Section 41A of the Arbitration Act 2005 came into force in 2018 through the Arbitration (Amendment) (2) Act. Section 41A deals with confidentiality. It provides that unless otherwise agreed by the parties, no party may publish, disclose or communicate any information relating to the arbitral proceedings under the arbitration agreement or an award made in those arbitral proceedings,(1) unless such publication, disclosure or communication is made:
- to protect or pursue a party's legal right or interest;
- to enforce or challenge the award;
- to any government body, regulatory body, court or tribunal where the party is obliged by law to do so; or
- to a professional or any other adviser of any of the parties.(2)
One of the questions of law that arose in the recent high court decision in Dato' Seri Timor Shah Rafiq v Nautilus Tug & Towage Sdn Bhd(3) was whether confidentiality obligations, whether by virtue of Section 41A or in common law, extend to non-parties to an arbitration.
The plaintiff was a director of the defendant, which owned, leased, chartered and hired boats, ships and vessels. The defendant entered into a harbour tugs services agreement with Vale Malaysia Minerals Sdn Bhd for the charter of harbour tugboats owned by the defendant. To provide harbour tug services, the defendant entered into a ship management agreement with Azimuth Ship Management Sdn Bhd. In September 2016 one of the harbour tugboats chartered to Vale and managed by Azimuth sank. The plaintiff filed an application pursuant to Section 348 of the Companies Act 2016 to seek leave of court for an order that the plaintiff be given leave to initiate negligence proceedings against Azimuth in the defendant's name.
During the proceedings, the defendant objected to an exhibit in the plaintiff's affidavit – namely, an expert report prepared by Ferrier Hodgson MH Sdn Bhd – on the grounds that the annexures to the report contained documents that had been prepared for the purpose of an arbitration between Nautical Supreme Sdn Bhd (a shareholder of Azimuth), Azimuth and the defendant. The defendant relied on Section 41A(1) of the Arbitration Act and contended that, as the defendant (a party to the arbitration) had not consented to the documents being published, Ferrier Hodgson's reference to and use of the documents in its report should be expunged from the proceedings, despite the fact that the plaintiff was not a party to the arbitration.
The high court took the position that the prohibition under Section 41A of the Arbitration Act did not extend to non-parties to the arbitration and dismissed the defendant's application to expunge or exclude the expert report and the references to the documents prepared for the purpose of the arbitration in the plaintiff's affidavit.
Previous law The defendant relied on Jacob and Toralf Consulting Sdn Bhd v Siemens Industry Software Gmbh & Co KG.(4) In that case, it was held that the principle of privacy precludes third parties from using documents generated in arbitration proceedings outside the arbitration without the consent of the party producing them.
Section 41A of Arbitration Act 2005
The high court held that Section 41A(2) of the Arbitration Act provides for exceptions to the prohibition set out under Section 41A(1). The high court noted that Section 41A(2) was drafted:
in a manner such that the exception is not by way of an exemption from the prohibition imposed by section 41A(1), but rather that the prohibition imposed does not extend to the circumstances set out in section 41A(2).
The high court further held that it was clear from the way that the prohibition in Section 41A(1) was formulated that it does not extend to non-parties to an arbitration. It was observed that it would be inane for parties to an arbitration that are subject to the prohibition under Section 41A(1) to enjoy the exceptions under Section 41A(2), but for third parties that are not privy to the arbitration (and thus not caught by Section 41A(1)) to be prohibited, either by Section 41A(1) or its common law equivalent, from using any information in an arbitration without the benefit of any exception.
Common law principles no longer apply
The high court further found that it would be pointless for the formulation in Section 41A(1) to include parties to an arbitration only if common law principles were intended to continue to apply. Therefore, common law principles of confidentiality attached to any arbitration must be held to have been superseded. The high court further noted that the common law principle of confidentiality is founded on an implied obligation between the parties to an arbitration. This fortifies the view that this obligation cannot extend to non-parties to an arbitration.
Interests of justice
Finally, in concluding that the defendant's application to expunge the plaintiff's affidavit should be disallowed, the high court noted that the confidentiality imposed would not apply where the interest of justice requires disclosure, and that this consideration was also stated in Jacob.
The high court has now clarified that Section 41A applies only to parties to arbitration proceedings; therefore, non-parties can disclose information relating to arbitral proceedings and awards. It also means that the previous common law position, including the rationale in Jacob, which precluded third parties from making use of documents generated in arbitration proceedings outside the arbitration, is no longer the law. It appears that the prohibition against third parties publishing, disclosing or communicating information relating to arbitration proceedings has now been removed. The decision has implications on the extent to which the confidential documents used in arbitral proceedings will remain confidential.
This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.