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Joanna Wright

Specialised Subjects

Consumer Law, Contract Law, Criminal Law, European Law, Human Rights, International Law, Law, Public Law

I am a law graduate from London who aspires to work in the legal profession. I recently obtained a Master’s degree in law, my dissertation being on ‘Human Rights in Globalisation’. I plan to carry on with my legal studies and will do a course in legal practice later on. Meanwhile, my objective is to continue to be involved academically with legal writing. My main area of interest is in Human Rights law and I aim to work primarily in this field. I have previously studied European Human Rights Law as a separate subject.  I am interested in international studies and cultural overviews and, therefore, studied psychology and social psychology in Scandinavia. As well as English, I speak German, Swedish, Norwegian and Serbo-Croatian.

DUAL IN CONFIDENTIALITY – ADVANTAGES AND DISADVANTAGES IN ARBITRAL PROCEEDINGS

SECTION I: INTRODUCTION

Disputing international companies who would like to settle the matter privately often prefer the option of arbitration. An arbitration clause in the contract, included as a pre-enforceable clause, enables the solving of a contractual issue when a dispute arises.[1] Alternatively, arbitration is the agreed method when the dispute arises. The privacy of arbitration is questionable, as parties involved in the proceedings can have their information leaked without consent. There have been instances when one party conspires with a third party to disclose confidential information.[2]

Consequently, the issue under consideration refers to confidentiality. The principal of confidentiality can be an ambiguous or a distinct concept. One study found that of 93 national jurisdictions, 36 had deficient legal guidance on confidentiality whilst only 32 had some form of fixed provisions.[3] The most efficient way of ensuring that a duty of confidentiality in arbitration will persist is by including it contractually. Circumstantially, a contractual reference or agreement on confidentiality is often absent; thus how it is applied in a situation is according to the arbitration rules, which might not refer to confidentiality in assessing a party’s advantage.

The purpose of this paper is to discuss the principal of confidentiality in arbitral proceedings and the advantages and disadvantages that might exist in practice. While the main point of reference will be English case law, various jurisdictions will be considered in order to provide a constructive view of the discussion. I will present the existing approaches and contexts for an understanding of the implications of the principal of confidentiality

What is arbitration?

Arbitration is an alternative to court proceedings for dispute settlement.[4] There are various forms of arbitration such as domestic and international arbitration. It is considered to be an effective dispute settlement mechanism as it is generally less costly and proceeds at a faster pace than court proceedings. It also perceived to be an appropriate and flexible means of resolution for international companies; the companies concerned are not required to be physically present for the hearing. The London Court of International Arbitration has, for example, been an important institute for international arbitration.[5] In English law, the principal of confidentiality is highly valued which is why international companies prefer the English courts as the seat of law.[6]

  1. Confidentiality under International Law

The definition of confidentiality can be assumed to carry a similar threshold for majority, though the concept between international law and national jurisdictions can vary somewhat in application and interpretation. [7] The only international instrument that refers to confidentiality for international arbitration[8] is found under the UNICTRAL Arbitration Rules (1976).[9] Specifically, Rule 52(5) states that a duty of confidentiality applies to the arbitral award; this means that a duty of confidentiality does not necessarily cover the arbitrary proceedings. Both parties must consent to the award being made public.[10] This suggests that the parties determine the application of confidentiality regarding the award. The UNICTRAL Model Law (1985)[11] , on the other hand, is silent on the subject.

The LCIA Arbitration Rules include a ‘general duty of confidentiality’ unless both parties have agreed otherwise. [12] The disregard of confidentiality should be expressed in writing and should be referred to in the award and the proceedings. Duty of confidentiality should not disable ‘a legal duty to protect or pursue a legal right’ or when the award is challenged in ‘bona fide legal proceedings before a state court or other judicial authority.’[13] Any publishing of the award must be only with the consent of the parties.[14]

The most established international arbitration rules are the ICC Arbitration Rules.[15] Under the rules referred to earlier, the primary duty of confidentiality derives from the parties. However, the ICC rules stipulate that arbitration tribunals are to include clauses that protect confidential material, such as trade secrets.[16] Any party to the proceedings ‘shall not be admitted.’[17] While the ICC does not refer to a specific notion on the confidentiality of an award, it does provide a general field of reference for confidentiality[18] with regard to the court’s conduct in the proceedings.

The WIPO Arbitration Rules  explicitly refer to the duty of confidentiality[19] in the arbitration process. In the rules, confidentiality is the default position[20]  with reference to three implications for confidentiality. First, the duty of confidentiality comes about with the existence of arbitration. Any disclosure is subject to confidentiality unless it generates legal relevance for the arbitration or a court claim, or is disclosed in good faith.[21] Secondly, when either party discloses information during the arbitration proceedings, there should be a witness present.[22] Thirdly, the award is also subject to confidentiality unless it becomes a public matter by court proceedings or the award is relevant in protecting a third party’s rights.[23]

  1. Confidentiality under Other (National) Laws

Courts generally have expressed different views on the implication of confidentiality.[24] It can be argued that one reason why applications of confidentiality differ between international courts is that some states lack  domestic sources that clarify the application of confidentiality.[25] The Norwegian arbitration rules, though, have recently included provisions on confidentiality for guidance on the issue.[26] The relevant provision mainly concerns the confidentiality of awards, rather than a general duty of confidentiality in relation to the information used in the arbitration proceedings. While the English Arbitration Act 1996[27] does not provide for confidentiality,[28] it does have a richer case law, as seen by the leading cases Emmott v Michael Wilson (2008) and Dolling-Baker v Merrett (1990). These provide legal direction, [29] unlike in Norwegian law, where case law on the issue has not been sufficiently extensive for usage.

  • Arbitral proceedings and arbitration awards

There are different rules for when confidentiality in arbitration shall commence. The UNICTRAL Arbitration Rules (1976) only refer to confidentiality over awards, though the WIPO Arbitration Rules cover both the award and the proceedings. The ICC rules do not refer to confidentiality regarding the award but do express confidentiality in arbitration, while the LCIA’s rules apply confidentiality to the award and the parties must consent before it is made public. Significantly, when challenging an award in  court, the question of confidentiality tends be viewed as a public matter.[30]  It is the award rather than the proceedings that would most likely attract public interest[31] . Therefore, confidently is influenced by public interest.

In the English case of Ali Shipping (1999) the duty of confidentiality was applied to all input provided, i.e. information, award, witnesses and other submissions.[32] The entire arbitration processes was subject to confidentiality.[33] In the recent Norwegian Arbitration Act 2004,[34] it was stated that confidentiality could apply both to the proceedings and the arbitration award; however, the duty would only be confirmed by consensus between the parties on non-disclosure. The Norwegian Arbitration Committee also claimed that because public interest in the award was greater than in the proceedings, awards should preferably be made available to the public.[35]

 

SECTION II: From Privacy to Confidentiality

‘It was not always easy to distinguish confidentiality from privacy and it was also important to bear in mind the context of the decisions because quite different considerations might apply in different contexts.”[36]

When referring to the principal of confidentiality, the sub-text implies a correlation with privacy since ‘confidentiality is impossible without privacy and privacy is meaningless without confidentiality’.[37] For this reason, arbitration is often referred to as  private rather than public proceedings. Privacy in arbitration is ensured by confidentiality.[38] The absence of a clear definition of confidentiality has been an indirect limitation and thus approaches to confidentiality have been diverse and complex.[39] The concept of confidentiality of arbitral proceedings has, for example, not been recognized under the common law in Australia, while privacy has.[40] The claimed privacy in common law automatically derives once parties agreed to undergo arbitration. Initially, ‘privacy is unquestionably a fundamental feature of arbitration. In contrast, confidentiality is an underlying issue.’[41] Consequently, in order to argue against confidentiality would mean to separate it from the concept of privacy in arbitration.

  1. The ‘ratio’ of confidentiality

English courts’ view of privacy in arbitration is that it is not limited to confidential material such as e.g. trade secrets, ‘but is implied as a matter of law.’[42] Some national jurisdictions provide a detailed understanding of confidentiality while others give a general description.[43] An example of this can be found in the Latvian Civil Procedure Law 2006, where it states that ‘all information concerning arbitral proceedings’ is under the duty of confidentiality. [44] The Hong Kong Ordinance 2011 states that it refers to ‘any information relating to arbitral proceedings or award.’ [45] As a result, a loose definition of confidentiality creates an issue regarding what is the scope of ‘all/any information’.

In the Australian International Arbitration Act 1974, it is stated ‘in reliance on an arbitration agreement [parties] must not disclose confidential information in relation to the arbitral proceedings.’[46] Accordingly, the parties must realise that the duty of confidentiality applies when the proceedings commence and thereafter the entire proceedings are subject to confidentiality. [47]  The Stockholm Chamber of Commerce Rules 2010,[48] specifically state that ‘the arbitration shall be deemed to commence on the date on which the request for arbitration is received.’[49]

The law in New Zealand and, in particular, Scotland maintains a more detailed version of confidentiality. The Arbitration (Scotland) Act 2010 defines confidential information (within the arbitration) as any information relating to the dispute, the arbitral proceedings, award, any proceedings relating to arbitration (unless a court order under section 15, specifies otherwise) and is not meant to be made public. [50] Clearly, the law of Scotland has taken a further step in assessing confidentiality by not only indicating that it is a form of information, but also presenting it within the relevant context in which information is subject to confidentiality.

English cases have displayed inconsistency. In Dolling-Baker v Merrett (1990),[51] where prepared information for the arbitration was incorrectly wrongly, it was asserted that only information relevant to the arbitration was confidential. According to the meaning of relevant documents, the court in this case affirmed that pleadings, documents, witnesses, and statements sought were considered to be relevant. However, this was not the prevailing view in Ali Shipping (1999).[52] In another English case, Hassneh Insurance v Steuart (1993),[53] the court held that the award was not subject to the duty of confidentiality, claiming that an award is a public document under the Arbitration Act 1950.[54]

 

SECTION III: Assumption versus Compulsion

The duty of confidentiality can be implied or expressed.[55] In the French case of NAFIMCO v Forster Wheele (2004), where damages for disclosure was refused, the court argued that a ‘duty of confidentiality is not to be taken for granted’ in French law. [56] One could question why an assumption of implied confidentiality has emerged at all. The purpose of taking a dispute to arbitration is partly to solve a dispute privately and avoid the publicity of [57] court litigation.

One could further consider who the parties are in a dispute. On the one hand, international and commercial arbitration often involve public figures and businesses while domestic arbitration usually concerns private people. In this sense, implied confidentiality should not be anticipated. On the other hand, the parties are often foreign companies which possibly have limited or vague communication. Thus an implied gesture of confidentiality of a dispute is naturally assumed, based on the communication between the parties.

Whether confidentiality should be an assumed undertaking for parties in arbitration or be expressly compelled by agreement between the parties, or by law, poses a constant dilemma for the courts and arbitrators. The general idea of confidentiality in arbitration tends to be that it is automatic when arbitration is agreed.[58] In reality, the assumption has not yet been internationally confirmed.[59] Prior to the introduction of the Norwegian Arbitration Act 2005, Norwegian law remained silent with regard to confidentiality as is the case in many other jurisdictions. [60] It is evident that confidentiality is an essential component of privacy in arbitration, which is why several critics perceive it as being an ‘inherent’ element.[61] The virtue of confidentiality has been difficult to institute. Conversely, arbitration proceedings are also meant to be flexible; therefore, the responsibility of a duty of confidentiality should be initiated by the parties themselves.

In Dolling-Baker v Merret, it was assumed that an arbitration agreement included an ‘implied’ confidentiality obligation. Such an assumption was not made in the Australian case of Esso Australia Resources Ltd v Plowman (1995),[62] or in a Swedish case.[63]  Since Dolling-Baker v Merret, the English courts have generally maintained the view that implied confidentiality does exist.

What is relied upon is, in effect, the essentially private nature of an arbitration, coupled with the implied obligation of a party who obtains documents on discovery not to use them for any purpose other than the dispute in which they were obtained.[64]

This point of reference was upheld later in the other cases mentioned such as Hassneh Insurance v Mew, Ali Shipping Corp v Shipyard Trogir and Emmott v Michael Wilson & Partners Ltd. According to these, the concept of implied confidentiality was supported and enforced by the court. While the court might reject implied confidentiality in terms of its context, it does acknowledge it as an existing principal, unlike the majority of other law considerations. ‘The case law over the last 20 years has established that there is an obligation, implied by law and arising out of the nature of arbitration.’[65] This means that an implied duty of confidentiality under English law can be relied on. Most parties prefer to have their seat under English law, thereby suggesting that an implied or pre-existing duty of confidentiality is more accepted than rejected. Eventually, it can be predicted that the issue regarding an assumed duty will be based on the perception that privacy and confidentiality are corresponding equals.[66] 

 

[1] Yu, Hong-Lin. ‘Duty of confidentiality: myth and reality.’ (2012)Civil Justice Quarterly 31 (1), 68-88

[2] Emmott v Michael Wilson & Partners Ltd [2008] EWCA Civ 184

[3] (Yu 2012)

[4] Hassneh Insurance Co of Israel v Steuart J Mew [1993] 2 Lloyd’s Rep. 243,

[5] Dundas, Hew R. ‘Confidentiality in English Arbitration: The Final Word? Emmott v Michael Wilson & Partners Ltd.’ (2008) Law Publishers, Arbitration 74, 458-466

[6] Russell v Russell (1880) 14 Ch D. 471

[7] Advocate, Roi Bak. ‘Arbitration – Duty of Confidentiality?’ Available at <http://www.israelbar.org.il/uploadFiles/Confidentiality_of_Arbitration.pdf> accessed 28 April, 2013

[8] (Yu 2012)

[9] UNICTRAL Arbitration Rules 1976

[10] UNICTRAL Arbitration Rules 1976, Rule 52

[11] UNICTRAL Model Law on International Commercial Arbitration(1985)

[12] London Court of International Arbitration Rules (LCIA)

[13] London Court of International Arbitration Rules (LCIA), Rule 30.1

[14] LCIA, Rule 30.3

[15] International Chamber of Commerce (ICC)

[16] ICC, Rule 20.7

[17] ICC, Rule 21.3

[18] Statues of the International Court of Arbitration, rule 6

[19] World Intellectual Property Organization (WIPO) Arbitration Rules; (Advocate u.d.)

[20] WIPO Arbitration Rules, art 52

[21] WIPO Arbitration Rules, art 73

[22] WIPO Arbitration Rules, art 74

[23] WIPO Arbitration Rules, art 75

[24] (Yu 2012)

[25] Nisja, Ola O. ‘Legislative Comment Confidentiality and public access in arbitration – the Norwegian approach.’ (2008) International Arbitration Law Review 11(15), 187-192

[26] (Nisja 2008)

[27] English Arbitration Act 1996

[28] (Yu 2012); (Advocate u.d.)

[29] Emmott v Michael Wilson & Partners Ltd [2008] EWCA Civ 184M; Dolling-Baker v Merrett [1990] 1 W.L.R. 1205

[30] Stojcevski, M. and Bruno Zeller. ‘Confidentiality and privacy revisited.'(2012) Arbitration 78(4), 332-339

[31] (Nisja 2008)

[32] Ali Shipping [1999] 1 W.L.R. 314 at 326

[33] (Yu 2012)

[34] Norwegian Arbitration Act 2004

[35] (Nisja 2008)

[36] (Dundas 2008)

[37] Kyriaki Noussia, Confidentiality in International Commercial Arbitration: A Comparative Analysis of the Position under English, US, German and French Law, (Springer, 2010)

[38] (Stojcevski och Zeller 2012)

[39] (Yu 2012)

[40] (Stojcevski och Zeller 2012)

[41] (Stojcevski och Zeller 2012)

[42] Ali Shipping [1999] 1 W.L.R. 314 at 326

[43] (Yu 2012)

[44] Latvian Civil Procedure Law 2006, art 512 (2)

[45] Hong Kong Ordinance 2011, section 18; (Yu 2012)

[46] The Australian International Arbitration Act 1974, s.23C

[47] (Stojcevski och Zeller 2012)

[48] Stockholm Chamber of Commerce Rules 2010

[49] (Stojcevski och Zeller 2012)

[50] Arbitration (Scotland) Act 2010, Rule 26

[51] Dolling-Baker v Merrett [1990] 1 W.L.R. 1205

[52] Ali Shipping [1999] 1 W.L.R. 314 at 326

[53] Hassneh Insurance Co of Israel v Steuart J Mew [1993] 2 Lloyd’s Rep. 243

[54] Arbitration (English) Act 1950, section 26

[55] (Stojcevski och Zeller 2012)

[56] Nafimco v Foster Wheeler Trading. Company, 2004 REV. ARB. 647; (Yu 2012)

[57] (Yu 2012)

[58] (Yu 2012)

[59] (Yu 2012)

[60] (Nisja 2008)

[61] (Nisja 2008)

[62] Esso Australia Resources Ltd v Plowman (Minister for Energy and Minerals) (1995) 128 A.L.R. 391

[63] Bulbank (A.I. Trade Finance v Bulgarian Trade Bank ; unreported, October 27, 2000, Supreme Court case 1881-99)

[64] Dolling-Baker v Merrett [1990] 1 W.L.R. 1205

[65] Emmott v Michael Wilson & Partners Ltd [2008] EWCA Civ 184, per se Lawrence Collins L.J.

[66] (Stojcevski och Zeller 2012)