The Arbitrator’s New Clothes[i]

If privacy matters in arbitration, how do we preserve it? 

In 1994 Australia’s High Court[ii] differed from the UK Courts in finding that at common law there was no implied obligation of confidentiality in an arbitration agreement. When Australia’s arbitration legislation was amended six years later Australia went from having no common law position on confidentiality to having what may be the strictest legislated “confidentiality code”[iii] in world.  

In doing so part of the justification was that Australia had become “out of step with the rest of the world”.

But had it? And even if it had, did it really matter? And what is the nature of confidentiality in arbitration anyway?

This paper examines three broad issues.

The first surrounds the meaning of confidentiality. Do we really mean privacy? Does it matter? And what does it apply to? The hearing? The submissions? The award? The existence of the arbitration (including the identity of the arbitrator)?

Once we have some understanding about what we mean by confidentiality, why do we need to protect it? What are the policy reasons for and against confidentiality?

Finally, if we can identify what should be confidential, how do we best maintain that confidentiality? And what, if any, consequences should flow if there is a breach of confidentiality?

1.   The right to confidentiality

In recent years the position in the UK and Australia has diverged. The response to this divergence is informative.  

In Esso Australia Resources Ltd v Plowman (Ministry for Energy and Minerals)[iv], the Australian High Court was asked to determine whether some form of confidentiality was implicit in an arbitration agreement.

The underlying dispute was between two energy producers and government energy utilities whom they supplied. The producers sought to increase the prices charged to the utilities and the utilities refused to pay. The dispute was referred to arbitration and the producers were concerned that the sensitive commercial information they would produce to justify the price increases might become public. 

There were in effect two issues to be determined.

The first related to the privacy of the arbitration hearing itself (Privacy Point). 

The second was whether a party was at liberty to disclose information provided in the course of an arbitration (Confidentiality Point). Chief Justice Mason, with whom Dawson and McHugh JJ agreed, delivered the leading judgment. 

In relation to the Privacy Point he observed that

“It is well settled that when parties submit their dispute to a private arbitral tribunal of their own choice, in the absence of some manifestation of a contrary intention, they confer upon the tribunal a discretion as to the procedure to be adopted in reaching its decision. No doubt the conferral of that power upon the tribunal is incidental to the power which it is given to determine the dispute submitted to the tribunal...

I prefer to describe the private character of the hearing as something that inheres in the subject matter of the agreement to submit disputes to arbitration rather than attribute that character to an implied term.”[v] 

On the Confidentiality Point, the Chief Justice observed that the “the efficacy of a private arbitration as an expeditious and commercially attractive form of dispute resolution depends, at least in part, upon its private nature. Hence the efficacy of a private arbitration will be damaged, even defeated, if proceedings in the arbitration are made public by the disclosure of documents relating to the arbitration.”[vi] 

An obligation of confidentiality, if not expressed in the arbitration agreement, would need to be found to be an intrinsic part of the arbitration process, or implied.

The determination of the point required consideration of UK and US authorities. 

In Hassneh Insurance Co of Israel v Mew[vii], Coleman J said

“If the parties to an English law contract refer their disputes to arbitration they are entitled to assume at the least that the hearing will be conducted in private. That assumption arises from a practice which has been universal in London for hundreds of years and [is], I believe, undisputed. It is a practice which represents an important advantage of arbitration over the courts as a means of dispute resolution. The informality attaching to a hearing held in private and the candour to which it may give rise is an essential ingredient of arbitration.”

In Dolling-Baker v Merrett[viii], the UK Court of Appeal restrained a party to an arbitration from disclosing on discovery in subsequent proceedings documents relating to the arbitration.

Parker LJ, with whom Gibson and Fox LJJ agreed, said

“As between parties to an arbitration, although the proceedings are consensual and may be regarded as wholly voluntary, their very nature is such that there must … be some implied obligation on both parties not to disclose or use for any other purpose any documents prepared for and used in the arbitration, or disclosed or produced in the course of the arbitration, or transcripts or notes of the evidence in the arbitration or the award, and indeed not to disclose in any other way that evidence has been given by any witness in the arbitration, save with the consent of the other party or pursuant to an order or leave of the court.”

Despite these authorities the Chief Justice concluded that an obligation of confidentiality was neither inherent in the arbitration process nor to be implied. In this he referenced US and Australian authorities which were inconsistent with the existence of such an obligation and also observed if such an obligation truly formed part of the law one would have expected it to have been recognised long before Dolling-Baker. 

He went on to doubt the extent to which complete confidentiality could ever be achieved, considering:

  1. the position of witnesses who were free (according to the Chief Justice) to disclose to 3rd parties what they know of the proceedings;
  2. the exposure of awards in Court process for enforcement and/or appeal; and
  3. the general right or obligation of a party to reveal an award to a 3rd party, such as an insurer.

His Honour said

“That confidentiality [arising from private hearings], though it was not grounded initially in any legal right or obligation, was a consequential benefit or advantage attaching to arbitration which made it an attractive mode of dispute resolution. There is, accordingly, a case for saying that, in the course of evolution, the private arbitration has advanced to the stage where confidentiality has become one of its essential attributes so that confidentiality is a characteristic or quality that inheres in arbitration.”

 

However his Honour concluded that

“Despite the view taken in Dolling-Baker and subsequently by Colman J in Hassneh Insurance, I do not consider that, in Australia, having regard to the various matters to which I have referred, we are justified in concluding that confidentiality is an essential attribute of a private arbitration imposing an obligation on each party not to disclose the proceedings or documents and information provided in and for the purposes of the arbitration.”[ix]

His Honour then considered whether such an obligation should be implied, either as a matter of law, or in order to give business efficacy.  His Honour concluded that a term of confidentiality could not be implied for the same reasons that it did not form an inherent part of the arbitration itself.  While Justices Brennan and Toohey agreed with the Chief Justice on the Privacy Point, they differed somewhat on the Confidentiality Point.  Brennan J felt that any obligation of confidentiality must be contractual in nature. Given the parties rarely included confidentiality obligations in the arbitration agreement itself, it would need to be implied at least when a party has a duty to produce a document or make disclosure of information. He said

“To give business efficacy to the limited purpose of production or disclosure, an undertaking of confidentiality must be implied. But it does not follow that an undertaking of absolute confidentiality is to be implied.”

2.   What do we mean by confidentiality?

The right of arbitrating parties to conduct their hearing in private is almost universally accepted as an inherent characteristic of private arbitration and one of its significant advantages over litigation. 

One imagines the enforcement of that right would be akin to trespass; having a stranger ejected from the hearing room, or simply suspending proceedings until the stranger has left. 

But is this quaint notion of privacy via the locking of doors still realistic? Another more contemporary consideration may be the fact that we live in the digital age. 'Live tweeting' from an arbitration is now possible, though entirely undesirable. Images and recordings of arbitral proceedings could be instantly shared via the World Wide Web. Should all participants in a hearing be required to abandon their smart-phones before entry?

While it appears to be accepted that the idea of confidentiality emerges from and is concomitant to this right to a private hearing, the formulation of the right to confidentiality is altogether more problematic. 

There is also a policy issue to be considered and possibly an area of some friction with the judiciary in that the complete insulation of arbitration awards and proceedings may be said to hamper the jurisdiction of the Courts to develop commercial law[x] (though this is less an issue in the UK which has not adopted the UNCITRAL Rules).  

The difficulty in defining what the obligation involves and exceptions to the obligation formed the basis for its rejection in Esso

In =Emmott v Michael Wilson & Partners Ltd,[xi] Collins LJ in delivering the judgment of the Court of Appeal cited the Departmental Advisory Committee on Arbitration Law, Report on the Arbitration Bill 1996, where it was said that confidentiality was not included in the Bill because the law was “unsettled and better left to the common law to evolve.”

The Committee also said that in English arbitration “the exceptions to confidentiality are manifestly legion and unsettled in part” and concluded that “whilst the breadth and existence of certain exceptions remains disputed, these can be resolved by the English courts on a pragmatic case-by-case basis.”[xii]

There is some irony that confidentiality in arbitration should be left to the Courts to decide.

The situation may be complicated, rather than aided, by the commonly held assumption that arbitration proceedings are private and/or confidential. It is human nature not to value that which is taken for granted.  

Part of the difficulty arises from uncertainty around what is to be kept confidential and what exceptions must logically apply.

Given that privacy and confidentiality are regularly cited as advantages of arbitration over litigation, presumably the arbitration community has views about what should be kept confidential, and why. 

At the least one might assume that arbitral confidentiality should mirror that in litigation, that a party must not disclose or use documents produced in proceedings for a purpose unrelated to those proceedings. 

But what of witness statements, submissions, a transcript and the award itself? Would the parties, if asked, wish to protect these? And if so, for how long?

And do the parties to arbitration understand and place a value or premium on confidentiality? 

It is received wisdom that they do, and certainly some may, but I am not sure how widely held that belief can be, especially when it cannot be defined, even by the Courts. 

In both the UK and Singapore, which appear to have the busiest court lists in relation to arbitration, the parties can apply to the court to preserve confidentiality by allocating the matter a neutral citation e.g. A v B.  

Based on law reports from those jurisdictions, few parties to court actions concerning arbitration awards choose to take steps (and incur the costs) to enforce that confidentiality.

And would that protection extend to confidentiality in the substance of witness testimony or legal submissions, if not the actual documents themselves? What can be done if someone appears to be “leaking” information about proceedings to or via the media?

It is possible confidentiality as an attribute of arbitration is underappreciated precisely because it is ill-defined.

The policy in the UK appears to continue to be to let the concept evolve in the Courts, on a case-by-case basis.

With respect, this is a policy that only a Court would endorse. How are practitioners expected to advise clients on the prospect of making or opposing an application in relation to a waiver or enforcement of confidentiality?

And are not the arbitrators themselves best placed to make the decision?  

1.   How should confidentiality be protected?

There would appear to be three avenues for addressing confidentiality.

At a high level, all revolve around creation of a confidentiality code thoroughly defining what we mean by confidentiality, outlining the exceptions to confidentiality and how disputes over confidentiality should be adjudicated.

a.   Institutional Arbitration Rules

The first would be to include a confidentiality code in institutional arbitration rules, or as part of the arbitration clause or agreement (though this would be unwieldy).

UNCITRAL Arbitration Rules 2010

The UNICTRAL Rules make no reference to confidentiality but Article 28(3) provides that any hearing shall be conducted in camera (unless the parties agree otherwise).

LMAA Terms 2017

The recently published LMAA Terms 2017 do not contain any express provisions with respect to privacy or confidentiality. However Articles 12 and 14 would appear to confirm the broad jurisdiction of the Tribunal to determine all disputes arising under or in connection with the transaction the subject of the reference and to decide all procedural and evidential matters.

Article 16 expressly provides that where two or more arbitrations appear to raise common issues of fact or law the Tribunals may direct that the matters be heard concurrently and documents disclosed by parties in one arbitration be made available to the parties to the other arbitration “upon such conditions as the tribunals may determine.”

Article 28 also contains a mechanism (subject to a right of “veto” by a party) to allow publication of awards so as to preserve anonymity as regards the identity of the parties, of their legal or other representatives, and of the Tribunal.

Maritime Arbitration Rules of the Society of Maritime Arbitrators

There appear to be no references to confidentiality in the Rules of the SMA, nor in the Federal Arbitration Act.

Singapore Chamber of Maritime Arbitration

Rule 44 of the SCMA Rules contains the following rules in relation to confidentiality

“RULE 44

44.   Confidentiality

The parties and the Tribunal shall at all times treat all matters relating to the arbitration (including the existence of the arbitration) and the Award as confidential. A party or any Arbitrator shall not, without the prior written consent of the other party or the parties, as the case may be, disclose to a third party any such matter except:

  1. for the purpose of making an application to any competent court;
  2. for the purpose of or in relation to an application to the courts of any State to enforce the Award;
  3. pursuant to the order of a court of competent jurisdiction;
  4. in compliance with the provisions of the laws of any State which is binding on the party making the disclosure; or
  5. in compliance with the request or requirement of any regulatory body or other authority which, if not binding, nonetheless would be observed customarily by the party making the disclosure.”

b.   By Order of the Tribunal

The second would be the incorporation of a confidentiality code in any arbitration contract between the arbitrators and the parties. A question as regards to confidentiality could, for example, be included in the Questionnaire at Schedule 3 to the LMAA Terms 2017.

The advantage of this course would be that the arbitrator is able to raise the issue directly with the parties and gauge their need for confidentiality (which may not be well understood by the parties, in any event), to the extent that can be established at the commencement of proceedings. It would also allow the Tribunal to tailor the appropriate order.

c.  Legislation

The third, and it is submitted preferred course, is the approach taken in Australia being the statutory approach of creating a “confidentiality code” within arbitration legislation. 

It is not the role of this paper to assert that the Australian code is in any way perfect and without room for improvement, however it does the following things

  1. It applies to all arbitrations producing a consistent approach.
  2. It defines confidential information  It is arguable that the current definition is too broad. It is inclusive in that it refers to “information that relates to the proceedings”, including (for example) the statement of claim and submissions. This could also include, for example, the existence of the arbitration and the identity of the arbitrators.  
  3. It defines the exceptions to confidentiality The list of established exceptions includes most of those the subject of UK decisions such as in EmmottAli Shipping, Hassneh and Dolling-Baker.  
  4. It preserves the decision-making power of the arbitrator in the first instance;  If the preservation of confidentiality is important it seems preferable that in the first instance it should be for the arbitrator to determine the existence of confidential information and whether an exception has been made out.   
  5. It prescribes the circumstances in which the parties may have recourse to the Court.

What are the arguments against a legislative approach?

One may take the view perhaps that over-regulation arbitration of is undesirable. However if the object of that regulation is to both clarify the ambit of confidentiality and ensure that that arbitrator is at least the primary decision maker then that regulation should be welcome. 

One may also take the view that it is impossible to legislate when the ambit of the duty is uncertain. This may depend on the jurisdiction. UNCITRAL jurisdictions tend to prefer to authorise the arbitrator with discretion to rule on issues with minimal curial intervention. Arbitrators in such circumstances may appreciate the guidelines set out in legislation.

In Wilmar Sugar v Burdekin District Cane Growers Ltd [2017] QSC 3, Jackson J in the Queensland Supreme Court dealt with such an application.

The underlying arbitration was a pre-contractual arbitration mandated by the Queensland Sugar Industry Actwhich provided that such arbitration would be conducted pursuant to the Queensland Commercial Arbitration Act 2010 (CAA). The CAA contains the confidentiality code set out in the Schedule.

The Respondent had applied for and been granted leave to make disclosure of certain of the Applicant’s submissions to two identified parliamentarians. The Arbitrator published his reasons giving leave to the Respondent to make the disclosure on the basis of public interest, allowing time for the Applicant to challenge the award.

The Applicant applied to the Supreme Court of Queensland to have the award set aside.

The Judge observed that the application was not an appeal from the Arbitrator’s award but a re-hearing. He nevertheless dismissed the application in large part because he agreed with the Arbitrator’s reasons in any event.

The judgment is otherwise noteworthy because the Judge in fact published a confidential and a public judgment being careful in the process not to breach the confidentiality of the arbitral process which continued.

The other aspect of the decision worth noting related to the Applicant’s submission that it would consent to the Respondent disclosing the substance of the Applicant’s submission but not the submissions themselves and without reference to the Applicant or the existence of the arbitration.

His Honour rejected that submission on the basis that he agreed with the Arbitrator’s reasons why the public interest in the disclosure outweighed the public interest in preserving the confidentiality in the arbitration process.

2.   Conclusion

The issue of confidentiality in arbitration is not new. But nor is it resolved.

The appropriate response to the issue of confidentiality may depend on whether one views it as an 'issue' at all.

It does not appear to be an issue in the United States, for example[xiii].

In other jurisdictions it assumed to be an essential aspect of arbitration and so deserving of protection.

One’s attitude may also be related to whether a jurisdiction has adopted the UNCITRAL approach of minimal curial oversight.

Those that have not prefer to allow the courts to address the issue on a case by case basis.

However UNCITRAL jurisdictions appear to prefer some sort of code administered at least in the first instance by the arbitrator him or herself.

Schedule 1 – Confidentiality Code contained in the Australian International Arbitration Act 1974 (Cth)[xiv]

confidential information, in relation to arbitral proceedings, means information that relates to the proceedings or to an award made in the proceedings and includes:

  1. the statement of claim, statement of defence, and all other pleadings, submissions, statements, or other information supplied to the arbitral tribunal by a party to the proceedings; and
  2. any evidence (whether documentary or other) supplied to the arbitral tribunal; and
  3. any notes made by the arbitral tribunal of oral evidence or submissions given before the arbitral tribunal; and
  4. any transcript of oral evidence or submissions given before the arbitral tribunal; and
  5. any rulings of the arbitral tribunal; and
  6. any award of the arbitral tribunal.

disclose, in relation to confidential information, includes giving or communicating the confidential information in any way.

23C Disclosure of confidential information

  1. The parties to arbitral proceedings commenced in reliance on an arbitration agreement must not disclose confidential information in relation to the arbitral proceedings unless:
    1. the disclosure is allowed under section 23D; or
    2. the disclosure is allowed under an order made under section 23E and no order is in force under section 23F prohibiting that disclosure; or
    3. the disclosure is allowed under an order made under section 23G.
  2. An arbitral tribunal must not disclose confidential information in relation to arbitral proceedings commenced in reliance on an arbitration agreement unless:
    1. the disclosure is allowed under section 23D; or
    2. the disclosure is allowed under an order made under section 23E and no order is in force under section 23F prohibiting that disclosure; or
    3. the disclosure is allowed under an order made under section 23G.

23D Circumstances in which confidential information may be disclosed

  1. This section sets out the circumstances in which confidential information in relation to arbitral proceedings may be disclosed by:
    1. a party to the arbitral proceedings; or
    2. an arbitral tribunal.
  2. The information may be disclosed with the consent of all of the parties to the arbitral proceedings.
  3. The information may be disclosed to a professional or other adviser of any of the parties to the arbitral proceedings.
  4. The information may be disclosed if it is necessary to ensure that a party to the arbitral proceedings has a full opportunity to present the party’s case and the disclosure is no more than reasonable for that purpose.
  5. The information may be disclosed if it is necessary for the establishment or protection of the legal rights of a party to the arbitral proceedings in relation to a third party and the disclosure is no more than reasonable for that purpose.
  6. The information may be disclosed if it is necessary for the purpose of enforcing an arbitral award and the disclosure is no more than reasonable for that purpose.
  7. The information may be disclosed if it is necessary for the purposes of this Act, or the Model Law as in force under subsection 16(1) of this Act, and the disclosure is no more than reasonable for that purpose.
  8. The information may be disclosed if the disclosure is in accordance with an order made or a subpoena issued by a court.
  9. The information may be disclosed if the disclosure is authorised or required by another relevant law, or required by a competent regulatory body, and the person making the disclosure gives written details of the disclosure including an explanation of reasons for the disclosure to:
    1. if the person is a party to the arbitral proceedings—the other parties to the proceedings and the arbitral tribunal; and
    2. if the arbitral tribunal is making the disclosure—all the parties to the proceedings.  
  10. In subsection (9):

another relevant law means:

  1. a law of the Commonwealth, other than this Act; and
  2. a law of a State or Territory; and
  3. a law of a foreign country, or of a part of a foreign country:
    1. in which a party to the arbitration agreement has its principal place of business; or
    2. in which a substantial part of the obligations of the commercial relationship are to be performed; or
    3. to which the subject matter of the dispute is most commonly connected.

23E Arbitral tribunal may allow disclosure in certain circumstances

  1. An arbitral tribunal may make an order allowing a party to arbitral proceedings to disclose confidential information in relation to the proceedings in circumstances other than those mentioned in section 23D.
  2. An order under subsection (1) may only be made at the request of one of the parties to the arbitral proceedings and after giving each of the parties to the arbitral proceedings the opportunity to be heard.

23F Court may prohibit disclosure in certain circumstances

  1. A court may make an order prohibiting a party to arbitral proceedings from disclosing confidential information in relation to the arbitral proceedings if:
    1. the court is satisfied in the circumstances of the particular case that the public interest in preserving the confidentiality of arbitral proceedings is not outweighed by other considerations that render it desirable in the public interest for the information to be disclosed; or
    2. the disclosure is more than is reasonable for that purpose.
  2. An order under subsection (1) may only be made on the application of a party to the arbitral proceedings and after giving each of the parties to the arbitral proceedings the opportunity to be heard.
  3. A party to arbitral proceedings may only apply for an order under subsection (1) if the arbitral tribunal has made an order under subsection 23E(1) allowing the disclosure of the information.
  4. The court may order that the confidential information not be disclosed pending the outcome of the application under subsection (2).
  5. An order under this section is final.

23G Court may allow disclosure in certain circumstances

  1. A court may make an order allowing a party to arbitral proceedings to disclose confidential information in relation to the arbitral proceedings in circumstances other than those mentioned in section 23D if:
    1. the court is satisfied, in the circumstances of the particular case, that the public interest in preserving the confidentiality of arbitral proceedings is outweighed by other considerations that render it desirable in the public interest for the information to be disclosed; and
    2. the disclosure is not more than is reasonable for that purpose.
  2. An order under subsection (1) may only be made on the application of a person who is or was a party to the arbitral proceedings and after giving each person who is or was a party to the arbitral proceedings the opportunity to be heard.
  3. A party to arbitral proceedings may only apply for an order under subsection (1) if:
    1. the mandate of the arbitral tribunal has been terminated under Article 32 of the Model Law; or
    2. a request by the party to the arbitral tribunal to make an order under subsection 23E(1) allowing the disclosure has been refused.
  4. An order under this section is final.