Historically in England, it has been assumed that confidentiality and privacy is an essential feature of arbitration as an implied condition in the agreement to arbitrate. This represents the classical view or approach with regard to confidentiality in international commercial arbitration . This view is accepted by civil law countries, mainly by France, Germany and Switzerland .
However, High Court of Australia came up with a different view. They rejected the English view or common view on confidentiality in international commercial arbitration, in Esso Australia Resources Ltd and Ors v. Plowman (Minister for Energy and Minerals) and Ors . The Australian High Court held that, in the light of the public interest, confidentiality was not a vital element of private arbitration and an arbitration agreement contained no implied term as to confidentiality . United States of America also accepted this view .
In general, the duty of confidentiality is not based on statutes; it is just an assumption that confidentiality is an implied term in international arbitration. The UNCITRAL Model Law and the National Laws of foremost commercial nations is silent on confidentiality. There is no consensus on this topic in international arbitration community, so confidentiality and privacy is not assured in international commercial arbitration unless it is expressly mentioned in arbitration agreement .
Different Approaches to the Doctrine of Confidentiality:
a) Orthodox or traditional view:
English law and civil law countries like France, Germany and Switzerland represents this view.
In Dolling-Baker v. Merret , the English Court of Appeal held that there is an implied obligation of confidentiality arising out of the nature of the arbitration itself. However, the Court of Appeal in this case held that with regard to the production of documents, if it is proved that the disclosure of the documents is necessary for a fair trial of a third party, this consideration should prevail over implied obligation of confidentiality. When the court arrived at this decision, the court should consider amongst other things, whether there are other and possibly less costly ways of obtaining the information, which is sought and do not involve breach of implied obligation of confidentiality.
Consequently, in another case the English Court acknowledged the existence of an implied duty of confidentiality as the natural extension of the undoubted privacy of the hearing in an international commercial arbitration :
Hassneh Insurance Co. of Israel v. Steuart J. Mew
In this case, according to Justice Coleman, if it be correct that there is an implied term in every agreement to arbitrate that the hearing shall be held in private, the requirement of privacy must in principle extend to documents which are created for the purpose of that hearing. The most obvious example is note or transcript of the evidence. The disclosure to a third party of such documents would be almost equivalent to opening the door of the arbitration room to that third party. Similarly, witness statements, being so closely related to the hearing, must be within the obligation of confidentiality. So also must outline submissions tendered to the arbitrator. If outline submissions, then so must pleadings be included. Thus, it was held that, privacy is meaningless without its confidentiality corollary with regard arbitration process. Even in this case the court found an exception to the confidentiality rule and held that disclosure of an arbitral award was permissible, if necessary to establish causes of action in a subsequent proceeding .
In addition, in the above case Judge made a distinction between arbitration award and the documents of the proceedings. Judge declined to widen the freedom to disclose more than the award and its reasons and thought it is understandable that pleadings, witness statements and outlines were subject to confidentiality. To make public such documents without the permission of the arbitrating parties would be a
breach of confidentiality.
In Ali Shipping Corporation v. Shipyard Trogir , the English Court of Appeal restated the classical or traditional position and held that confidentiality was established on privacy of the arbitral proceedings and that an implied term as to the confidentiality of arbitration was “[a term] which arises as to the nature of the contract itself implicitly requires” which the law would imply as a necessary incident of a definable category of contractual relationship. However, the boundaries of the obligations of confidentiality, which thereby arise have yet to be demarcated .
In London & Leeds Estates Ltd. v. Paribas Ltd
English Courts allowed an exception when public interest demanded disclosure, on the other hand, it has been interpreted that, the Judge was making reference to public interest keeping in mind the interest of justice. It is better to accept such an exception in the interest of justice than in public interest, within traditional English view.
The French view is also in line with traditional English view. In France, confidentiality is the main principle of international commercial arbitration. According to French view, parties refer to arbitration only because of the Doctrine confidentiality and its attachment to arbitral proceedings .
The French view is clearly expressed in Aita v. Ojjeh , a party sought annulment in France of an arbitral award rendered in London. The Court of Appeal in France ruled against the party, who sought annulment. The court held that, the annulment proceedings violated the principle of confidentiality of arbitral proceedings, because this action of the party initiated a public debate of facts, which should remain confidential. Therefore, the party who sought annulment in France is ordered to pay penalty for violating the doctrine of confidentiality.
The Swiss and German view on the Doctrine of Confidentiality is same as the traditional English and French view. Confidentiality is vital part of arbitration and therefore, the parties had an implied duty of confidentiality arising from arbitration agreement itself. Confidentiality is one of the main reasons why people choose arbitration against litigation and the arbitral award should be published only with the permission of the parties. The doctrine of confidentiality in Germany is based on customary laws and it is functioning without the support of proper legislation .
b) New or Present View:
“The present view in international commercial arbitration is to distinguish between the unquestioned privacy of the hearing and the confidentiality of the arbitral proceedings as a whole .” This trend is mainly influenced by arbitrations, in which there is a genuine public interest i.e. the decision of the arbitral tribunal will affect the public .
In Esso Australia Resources Ltd v. The Honourable Sidney James Plowman
The Australian Court held that, the privacy of the hearing should be respected but even then, the confidentiality was not an essential attribute of private arbitration. Especially when the court found that, a requirement to conduct proceedings in camera did not translate into an obligation prohibiting disclosure of documents and information provided in, and for the purpose of, the arbitration. Although a certain degree of confidentiality might arise in certain situations, it was not absolute. The public’s legitimate interest in obtaining information about the affairs of public authorities prevailed over the doctrine of confidentiality. The real meaning of this judgement is that, the parties could no longer expect that any element of their arbitral proceedings would remain protected by an umbrella of confidentiality .
According to the Australian Court, confidentiality is not part of the inherent nature of the arbitration contract and of the relationship thereby established and any possible duty of confidentiality is vulnerable to clear public interest exception .
In another Australian Case, Commonwealth of Australia v. Cockatoo Dockyard Pty Ltd , the Court of Appeal of New South Wales held that, the arbitrator cannot impose the obligation of confidentiality that will prevent the government from disclosing information and documents to state agencies or to the public. Once again the new trend related to the doctrine of confidentiality is reaffirmed.
In United States v. Panhandle Eastern Corp , the American view on Doctrine of Confidentiality is reaffirmed. American Statutes are silent on confidentiality and arbitration proceedings. Consequently, the parties are not required to keep confidentiality with regard arbitration proceedings unless the applicable rules or arbitration agreement by the parties expressly provides. In the above case, the court held that in the absence of explicit agreement by the parties or institutional rules on point, arbitration proceedings are not necessarily confidential. Moreover, in America the information given in arbitration proceedings should be disclosed in order to serve the public interest even if the parties agreed for confidentiality . The same is the case with Sweden.
Arguments in support of Confidentiality Doctrine:
Arbitration is an excellent way of resolving commercial disputes in international scenario. The international arbitration community traditionally accepted confidentiality of documents and proceedings. The supporters of confidentiality argued that the difference between privacy and confidentiality is highly unrealistic, because the concept of privacy is meaningless, if the confidentiality doctrine is not followed, meanwhile they recognise the presence of exceptions as well. However, the exceptions should be determined on a case-by-case basis . If both private interest and public interest needed the disclosure of documents and proceedings, then breach of confidence is not a matter of question. For the enforcement of arbitral awards, sometimes it should be revealed to the court of law, but it is done to protect the private interest. It is argued that, if everybody involved in arbitration is accepting the confidentiality doctrine then it should be treated as fundamental principle. Moreover, the group in favour of confidentiality doctrine also accepts that the, disclosure of a modified version of awards, proceedings and documents for academic studies and legal reference.
“The primary justification for confidentiality in international arbitration is party autonomy. If parties value privacy and confidentiality, they should be able to resolve their disputes in a manner that respects their priorities. This is a valid justification for confidentiality rule, since international commercial arbitration is private regime in the sense that private parties pay for the use of the system, not the taxpayers .”
In Esso Case, strict legal theory left no space for doctrine of confidentiality; this subordinated the system, which is considered as an effective way to achieve justice by minimal interference, to an undefined exception of public interest .
In Codock Case, Public interest took precedence and this confidentiality model put the State and state entities in a more encouraging position than others .
“The possibility of protecting confidentiality is limited, however confidentiality can be protected by including confidentiality provisions in the arbitration agreement, parties should keep in mind the confidentiality while drafting other sections of arbitration agreement and the parties can consider a protective order or stipulation or provisional measures to ensure the confidentiality of arbitration proceedings .”
The usual remedies in the event of breach of the confidentiality obligation is injunctive relief against further disclosures or monetary damages, either from the arbitral tribunal if it has the power to do so or from the court. It is not necessary to show that prejudice will be caused by the disclosure .
Arguments against Confidentiality Doctrine :
“There are several arguments against a duty of confidentiality in international commercial arbitration. Protecting the confidentiality of arbitral proceedings can produce inconsistent resolutions of disputes arising out of the same transaction. Protecting the details of arbitral proceedings and final awards can be inefficient. Much international commercial arbitration involves common issues of law or facts.
Beyond efficiency, there are additional economic and public policy reasons why publication of awards and the resulting precedent system created would be beneficial. The release of procedural orders and awards may be useful for the purpose of training current and future arbitrators.
The realities of the current system may make protection of confidentiality a wasted effort. Confidentiality is often undermined by enforcement and challenge proceedings in national courts. Many parties solicit a reciprocal confidentiality obligation without giving thought to the opportunities and rights they may be foreclosing as a result. In addition to the obvious advantages – beneficial publicity following a favourable award .”
The need for openness and transparency with regard to the arbitration is gaining acceptance internationally, especially when it is related to state and its actions have a public interest element.
In Australia and New Zealand v. Japan Southern Bluefin Tuna, there is an unprecedented depart from the fundamental principle of privacy of arbitration proceedings and in Ireland v. United Kingdom, the parties agreed for the hearings and awards to be open to the public .
The issue of greater transparency with regard to the resolution of disputes between the states was raised in Doha declaration of WTO. The European Union and the USA responded to this issue more swiftly. The trend towards transparency in dispute resolution process has been given much importance since then, including arbitration. A free trade agreement between Singapore and USA dated May 2003 includes express provisions for transparency in arbitral proceedings .
Institutional Arbitration and Confidentiality Doctrine:
The rules of the main Institutions, offer confidentiality in one way or another. Nevertheless, the Institutional Rules only provide obligation of confidentiality for the arbitrators and the institution itself .It is interesting to note the different approaches taken by ICC and LCIA in the drafts of their new Rules, even though they were drafted at the same time. It shows how complex this issue is, and it also illustrates the
difficulties in drafting a reasonable provision regarding confidentiality. UNCITRAL rules are in unique pose, because it represents the common views of the world. WIPO rules are the best in institutional arbitration, because it gives a detailed directions with regard to the confidentiality. The main reason behind this innovative and descriptive provision is that, WIPO deals with intellectual property rights and which needs more confidentiality . Even then there is a lack of consensus among institutions.
Conclusion:
The Confidentiality Doctrine and Public interest are conflicting principles. Generally, it is believed that arbitral proceedings by their nature private and confidential. But when it is dealing with a third party or involve functioning of a state, then there is a need for openness rather than secrecy . A state or a multinational corporation is using the Doctrine of Confidentiality in arbitration to hide their business dealings is not acceptable, because it may affect millions of people.
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