By: Sophie Lee
Confidentiality is often viewed as a cornerstone of English arbitration and one of the main reasons commercial parties often opt for arbitration over court proceedings (which tend to be open to the public) for the resolution of their disputes. The English courts have taken a strict approach when enforcing the confidentiality of arbitration and parties should be careful to avoid breaching the general duty of confidentiality. However, the duty is not absolute and if the parties can show that the disclosure would fall within an exception, they will be permitted to disclose details of the arbitration.
Parties to arbitration may frequently find themselves facing issues of confidentiality. For example, where there are related proceedings in open court or other arbitrations (either in the UK or another jurisdiction) and the opposing party is demanding disclosure of documents produced in the course of arbitration, or alternatively where a party themselves seeks to rely on arbitration documents in open court proceedings or other arbitrations.
When considering confidentiality obligations in arbitration, parties should keep in mind the following points.
Underlying Contract
Parties must first look at the relevant underlying contract that contained the arbitration agreement. Most contracts will not contain specific confidentiality provisions relating to arbitral proceedings but may well include more general provisions on confidentiality. Parties should therefore first check their contract to ensure they do not breach their contractual duties of confidentiality if any.
Arbitration Agreement
There are conflicting positions on where the obligation of confidentiality arises from. The leading position applied by the English courts is that the duty of confidentiality is an implied term in the arbitration agreement. This means that parties are free to contract to amend the general duty.
Arbitration Rules?
Next, where the parties agreed that the arbitration would be administered by and subject to a particular administrating body, parties must check the relevant arbitration rules.
For example, Article 30 of the LCIA Rules provides that all materials created for the arbitration must be kept confidential except where the “disclosure may be required of a party by legal duty, to protect or pursue a legal right, or to enforce or challenge an award in legal proceedings before a state court or other legal authority.”
Section 6.11 of the LME rules prevents parties from disclosing details of the arbitration without the other party’s written consent or unless the disclosure can be shown to be required by ‘legal duty’ or to protect a legal right.
Provision 29 of the LMAA rules allows the tribunal to publicize an arbitration award (anonymously) unless either party objects.
Common Law Obligations
The Arbitration Act 1996 does not include any express provisions as to confidentiality because the drafters considered this was better left to the courts to resolve on a case-by-case basis.
English common law provides for a general duty of confidentiality in relation to arbitration proceedings. The duty will apply to all aspects of the arbitration: the hearing, the documents produced during the arbitration, and the award. Whilst it is unlikely the duty would extend far enough to prevent a party merely disclosing the fact that an arbitration was commenced and/or an award given, parties should tread very carefully when making any disclosure given the stringent way the courts have enforced the duty.
However, the duty is not absolute and the courts have set out various exceptions. These exceptions were most recently set out in Ali Shipping Corporation -v- Shipyard Togir [1998] 1 Lloyd’s Rep 643 (CA)
- The parties’ consent (express or implied)
- Where there is an order or permission from the court
- Where it is reasonably necessary for the protection of the legitimate interests of an arbitration party
- The interests of justice
- The public interest
This list is still being developed and is ever-evolving.
Parties seeking to rely on the third exception should err on the side of caution as the courts have shown that it is not sufficient to justify disclosure simply to aid a commercial situation or save money, even if it would save time and costs in related proceedings in another jurisdiction. By way of example, in Ali Shipping Corporation -v- Shipyard Togir [1998] 1 Lloyd’s Rep 643 (CA), Ali Shipping was successful in obtaining an arbitration award for damages as a result of the yard failing to complete the vessel. The shipyard then commenced three separate arbitrations against other buyers before a different tribunal and sought to rely on documents from the first arbitration. The Court of Appeal upheld an injunction restraining the yard from disclosing material from the first arbitration in the later arbitrations because the disclosure was not reasonably necessary for the yard to make its case on the merits but would simply have saved time and expense.
The Court of Appeal has held that the ‘interests of justice’ exception can extend to foreign proceedings to which the applying party is not a party.
Conclusion
The duty of confidentiality has been developed as an implied term in the arbitration agreement. As such, any dispute as to the scope of the duty should be dealt with by the arbitral tribunal. The court can be involved in the granting of injunctions etc to prevent breaches of the duty, but the parties should primarily refer disputes back to the arbitral tribunal.
The common law exceptions to the duty of confidentiality have not been defined in detail and leave room for interpretation. Parties should err on the side of caution when disclosing information/ documents from an arbitration. The only way to do so safely is either with the written consent of all parties or if the disclosure would fall within one of the exceptions.
