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18 Jun 2010

Is the duty of confidentiality in international commercial arbitration an unwarranted assumption?

by Saloni Kantaria

Since parties can no longer assume that the existence of the arbitration, the evidence, and the reasons for the award will be kept confidential, they should consider to include express provisions in their arbitration agreement which deal with confidentiality.

Given that arbitration is a private system of adjudication and provides the parties substantial autonomy and control over the process to resolve their disputes, it is hardly surprising that commercial parties assume that an arbitration agreement between the parties includes an implied duty of confidentiality.

This assumption appeared to be warranted until the High Court of Australia's decision in Esso Australia Resources Ltd v Plowman (1995) 183 CLR 10. Esso sparked the debate on the existence, nature and scope of the duty of confidentiality in arbitration worldwide and brought into question this assumption. While there has been more consideration given to this issue by courts worldwide, there is no consistency in their decisions.

The issue for the High Court in Esso was whether a third party, that was not a party to the arbitration proceedings, is entitled to discovery of information and documents concerning the arbitration.

The High Court held that a general duty of confidentiality is not to be implied in an agreement to arbitrate, since confidentiality is not "an essential attribute" of a private arbitration, whether on the grounds of long-standing arbitral custom and practice, or in order to give efficacy to the private nature of arbitral proceedings. Although it was said that this decision "crashed like a giant wave - a veritable Australian tsunami - on the shores of jurisdictions around the world", decisions by courts in the United States suggest that the High Court of Australia's decision to reject an implied duty of confidentiality in arbitration is not unique to Australia.

The US position - Panhandle

In United States v. Panhandle Eastern Corp 119 F.R.D. 346 (D.Del.1988), the US Federal Government sought to have Panhandle, a U.S. company, produce documents from an ICC arbitration between Panhandle's subsidiary and the Algerian state oil company. Panhandle sought to block discovery on the basis that arbitration is confidential in nature and the disclosure would frustrate the parties' expectations. The US Federal District Court held that there is no inherent duty of confidentiality unless the parties contract for it. This blanket approach taken by the Australian and US courts has not been adopted in the UK.

English courts and confidentiality of arbitration

Case law over the last 20 years in the UK has established that there is an obligation, implied by law and arising out of the nature of the arbitration, on the parties:

  • not to disclose or use for any other purpose any documents prepared for and used in the arbitration, or disclosed or produced in the course of the arbitration, or transcripts or notes of the evidence in the arbitration or the award; and
  • not to disclose in any other way what evidence has been given by any witness in the arbitration.

More recently, the English Court of Appeal in the case of Emmott v Michael Wilson & Partners Ltd [2008] EWCA Civ 184 acknowledged that there was an obligation, implied by law, on both parties not to disclose for any other purpose any documents prepared for and used in arbitration. However, the court recognized four circumstances in which disclosure may be permissible:

  • where there is consent;
  • where there is an order or leave of the court;
  • where it is reasonably necessary for the protection of the legitimate interests of an arbitrating party; and
  • where the interests of justice and (perhaps) the public interest require disclosure.

The court concluded that the interests of justice required the English court, so far as possible, to ensure that the parties to the London arbitration should not seek to use the cloak of confidentiality with a view to misleading foreign courts, particularly where the foreign cases raised the same or similar allegations and were proceeding in parallel with the arbitral proceedings.

Conclusion

The divergence of views across jurisdictions on the existence, nature and scope of the duty of confidentiality in arbitration demonstrates that there is no absolute certainty that the law of the seat of the arbitration will recognise or support the confidentiality of the arbitration process. To overcome this uncertainty, commercial parties should expressly incorporate a confidentiality provision in their arbitration agreement, which factors in the following:

  • whether it is the proceedings, the documents, the award and/or possibly the very existence of the arbitration which should be kept confidential;
  • whether such information may be made public in specified circumstances, such as enforcement proceedings, court challenges, compulsion of law, or to satisfy insurers, auditors and other persons for the purpose of protecting legitimate interests of an arbitrating party; and
  • what sanctions are to follow in the event of a breach.

The easiest way to cater for such provisions is to adopt a set of arbitration rules which already provide for detailed confidentiality provisions, for example the Arbitration Rules of the Australian Centre for International Commercial Arbitration (ACICA) which contain very detailed provisions concerning the various aspects of confidentiality throughout the arbitration. Article 18 of those Rules says:

"18 Confidentiality

18.1 Unless the parties agree otherwise in writing, all hearings shall take place in private.

18.2 The parties, the Arbitral Tribunal and ACICA shall treat as confidential and shall not disclose to a third party without prior written consent from the parties all matters relating to the arbitration (including the existence of the arbitration), the award, materials created for the purpose of the arbitration and documents produced by another party in the proceedings and not in the public domain except:

(a) for the purpose of making an application to any competent court;

(b) for the purpose of making an application to the courts of any State to enforce the award;

(c) pursuant to the order of a court of competent jurisdiction;

(d) if required by the law of any State which is binding on the party making the disclosure; or

(e) if required to do so by any regulatory body.

18.3 Any party planning to make disclosure under Article 18.2 must within a reasonable time prior to the intended disclosure notify the Arbitral Tribunal, ACICA and the other parties (if during the arbitration) or ACICA and the other parties (if the disclosure takes place after the conclusion of the arbitration) and furnish details of the disclosure and an explanation of the reason for it.

18.4 To the extent that a witness is given access to evidence or other information obtained in the arbitration, the party calling such witness is responsible for the maintenance by the witness of the same degree of confidentiality as that required of the party."

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