Introduction

Arbitration today is the most preferred method of resolving international disputes. The increase in globalisation, world trade and bilateral investments has steadfastly led to the harmonisation of arbitration norms used by international arbitration practitioners irrespective of which country they practise in. 

Confidentiality and privacy of arbitration proceedings are considered to be among the most attractive attributes of arbitration. It must be noted that privacy and confidentiality are not synonymous. Privacy connotes that a third party won’t have access to the arbitration proceedings. Confidentiality connotes that without the parties' consent, the information disclosed during the proceedings and the arbitral award cannot be disclosed to a third person. While arbitrations are private, they may or may not be confidential. 

Although companies and institutions often aspire for confidentiality due to various reasons, including anticipation of adverse publicity, revelation of trade secrets or competitive practises etc., confidentiality is not an all-encompassing rule.

Increasing Transparency in the Investment Arbitrations

The two types of disputes usually resolved through arbitration are commercial and investment disputes. The legal frameworks for international commercial arbitration and investment arbitration are pretty different. The main treaty for international commercial arbitration is the New York Convention. It establishes international recognition and enforcement of foreign arbitral awards and arbitration agreements. Investment arbitration belongs to the realm of public international law, which is governed by treaties like ICSID, Bilateral Investment Treaties (BITs), and regional trade agreements. 

The governing treaties like the ICSID Convention[1] & the majority of the BITs are silent regarding the question of confidentiality. However, ICSID Arbitration Rules and UNCITRAL Transparency Rules confer only a basic level of transparency in international investment arbitrations. Rule 19 of the ICSID Arbitration Rules 2022[2] require the Tribunal to sign a declaration requiring “commitment to maintain the confidentiality of the proceeding.” But, when it comes to the publication of the award, Rule 62 provides that the Centre shall publish every award with the deemed consent of the parties if no party objects to such publication within 60 days of issuance of the award. 

The UNCITRAL Rules on Transparency in Treaty-based Investment-State Arbitration[3] provide that the Tribunal shall make arrangements to facilitate public access to hearings and publication of documents like notice of arbitration, response to the notice, the SOC, the SOD, exhibits, expert reports, witness statements, transcripts of hearings, orders and awards. However, these are subject to certain exceptions listed under Article 7, according to which the Tribunal shall prevent confidential or protected information like confidential business information, information protected under the treaty or information protected under the law of the respondent state from being made available to the public, after consultation with the parties. 

As a result, there is very little confidentiality in most of the investment arbitrations. It seems justifiable in investment disputes as state interests are involved. Even the awards delivered in investment arbitrations have precedential value. Thus, the movement towards transparency in the sphere of investment disputes has been welcomed as it instils greater public confidence in resolving such disputes through arbitration. 

Is Confidentiality desirable in Commercial Arbitrations?

Parties often perceive confidentiality as a norm in commercial arbitrations, making them opt for arbitration rather than court proceedings. While commercial arbitrations arise through private agreements and the awards are generally kept confidential, bereft of precedential value, the assumption of confidentiality as a norm is incorrect. Moreover, there’s a section of the society which believes that the way transparency has become part of investment arbitrations, even commercial arbitrations should follow suit. In this regard, no common approach can be observed worldwide. 

As we have seen, investment arbitrations draw great public interest but this isn’t the same for commercial disputes, which involve private parties who wish to resolve the disputes outside the national courts, intending to keep the dispute away from the public glare. There are some pertinent reasons why the parties to a commercial dispute desire confidentiality: 

  • If the names of disputing parties come out in public, it can dent their reputation and further harm them through consequences like a fall in share prices, disinclination of other companies and organisations to work with them in future, becoming subject to speculation.
  • If their documents and confidential information come out in public, it can also harm their business as their trade secrets, copyrights, and ideas would be revealed and become available to their competitors. 

Different Legal Positions concerning Confidentiality

Only some arbitral institutions provide for confidentiality. For instance, Article 8 of the ICC Statutes of the International Court of Arbitration[4] states, “The work of the court is of a confidential nature which must be respected by everyone who participates in that work in whatever capacity. The court lays down the rules regarding the persons who can attend the meetings of the Court and its Committees and who are entitled to have access to materials related to the work of the Court and its Secretariat.” Similarly, Article 30 of the LCIA Arbitration Rules[5] provides that the parties shall undertake as a general principle to keep all the documents, material and awards confidential. In contrast, important arbitral rules like ICC Arbitration Rules and UNCITRAL Arbitration Rules are silent on it. 

Even the UNCITRAL Model Law on International Commercial Arbitration, which serves as a base for States in developing their national legislations, does not categorically provide for confidentiality. It gives importance to party autonomy as it leaves it open for parties to decide whether they wish the proceedings to remain confidential. Since the Model Law is silent on it, national laws vary. 

In the UK, the courts try to balance confidentiality and public interest. In the absence of an express clause, confidentiality is protected in the arbitration. But it’s ensured that confidentiality isn’t protected at the cost of public interest. 

In the case of Emmott v. Michael Wilson & Partners Ltd[6], the English Court of Appeal observed that privacy is almost universally recognised by institutional rules. On the other hand, only a minority of arbitration rules deal expressly with confidentiality. The court expounded that there is an obligation implied by law and the nature of arbitration on both parties to not disclose the documents used in arbitration. Thus, the confidentiality rule has developed as an implied term of the arbitration agreement. However, the obligation would depend on the context and nature of documents on a case-by-case basis. The court held that disclosure would be permissible in the following scenarios:

  1. Where there is consent, express or implied.
  2. Where there is an order or leave of the court (but that does not mean that the court has a general discretion to lift the obligation of confidentiality)
  3. Where it is reasonably necessary for the protection of legitimate interests of an arbitrating part. 
  4. Where the interests of justice and public interest require disclosure.

In India, confidentiality of arbitral proceedings is expressly protected under Section 42A of the Arbitration and Conciliation Act, 1996. It places an obligation on the arbitrator, the arbitral institution and the parties to maintain confidentiality of all the arbitral proceedings except award where its disclosure is necessary for enforcement of the award.

Whereas in the USA, Australia & France there’s no express or implied right to confidentiality. There’s no such implied obligation unless there’s an express clause made for it. The notion of implied confidentiality was turned down by Sweden and Norway also.

In a case titled Esso Australia Resources Ltd v. The Honourable Sidney James Plowman and Ors[7]., the Australian High Court stated that while privacy in arbitrations should be respected, confidentiality isn’t an indispensable feature of private arbitrations. The court also said that conducting arbitration proceedings online does not translate into a prohibition on disclosing documents and information needed for the arbitration. The court then enunciated that though a need for a certain degree of confidentiality might arise in some cases, it isn’t absolute. Thereby, the High Court upheld the public’s legitimate right to obtain information about the affairs of public authorities involved in arbitration.

The courts in many jurisdictions have consistently taken the view that governmental secrets are different from personal & commercial secrets, and they involve public interest. 

In the USA, both the Federal Arbitration Act and the Uniform Arbitration Act do not contain any provision requiring the arbitrators or the parties to keep the arbitration proceedings secret. As a result, unless the parties agree or the chosen arbitration rules provide so, the parties aren’t required by the law of the United States to treat the arbitral proceedings as confidential. 

In the case of United States v. Panhandle Eastern Corporation[8], Panhandle moved a District Court in the USA seeking a protective order to prevent the disclosure of documents relating to arbitration proceedings. Panhandle submitted that disclosing the documents to third parties would seriously affect its business relationships. The court declined the relief, stating that Panhandle had failed to put forth a ‘good cause’ which was a requirement under Rule 26(c) of the Federal Rules of Civil Procedure. The court noted that there was no express agreement relating to confidentiality between the parties to the arbitration. It refused to give any credence to the argument of the existence of an implied obligation. 

On the other hand, New Zealand protects confidentiality as an inherent duty. Even the court proceedings arising out of the arbitration remain confidential, unlike the UK.[9]

Balancing the Interests

The existence of a great degree of confidentiality in Commercial arbitration leads to apprehensions of easy concealment of wrong or unethical practices and decisions. A balance should be drawn between the interests of the parties seeking confidentiality and the need for transparency in the public interest. 

The arguments that favour the call for greater transparency are:

  • That even though the parties to a commercial arbitration usually are private, in some cases, even states or state entities can be party to such arbitration. Such cases involve great public interest.
  • Even commercial disputes can have a far-reaching effect on the general public and not just the parties to the arbitration, making the call for transparency in such cases even stronger. For example, disputes related to agriculture, state defence system, etc. 
  • The power and importance of corporate giants is increasing in the world. Some companies concentrate more wealth and influential power than many States. 

Although confidentiality can be crucial to some parties or in certain cases, it cannot be considered an inherent feature of arbitration. The binding nature of arbitration can give rise to far-reaching effects, especially in disputes of high public importance. However, unlike investment arbitrations, it may not be possible to have general provisions regarding confidentiality in commercial arbitrations because a fine balance would have to be drawn between public interest and parties’ intent. Such an evaluation can be made only on a case-by-case basis by analysing the nature of the documents involved and the context in which the disclosure is sought. Therefore, there can be no inherent norm or a hard-and-fast rule regarding confidentiality in the realm of Commercial Arbitrations.

Picture Source :

 
Riya Rathi