By: Abhinav Gupta (National University of Juridical Sciences, Kolkata)
The majority of jurisdictions and scholars hold confidentiality as an essential element of arbitration. Under English law, there is an implied obligation of confidentiality when parties agree to arbitrate and submit themselves to arbitration. However, public interest has been held as an exception to confidentiality in arbitration by various English courts.
This exception to confidentiality under English law is an unsettled debate. Some courts have rejected it while the others have recently accepted it in certain circumstances. This blog-post will critically analyse the scope of the exception of public interest to confidentiality under English law and thereafter provide recommendations.
THE EXCEPTION OF PUBLIC INTEREST
The concept of public interest as an exception to confidentiality is at a nascent stage in England and other common law countries. Public interest, in its rudimentary sense, can be defined as interest benefitting a large group of people or as specific collective values that go beyond the interest of the parties to the dispute. The usage of the term may also change depending upon the context in which it has been used. It may have a different meaning under a constitutional discourse than in a discourse relating to economic, sociology or political theory.
One of the first cases in international commercial arbitration that discussed the removal of confidentiality based on public interest was the Hassneh Insurance Co. of Israel v. Steuart J. Mew. The court, in this case, observed that if a broader interpretation is given to the term public interest, it would drastically narrow the scope of confidentiality in arbitration. It observed that the parties could not have consented to participate in such a public arbitration. The English court gave a similar verdict in Ali Shipping Corp. v. Shipyard Trogir (‘Ali Shipping’) where it held that such a broad exception could not outweigh the duty to maintain confidentiality under English law. Over the years, English courts have failed to determine a clear-cut and precise position as to whether an exception of public interest can justify the breach of confidentiality. The concern was highlighted in the case of The Secretary of State for the Home Department v. Raytheon Systems Ltd., where an award of approximately 228 million pounds was given in favour of Raytheon Systems, a U.S. company. This generated huge outcry amongst the public and the British government itself. However, the details of the award were never published. It raised concerns since dispute cost the taxpayers millions of pounds, and there was no disclosure of information as to what went wrong with the contract.
However, the Australian courts have developed a clearer rationale for the exception of public interest. In Esso Australia Resources Ltd. v. Plowman (‘Esso’) the dispute was regarding the publication of an arbitral proceeding relating to the cost of fuel prices. The court permitted the publication on the rationale that the public should not be denied knowledge about the arbitration, the outcome of which will affect the prices chargeable to consumers for public utilities. Further, such a general public interest exception was also granted in the case of Commonwealth of Australia v. Cockatoo Dockyard Pvt. Ltd. In this case, the court noted that the need for transparency with respect to government actions was in the public interest. Therefore, the Australian jurisprudence is much clearer than the English position and grants an exception to confidentiality based on broader public interest.
The Ali Shipping case rejected such broad consideration given to the exception of public interest in Esso by the Australian court. The court stated that though it may fall to the English courts at a later time to consider some further exception to the general rule of confidentiality based on broader considerations of public interest, it was not necessary to do so in that case.
The recent cases seem to suggest that the English courts are heading steadily towards the recognition of the broader public interest mentioned in the Esso case. In Westwood Shipping Lines Inc. v. Universal Schiffahrtsgesellschaft, disclosure was granted where it was necessary to support an unlawful means conspiracy claim and to bring wrongdoing to light. Further, in the recent case of The Chartered Institute of Arbitrators v. B, C & D (‘Chartered Institute’) a plea was filed for the disclosure of an arbitration regarding disciplinary proceedings against an arbitrator. The court granted the petition and held that there was a general public interest in maintaining the quality and standard of arbitrators. This interest extended beyond the interests of the parties in the particular case.
Thus, such cases have increased the scope of the exception to confidentiality under English law. The English courts have come to recognise the broader test of public interest that is well-established under Australian jurisprudence. However, the scope of this exception is slowly increasing. Therefore, the precise scope of this exception remains unclear to date and will be able to broaden through either future amendments or cases.
The Australian courts give priority to public interest over all other competing interests, such as commercially sensitive information and the natural desire of a commercial entity to participate in a confidential arbitration. However, the English courts have favoured the balancing approach to confidentiality. The balancing approach envisages that the exception of public interest needs to be balanced against the reasons for maintaining confidentiality. In the Chartered Institute case, the court allowed disclosure of all information since the public interest as to the misconduct of an arbitrator outweighed the desire of the arbitrator to not let his name be revealed. Therefore, the disclosure of information that is challenged by a party should be granted only when there is a compelling justification.
It is contended that the balancing approach is a more appropriate method of disclosing information in the public interest. The broader public interest should not be prejudicial to the party contesting the disclosure. For instance, commercially sensitive information such as profit margins, technical know-how, trade secrets, will rarely qualify as information to be disclosed in public interest. Therefore, the arbitrators and the courts must be careful in permitting the release of information concerning an arbitration proceeding. Unjustified release of such information can result in irreparable commercial harm to the party.
THE WAY FORWARD
In order to device and strengthen the framework of the exception of public interest under English law, the author proposes two suggestions. First¸ it is suggested that the scope of public interest should be widened under English law. The existing scope is narrow though increasing slowly with subsequent judgments. Under the present scope, it is difficult to cover public-private arbitration under its ambit. This contention becomes increasingly more important and relevant with the rise of public-private arbitration involving several government entities taking part in private arbitration. These arbitrations essentially concern the contracts that involve public money of the taxpayers.
Therefore the public has an interest in ensuring that the proper procedure is followed and have a right to have knowledge about the proceedings, based on the principles of openness and accountability. Based on the justification laid down in Esso, it is argued that the public should not be denied knowledge of an arbitration, the outcome of which directly affects the utilisation of their taxed money. Although such disclosure should be balanced against claims that are prima facie not in public interest such as technical know-how and other commercially sensitive information.
Second, it is suggested that the tribunal, while applying this approach, appoint a confidentiality expert. The role of a confidentiality expert is to decide whether certain information is sensitive and assess any harm that might be caused by the potential disclosure of that piece of information. The confidentiality expert, being a neutral party, reviews the alleged confidential material and decides when and who can access it.
The appointment of the expert will help in preventing the party claiming non-disclosure from hiding information under the veil of confidentiality. Further, it will also avoid any unjustifiable harm that may be caused by the disclosure which may not have been foreseen or taken into account by the tribunal. Thus, the appointment of a confidentiality expert could assist in implementing the balancing approach in the most appropriate and effective way.
The scope of the public interest exception is increasing with subsequent cases under English law. Although far from the standard laid down in Esso, English law is slowly progressing in this respect. English courts have realised the effect a private arbitration can have on the interests of a third party. Further, the recently formulated balancing approach is an appropriate method of preventing injustice to the party challenging disclosure. Only information that is necessary to the public knowledge should be revealed from a private arbitration.
It is suggested that the scope of this exception should be expanded to cover public-private arbitration. The result of such arbitration has an effect on the taxpayers’ money. Further, the public has an interest in the governance of this dispute since it involves their money.
The appointment of a confidentiality expert by the tribunals can assist them in properly following the balancing approach. The expert can assist in determining whether certain information should be confidential or can be published.
(Abhinav is currently a second-year law student at the National University of Juridical Sciences, Kolkata. He is a Junior Associate Member of the NUJS Law Review and also serves as an Associate Editor at both the Journal of Indian Law and Society, and NUJS Journal on Dispute Resolution. He may be contacted here.)