One of the main attractions of arbitration over other forms of dispute resolution is that proceedings are confidential. By contrast, trials are usually open to the public so that justice can not only be done but be seen to be done. Often, however, it is better to wash dirty linen in private.
In arbitration, confidentiality is implied through longstanding custom and practice. The duty applies not only to the documents disclosed by each side and to the arbitration award itself but also to documents, materials and arguments generated during the process. In one case, it was used to prevent witness statements produced in the arbitration from being used in later litigation with an unconnected party.
The duty does not apply where details of an arbitration are disclosed, either with the consent of both parties, by order or leave of the court or in court proceedings relating to the arbitration, such as to enforce, challenge or appeal against an award.
Some participants may be happy that the implied duty goes far enough, whereas others may think it goes too far. Situations commonly arise where a party will want, or be obliged, to reveal something about an arbitration to a third party: perhaps merely the fact that it took place or, in other situations, what it was about, who was involved or what the outcome was.
Often, it will be banks, creditors, insurance companies or shareholders who need to be informed, or a sub-contractor who is entitled to details of a dispute between the main contractor and the owner of the works.
Of course, implied duties can always be extended by an express term. A confidentiality agreement may go much further than protecting the fact of arbitration, the identity of the arbitrator or the result. It may also specify the material and information to be kept confidential and the measures required to ensure this, such as special procedures for information transmitted electronically. It should also cover the circumstances in which specific confidential information may be disclosed.
All the major institutions under whose auspices arbitrations are conducted around the world have their own standard rules governing proceedings. For example, LCIA and WIPO rules have express confidentiality clauses.
By contrast, ICC rules do not have an express confidentiality provision, although they provide that tribunal is allowed to take steps to protect confidential information and to refuse outsiders admission to the proceedings.
Similarly, the UNCITRAL rules have no express confidentiality provisions but require hearings to be held in private unless the parties agree otherwise.
Thus it is not safe to assume that every ‘boilerplate’ arbitration clause will ensure that a dispute is kept away from the public eye. It is safer to protect confidentiality either expressly or by incorporating the rules of an institution such as LCIA or WIPO, where confidentiality is protected.
Internationally, there is a spectrum of opinion: in France, the courts have decided that confidentiality is part of the very nature of arbitrations; in New Zealand, there is legislation to the same effect, while, in Australia, the court has ruled that there is no duty of confidentiality unless the parties expressly agree to have one.
In two separate disputes between the same insurers referred to arbitration in Bermuda, the implied duty of confidentiality was not allowed to prevent material from one arbitration being used in the other, despite one party objecting to the use of the material. The reason for the disclosure was that failure to do so this would have undermined the purpose of the arbitration – to resolve the dispute between the parties.
In England, the Court of Appeal has recently limited the extent to which confidentiality can be maintained when one of the parties decides to appeal against the arbitration award. It had previously been assumed that not only would the appeal be held in private (unless brought on a point of law, which would be of public interest) but that the judgment would remain private too.
In City of Moscow v. Bankers Trust Company, the Court of Appeal ruled that this did not necessarily follow: what the parties had agreed to when dealing consensually with their dispute via arbitration could not dictate what should happen in court when appeal proceedings were not consensual.
Furthermore, the public interest in knowing the judgment had to be balanced against the interest of the parties in keeping details of the arbitration private. The argument that publication would undermine the confidence of the business community in English arbitration proceedings could not be used to create a presumption against publishing the judgments.
Although confidentiality is still a key attraction of arbitration, a growing body of opinion appears to favour a restricted interpretation. Arbitration is still an efficient and neutral way of settling complex commercial disputes but it is clear from recent developments that absolute privacy can no longer be taken for granted.
