By: Divyanshu Singh (West Bengal National University of Juridical Sciences, Kolkata)
CONFIDENTIALITY: LEGAL BASIS AND ITS SCOPE
Arbitration evolved as a primary alternative to litigation for resolving commercial disputes because confidentiality was considered an inherent characteristic of this mechanism. The concept of privacy in International Commercial Arbitration (hereinafter ‘ICA’) is a result of multiple international agreements; therefore it is necessary to understand the evolution of confidentiality principle in the international community. Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 1958) is the most significant legislation with regards to ICA. However, it does not provide any provision regarding confidentiality. UNCITRAL Arbitration Rules of 2010, provides for confidentiality in the publication of arbitral awards subject to party agreement and to protect legal rights of the related parties [Art 34(5)]. But it limits the application of confidentiality obligation to certain specific aspects only.
Similarly, the International Chamber of Commerce (hereinafter ‘ICC’) rules also do not impose a general duty of confidentiality. The draft commission could not reach a consensus on confidentiality, which explains the absence of any such provision in the ICC rules. Even the amended ICC rules (2017) provide only for privacy in arbitral proceedings and leave the confidentiality of proceeding in the hands of the parties [(Appendix I) Art. 6].
However, the institutional rules have been able to provide more general principles while regulating confidentiality in ICA. Art.30 under The London Court of International Arbitration (hereinafter ‘LCIA’) offers a sophisticated mechanism to guard confidentiality by casting obligations on the parties to maintain secrecy regarding proceedings and deliberations (Art. 30). The provisions of Swiss rules are also on the same lines as that of LCIA. It allows for the publication of awards subject to certain requirements (Art. 44.3).
The concept of privacy is distinguished from confidentiality as the former indicates who all can be a party to proceedings, the latter indicates an obligation on the parties not to disclose the information concerning the proceedings. The conflict between the two arises due to the absence of similar treatment in domestic as well as in the international sphere.
a. Lack of uniformity in various jurisdictions
The traditional notion concerning confidentiality in ICA was that there existed an implied obligation to maintain confidentiality. This opinion was upheld in Dolling-Baker v. Merrett and decisions prior to it. The English Arbitration Act, 1996 also lacks express provisions for confidentiality. The drafters refrained from codifying this particular aspect of arbitration as it was difficult to theorize the exceptions to the confidentiality obligation without compromising on commercial interests. Therefore, it was left on courts to decide on a case to case basis, the degree of confidentiality necessary in each instance. The general principle of confidentiality was to prevent public disclosure to protect the commercial interest of the parties. Therefore, English courts tried to balance public interest and confidentiality obligation to meet the ends of justice even in the absence of express agreement.
On the other hand, there are multiple jurisdictions that do not uphold the traditional notion of confidentiality obligation as presented by English law. In Esso Australia Resources Ltd., it was held that the private nature of the proceedings does not establish the confidentiality obligation as an inherent part of the arbitration. The Australian High Court reasoned that there is no requirement for a presumption of confidentiality when it can be expressly agreed upon by the parties. Similarly in Nafimco v. Foster Wheeler Trading Company AG, the French court did not recognize the duty of confidentiality in the absence of an express agreement. When parties have the freedom to opt-in for confidentiality in the agreement, courts felt it is was unnecessary to consider it in implied terms. The approach taken by the Australian High court was followed in various jurisdictions. The U.S. courts, while deciding on the matter of confidentiality in ICA, tried balancing the need for protection from disclosure and public interest involved in the matter. They look into the nature of the document and whether a disclosure is necessary for a fair procedure while deciding on issues of confidentiality.
b. Statutory Recognition of Principle of Confidentiality
While majority countries have not codified provisions on confidentiality, Singapore which is the leading arbitration hub in Asia has statutory regulation for the same. Along with Singapore, New Zealand also has a comprehensive code for arbitral confidentiality (Section 14, New Zealand Arbitration Act, 1996).
Legislators in the case of Singapore have tried to showcase a balance between confidentiality and transparency in dispute resolution. The Act has laid down the exceptions under which disclosure of information will be allowed with the consent of the parties (Section 57, Singapore arbitration Act, 2001). Also, if the court is satisfied that disclosure would not damage the interest of parties by revealing information that was explicitly protected by a confidentiality obligation, such information can be put in the public domain [Section 57(3)]. It also provides for concealment of certain information, failing which no records can be made public for a period not exceeding ten years [Section 57(4)].
Similarly, the legislation in New Zealand also has well-defined exceptions for the duty of confidentiality [Section 14(c), New Zealand Arbitration Act, 1996]. It has even gone one step ahead to reduce the ambiguity and has defined ‘confidential information’.
DIFFERENCE IN THE THRESHOLD OF CONFIDENTIALITY OBLIGATIONS ACROSS VARIOUS JURISDICTIONS
The needs of public interest have to be balanced with the purpose of private arbitral justice. It is not possible to provide the same degree of confidentiality to each category of information. The courts across the globe have followed the same practice but have varied thresholds. It is apparent from judicial trends that for disclosure of material it is necessary, first, to demonstrate a compelling need for the information and second, inability to secure it by another means. It resonates with the work-product doctrine which was developed in the U.S. based on Hickman v. Taylor. Therefore to understand the degree of protection granted to materials used in proceedings it is necessary, first, to analyze the difference in threshold in multiple jurisdictions and second, to analyze measures available to ensure the duty of confidentiality for protection of commercial interest of the parties.
a. The threshold for duty of confidentiality in various jurisdictions
The courts have respected the arbitration agreements while addressing the confidentiality obligations, but they have also allowed disclosure of information in the legitimate public interest. The judicial trends differ on the degree of confidentiality on a country to country basis. Under English law, the duty of confidentiality extends to all the documents exchanged during the arbitration. In Dolling-Baker v. Merrett, the court laid down an extensive list virtually including all the documents used in the proceeding which were protected by a confidentiality obligation. The court further distinguished between the degree of strictness in documents used in proceedings and arbitral awards. The Ali Shipping case overruled this, and the court granted equal protection to arbitral awards and other documents. It also enlisted disclosure in the interest of justice an exception to the duty of confidentiality. On the contrary, the approach taken by the Australian high court in this regard depends upon the principle of public interest.
The English courts differ from the Australian perspective as they seek the importance of accurate evidence in delivering judicial decisions. On the other hand, Australian courts decide on the basis of public interest involved in the matter. However, there is still a dilemma regarding what would qualify as public interest in the matter of commercial disputes. The approach adopted in the Esso case tends to widen the ambit of exception by overlapping commercial and investment arbitration. In a purely commercial transaction, the approach taken by English courts seems to balance the competing private and public interest in a better manner.
b. Measures for ensuring confidentiality
The confidentiality issues faced by the parties is in regard to the evidence adduced by them or requested by the opposing parties. In both cases, there is a concern regarding the protection of documents containing trade secrets, business plans and other related information. There are certain measures available to balance the protection of confidential information and due process in the investigation of evidence. The arbitral rules have tried to bring things to balance by providing a comprehensive set of rules for exemptions. Redaction of confidential information is another measure implemented in practice. If the information is truly confidential in nature and does not have a material impact on the dispute, it can be redacted in parts or entirely. Another prevalent practice is the destruction of the evidence and its copies after inspection. Hence there is no tailor-made procedure, and parties can come up with their creative solutions depending upon the dispute.
The duty of confidentiality is the extension of the concept of privacy which forms a fundamental cornerstone of arbitration. Taking into account the jurisprudential differences across jurisdictions, it is necessary to balance the commercial interest of the parties with the principle of equity and justice. A consistent judicial approach would have helped in reconciling the differences and would have provided uniformity to the law. In the absence of such consistent judicial decisions, statutory remedies have provided relief to a limited extent [Section 57(4), Singapore arbitration Act, 2001]. As evident from the comparative analysis of various jurisdictions, the harmonization of national legislations with international rules can offer a potential solution. However, in the meantime, the parties should essentially follow the judicial trend and prefer custom made agreements while concurrently opting for institutional regulations that provide a comprehensive set of rules to maintain the confidentiality obligation.
(Divyanshu Singh is a third-year student at West Bengal National University of Juridical Sciences, Kolkata.)