Confidentiality in Arbitration

This summary article was written by members of academic unit, USIM Moot Club. Enjoy reading!

ARTICLE SUMMARY

Title: CONFIDENTIALITY IN ARBITRATION: Fundamental Virtue or Mere Illusion?

Published on: October 10, 2013

Prepared by: Nur Hasya Amni Binti Azizan

Retrieved from: https://www.aiac.world/news/189/CONFIDENTIALITY-IN-ARBITRATION:-Fundamental-Virtue-or-Mere-Illusion?

This article argues on whether confidentiality in arbitration is a fundamental virtue or mere illusion. Arbitration serves as an alternative to litigation and generally known to be conducted in private and confidential manner. Due to its nature that is private and confidential, arbitration is favourable among parties who wish to resolve disputes without the knowledge of the public. Privacy in arbitration means that arbitration proceedings are not easily accessible by anyone. This is because arbitration proceedings are not open to public scrutiny and the right to attend the arbitration proceedings is subject to the consent of the parties. Confidentiality in arbitration on the other hand, refers to the obligation to keep all material disclosed or created during proceedings, the proceeding and the arbitral award away from the third parties. This obligation is owned by the tribunal, parties, their representatives, witnesses and any involved individuals during the proceedings and can only be revoked with the consent of the parties. In terms of confidentiality in arbitration, many people assume that confidentiality is secured. In this article, the writer notes few crucial points in regards with confidentiality in arbitration which readers may be surprised to learn.

First, the writer addresses the implied duty of confidentiality in arbitration. While several countries namely the United Kingdom and France recognised the implied duty of confidentiality in arbitration, other countries for example Australia and the United States believed otherwise. In Australia, the judges and the courts believed that confidentiality could be agreed to expressly but could not be automatically implied. In the case of Esso Australia Resources Ltd v The Honourable Sidney James Plowman (Minister of Energy and Minerals) & 2 Others that occurred in 1995, it can be seen that documents and information given during arbitration proceedings are not confidential. In this case, Esso Australia was the gas supplier for the two public utilities companies, Gas and Fuel Corporation of Victoria (GFC) and State Electricity Commission of Victoria (SEC). Esso Australia and the two companies agreed to act on an arbitration agreement. However, a dispute had arisen when the two companies, GFC and SEC refused to pay an increased price for gas supplied by Esso Australia because the calculations of the price increase were not being disclosed by Esso Australia. Esso Australia refused to provide details of calculations because they had entered a confidential agreement. Esso Australia also claimed that the information, if made public, would be detrimental to their commercial interests as the information was in concern of public interest. The declaration made by Esso Australia was then argued by the Minister for Manufacturing and Industry. The Minister claimed that all information disclosed to GFC and SEC was not subject to any obligation of confidence because the information needed to be revealed due to a statutory duty.

The High Court of Australia held on a majority of four to one that a general duty of confidentiality cannot be implied in an arbitration agreement. Mason CJ, one of the judges, remarked that there were various circumstances in which an arbitration award or proceeding may be disclosed. One of the circumstances where disclosure needs to be made is when there is an obligation to comply with statutory, regulatory or insurance requirements. In this case, the court declared that GFC and SEC were not restricted from disclosing information provided by Esso Australia pursuant to their obligation stated in the 1975 Sales Agreement. Based on this case, the writer attempts to correct the assumption that confidentiality in arbitration is absolute and makes a crucial remark, stating that each country regulates arbitration proceedings differently.

Next, the writer highlights the limits of confidentiality that refers to few instances where a disclosure is necessary. For example, disclosure pursuant to an order of the court. This justifies the fact that there is no total confidentiality in arbitration. Lastly, the writer suggests few measures that could be taken to protect confidentiality in arbitration. The first suggestion would be to expressly incorporate a confidentiality clause in the arbitration agreement, stating the extent of confidentiality and remedies for breach. The second step would be to consider the different governing rules of arbitration. There are numerous rules in regards to arbitration that can be applied like UNCITRAL[1] model law and WIPO[2] rules. Towards avoiding unwanted disclosure, the parties can either communicate the obligation to protect confidential information, particularly to witnesses that are not subject to any contractual obligation or control the copies of documents used in the arbitration proceedings. These extra precautions need to be taken seriously to protect confidentiality in arbitration. The author concludes that confidentiality in arbitration is not absolute and subject to various exceptions.

Based on my personal view, this article is written to rectify the assumption that most people believed - confidentiality will always be guaranteed and secured in arbitration. The writer argues on the grounds that there are several instances where valuable and confidential information in arbitral proceedings can be disclosed. For example, the writer touches upon the disclosure made to comply with statutory duties as in the case of Esso Australia Resources v Plowman. In my opinion, the mentioned case emphasised few important matters in regard of confidentiality in arbitration. The most important lesson that I want to highlight concerns with the duty of parties drafting arbitration clauses. Before the drafting stage, they need to consider whether they and the other parties share a mutual intention. If both parties agree to secure all information revealed, then there is a need to include express provisions on confidentiality to their agreements. This is a precaution measure to ensure all documents will not be revealed to outsiders or third parties. Moreover, by taking this precaution measure, the parties have a solid reason to protect themselves from disclosure because of the court order. This is due to the fact that some courts may not recognize the implied duty of confidentiality in arbitration, which means the court will only take confidentiality into account when it is clearly stated in the clauses. The courts that adopt this principle are mostly located in countries such as Sweden and the United States.

Towards the ending, the writer suggests few precaution measures that can be taken to ensure confidentiality in arbitration. In my personal view, all of the steps mentioned by the writer should be carefully followed by parties who wish to enter an arbitration agreement. The first and second suggestion specifically note that parties are responsible in drafting a precise agreement and are free to choose suitable governing rules in accordance with the degree of confidentiality they desire. As for the third step, I agree that good communication between the parties and any involved individuals will help maintain the confidentiality of documents and information in arbitration. This is because communication is a primary way to build trust. I believe that by having good communication, the parties can avoid information leakage as well as preserve positive relationships.

On the whole, I believe that the writer intended to prove that confidentiality is a fundamental virtue in arbitration. It is not directly stated in any of the paragraphs but as the reading goes on, I sense that the writer repeatedly addressed that confidentiality is not absolute which shows that the writer did not object to the fact that arbitration is confidential. Therefore, I conclude that confidentiality, be it the fundamental virtue of arbitration, it is still limited and subject to exceptions. This means, more research needs to be done in regards to this topic in order to obtain a clear and certain answer for the title. Even so, the reading convinces the readers of two strong facts. Firstly, confidentiality exists in arbitration but it is limited. Secondly, there are some steps that can be taken to maintain confidentiality in arbitration.