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“Confidentiality will never be absolute: a small circle of people will be aware of the
award and that circle will grow if the award gives rise to litigation before the courts
and thereby becomes public.”1 - Emmanuelle Gaillard and John Savage
Confidentiality has always remained synonymous with arbitration and has been accepted as one of the key principles of the process. Along with cost savings, expeditious resolution of disputes and enforceability of awards, the perceived existence of confidentiality, is seen as one of the key advantages of the arbitration process. The acceptable datum in international commercial arbitration is that when private parties have specifically contracted to resolve commercial disputes (arising between them) in a private forum, such as an arbitration, the parties are at liberty to withhold specifics about the matter from public scrutiny.
Per Fouchard, Gaillard, Goldman’s version is, confidentiality is a fundamental principle, and one of the main advantages of international arbitration.2. They stated further that “confidentiality of the arbitral process is not to be taken lightly”. Being a well-established principal in English law, references to confidentiality in arbitration can be found in cases dating over a century. Most notably, Sir George 1 Fouchard, Gaillard, Goldman on International Commercial Arbitration (Emmanuel Gaillard & John Savage ed. 1999) at 188.
2 Ibid. Jessel, in the case of Russell v. Russell3, stated the following while commenting on the arbitration clause in a partnership agreement in this way: “As a rule, persons enter into these contracts with the express view of keeping their quarrels from the public eyes, and of avoiding that discussion in public, which must be a painful one, and which might be an injury even to the successful party to the litigation, and most surely would be to the unsuccessful.”
Arbitration nations such as England, France and Switzerland claim confidentiality to be a fundamental principle of the arbitration process. Both French and English courts have heard and opined on numerous cases involving breach of confidentiality in the arbitration process, having established time and again, the implied duty to confidentiality as inherent to the arbitration process.
Arbitral rules of international institutions such as the International Chamber of Commerce (ICC), London Court of International Arbitration (LCIA), Singapore International Arbitration Centre (SIAC) and Hong Kong International Arbitration Centre (HKIAC), have also codified provisions that maintain confidentiality over the international arbitration process. At the same time, certain institutions such as UNCITRAL and the Stockholm Chamber of Commerce (SCC) Rules have a more
limited role of providing for private hearings and confidentiality of awards.
Empirical evidence available from the annual arbitration surveys conducted by Queen Mary University of London reveals that confidentiality remains high on the list of important factors considered by the respondents in selecting arbitration over litigation. For instance, the survey suggested that “87% of respondents attach some degree of importance to confidentiality, ranging from “very” to “somewhat” important.” 4 Proponents of confidentiality in international commercial arbitration (scholars and practitioners alike) also find favour in investor state arbitrations, specifically with regards to the public interest.
3 Russell v. Russell, (1880) 14 Ch. D 471 at 474-475.
4 Queen Mary University of London’s 2018 International Arbitration Survey: The Evolution of International Arbitration, exception built into the framework. Various cases (the Metaclad case5, Loewen case6 and the Methanex case7) have discussed and established the need for transparency in investor state arbitrations. In each of the above noted cases, it has been argued and established (with considerable conviction) that investor state arbitrations warrant a more open transparent process, unlike that adopted in international commercial arbitrations, since such disputes "Concerns the people as a whole" and parties have an implied duty to publicly disclose such
information.
Although both investor state arbitrations frameworks, North American Free Trade Agreement (NAFTA) and International Centre for Settlement of Investment Disputes (ICSID) do not contain specific rules relating to confidentiality, there is an implied obligation to transparency given the public interest nature of such disputes.
As we look in to the recent past however, we note a high degree of debate around the merits of confidentiality within the international arbitration community. The perceived existence of confidentiality has been challenged by various national courts at various times, to the extent that jurisdictions such as United States, Australia and Sweden, do not generally assume confidentiality in the arbitration process. The positions stated above find favour in the ruling by the Australian High Court in the case of Esso Australia Resources Ltd. et al. v the Honourable Sidney James Plowman et al, wherein the High Court denied existence of an implied duty of confidentiality in commercial arbitrations in Australia and found that even if such duty of confidentiality existed, it would be subject to a public interest exception in the circumstances of the case.
The Swedish Supreme Court in the case of Bulgarian Foreign Trade Bank Ltd v. A.I. Trade Finance Inc., ruled that parties to an arbitration are not bound by confidentiality and are not obliged to keep the fact that an arbitration is taking place confidentially. Therefore, under Swedish law, confidentiality is not deemed under arbitration agreements and ought to be provided expressly. Over the years, many other scholars and practitioners have propagated greater transparency in the arbitration processes. In fact, even under English law, which acknowledges an implied duty to maintain confidentiality in arbitral proceedings, arguments against confidentiality have found increasing favour.
An ideal example would be the case of Ali Shipping Corporation v Shipyard Trogir, wherein Potter J rejected the automatic connection between privacy and confidentiality and established a rule of three exceptions to the confidentiality protection under English law.
Having discussed arguments both for and against confidentiality in international commercial arbitration, the question remains unanswered; does confidentiality in international commercial arbitration undermines the legitimacy of the process?
In my opinion, the answer to the above question is in the affirmative. Yes, confidentiality does undermine the legitimacy of the international commercial arbitration process. In the following paragraphs, I have outlined how confidentiality, to a certain extent, impedes the expeditious resolution of disputes, thereby undermining the efficiency of the process, both from a time and cost perspective.
5 Metalclad Corporation v. United Mexican States (Award) (August 30, 2000), Case No. ARB (AF)/97/1, (International Centre for the Settlement of Investment Disputes Tribunal), online: World Bank http://www.worldbank.org/icsid/cases/mm-award-e.pdf;
6 The Loewen Group, Inc. and Raymond L. Loewen v. United States of America (Decision on Hearing of Respondent’s Objection to Competence and Jurisdiction) (5 January, 2001), Case No. ARB(AF)/98/3 (International Centre for the Settlement of Investment Disputes Tribunal),online: NAFTALAW.ORG http://www.naftaclaims.com;
7 Methanex Corporation v. United States of America (Decision of the Tribunal on Petitions from Third Persons to Intervene as "Amici Curiae"), (2001), (UNCITRAL), online: NAFTACLAIMS.ORG http://www.naftaclaims.com;
To elaborate, I would revisit the four key advantages of the arbitration process –
(1) cost efficiency, (2) expeditious resolution, (3) confidentiality, and (4) enforceability of awards.
I find it conflicting that on one hand the international commercial arbitration process seeks to provide an alternative, cost effective and expeditious solution to commercial disputes between private parties; and on the other, it restricts the compilation of a repository of precedents that would greatly assist in the expeditious and cost-effective resolution of dispute of same or similar nature.
I find solace in Lord Mance’s (a UK Supreme Court judge) statement that he made while arguing in favour of greater transparency in the arbitration process. Lord Mance saw confidentiality as an impediment to compiling meritorious judicial precedents and stated the following:
“An important point of reinsurance law which was resolved by an arbitrator in a case he appeared in as counsel in the 1980s did not come before the House of Lords [the precursor of the UK Supreme Court] until a decade later, when it was resolved in the same way. “There had been an arbitral decision on this for 10 years!” 8 I also find Sir Bernard Rix’s (a retired Court of Appeal judge) statement quite insightful. Sir Rix advocated and rightfully pointed out the detrimental and cascading affect closed-door, private arbitrations have on the progress of commercial law, in general. Sir Rix encouraged greater transparency in the arbitration process through publication of arbitral awards to facilitate the continued development of commercial law. Sir Rix stated the following: “Once however we come to awards which are concerned with standard forms of contracts, or jurisdictional issues, or principles of law, or important forms of interim relief, the lack of publication, the lack of transparency, the difficulty or impossibility of getting such awards into the public domain, a fortiori in the light of institutional rules which bar any challenge or appeal to the courts whatsoever, mean that our commercial law is going underground. As more and more international commercial cases go to arbitration rather than the courts, we are more and more losing sight of the basic feedstock of our commercial law.” 9 It must be noted that even proponents of confidentiality favour a publication of modified versions of awards, especially if it is done with the consent of the parties. In fact, many of the respondents to Queen Mary University of London’s 2018 International Arbitration Survey: The Evolution of International Arbitration, echoed Lord Mance and Sir Rix’s sentiments. The survey noted that “Many opined that publishing awards is likely to provide valuable insight into individual arbitrators’ general approaches, even where a degree of reduction is to be expected.” Although some survey respondents acknowledged that, “at least in some niche industries with a scarcity of players in the market, the tension between the desire to make arbitral awards available….
8 See Alison Ross, 'Is It Time to End Confidentiality by Default’ (16 June 2017) <http://globalarbitrationreview.com/article/1142992/is-it-time-to-endconfidentiality—by—default> accessed 2 May 2019. 9 The Jill Poole Memorial Lecture by the Lord Chief Justice: Keeping commercial law up to date, 8 March 2017, para 43; (citing Jones Day Professorship in Commercial Law Lecture, SMU, Singapore 12 March 2015)
….to users and the need to keep the identities of the parties confidential would likely render the publication of arbitral awards virtually impossible.”
Considering the above discussion, it is evident that there does not exist ‘Absolute Confidentiality’ in international commercial arbitration. There are exceptions to the rule such as public interest and disclosures relating to litigation, legal/regulatory compliances or to interested third parties. Solutions ought to be adopted that appropriately address the confidentiality and transparency concerns of (1) the participants of the arbitral process, and (2) other interest parties such as public (in general), scholars and practitioners. Over the years, practitioners have developed several measures in order to adequately and appropriately addressed confidentiality concerns in the arbitral process. Some of these measures are listed below:
redaction of confidential information;
restricted access to confidential information including restricted reference in materials submitted by the parties;
use of third parties; and,
specific measures arising with respect to testimonial evidence.
In conclusion and having discussed arguments both for and against confidentiality in international commercial arbitration, it appears that confidentiality, more often than not, does undermine the legitimacy of the international commercial arbitration process. Since ‘Absolute Confidentiality’ does not exist in international commercial arbitration and full transparency is difficult to attain (and not advisable), it is imperative to maintain a balance between protecting confidential information, securing due process and disclosure/ transparency requirements in the arbitral process.
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