A Brief Word on Arbitral Confidentiality in England

Adam Liew, LLB Candidate, King’s College London

London has established an increasingly powerful position as an arbitration hub. An oft-cited reason for this lies in the English courts’ commitment to arbitral confidentiality. The existence of arbitral confidentiality in English law is recognized by a number of cases. This might provide some measure of assurance for commercial parties intent on keeping business secrets and sensitive information under wraps. However, this article intends to demonstrate why it would be a fatal mistake to assume that arbitral confidentiality is a guaranteed advantage in England.

Aiming to serve as a commentary rather than an in-depth exploration into what is an expansive topic, this article will focus on three aspects of arbitral confidentiality: (a) scope, (b) protection, and (c) exceptions.

(a) SCOPE: Privacy & Confidentiality are Two Sides of the Same Coin

This article takes the position that privacy and confidentiality are two sides of the same coin. Admittedly there are existing authorities that disagree. One example is the Australian decision of Esso Australia Resources Ltd v Plowman[1] (“Esso v Plowman”) where Mason CJ recognised a rigid dichotomy between privacy and confidentiality. He pointed out that “it is one thing to say that the hearing is private, in the sense that strangers are excluded, it was another thing to say that it was confidential”[2].

Nevertheless, such a view seems artificial. A better view proposed is that taken by the Australian High Court in Esso v Plowman per Toohey J where he held that “[privacy and confidentiality] are, to a considerable extent, two sides of the same coin. The privacy of an arbitration hearing is not an end in itself; surely it exists only in order to maintain the confidentiality of the dispute which the parties agreed to submit to arbitration”[3]. Under such a view, privacy exists merely as a means towards achieving the broader objectives of confidentiality.

The English authorities seem to take a similar stance. In the English Court of Appeal decision of Emmott v Michael Wilson & Partners Ltd[4] (“Emmott”), Collins LJ took the wider view by holding that privacy would also be violated by the publication or dissemination of documents in the arbitration[5]. Indeed, such an understanding explains the outcomes of several cases under English law. For instance, in Ali Shipping Corp v Shipyard Trogir[6] (“Ali Shipping”), the defendant sought to use materials obtained in an earlier arbitration to support a plea of issue in a later arbitration. The claimant successfully obtained an injunction from the court to prevent this from happening.

Furthermore, arbitral confidentiality and privacy prevents parties from invoking the principles of res judicata and issue estoppel through reliance on an award rendered in a separate arbitration. In Lincoln National Life Insurance Co v Sun Life Assurance Co of Canada[7] (“Lincoln Reinsurance”), the English Court of Appeal had to determine whether the Respondents could rely on an award rendered by the Cigna Arbitration Tribunal to avoid certain reinsurance policies covering the Appellant’s Unicover book exposures.

Counsel for the Respondents argued that since the Cigna Arbitral Tribunal already determined in its award that the Appellant’s Unicover book exposures were reinsured by a different party, the principles of res judicata and issue estoppel meant the Respondents were entitled to rely on the Cigna award to establish their position[8].

However, after much deliberation, the English Court of Appeal refused to allow such reliance. For our purposes, one fundamental reason lies in the confidentiality and privacy attaching to arbitration[9]. Arbitral confidentiality upholds the fact that the arbitrators in each arbitration are specifically appointed to decide the disputes in that particular arbitration between those particular parties. Therefore, the findings of a previous arbitral tribunal cannot be relied upon to establish a party’s position, even if those findings were reached based on largely similar and closely inter-linked issues. [10]

(b) PROTECTION: Arbitral Confidentiality as a Rule of Substantive Law

Recent English case law seems to take the position that arbitral confidentiality exists as a rule of substantive law rather than an implied term of business efficacy.

However, case law has not always been consistent. In Hassneh Insurance Co of Israel & Ors v Steuart J Mew[11](“Hassneh”), the High Court recognised the existence of an implied duty of confidence as a natural extension of the undoubted privacy of the hearing in an international commercial arbitration as a matter of business efficacy. However, in Ali Shipping,the Court of Appeal held that the confidentiality rule arises as an essential corollary of the privacy of arbitral proceedings and is implied as a matter of law.

Emmott preferred the view taken in Ali Shipping. It also shed further clarity by pointing out that this “implied agreement is really a rule of substantive law masquerading as an implied term”. After all, if arbitral confidentiality were merely an implied term, it ought to follow that disputes about its limits would fall within the scope of the arbitration agreement and would be determinable by the arbitral tribunal rather than the courts by virtue of the doctrine of competence-competence. Yet, Lord Justice Collins pointed out that evidence of reported cases has shown that whenever disputes arose between parties as to the applicability and extent of confidentiality, it is often resolved by an application to the court for an injunction to restrain disclosure[12].

Some assurance may be found in this. After all, if arbitral confidentiality exists as an implied term, lawyers may attempt to argue that such a term should not be implied by virtue of parties’ particular contractual arrangements. However, since it exists as a rule of substantive law, parties seeking to demonstrate that arbitral confidentiality does not apply have the more tremulous burden of demonstrating that parties have opted out by consent or a general waiver of privilege[13].

(c) EXCEPTIONS: Arbitral Confidentiality is not a Guarantee.

Despite the above, it would be a fatal mistake for any party to assume that arbitral privacy and confidentiality is a guaranteed advantage of arbitration.

Pitfall (i): The Arbitral Tribunal

Whether or not an arbitral hearing is held in private ultimately depends on the discretion of the arbitral tribunal. After all, it is the arbitrators – who are vested with the power to decide on matters of procedure[14] – that decide on the persons present at the arbitration hearing.

This power is not a freestanding one. It must be exercised while having regard to the provisions of the relevant contract or arbitration agreement. However, if construing the relevant arbitration agreement gives rise to a contrary intention against arbitral confidentiality, the arbitrators may commence the arbitration in a manner that detracts from absolute privacy. After all, while arbitral confidentiality exists as a matter of substantive law, it is rebuttable in the face of a clear intention to opt-out.

Pitfall (ii): Institutional Rules

Those entering into arbitration should also give particular attention to the institutional rules they adopt. This is because nothing in the Arbitration Act 1996 enacts or regulates the principle of confidentiality.

One example lies in the WIPO Arbitration Rules. Article 73(a) states that information concerning the existence of an arbitration cannot be unilaterally disclosed by a party to any third party unless it is required to do so by law or by a competent regulatory body. In this instance, it is pertinent to note that nowhere in the WIPO rules defines what constitutes  “a competent regulatory body”. This ambiguity, one may argue, gives rise to a potential gateway through which confidentiality can be diluted.

Pitfall (iii): The “Brief, Neutral” Exception

Despite the increasing trend for the privacy of arbitration as illustrated by the Civil Procedure Rules; Part 62, there are exceptions. It was held in Department of Economics, Policy and Development of the City of Moscow v Bankers Trust Co[15] (City of Moscow) that in circumstances where an order was made prohibiting publication of an arbitral judgment on account of its sensitive content, a report of the legal principles arising from the case would not be in breach of such an order if it were brief, neutral and did not disclose any private or confidential information[16]. While this seems reasonable, it involves drawing a fine but difficult line between what is private information and what is not. In this regard, what is private to one party may not be the same to the other or to the general public.

Pitfall (iv): Court Proceedings

Furthermore, the details of an arbitral dispute may also become public when one party seeks an injunction to restrain court proceedings brought in breach of an arbitration agreement[17], where a court deals with a challenge to an award for serious irregularity or on an appeal on a point of law[18], or even where enforcement of an award is resisted on grounds of public policy[19]. To that extent, while arbitral rules may protect arbitral confidentiality, the logistical implications of bringing any arbitral issues to court may cause that protection to unravel.

Tangential to this is the confidentiality of judgments. While arbitration-related hearings are often carried out in private, the same cannot be said about the judgments delivered after. Again, City of Moscow is the leading authority for this point. There, Mance J held that “even though the hearing may have been in private the court should when preparing and giving judgment bear in mind that any judgment should be given in public where this can be done without disclosing significant confidential information”[20].

It is possible that in instances where judgments cannot be delivered in public without disclosing significant confidential information, they will be delivered in complete privacy. However, bear in mind that this is a matter of discretion falling within the purview of the court.

Pitfall (v): Common Law Exceptions

Arbitral confidentiality is subject to several common law exceptions largely inspired by the principles of banking confidentiality. These exceptions were recognised in Tournier v National Provincial and Union Bank of England[21] (“Tournier”), and reaffirmed recently in Westwood Shipping Lines Inc, Weyerhaeuser NR Company v Universal Schiffahrtsgessellschaft MBH, Michael Bremen[22]. The four key exceptions:

1. Where one of the parties produced documents generated in arbitration by express or implied consent[23].
2. Compulsion by law[24].
3. Duty owed to the public[25].
4. Where disclosure is reasonably necessary for the establishment, compliance or protection of an arbitrating party’s legal rights and obligations vis-à-vis a third party[26].

Pitfall (vi): Witnesses

Witnesses are a potential source of limitless leaks, as are party-appointed experts who are given access to the arbitration file. Yet, it seems unrealistic to attempt imposing a duty on them. Indeed, doing so would likely demotivate them from appearing at all – the prospect of incurring liability is an unattractive one. Therefore, as far as witnesses are concerned, arbitral confidentiality seems to exist, in the practical sense, as a gentleman’s agreement rather than anything else.

Pitfall (vii): The Arbitrator

Arbitrators are generally understood to bear a duty of confidentiality. According to Julian M.D Lew[27], they are expected to keep confidential the names of the parties, the details of the matter, the proceedings and the deliberations of the tribunal. Lew points out that these are not obligations that arise specifically under English law but are general principles of international arbitration and practice, which arguably binds all arbitrators, including those in English arbitration. Pursuant to section 29(1) of the 1996 Act, failure to comply with this duty may incur liability on grounds of bad faith.

Despite the above, arbitrators are permitted to disclose materials obtained in an arbitration to comply with a court order or where it is in the interest of the public. Unless parties challenge an arbitrator’s finding on what encompasses “the interest of the public”, whether or not a particular aspect of an arbitration remains confidential, by and large, falls within the unfettered discretion of the tribunal.

Pitfall (viii): The “AEGIS” Exception

In AEGIS v European Reinsurance[28] (“AEGIS”), it was determined there that an arbitral award rendered from a previous arbitration could be produced in a subsequent arbitration thereby reaching a conclusion contrary to that held in the earlier case of Ali Shipping.

The Privy Council agreed in AEGIS that the legitimate use of an earlier award in a later private arbitration between the same two parties would not raise the mischief which confidentiality was meant to protect. Indeed, allowing such use would not expose either party to third parties with interests adverse to either of them. This is in stark contrast to the facts in Ali Shipping where one party sought to rely on an earlier arbitral award in a later arbitration involving a different party.

List of arbitral confidentiality exceptions are not exhaustive

Parties need to note that beyond the exceptions identified above, Collins LJ in Emmott points out very pertinently that the content of arbitral confidentiality depends on the context in which it arises and on the nature of the information or documents at issue[29]. Further, he goes on to say that the limits of the obligation are still in the process of development on a case-by-case basis, and are therefore in a state of flux. In view of this, it would be imprudent to rely on the implied rule of arbitral confidentiality alone to ensure all aspects of arbitration proceedings will be assured. Further, it would be a mistake to think arbitral confidentiality is guaranteed if the specific ‘pitfalls’ above do not arise.

The Law governing the Confidentiality Issue

While one can discuss volumes about the treatment of arbitral confidentiality in England, this would be fruitless if English law is not the law that decides that very issue. To that extent, it is important to ascertain which law makes that determination.  According to Michael Pryles[30], the choices lie between the law applicable to the arbitral proceedings (the lex arbitri) and the law of the place where the issue of confidentiality arises (the lex fori). Of the two options, Pryles takes the view that the lex arbitri should prevail.

Conclusion

In a climate where commercial parties often opt for arbitration as their dispute resolution process of choice – attracted by the perceived advantage of arbitral confidentiality – one should tread with measured expectations. Since the current position of confidentiality in England is far from absolute and plagued by exceptions, one would be wise to proceed with careful consideration.