Transparency and Confidentiality in International Commercial Arbitration: A Dynamic Equilibrium

By Apoorva Mandhani, Symbiosis Law School, Pune.

Arbitration has gradually emerged as the preferred mode for resolution of large commercial and corporate disputes in several jurisdictions. The principle of confidentiality is one of the advantages¹, if not the main one, for the increased popularity of international commercial arbitration.

However, a trend favoring transparency² is catching up. This has added fuel to the constant need to strike a balance between confidentiality and transparency in international commercial arbitration and has induced policy makers and adjudicators to devise innovations in order to harmonize the divergence.

Confidentiality:

Arbitration is an expression of party autonomy, facilitated by the arbitration agreement. Such agreements can hence provide for a confidentiality clause as well. The IBA Guidelines for Drafting International Arbitration Clauses – adopted in 2010 – at paragraphs 60-65 expressly suggest that the parties, if concerned about confidentiality, should address this issue in their arbitration clause. ³

The existence and scope of confidentiality may hence either be regulated by the terms of the agreements or may vary in the light of the different standards that may regulate it (i.e. institutional arbitration rules or domestic laws).

Further, even though the arbitrator may be bound by an ethical duty of confidentiality in an arbitration proceeding, third parties such as expert witness may not be bound by the duty of confidentiality in case of any agreement to the contrary.

While, confidentiality has been treated as an implied obligation in arbitration proceedings in UK, France and Singapore, such assumption has been challenged in Australia, Sweden and USA.⁴ New Zealand (Arbitration Act, Art.14), Spain (Arbitration Act, Art (24) (2)) and Romania (Code of Civil Procedure, Art. 353) have express statutory provisions providing for maintenance of confidentiality in arbitration proceedings.

Need for confidentiality:

The importance of confidentiality in cases of international commercial arbitration cannot be over-emphasized on. In this sense, a former Secretary-General of the ICC stated:

“It became apparent to me very soon after taking up my responsibilities at the ICC that the users of international commercial arbitration, i.e. the companies, governments and individuals who are parties in such cases, place the highest value upon confidentiality as a fundamental characteristic of international commercial arbitration. When enquiring as to the features of International commercial arbitration which attracted parties to it as opposed to litigation, confidentiality of the proceedings and the fact that these proceedings and the resulting award would not enter into the public domain was almost invariable mentioned.”⁵

Among other things, confidentiality is perceived as encouraging efficient, dispassionate dispute resolution rather than emotive “trial by press release” or efforts to gain extraneous leverage; reducing the risks of damaging disclosure of commercially sensitive information to competitors, customers and others.⁶

Privacy v/s Confidentiality:

The aspiration for maintaining confidentiality often takes a detour with justifications of the existing privacy in arbitration proceedings. While “privacy” refers to the fact that only parties to the arbitration agreement may attend arbitral hearings and participate in the arbitral proceedings; “confidentiality” refers to the obligation of the parties, the arbitrators or the institutions, not to disclose information concerning the arbitration to third parties (i.e. hearing transcripts, written pleadings, evidence or award).⁷

In Esso Australia Resources Ltd & Ors V Plowman (Minister for Energy and Minerals) & Ors,⁸ it was held that, no sharp distinction can be drawn between privacy and confidentiality in this context. They are two sides of the same coin. The privacy of arbitration exists in order to maintain the confidentiality of the dispute which the parties have agreed to submit to the arbitration and any curtailment in the confidentiality will affect the privacy of the arbitrator.

Transparency:

Transparency essentially refers to information about a decisional process provided to interested parties. The issue of increased transparency in international commercial arbitration has been advocated by commentators and scholars alike.⁹

It has been rightly argued that even though arbitration is binding only for the parties who are signatories, “quality” awards can have persuasive value for future parties and arbitrators.

Publication of sanitized arbitration awards¹⁰ has been the focus of most debates surrounding international commercial arbitration. For instance, the ICC Secretariat publicizes synthesis of awards in the ICC International Court of Arbitration Bulletin¹¹ for educational purposes. In this publication, reference is made only to the docket number and the award is sanitized by removing the names of the parties, geographical and industrial facts that would risk rendering the case and its participants identifiable.

Furthermore, concerns regarding maintenance of consistency and predictability provide greater support to the advocates of transparency. Publication of arbitral awards contributes to preservation of a research catalog, aiding future research and adjudication.

Moreover, transparency allows evaluation of the arbitrators, providing with reliable information in making an informed choice by parties seeking to get involved in international commercial arbitration proceedings.

The balance:

As transparency comes across confidentiality, the conflict between transparency and confidentiality cannot permit the victory of one on the other, and their settlement turns out necessary¹².

In contrast to investment arbitration and WTO adjudication, the international commercial arbitration system primarily adjudicates private law claims. In such a scenario, claiming that the citizens of the world will pose an interest in all international commercial arbitration proceedings does not hold ground. Not surprisingly, therefore ardent advocates of compulsory transparency reforms have conceded that transparency should not be insisted on in all cases because the public does not have an interest in all cases.¹³

Regulation of the desired equilibrium between transparency and confidentiality can be achieved by including specific clauses in the arbitration agreement, which would specify the scope, the extent, the duration of the confidentiality obligation, its exceptions and how it may be enforced.¹⁴ 

Codification of confidentiality constraints and transparency necessities would further enhance the functioning of the institutions involved in the proceedings.

Further, awards should be sanitized, safeguarding the identity of the parties involved. They should only be disclosed in situations where it is important to comply with the legal requirements imposed on an arbitrating party or protect a person’s legal right to a third party.¹⁵ Arbitral Tribunals should be entrusted with preparing redacted versions of the awards.

Publication of awards on the institutions’ web pages can also be undertaken, in order to guarantee complete access. An example of this practice is the ICSID webpage were almost all awards are posted for public access.¹⁶

The advantages to be achieved by exhibiting a more nuanced approach to confidentiality, while at the same time, facilitating a greater degree of transparency where appropriate would greatly benefit international commercial arbitration as a whole. A cautious weighting of the benefits and costs of confidentiality versus greater transparency under a particular situation should be undertaken in order to keep the wheels churning.