Questions upon confidentiality in international arbitration
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.
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