Emma Van Son outlines the confidentiality of arbitral proceedings and how it is often taken to be one of the most important advantages of arbitration.
Unlike proceedings in a court of law, where as a general rule, the press and public are entitled to be present; international commercial proceedings have always been considered to be private in nature.
Allegations of bad faith, incompetence and worse are often made in the course of commercial disputes. It is understandable that the parties prefer such allegations to be aired in private rather than in public, where business reputations might be irreparably and unjustly tarnished. But what do "confidentiality" and "privacy" in arbitration actually mean?
Does the privacy of the arbitration proceedings translate into an obligation of confidentiality that binds the parties and the arbitrator?
The concepts of privacy and confidentiality can be distinguished in that privacy relates to the hearing and to the deliberations of the Tribunal, whereas confidentiality relates to the non-disclosure of any details with regard to the content of the materials and documents presented in the proceedings, the award, and the very existence of the arbitration itself.
The privacy of the hearing The position in respect of the privacy of the hearing is the least controversial and the majority of institutional rules are in agreement: the hearing is private. Article 21(3) of the International Chamber of Commerce ("ICC") Arbitration Rules 3 provides for the privacy of arbitral hearings and similarly Article 25.4 of the UNCITRAL Arbitration Rules states "hearings shall be in camera unless the parties agree otherwise". Arbitrations held under the rules of the Dubai International Arbitration Centre ("DIAC") are likewise private. Article 28.3 of the DIAC Arbitration Rules states "unless the parties agree otherwise in writing or the Tribunal directs otherwise, all meetings and hearings shall be held in private."The DIAC Arbitration Rules also expressly provide that the deliberations of the Tribunal shall be confidential to its members "except where an explanation of an arbitrator's refusal to participate in the arbitration is required..." The rules of the new DIFC/LCIA Arbitration Centre are expected to be released shortly. It is likely that these rules will be closely modelled on the current LCIA Arbitration Rules, which also expressly provide for the privacy of arbitration hearings4 and the confidential nature of the deliberations of the Tribunal. Is there a duty of confidentiality?
If the hearing is to be held in private, it would seem to follow that the documents disclosed and the evidence given at the hearing should be and should remain private. However, this assumption is not always valid. The position under the law varies markedly between jurisdictions.
While courts in some countries have recognised an implied duty of confidentiality, case law developments in other countries have not, and the courts have protected confidential information only when the circumstances require.
Case law
The writer was unable to locate any UAE judgments pertaining to this issue.
However, a number of English cases have recognised an implied obligation of confidentiality, but have insisted that this implied duty is subject to limitations that should be determined on a case by case basis.7 The classical view was outlined by the English Court of Appeal in Dolling-Baker v Merrett8, where the court found that an implied obligation of confidentiality existed in the arbitration process which extended to documents prepared in contemplation of arbitration or used in the process, transcripts, notes of evidence, testimonial evidence, and the award. In the recent case of Emmott v Michael Wilson Partners Ltd9, the Court of Appeal extended an exception to the general principle by concluding that the disclosure of arbitration materials in the "interests of justice" is not limited to the interests of justice in England, but includes the interests of justice in another jurisdiction.
In comparison, courts in other jurisdictions have rejected a general implied duty of confidentiality. In the controversial Australian case Esso Australia Resources Ltd v The Honourable Sidney James Plowmann,10 the High Court of Australia held that whilst the privacy of the hearing should be respected, confidentiality was not an essential attribute of the arbitral process. The court concluded that confidentiality could be overridden by legitimate public interest. Likewise courts in the United States have rejected a general implied duty of confidentiality.
In the US case United States v Panhandle Eastern Corp.11 the US Federal District Court said in obiter dicta that there was no implied obligation of confidentiality in arbitration and therefore in the absence an express confidentiality agreement or procedural rules guaranteeing confidentiality, arbitration proceedings were not necessarily confidential.
What about the use of an award obtained in one arbitration in a later arbitration relating to the same main agreement?
Should an award in those circumstances be confidential? In Associated Electric & Gas Insurance Services Ltd (AEGIS) v European Reinsurance Company Zurich (Bermuda) the Privy Council to consider whether an arbitration in one arbitration under a reinsurance agreement could be relied upon by winning party in another arbitration the same agreement, despite an express confidentiality agreement in respect the first arbitration. The Privy Council said that the legitimate use of an earlier award in a later, also private, arbitration between the same parties was the kind of mischief against which confidentiality agreement was directed.
The judgment has been described sensible in the circumstances of case in that "the private and, in theory, confidential nature of arbitration should not mean that the parties can go arbitrating the same point ad infinitum until they get the result they prefer."
Arbitration Laws
Very few arbitration laws deal the obligation to keep the arbitration proceedings confidential on the part the parties and/or the tribunal. Indeed, the current UAE arbitration law, which located in three chapters of the UAE Procedure Code, (Federal Law No ( 1992) is entirely silent on the issue confidentiality.
However, this situation is set to change with the introduction of the new Federal Arbitration Law, which was recently released in draft form.
The draft Law incorporates the entire text of the 1985 UNCITRAL Model Law and then augments this with clearly marked supplementary and additional provisions. The additional provisions address the issue of confidentiality of the materials in the proceedings and state that unless the parties agree in writing to the contrary, the parties undertake to keep confidential all awards, together with all materials in the proceedings, subject to any legal duty or the pursuance of a legal right. Likewise, the draft of the new DIFC Arbitration Law covers confidentiality of information relating to the proceedings, although it is arguable that the wording of the proposed clause is too narrow and may lead to excessive litigation by stipulating that information is confidential "except where disclosure is required by an order of the DIFC Court."
Arbitral Institution Rules
Some arbitral institutional rules also recognise the importance of confidentiality in arbitration and impose a duty of confidentiality upon the parties, although this can often be overridden in the public interest. The ICC Rules are silent on the issue of confidentiality; however the UNCITRAL Arbitration Rules provide that "the award may be made public only with the consent of both parties". Likewise arbitration conducted under the LCIA or DIAC Rules will have the benefit of clear guidance from the rules of both those institutions. The wording used in the LCIA Rules16 and the DIAC Rules is virtually identical. Article 41.1 of the DIAC Rules states "unless the parties expressly agree in writing to the contrary, the parties undertake as a general principle to keep confidential all awards and orders in their arbitration together with all materials in the proceedings created for the purpose of the arbitration and all other documents produced by another party in the proceedings not otherwise in the public domain...". The exceptions to this general principle occur in circumstances where disclosure is required by law, to protect or pursue a legal right or to enforce or challenge an award in bona fide legal proceedings.
What is the remedy for a breach of confidentiality?
Sometimes the existence of or even details relating to an arbitration are inappropriately disclosed by those involved in the case, especially in particularly large or controversial cases.
Incidentally, neither the DIAC nor the current LCIA rules provide guidance in the event of a breach of the provisions of confidentiality. The obvious remedy would be a claim for damages either in the local court, or in the DIFC Court. Any damages awarded in the Dubai courts are likely to be nominal. However, the DIFC Court is based on the English common law system and the damages awarded by that court could be much greater. Pursuant to the Law of Damages and Remedies (DIFC Law No 7 of 2005) parties can claim compensation for breach of an obligation or breach of a contract. The right to damages can either be exclusive or in conjunction with other remedies and the injured party is entitled to full compensation for the loss sustained.
Conclusion
In conclusion, the privacy of arbitration hearings appears to be a constant feature in all jurisdictions. However, because of the inconsistencies across jurisdictions and the variations between institutional rules, parties should not assume that the existence of the arbitration, the evidence, and the award will be kept confidential. To ensure the confidentiality of the entire proceedings it is advisable to arbitrate under the rules of an institution which expressly protect privacy and confidentiality, such as the DIAC or LCIA Rules, or to enter into a specific confidentiality agreement, although even this may be overturned in some jurisdictions if there is an overriding public interest.
By Emma van Son Corporate Commercial Department
© Al Tamimi & Company 2008
