Authors: Saumya Sinha*
| Jurisdiction: International |
Topics:
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I. Introduction
Arbitration has witnessed remarkable growth in the recent past and has emerged as parties’ preferred choice of dispute resolution mechanism in commercial disputes. One of the several reasons for its popularity is the private nature of the arbitral process, which helps the parties keep their disputes confidential.[1] The principle of confidentiality in arbitration proceedings implies that the information, documents, evidence adduced during the proceedings and the award rendered, cannot be made available in the public domain. The parties and the tribunal are obligated to uphold the confidentiality of such content, subject to reasonable exceptions. The principle assumes great significance as the dissemination of commercially sensitive information can potentially result in consequences ranging from reputational damage to monetary losses to the concerned parties.
The principle of confidentiality has consistently remained an unsettled issue before the judicial authorities. In the recent Amazon-Future dispute, the breach of a confidentiality clause was raised as a significant concern by the Future Group.[2] That clause purported to prohibit the parties involved in arbitration from disclosing the contents of the arbitral process except for the purpose of enforcement of the award, thereby rendering contentious the disclosure of such information during court proceedings. The England and Wales Court of Appeal was also faced with the issue of confidentiality vis-à-vis the principles of open justice in the context of arbitration proceedings earlier this year.[3] Noting that arbitral confidentiality engages both public interest as well as private interests of the parties, the Court iterated that the parties’ contractual arbitration agreements shall constitute the fulcrum for rendering a decision on protection of confidentiality.[4] Canadian courts have also recurrently dealt with the issue, enunciating that the applications for confidentiality of arbitral disputes before the courts need to be evaluated on a case-to-case basis depending on actual necessity, so as to protect the confidence in public administration of justice.[5]
Although many countries have endeavoured to statutorily or judicially recognize the principle of confidentiality in arbitration, there still remain several concerns that surround the subject. For instance, there persist inadequacies and non-uniformity across various jurisdictions in their legal framework of arbitration for implementation of confidentiality. Further, most jurisdictions do not regulate the duty of confidentiality when the arbitration disputes go before the courts of law. This poses a notable disadvantage to the parties involved, considerably failing to protect the private nature of the arbitral process. This blog post seeks to address the issue of implementing confidentiality in arbitration disputes when they are before the courts, as it contradicts the broader principle of open justice. It further evaluates the existing legal regime across various jurisdictions and seeks to provide viable recommendations intended to fill the persisting lacunae in the law.
II. Confidentiality Concerns in Arbitration Disputes Before Courts
A. Statutory Framework
Most jurisdictions, including India, have adopted the UNCITRAL Model Law on International Commercial Arbitration (“UNCITRAL Model Law”) as the basis of their respective arbitration legislations. Pertinently, the UNCITRAL Model Law does not contain specific provisions concerning the principle of confidentiality. Therefore, the statutory framework varies significantly across jurisdictions in the context of confidentiality in arbitration proceedings. Some countries expressly recognize the principle in their statutes, while others do not impose such an obligation on the parties or the tribunal.
1. India
The Arbitration and Conciliation Act, 1996 (“the Act”) did not incorporate provisions concerning confidentiality at the commencement of the statute. Thereafter, pursuant to the recommendations of B.N. Srikrishna J Committee’s report on confidentiality in arbitration, which derived its inspiration from Hong Kong’s Arbitration Ordinance, Section 42A was incorporated via the 2019 Amendment to the Act.[6]
Section 42A prescribes the obligation of the arbitrator, arbitral institution, and the parties to the arbitration agreement to maintain the confidentiality of all arbitral proceedings, except the award, where its disclosure is necessary for its implementation and enforcement.[7] Although the legislature has endeavoured to statutorily recognize confidentiality as a legal duty in arbitration by incorporating Section 42A into the Act, the provision exhibits several anomalies.
Firstly, Section 42A imposes the constraint of maintaining confidentiality on the arbitrator, arbitral institution, and the parties to the arbitration agreement only. It fails to encompass within its sphere, third parties, witnesses, experts, and the likes involved in the proceedings, who could potentially jeopardize the confidential nature of the proceedings. This naturally poses a challenge in proceedings implicating consolidated hearings or the impleadment of non-signatories.
Secondly, the provision limits the exceptions to confidentiality to the disclosure of the award for the purpose of implementation and enforcement. The provision thereby fails to account for the instances where the parties may seek judicial intervention for purposes other than implementation and enforcement, such as for grant of interim reliefs under Section 9 of the Act.[8]
Thirdly, the provision merely lays down the duty to maintain confidentiality and fails to address the consequences of non-observance of such duty as a corollary. The effect of such non-observance on the validity of the award and the proceedings, therefore, remains unclear.
Fourthly, neither the statutory framework nor the judicial precedents have sought to address the juxtaposition between the concepts of arbitral confidentiality and the principle of open justice to be followed by the courts.
The law on confidentiality has not been adequately addressed and interpreted by the Indian judiciary yet, although the same has been iterated by the courts in mediation[9] and conciliation.[10]
2. United Kingdom
The English Arbitration Act, 1996 does not contain explicit provisions regarding confidentiality. However, the English Courts have time and again acknowledged the confidential nature of arbitration proceedings. In John Forster Emmot v Michael Wilson & Partners, the English Court of Appeal upheld the obligation of confidentiality in arbitration to be implied by law by the very nature of arbitration. Earlier, in Dolling-Baker v Merret, among other cases, the Court had ruled that “there must be some implied obligation on the parties not to disclose or use for any purpose any document used in arbitration … save with the consent of the other party or pursuant to an order or leave of the court.” A similar approach has been adopted by English courts on various instances, upholding an implied duty of confidentiality. The courts have further laid down that such a duty is not absolute[11] and is subject to the exceptions where disclosure is reasonably necessary for protecting the interests of a party, public interest, or interests of justice.[12]
3. Singapore
In Singapore, a similar implied duty of confidentiality has been pronounced by the courts and the level of confidentiality to be observed is to be determined on a case-to-case basis, based on the factual matrix.[13] Pertinently, unlike most other jurisdictions, the Singapore International Arbitration Act (“SIAA”) acknowledges and provides for the preservation of confidentiality when the arbitration disputes are before the courts. Section 22 of SIAA provides that the proceedings under the act before the courts shall be heard otherwise than in open courts, on the application of any party to the proceedings. Further, when such disputes are before the courts, the courts are empowered to give necessary directions regarding what information relating to the proceedings may be published, provided the parties mandatorily consent to such publication.[14]
4. Scotland and Hong Kong
The Arbitration (Scotland) Act, 2010 allows a party to any civil proceedings relating to an arbitration to apply to the court for an order prohibiting the disclosure of the identity of a party to the arbitration in any report of the proceedings.[15] This provision paves way for the protection of confidentiality in arbitration-related court proceedings and deflects damage to the concerned parties.
The arbitration regime of Hong Kong explicitly recognizes confidentiality as an obligation upon the parties, unless the parties to the arbitration agreement have a differential agreement, under the Hong Kong Arbitration Ordinance.[16]
5. Jurisdictions that do not recognize the duty of confidentiality
In contrast to the above, the arbitration statutes of Indonesia, Japan, and the People’s Republic of China do not regulate confidentiality in arbitration proceedings and leave the same to the agreement between the parties and institutional rules. Similarly, no such duty of confidentiality is imposed by the Federal Arbitration Act and the Uniform Arbitration Act of the United States. The legal regime of France stipulates an implied duty of confidentiality only in domestic arbitration and does not establish such a mandate for international arbitrations.[17] Interestingly, the arbitration statute of Norway provides for the non-confidentiality of arbitration proceedings, unless otherwise agreed by the parties.[18]
The above discussion categorically exhibits that the arbitration statutes of most jurisdictions do not regulate the implementation of confidentiality when the disputes go before the courts, with the exception of SIAA and Arbitration (Scotland) Act, which contain provisions for furthering the objective of upholding the confidential nature of arbitration disputes in judicial proceedings.
B. Institutional Rules
The various arbitral institutions across the globe adopt distinguishable approaches in the context of the principle of confidentiality. Though most institutions recognize a duty of confidentiality in their rules, the degree and ambit of such recognition are different. Institutions such as the London Court of International Arbitration (“LCIA”) and the Singapore International Arbitration Centre (“SIAC”) and the Swiss Arbitration Centre stipulate detailed provisions regarding confidentiality and oblige the arbitrators and parties alike.
Article 30 of LCIA Rules impose an obligation upon the parties, the arbitral tribunal, any tribunal secretary, and experts to maintain the confidentiality of “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.”[19] Similarly, Rule 39 of SIAC Rules, 2016 provides for the observance of the duty of confidentiality by persons associated in the arbitration proceedings, subject to the consent of the parties otherwise.[20] Article 44 of the Swiss Rules of International Arbitration enshrines an analogous mandate.[21] The Mumbai Centre for International Arbitration (“MCIA”) mirrors the SIAC Rules on the aspect of confidentiality.[22] These rules allow for certain exceptions to the general principle of confidentiality and permit disclosures pursuant to legal orders, for enforcing a legal claim or right, or for purposes such as challenge and enforcement of arbitral awards, etc.
Some institutions, on the other hand, only establish the duty of confidentiality on arbitrators and not on the parties. For instance, the ICC rules only compel the arbitrators and the staff of the International Court of Arbitration to uphold the confidentiality of the proceedings and not the parties to the dispute.[23] Similarly, the rules of the International Centre for Dispute Resolution (“ICDR”) impose the duty of confidentiality only on arbitrators and administrators.[24]
Essentially, the institutional rules, in the context of confidentiality, limit their expanse to the arbitral procedures and do not regulate the observance of the same when the disputes are before courts of law. In fact, such a situation falls under the permitted exceptions to the duty of confidentiality under these rules.
III. Recommendations for Establishing a Robust Mechanism for the Protection of Confidentiality in Courts
A perusal of the above-discussed legal framework on confidentiality suggests that most jurisdictions lack the regulation of confidentiality when the disputes are before the respective courts. Such a prevailing inadequacy of statutory regulation presents potential anomalies that may persist when the disputes go before the courts and commercially sensitive information needs to be protected. To address the same, the following segment proposes considerations for establishing a legal framework for the observance of the duty of confidentiality in arbitration when the disputes are before the courts.
1. Well-defined statutory framework: Drawing inspiration from the SIAA and Scotland Arbitration Act, the legislatures of other countries need to incorporate explicit provisions concerning the implementation of confidentiality in arbitration disputes when they are before the courts, in the arbitration statute itself. The provision must entail that the parties and others involved in the proceedings before the court undertake to maintain the confidentiality of the information exchanged during the resolution of the dispute. Such proceedings should necessarily be conducted in camera, if so requested by either party unless the interests of justice warrant an open hearing. Further, the provision must detail the contours of its application in definitive terms and lay down exceptions thereof.
2. Defining the contours and exceptions to confidentiality: Ideally, the provision must encompass within the ambit of its application, not only arbitrators and the parties but also any third party, secretaries, and administrative staff to the arbitral institution and the respective court, witnesses, experts, rapporteurs, etc. The same modification needs to be brought to Section 42A of the Act as well, relating to confidentiality in arbitration proceedings.
The permitted exceptions to the mandate must also be detailed in the statute concisely, a suggested list of the same is enumerated as follows: (a) where the disclosure is necessary for the protection of interests of either party; (b) where the disclosure is necessary for public interest; (c) where the disclosure is necessary in the interests of justice;[25] and (d) where such disclosure is required by statutory regulations. Disclosure may also be allowed in light of an agreement by the parties to such effect.
Essentially, the courts while exercising their discretion to order disclosure on grounds of public interest or interests of justice, must do so after comprehensive scrutiny of the facts and circumstances involved in the particular dispute. The judicial discretion to order disclosure must be applied sparingly, avoiding adverse impacts on either party to the underlying arbitration agreement.
3. Consequences of breach: As discussed earlier, Section 42A of the Indian Act, like statutes of other jurisdictions, does not provide for the repercussions of the breach of duty of confidentiality that may arise. The provision for implementation of confidentiality in courts, as well as arbitral tribunals, must categorically outline the consequences that may follow from its breach. It is suggested that the consequences must depend on the degree of the breach, and may range from grant of damages to invalidating the respective order/proceedings during which such breach takes place.
4. Publication of the court’s decision with the parties’ consent and anonymity: The judgments of civil proceedings in matters relating to arbitration must not be published and made available in the public domain without the consent of the parties to the proceedings, unless the court determines such publication to be necessary in public interest or the interests of justice. Further, the practice of maintaining the anonymity of the parties, redaction of sensitive information from the decision before publication, and sealing the court files must be encouraged.
Conclusion
The implementation of confidentiality in arbitration disputes before courts is a necessary corollary of administering justice to the parties involved in commercially sensitive disputes. However, the aforesaid implementation poses several complexities owing to the contradictory nature of judicial proceedings. The lack of a well-defined statutory regime in this context serves to aggravate the issue in the current scenario. Taking insights from the laws of certain jurisdictions which encompass requisite provisions for implementing confidentiality in courts, necessary amendments need to be made to the legal framework to ensure effective implementation of the duty of confidentiality. The courts will also play a crucial role in interpreting and exercising judicial discretion to allow exceptions to the general principle of confidentiality. The establishment of an efficacious legal mechanism will further the objectives of arbitration and stimulate the confidence of the parties in the dispute resolution process.
*Saumya Sinha is a student at National University of Study and Research in Law, Ranchi (India). She is interested in international arbitration and commercial litigation, and can be reached at sinhasaumya300@gmail.com.
[1] Shailesh Dhairyawan v. Mohan Balkrishna Lulla (2016) 3 SCC 619 (Ind.).
[2] IANS, ‘Confidentiality clause latest flashpoint in Amazon-Future dispute’ CNBC (Oct. 28, 2020), https://www.cnbctv18.com/business/companies/confidentiality-clause-latest-flashpoint-in-amazon-future-group-dispute-7323981.htm.
[3] CDE v. NOP [2021] EWCA Civ 1908 (U.K.).
[4] Id.
[5] USA Inc. v. Mondofix Inc. (2020) QCCS 1104 (Can.); Ontario Inc. v. Donato (2017) ONSC 4975 (Can.).
[6] B. N. Srikrishna, Report of the High Level Committee To Review the Institutionalisation of Arbitration Mechanism in India (July 30, 2017) (Ind.).
[7] The Arbitration and Conciliation Act(1996), § 42A (Ind.).
[8] Jaideep Khanna, Confidentiality under the Indian Arbitration Regime, 3 Ind. Arb. L. Rev. 84 (2021).
[9] Perry Kansagra v. Smriti Madan Kansagra (2019) 20 SCC 753 (Ind.).
[10] Govind Prasad Sharma v. Doon Valley Officers Cooperative Housing Society Ltd. (2018) 11 SCC 501 (Ind.).
[11] Milsom & Ors. v. Ablyazov [2011] EWHC 1846 (Ch) (U.K.).
[12] John Forster Emmott v. Michael Wilson & Partners Ltd. [2008] EWCA Civ 184 (U.K.).
[13] International Coal Pte Ltd v. Kristle Trading Ltd & Anor. [2008] SGHC 182 (Sing.).
[14] Singapore International Arbitration Act (1994), §§ 22, 23.
[15] Arbitration (Scotland) Act (2010), § 15.
[16] Hong Kong Arbitration Ordinance (2011), § 18.
[17] Code de Procédure Civile [C.P.C.] (Civil Procedure Code) arts. 1464, 1479 (Fr.).
[18] Norwegian Arbitration Act (2004), § 5.
[19] LCIA Arbitration Rules (2020), art. 30.1.
[20] SIAC Arbitration Rules (2016), rule 39.1.
[21] Swiss Rules of International Arbitration (2021), art. 44.1.
[22] MCIA Rules (2016), art. 35.
[23] ICC Arbitration Rules (2021), art. 8 of appendix 1, art. 1 of appendix II.
[24] ICDR International Arbitration Rules, 2021, art. 40.1.
[25] See, e.g., Esso Australia Resources Ltd v. The Honourable Sidney James Plowman and Ors (1995) 183 CLR 10.