Confidentiality in Arbitration

Att. Leyla Orak Celikboya, April 2015

Introduction

Confidentiality is considered to be among the unequivocal features of commercial arbitration. This feature is regarded as a crucial advantage of arbitration, mentioned among one of the main reasons for parties to resort to arbitration.

The mere fact that arbitration does not take place in public, before national courts, renders arbitration proceedings private. Public authorities are not included in the proceedings. Participation in hearings is subject to numerous regulations. As a consequence, confidentiality is regarded as an inherent quality of arbitration.

Notwithstanding the above, the privacy of arbitration does not, necessarily, always entail confidentiality. The duty of confidentiality and its scope differ when different arbitration rules or national laws come into play. Moreover, transparency and public interest in the disclosure of information must be weighed against the parties’ interest in confidentiality. This Newsletter article discusses confidentiality in international arbitration, briefly examining the confidentiality provisions of certain arbitration rules in practice.

Clash of Interests: Confidentiality or Transparency?

While an implied duty of confidentiality in arbitration is referred to, and accepted in certain national laws and jurisprudence[1], the scope of such duty is uncertain. The general trend in international arbitration leans towards questioning, and even disregarding, confidentiality as a whole. Especially in circumstances where governmental institutions are involved, information disclosed during arbitration proceedings, which ought to be public information disclosed by that authority[2], are not protected under the veil of the inherent confidential nature of arbitration. This inclination is not without reason. When confidentiality of arbitration proceedings is concerned, there is a clash of interests: the interest of the parties in terms of confidentiality, versus the interests of the public in disclosure.

The parties may have a material interest not to disclose the existence of a dispute, any information provided therein a dispute, or the results thereof. Confidentiality serves the parties’ trade secrets, as well as maintaining an image without suffering damages. It may be easily argued that a party’s autonomy is reserved in arbitration. As the dispute concerns the parties, the parties’ interests must be taken into consideration, exclusively. Therefore, the parties’ interests in arbitration proceedings being entirely confidential must be a determining factor.

To the contrary, although a dispute mainly concerns the parties, access to case law is a key component for the progress of arbitration and the education of practitioners of arbitration. Inconsistencies and lack of predictability may be prevented through transparency[3]. Arbitral awards establish jurisprudence, serving both the parties and practitioners. In practice, awards are published, without disclosing the parties that are involved. In fact, numerous rules of arbitration regulate the procedure of disclosure of arbitral awards. However, in addition to the development of case law and arbitration, at certain times, greater public interest may be the case. Especially when a state is involved in disputes that are resolved through arbitration, transparency becomes very important. In the above example, public interest in the disclosure of information prevails over the concerns of confidentiality.

Arbitration Rules

Confidentiality and privacy rules are regulated under numerous arbitration rules. However, especially in view of the clash of interests and the relevant discussions among scholars and practitioners on confidentiality versus transparency, the scope of confidentiality needs to be considered in great detail.

ICC Rules

The ICC Rules of Arbitration[4] (currently in force as from 1 January 2012; “ICC Rules”) provide, in Art. 22/3, the following: “Upon the request of any party, the arbitral tribunal may make orders concerning the confidentiality of the arbitration proceedings or of any other matters in connection with the arbitration and may take measures for protecting trade secrets and confidential information.” Further, Art. 26/3 of the ICC Rules regulates that the arbitral tribunal shall be in charge of the hearings, where persons not involved in the proceedings shall not be admitted unless approved by the arbitral tribunal.

Art. 6 of Appendix I to the ICC Rules, governing the statutes of the International Court of Arbitration, and Art. 1 of Appendix II, providing the internal rules of the International Court of Arbitration, govern extensive confidentiality provisions, declaring that the work of the court is confidential in nature, and that the sessions are open only to its members.

The ICC Rules provide a broad scope of confidentiality, whereby the arbitral tribunal may make orders governing confidentiality. However, absent such an order, the ICC Rules do not impose a duty of confidentiality on the parties. The hearing and deliberations of the tribunal are confidential.

LCIA Rules

The LCIA Arbitration Rules[5] (effective as on 1 October 2014, “LCIA Rules”), at Art. 30/1, specifically states that “[t]he parties undertake as a general principle to keep confidential all awards in the arbitration, together with all materials in the arbitration created for the purpose of the arbitration and all other documents produced by another party in the proceedings not otherwise in the public domain, save and to the extent that disclosure may be required of a party by legal duty, to protect or pursue a legal right, or to enforce or challenge an award in legal proceedings before a state court or other legal authority.” Art. 30/2 of the LCIA Rules, similar to the ICC Rules, underlines the confidential nature of the arbitral tribunal’s deliberations. The scope of confidentiality is broad under the LCIA Rules, which expressly regulates and imposes a confidentiality obligation on the parties of the dispute.

Swiss Rules

The Swiss Rules of International Arbitration[6] (June 2010, “Swiss Rules”), at Art. 44, also regulate a confidentiality undertaking of the parties in relation to awards and orders and materials submitted to the file that are not already in the public domain, unless it is agreed, in writing, to the contrary by the parties. The same provision also declares the confidential nature of the deliberations of the arbitral tribunal.

UNCITRAL Rules

The UNCITRAL Arbitration Rules (as revised in 2010, “UNCITRAL Rules”) does not explicitly provide a confidentiality obligation, but its Art. 25.4 grants the arbitral tribunal to require retirement of witnesses during the testimony of others, and determines the manner of examination of witnesses. The hearing will be conducted as determined by the tribunal. Therefore, it is accepted that the UNCITRAL Rules provides a framework where the hearing is private[7].

ICDR Rules

The ICDR Arbitration Rules[8] (as amended on 1 June 2010, “ICDR Rules”) also provide for confidentiality obligations. The ICDR Rules, at Art. 34, govern the duty of confidentiality of the arbitral tribunal and the administrator, and Art. 27 regulates that an arbitral award may only become public if the parties consent thereto, or if so required by law. The ICRD Rules, therefore, imposes a duty of confidentiality on the arbitrators and the administrators, thereby regulating the privacy of the hearing.

In General

Numerous other arbitration rules also contain provisions governing confidentiality. However, the scope of confidentiality as foreseen under arbitration rules is diverse. Different provisions are envisaged in order to ensure confidentiality of the arbitral tribunal’s deliberations, confidentiality of the hearings, or the confidentiality duty of the parties. The LCIA Rules is regarded as a notable exception[9] where the duty of confidentiality of the parties is expressly foreseen. Most arbitration rules focus on the privacy of the hearing. The ICSID’s Rules of Procedure for Arbitration Proceedings, to the contrary, does not include provisions governing confidentiality.

As no institution must be involved in or notified of the dispute, ad hoc arbitrations may be regarded as being more confidential than institutional arbitrations[10]. However, it is difficult to envisage an arbitration institution disclosing confidential information. To the contrary, in light of the rules assessed above, institutional arbitration may appear to provide for a broader scope of confidentiality.

Regardless of the scholar’s discussions on whether the duty of confidentiality is inherent in arbitration, the regulatory framework under numerous arbitration rules does not provide for such a clear cut and universal duty of the parties. Therefore, in the event the parties wish to ensure confidentiality, not just privacy, of the arbitration proceedings as a whole, they are advised to draft a contractual confidentiality obligation.

Conclusion

Both on a theoretical level, and in light of the rules applied in practice for institutional or ad hoc arbitration, a broad acceptance of confidentiality, including the parties’ duty of confidentiality, is not inherent in arbitration. Numerous arbitration rules regulate the privacy of hearings, and at times the duty of confidentiality is foreseen, either under express provisions, or through the possibility of an arbitral tribunal, to issue such an order. Nevertheless, privacy does not automatically result in confidentiality.

There is an inclination to move towards further transparency. The clash of interests of the parties considering confidentiality, versus public interest in disclosure, increasingly paves the way to limit the scope of confidentiality. Therefore, it is advised to all parties, who wish to have the arbitration proceedings confidential as a whole, to include a contractual confidentiality obligation.

[1] See English Court of Appeal decisions of Hassneh Insurance Co of Israel v Mew where the confidentiality is not questioned, Ali Shipping Corporation v “Shipyard Trogir” where the court expresses the need to determine the scope of such duty, and John Froster Emmott v Michael Wilson & Partners Limited, where the parties’ duty of confidentiality is affirmed; citations of which are provided in Nick Blackby and Constatine Partasides with Alan Redfern and Martin Hunter, Redfern and Hunter on International Arbitration, 5th Edition, Oxford University Press (“Redfern and Hunter on International Arbitration”), para. 2.149 to para. 2.151.

[2] Redfern and Hunter on International Arbitration, para. 2.152 to para. 2.157.

[3] See Stefano Azzali, Confidentiality vs. Transparency In Commercial Arbitration: A False Contradiction To Overcome, http://blogs.law.nyu.edu/transnational/2012/12/confidentiality-vs-transparency-in-commercial-arbitration-a-false/ (accessed on 27 April 2015).

[4] For the full text, please see http://www.iccwbo.org/products-and-services/arbitration-and-adr/arbitration/icc-rules-of-arbitration/ (accessed on 27 April 2015).

[5] For the full text, please see http://www.lcia.org/Dispute_Resolution_Services/lcia-arbitration-rules-2014.aspx (accessed on 27 April 2015).

[6] For the full text, please see https://www.swissarbitration.org/sa/download/SRIA_english_2012.pdf (accessed on 27 April 2015).

[7] Redfern and Hunter on International Arbitration, para. 2.148.

[8] For the full text, please see http://www.internationalarbitrationlaw.com/icdr-arbitration-rules/ (accessed on 27 April 2015).

[9] Arbitration World, Jurisdictional Comparisons, Ed. Karyl Nairn and Patrich Heneghan, Skadden, Arps, Slate, Meagher Flom (UK) LLP, 4th Edition, Global Overview, Constantine Partasides and Greg Fullelove, p.9.

[10] Michael McIlwrath, John Savage, International Arbitration and Mediation, A Practical Guide, Wolters Kluwer Law & Business, para. 1-144.