CONFIDENTIALITY AND TRANSPARENCY IN ARBITRATION; STRIKING A BALANCE
By Diane Okoko FCIArb
CONTENTS
- Introduction
- Confidentiality
Confidentiality and Privacy
- Transparency
UNCITRAL Rules on Transparency
- Is there a balance?
The question of confidentiality in arbitration remains unsettled and one which scholars and practitioners of international arbitration have varied opinions till date. This paper does not seek to pitch confidentiality and transparency in an adversarial manner but rather seeks to find an equilibrium between two seemingly opposing features of international commercial arbitration. Are these principles singularly independent of each other or can they be complementary in some sense? In order to answer this question, this paper will examine the extent to which the UNCITRAL Rules on Transparency have created a balance (if at all) between the two concepts in the practice of commercial arbitration.
CONFIDENTIALITY
Confidentiality is the bedrock of arbitration based on the privacy of the arbitral process. It is one of the hallmarks[1] of arbitration and one of arbitration’s most prominent features[2], one which has endeared arbitration as the preferred means of dispute resolution in the business world.
Confidentiality has been considered essential to arbitration as it recognises the needs of businesses to maintain secrecy inherent in their dealings.[3] The protection of business secrets is perhaps the primary purpose of the principle of confidentiality.[4] Confidentiality also affords business partners to continue doing business even where there is a dispute on some aspect of the transaction. Parties to an arbitration value confidentiality for more reasons than the above, however, some of these reasons are not unrelated to the almighty concept of party autonomy. Parties want to have greater control over their proceedings, inclusive of a greater influence over the choice of applicable law, the forum and jurisdiction in which the dispute will be heard, and greater efficiency in terms of money and time.
Where information is given as confidential by one party in the course of negotiations, the other party is under a duty not to disclose that information or to use it improperly for its own purposes, whether or not a contract is subsequently concluded.
This principle, although specifically for negotiations, is the affirmation of a broader principle of confidentiality and secrecy in business dealings.[5] As will be seen throughout this paper, such a principle must compete against other fundamental principles of public interest and, at least where the courts become involved, open justice. Although the concept of confidentiality in arbitration has become eroded over years, especially with the rise of Investor-State arbitration, it remains vital to maintain the attractiveness of arbitration.
The Queen Mary University International Arbitration Survey 2015 stated that 33% of the respondents reported that confidentiality and privacy are compelling reasons to opt for arbitration over litigation.[6] English courts have favoured a duty of confidentiality on the assumption that the hearings are conducted in private. In Hassneh Insurance v Mew[7] Judge Coleman opined:
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.[8]
If the concept of confidentiality is so valuable to disputants, the question is why? This could be attributable to a number of reasons; firstly, parties may not want to expose certain “allegations” to the public.[9] Secondly, parties may not want to have a “loss” publicized, especially if they are in other cases with similar facts. Thirdly, parties may not want to take certain stands on a subject publicly but can do so privately.
Is there a Duty of Confidentiality in International Commercial Arbitration?
The question can be posed whether there is a duty of confidentiality in International Commercial Arbitration and if the answer to this question is yes, to whom is this duty attributable?
Every arbitral process has three main participants to whom the duty of confidentiality may apply; the tribunal, the parties and third parties such as witnesses and experts.
It is a pretty straightforward obligation when it to comes to arbitrators, that have a duty of confidentiality.[10] Third parties on the other hand do not owe a duty of confidentiality, except to the extent that such a duty is contracted. The major issue on confidentiality is with the parties themselves. In the absence of an express agreement on confidentiality, the duty on parties to maintain confidentiality will vary significantly from proceeding to proceeding, tribunal to tribunal, applicable law to applicable law, and the issues in dispute and how this confidential information is to be used.
What information should be kept confidential?
Having established that a duty of confidentiality is owed by some participants to the arbitral process, we can then attempt to determine what kind of information is subject to confidentiality, if at all; 1) The existence of a dispute or an arbitration, 2) The proceedings, including the evidence adduced and/or 3) the award of some part of it. What then is the treatment to be attached to the duty of confidentiality in private commercial arbitration and public international arbitration. Arbitral Institutions have approached this differently;
Private International Commercial Arbitration
Before we explore the provisions available for the privacy of proceedings in international arbitration, a look at our own domestic law, the Arbitration Rules under the First Schedule to the Arbitration and Conciliation Act, 2004 provides that hearings shall be in camera unless the parties agree otherwise[11]
International Chamber of Commerce (ICC)
Although the ICC has not been able to arrive at an express duty of confidentiality to be imposed on the participants, it has agreed on a fallback position by maintaining that the proceedings be kept private[12] and for the protection of confidential business information and trade secrets[13]. It goes further to make provision for confidentiality with regards to the award by ensuring that certified additional awards are only given on request to the parties but to no one else. [14]
United Nations Commission on Trade Law (UNCITRAL) Arbitration Rules
In the same vein, the UNCITRAL Arbitration Rules do not have express provisions for confidentiality but require that the proceedings be held privately[15] and for non-publication of the award without the parties’ consent[16].
Arbitration Rules of the London Court of International Arbitration (LCIA)
The Rules of the LCIA have more detailed provisions relating to privacy. Article 19[17] clearly states that meetings and proceedings shall be in private unless otherwise agreed by the Parties and directed by the tribunal. In addition, Article 30[18] is dedicated to imposing a duty of confidentiality on the parties throughout the proceedings.
World Intellectual Property Organisation (WIPO)
The arbitration rules of the World Intellectual Property Organisation (WIPO) may by far be the most detailed in terms of providing for confidentiality. The provisions are to the effect that no party can disclose any information pertaining to the existence of arbitration to any third party except to the extent that the information disclosed is as required by law or a regulatory body or such information is for the purpose of a challenge of the arbitration in court or for the enforcement of an award[19], or information pertaining to disclosures made during the hearing [20], or with regards to confidentiality of the award[21] and finally on strict duty is placed on the Centre and the tribunal[22].
Public International Arbitration
International Centre for the Settlement of Investment Disputes (ICSID)
The World Bank established ICSID for the sole purpose of facilitating the settlement of disputes between states and private investors. ICSID Rules expressly prohibit the publicizing of any award without the consent of the parties[23]. It, however, does not make require that all hearings be held in private. On the other hand, it states that parties shall decide which other people can be in attendance at the hearing in addition to the parties, their representatives and counsel, the tribunal, and necessary experts[24]. With particular reference to ICSID arbitrations, it appears that the discretion for the extent to which confidentiality is imposed in arbitration rests on the tribunal as has been found in the Metalclad and Amco Asia cases[25].
Transparency in Arbitration; Its History and Evolution
Although the term transparency is often invoked in international law, it is not clearly defined[26]. However, synonyms such as openness or accountability are often invoked in an attempt to describe the context of its use. It is an information-centric concept that relies on openness and access to information, viewed as a more accountable, more democratic, and more legitimate system of global governance. In the arbitral realm, it involves the disclosure of documents or other materials, open hearings, the participation of third parties in the arbitration process, public access, etc.
Arbitral proceedings have always been shaped around protecting the disputing parties from public glare and sometimes, judgment before the facts in disputes are settled, thereby shrouding the process with an air of mystery and secrecy.
In recent times, however, there have been more agitations towards transparency in arbitration. These may be in the form of a mandatory publication of awards, unless the parties decide otherwise, while others have advocated for an international supervisory body to scrutinize the publication of awards and yet a vast majority have advocated for more public access. The quest for a more transparent system in arbitration is more closely linked to public interest considerations in Investor-State arbitration, although there is still an agitation, albeit little, for more openness in international commercial arbitration, especially where there are human rights considerations involved. Some protagonists have taken the conversation even further when they argue that if public interest is such a major concern, why stop at publishing the awards alone? Why not open the whole process to public access? The transparency trend is based on the notion that the general public is a significant stakeholder in international arbitration. Since arbitrations can significantly impact public interests, people have a right, at least, to notice of disputes that affect them.
In its advocacy towards more transparency in Investor-State arbitration,
The New York Times wrote;[27]
“Their meetings are secret. Their members are generally unknown. The decisions they reach need not be fully disclosed. Yet the way a small group of international tribunals handles disputes between investors and foreign governments has led to national laws being revoked, justice systems questioned and environmental regulations challenged. And it is all in the name of protecting the rights of foreign investors under the North American Free Trade Agreement.”
The Need for Transparency
Transparency can lead to a higher degree of trust and acceptance of the arbitral process. Transparency increases accountability as the arbitrator, counsel, and parties to an arbitration are mindful that their behavior is likely to be scrutinized by the public.69 Transparency also renders the decision-making process in arbitration more accurate, as arbitrators who know that their awards will be rendered public are more inclined to thoroughly research and investigate before reaching a conclusion.70 It helps to guarantee democratic principles such as the right of access to information and also promotes fairness, the rule of law, equity, and due process.71 The benefits of arbitral transparency include the consistency of arbitral awards, development of arbitral law, prevention of prospective disputes, better openings to develop the arbitral system, and increased efficacy in determining the expertise of an arbitrator.73
In attempting to distill the topic of transparency in international arbitration, it is important to look at the concepts of public access as well as disclosure.
The relationship between Public Access and Transparency
Public access refers to the right of the public to have access to the testimony of a witness and even to some levels of scrutiny of that witness. Transparency on the other hand is aimed at affording information to the public. These concepts, although similar are distinct from each other. The idea of public access is rooted in domestic laws of justice and fairness majorly as a tool to facilitate accountability.
On the other hand, several international tribunals espouse public access in a bid to ensure transparency. Consequently, although public access is an instrument for stimulating transparency, it is not an essential characteristic of transparency. The fundamental difference between the domestic and international approach to public access lies in the fact that domestic legislators refrain from overstepping on a fundamental right in a bid to avoid a backlash of the local population and human rights activists, while in international disputes, such domestic considerations are non-existent[28].
The relationship between Disclosure and Transparency
Disclosure obligations are focused on the release of substantive information. While transparency deals with the manner in which information should be handled, disclosure focuses on the provision of substantive information. Transparency applies to a myriad of activities within an institution irrespective of the type of information involved, while disclosure deals with the specific disclosure of an identifiable piece of information.
Although transparency and disclosure differ in nature, these concepts can co-exist: the latter is an instrument to achieve the former. For example, arbitrators have to disclose any conflict of interest that may sway their opinion or affect their impartiality because such disclosure allows arbitrators to be appointed in a transparent manner and limits the possibility of appeals of arbitral awards on the basis of bias[29].
The dominant aim of disclosure, in general, is to protect or satisfy the public interest. Any disclosure of confidential information in arbitration should always be restricted to the specific information needed in order to protect or satisfy the public interest.67 More importantly, parties to international commercial arbitrations are often private entities aiming to resolve a commercial disagreement. In such cases, government disclosure obligations rarely arise where there is no public interest involved; when public interest issues do arise, government disclosures are limited.68
[1] Rodrigo Garcia Da Fonseca & Andre ́ De Luizi Correia, The Limits of Confi- dentiality in arbitration: A Brazilian perspective, 3 Y.B. ON INT’L ARB. 119, 123 (2013).
[2] Bernardo M. Cremades & Rodrigo Cortes, The Principle of Confidentiality in
Arbitration: A Necessary Crisis, 23 J. OF ARB. STUD. 25, 26 (2013)
[3] Serge Lazareff “Confidentiality and Arbitration: Theoretical and Philosophical Reflections” [2009] ICC Ct Bull Supp 81 at 82
[4] John Savage and Emmanuel Gaillard Fouchard Gaillard Goldman on International Commercial Arbitration (Kluwer Law International, Alphen aan den Rijn, 1999) at [384].
[5] Lazareff, above n 3, at 82.
[6] White & Case “2015 International Arbitration Survey: Improvements and Innovations in International Arbitration” (6 October 2015) <www.arbitration.qmul.ac.uk/docs/164761.pdf> accessed April 10th, 2016
[7] Hassneh Insurance v Mew [1993] 2 Lloyd’s Report 243 (QB Comm Ct)
[8] At 246-247
[9] A. Redfern & M. Hunter, Law and Practice of International Commercial Arbitration 27 (3d ed. 1999)
[10] See Article 9 of the International Bar Association Rules of Ethics for International Arbitrators; The deliberations of the arbitral tribunal, and the contents of the award itself, remain confidential in perpetuity unless the parties release the arbitrators from this obligation. An arbitrator should not participate in, or give any information for the purpose of assistance in, any proceedings to consider the award unless, exceptionally, he considers it his duty to disclose any material misconduct or fraud on the part of his fellow arbitrators.
[11] Art. 25.4; First Schedule to the Arbitration and Conciliation Act, CAP A18, Laws of the Federation of Nigeria, 2004
[12] ICC Arbitration Rules; Article 26.3
[13] ICC Arbitration Rules (2017); Article 22.3
[14] Art. 35.2 ICC Arbitration Rules (2017)
[15] Art. 28.3 UNCITRAL Arbitration Rules (2013); Hearings shall be held in camera unless the parties agree otherwise
[16] Art. 34.5 UNCITRAL Arbitration Rules (2013)
[17] Art. 19.4 LCIA Arbitration Rules (2014)
[18] Art. 30 LCIA Arbitration Rules (2014)
[19] Art. 75 WIPO Arbitration Rules (2014)
[20] Art. 76 WIPO Arbitration Rules (2014)
[21] Art 77 WIPO Arbitration Rules (2014)
[22] Art 78 WIPO Arbitration Rules (2014)
[23] Art 48.5 ICSID Convention (1965)
[24] Rule 32.2 ICSID Rules of Procedure for Arbitration
[25] Metalclad ICSID Case No. ARB(AF)97/1 Award (Aug 30, 2000) at Para. 13; Amco Asia Corp. et al. Vs Republic of Indonesia; 24 I.L.M at 368.
[26] See Pedro J. Martinez-Fraga, Juridical Convergence in International Dispute
Resolution: Developing a Substantive Principle of Transparency and Transnational Evidence Gathering, 10 LOY. U. CHI. INT’L L. REV. 37, 71 (2012)
[27] The New York Times on March 11, 2001
[28] A. Poorooye & R. Feehily; Confidentiality and Transparency in International Commercial Arbitration: Finding the Right Balance
[29] Paula Hodges, The Perils of Complete Transparency in International Arbitra- tion – Should Parties Be Exposed to the Glare of Publicity?, 3 PARIS J. OF INT’L ARB. 589, 596 (2012)