Leave a request

Practical Aspects of Confidentiality in Arbitration

Date of publication: 10 October 2016

Yevheniia Makarenko, Lawyer
Source: Jurist & Zakon

The question of confidentiality often arises when considering disputes between the major international business market entities in connection with the possible risk of inflicting harm during disclosure of certain information.

The concept of confidentiality implies several aspects. First of all, confidentiality of arbitration proceedings excludes publicity, i.e. no third parties (including the press, the public), different organizations do not have the right to demand ensuring their presence at the arbitration hearing or access to the case files of the parties unless the appropriate consent of the party is received. The arbitrators and employees of the arbitral tribunal shall ensure closed nature of the information provided by the parties and refuse the request for provision of such information filed by the person who is not a party to the arbitration proceedings.

In legal environment the concept of confidentiality is defined in two aspects, namely as subject and object of extension of the principle of confidentiality. Subjective aspect of confidentiality defines who is the holder of the obligation of confidentiality, e.g. the parties to the arbitration proceedings themselves, the arbitrators, the arbitral tribunal secretariat, the representatives of the parties to the arbitration proceedings (attorneys, lawyers), and third parties involved in the proceedings. From the viewpoint of objective aspect of the principle of confidentiality the objects (documents) to which the principle applies shall be taken into account, e.g. disclosure of information during the hearing (proof), orders and arbitration awards (procedural documents), any written submission of the parties, including annexes to such submissions, details of the parties, etc.

The principle of confidentiality is set forth in rules of the courts of arbitration, which specify expressly to whom and what the principle applies.

In accordance with the Arbitration Rules of the London Court of International Arbitration (Art. 30(1)) first and foremost the parties to the arbitration proceedings as the subjects are obliged to keep confidential all awards and all other files of the arbitration proceedings drafted for holding it, and any other documents, as well as the subject matter of the meeting of the arbitral tribunal.

The Rules of the Arbitration Institute of the Stockholm Chamber of Commerce also contain the confidentiality provision, and it determines extension of such principle to the Stockholm Chamber of Commerce and the Arbitral Tribunal, which shall maintain the confidentiality of the arbitration tribunal and the award (Art. 46).

The confidentiality provisions and obligations to observe this principle are extensively provided in the Arbitration Rules of the Chamber of Commerce, Paris (ICC). At the request of either party, the tribunal may issue orders regarding the confidentiality of the arbitration and may take measures to protect trade secrets and confidential information (Art. 22(3)). The ICC Arbitration Rules also include the Charter of the International Court of Arbitration, which specifies that the activities of such court shall be confidential, and it shall be observed by any person involved in its work in any capacity. The Charter defines the objects of confidentiality as “documents relevant to the work of the Court and its Secretariat”.

The UNCITRAL Arbitration Rules envisage a clear rule of confidentiality during the hearing (Art. 28), however, with regard to the parties’ obligations in relation to confidentiality and objective definition of the term, there is no such provision in the Rules.

In accordance with the Rules of the ICAC at the UCCI (Art. 12), the ICAC Chairman, his deputies, arbitrators and the secretariat are obliged to observe confidentiality of the information, which became known to them.

There are also cases when the principle of confidentiality was ignored.

For example, in Esso Australia Resources Ltd and Others v Plowman (Minister for Energy and Minerals) and Others (1995) 128 ALR 39 The High Court of Australia pointed out that confidentiality is not an integral part of the arbitration proceedings and in the absence of direct provision of the law and express agreement between the parties the arbitration agreement itself contains no obligation prohibiting disclosure of information received in the course of the proceedings. The Court pointed out that in the dispute with the public authority the parties were not bound by confidentiality when disclosing information to the Ministry of Energy of Australia, which is a controlling authority in this field and acts in the interests of the society as a whole.

In the case of Bulgarian Foreign Trade Bank Ltd. v A.I. Trade Finance Inc. the Supreme Court of Sweden confirmed the position of the Court of Appeal regarding challenge of the award. The issues raised in the judgment concerned validity of the arbitration clause and whether the parties were bound by confidentiality obligation. In this case, the arbitration clause itself did not envisage confidentiality obligation. The Swedish Arbitration Act of 1929, which was defined as the applicable law, does not provide for such obligation. On the basis of A.I. Trade Finance Inc. of being bound by the obligations of confidentiality Bulgarian Foreign Trade Bank Ltd. referred to the Arbitration Rules of the United Nations Economic Commission for Europe, where it is stated that “the case will be heard with open doors only if both parties demand it” (Art. 29). Bulgarian Foreign Trade Bank Ltd. argued that such interpretation refers to the entire process, while the literal wording – yet only to the oral hearing.

According to the Court, the starting point to resolve the issue of confidentiality is that arbitration proceedings are based on agreement. Although arbitration is private in nature, it is regulated by law. In this case, the court pointed out that the arbitration proceedings may be public based on the provisions set out in the arbitration legislation, or when applying to state courts, or when receiving remedies, recording the actual data, or challenging judicial proceedings. The Supreme Court of Sweden believes that the party to the arbitration may not be bound by the obligation of confidentiality, unless the parties agreed on it.