Questions upon confidentiality in international arbitration

By Evlampia Tsolaki, Attorney at Law

International arbitration inherently entails the transnational element that offers inexhaustible topics of research at multiple levels, namely at a doctrinaire, teleological and comparative plane, simultaneously. It is not a coincidence that there is an unending production of legal scholarship regarding international arbitration which is fueled by its flexible structure that has made it attractive for international commercial actors, both in the private and the public sector, as well. Against this background, international arbitration obviously raises novel legal issues while it challenges us to consider traditional ones in order to build a coherent and from that respect relatively safe legal environment. In this framework, there is an oxymoron, namely that established concepts of international arbitration that one would expect to have been clarified, remain rather vague, causing controversies and legal uncertainty. One of such a kind is confidentiality,the omnipotence of which in international arbitration is undeniable while at the same time its content remains obscure. This contradiction between its full embracement by the international legal community on the one hand and the vagueness of its concept on the other side cultivates the necessity for its scientific clarification. More specifically:

Confidentiality is a fundamental characteristic of international commercial arbitration that shields latosensu arbitral process, namely as a whole from its commencement to the issuance of the arbitral award, in a state of secrecy. In principle, it means that what happens behind the closed doors of arbitral proceedings is highly classified and thus it is prohibited to be communicated to the outside world. Exactly, this feature of arbitration is regarded as one of its major advantages towards classical litigation since it guarantees that the legal armory and the factual background revealed in the course of arbitration will remain far from prying eyes. Nevertheless, despite the fact that it is a well-established concept in the international legal community, its inherent conceptual plasticity, deriving from its broad definition, needs to be crystalized regarding its doctrinaire basis and its precise conceptual dimensions.

So, contrary to the principle of publicity that applies to litigation in order to ensure the transparency of the overall procedure, arbitral proceedings are primarily characterized by privacy and confidentiality. In spite of their being frequently confused, in reality they are two distinctive concepts that need to be strictly distinguished at the outset since they have different orientation and thus different addressees.On the one hand, privacy refers to and seeks the isolation of arbitral process from the outside world, literally meaning that it is not accessible to third parties. Confidentiality, on the other side, is connected with the stakeholders of arbitral proceedings and basically the litigants who in principle are not allowed to reveal information linked with the arbitration at stake. Consequently, it becomes clear that while privacy safeguards arbitration from publicity deriving from external actors, confidentiality secures it from revelations originating from internal informative leaks, meaning that it is exclusively confined to the relationship between the plaintiff and the defendant. Although, its acceptance is considered a common place, there are many questions open as regards its doctrinaire foundation, the absolute or relative character of the obligations produced by its application and the precise content of the latter. In particular:

The legal foundations of confidentiality have constituted a bone of contention for a very long time. Currently, the prevailing opinion focuses on three principal legal sources. Specifically, it supports that confidentiality can be based either on the contract between private individuals or the respective rules of national law and institutional statutes of the various international arbitration centers. At the beginning, in all those cases, it should be underlined that the obligation of confidentiality is not homogeneous, meaning identical, but it extensively diversifies, according to the phrasing of the respective clause, founded in one of the aforementioned bases. Bearing always in mind this clarification, the following possible legal groundings can be distinguished:

a) First, there is a widely common understanding that confidentiality derives from parties’ agreement. However, the opinions have been divided as regards the express or implied nature of the respective contractual clause. Apparently, it is indisputable that a positive articulation of such an obligation resolves the issue of its per se existence, leaving of course simultaneously open the vexed question of its scope. Nevertheless, it has not been equally widely accepted that an implied conduct could amount to such an agreement, which in fact is an approach supported basically by English courts by reasons of "business efficacy"[1] or "as a matter of law"[2], but denied by the Australian ones.

b) The second basis is offered by regulations of institutional statutes usually in the form of a default rule, namely a rule applicable on the condition that the parties have not otherwise agreed. In this case, it is more than obvious that the innumerable variations of the respective provisions alter the breadth of the respective obligation, extending from a generic to a comprehensible one. For instance, it is very aptly advocated[3] that WIPO Arbitration Rules contain one of the most intelligible framework of confidentiality in International Commercial Arbitration[4] in articles 73-75[5],[6],[7], ensuring its observance to the most possible degree. In contrast to that clarity, notably stand the ICC rules that in an opaque phrasing (art. 20 § 7), imply that confidentiality bounds only Arbitral Tribunals and not the parties to a dispute.

c) Last, but not least, rarer there are few national arbitration rules that provide for the observance of confidentiality, such as for example New Zealand Arbitration Act (art. 14B), the Norwegian Arbitration Act (section 5) and the Romanian Code of Civil Procedure (art.557), the contradistinction of which again proves that the scope of confidentiality varies, according to its legal basis.

All the aforementioned heterogeneous provisions may differ to the extent to which they adopt the concept of confidentiality, but they have a common denominator, they express a common logic, that arbitral proceedings shall be kept impassable, one way or the other, to thirds. The easy explanation provided for this peculiarity of arbitration is that the latter serves private interests and thus it shall remain a "private case".However, this argument is not irrefutable since civil litigation equally refers to private interests and despite this fact it is overall public. Namely, it is not only open to thirds, contrary to international commercial arbitration’s strict privacy, but its litigants are not legally bound by the general procedural rules applicable to keep secret anything related with the respective trial and the only limitations of such a kind can solely originate from specific legal frameworks, such as for example that for the protection of personal data or trade secrets. So, it becomes obvious that private interests per se do not offer the key for a proper answer as regards the dogmatic basis of confidentiality. 

On the contrary, the crucial point should be focused on the private nature of the institution of arbitration as such in combination with the private interests at stake. Indeed, arbitration constitutes a form of "privatized" justice that is organized by the national legislator only in its general framework for it serves a public value, the dispensation of justice. However, this element does not adulterate the very fact that it is conducted by private actors, arbitral tribunals and in case of institutional arbitration, international arbitration centers, for the sake of private individuals. Therefore, it is a private institution, which is organized in its basic lines by the domestic legislator primarily with default rules. Through this lens, it can be understood that (international) arbitration is indeed a "private case" and this is the reason why it functions in a conceptual framework pertaining to private activities.  Exactly, this rationale behind the international arbitration’s confidentiality explains in parallel the exceptions that can be accepted to its application.

Taking into consideration that litigants’ interests cannot be considered a priori more important in comparison with other legal values and interests either of public or private nature, it becomes evident that confidentiality is not an absolute magnitude. This common acceptance produces one of the major problems as regards the delineation of confidentiality’s limitations, which has divided jurisprudence throughout the world. English courts in an attempt to preserve as much as possible the confidential character of arbitration, as a means of a sound commercial policy, hold that confidentiality can be outflanked under two cumulative conditions. First, the disposal concerned shall be necessary for the fair dispensation of justice in another case and second the information at issue cannot be checked by less expensive means. In so doing, they obviously apply the principal of proportionality in the form of its last two dimensions, namely the principal of necessity and the weighing of the cost and the benefits deriving from the adoption of a specific exception to confidentiality. Contrary to this approach, Australian courts in Esso Australia Resourses Ltd v Sidney James Ploman[8], according to an interpretation[9], favors the (easier) lifting of confidentiality as in their perspective confidentiality does not characterize intrinsically arbitration and therefore it does not constitute always an implied obligation. Consequently, in order for it to be binding, it shall be express agreed. However, this approach, namely that Australian courts are more prone to decline the protection of confidentiality, is not precise since it ignores that in the case at hand the Australian High Court adjudicated in favor of the disclosure of the information asked for reasons of public interest. Specifically, the arbitration at stake referred to the public sector, where «……the need is for compelled openness not for burgeoning secrecy……»[10], an element that was reasonably evaluated by the Australian court.

The above mentioned jurisprudential tendencies represent solely a vestigial fraction of the views supported in international case-law, reflecting the different legal concepts of confidentiality provided for by each legal order.Moreover, its variations multiply when applying the obligation of confidentiality in each stage of international arbitration, from its beginning to the issuance of the arbitral award. Namely, arbitral procedure takes place in three distinct stages, its commencement, the main process per se and the delivery of the award, in the framework of which the obligation to observe confidentiality cannot be the same. Concerning the first stage, the issues raised are encapsulated in case Publicis SA v. True Northadjudicated on by French courts, which referred to the damages suffered by the leak of sensitive commercial information upon the initiation of arbitral proceedings between two companies[11]. The second stage relates to the heart of arbitral proceedings, in which take place the hottest revelations, containing trade secrets and in general classified information. In that regard, one could expect that courts would unvaryingly raise the threshold of the confidentiality obligation. However, their stance largely varies[12] since each one represents and expresses a completely different legal system, which interprets confidentiality in a differentiate legal context. Last, but not least the third stage, connected with the revelation of the award, touches the issue of divulging the arbitral tribunal’s deliberations and the award per se. In this case, while there is a unanimous position that in principle the deliberations as such are secret as a matter closely related with the independency of the arbitrators, it is largely debated the destiny of the arbitral award. It seems that the respective jurisprudence ranges in accordance with two basic parameters, the legal order and the exact usage of the arbitral award.

The aforementioned only brief account of the concept of confidentiality poses a series of fundamental questions, such as for example as towhether (a) it is demanded the express agreement on confidentiality and its content or in any case it suffices the conclusion of the arbitration agreement as such, from which such an obligation is deduced, (b)  there is a uniform concept of confidentiality or its content varies according to its legal basis, (c) the exceptions to confidentiality could be homogenized or are  diversified according to its legal foundation and last but not least (d) the obligation of confidentiality differentiates at the respective stages of arbitral proceedings.Those are solely some of the very basic topics remaining open until their proper response will take place based on an extensive study of both, its theoretical and jurisprudential background, as well. Before such an analysis being conducted, it is indispensable eventually to bear in mind that confidentiality is susceptible to various readings, namely it is a “rubber” concept, constituting the “joy” of lawyers by fueling their argumentation of either litigant. 

*Evlampia Tsolaki (linkedin Evlampia Tsolaki 1st) :  

-Attorney at law qualified at the Thessaloniki Bar Association

-Ph.D. candidate at the Faculty of Law of the Aristotle University of Thessaloniki

-LL.M. in Transnational and European Commercial Law, Mediation, Arbitration and Energy Law, School of Economics, Business Administration & Legal Studies of International Hellenic University (IHU, Thessaloniki)

-LL.M. in Civil, Civil Procedural and Labour Law at the Faculty of Law of the Aristotle University of Thessaloniki 

Read more articles by Evlampia Tsolaki here


[1]Smeureanu, Confidentiality in International Commercial Arbitration, p.9.

[2]ibid.

[3]ibid.

[4]ibid.

[5]Article 73 states that «……(a) Except to the extent necessary in connection with a court challenge to the arbitration or an action for enforcement of an award, no information concerning the existence of an arbitration may 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……».

[6]Article 74 states that «……(α) any documentary or other evidence given by a party or a witness in the arbitration shall be treated as confidential and, to the extent that such evidence describes information that is not in the public domain, shall not be used or disclosed to any third party by a party whose access to that information arises exclusively as a result of its participation  in the arbitration forany purpose without the consent of the parties or order of a court having jurisdiction……».

[7]Article 75 states that «……The award shall be treated as confidential by the parties and may only be disclosed to athird party if and to the extent that:i) the parties consent;or ii)it falls into the public domain as a result of an action before a national court or other competent authority;or iii) it must be disclosed in order to comply with a legal requirement imposed on a party or in order to establish or protect a party’s legal rights against a third party……».

[8]Smeureanu, op.cit.,p.37.

[9]ibid.

[10]Smeureanu, op.cit., p.38.

[11]Smeureanu, op.cit., p.29.

[12]Smeureanu, op.cit., p.30.

Φωτογραφία από τον χρήστη Oleg Magni στο Pexels

Comments

Popular posts from this blog

European Investment Bank is seeking to recruit an Associate Banking & Finance Lawyer

PhD Positions in “Digital Health – Digitalisation in Health Law”

Doctoral researcher (PhD student) in Law at the University of Luxembourg