This article has been written by Anubhav Singh, pursuing a Certificate Course in Arbitration: Strategy, Procedure and Drafting from LawSikho.
Arbitration is one of the leading alternative dispute mechanism methods which has seen a fundamental rise globally as well as in India. Arbitration is private dispute resolution, an alternative to courts where the dispute is adjudicated by a private arbitrator. Arbitration under the Arbitration & Conciliation Act, 2019 is defined as “arbitration means any arbitration whether or not administered by permanent arbitral institution”. It is considered a cost-effective substitute to litigation, it also allows greater party autonomy. Confidentiality in arbitration has already been addressed by various countries. In India, Section 42A was introduced by the way of the Arbitration & Conciliation (Amendment) Bill, 2019 and it was passed by the Rajya Sabha on 18th July 2019 wherein the concept of confidentiality was introduced with the intent of making India the hub of international and domestic arbitration and promoting institutional arbitration.
Meaning of confidentiality under the Amendment Act, 2019
The term confidentiality has not been defined anywhere in the Arbitration Act. However, the Oxford dictionary defines confidentiality as “the process of and obligation to keep a transaction, documents, etc. with limited access”. The term confidentiality is not an alien term to the legal fraternity, it has been embedded in the legal world which can be seen in the Indian Evidence Act from Section 126 to 129 wherein it is provided that no counsel is permitted to disclose any information made by his client during the course of his employment.
The concept of confidentiality was introduced in the Arbitration Act vide Section 42A “Confidentiality of Information” wherein the arbitrator, arbitral institution, and parties to the arbitration agreement are required to maintain the confidentiality of all arbitration proceedings.
Countries like the United Kingdom, New Zealand, Singapore, etc. have enacted statutes focusing upon the protection of arbitral awards from the Public. There are two sides to confidentiality: (i) Confidentiality of arbitration proceedings, (ii) Confidentiality of documents filed before the Arbitral tribunal.
Addressing the issues due to confidentiality in international commercial arbitration
There is no general duty on confidentiality in international commercial arbitration. Institutional rules provide a duty of confidentiality to the parties to the arbitration before the respective institution. The major issues concerning confidentiality in international commercial arbitration are:
Lack of uniformity in various jurisdiction
Various jurisdictions around the world have different laws pertaining to confidentiality in arbitration, confidentiality is to prevent disclosures of the commercial interest of the parties to the public. In the U.K. the English courts try to maintain a balance between the public interest and confidentiality obligation even in the event of the absence of express agreement. However, in Australia confidentiality cannot be presumed when the parties to an agreement can expressly agree on confidentiality.
Statutory recognition of principle of confidentiality
The principle of confidentiality has not been codified by the majority of countries. Arbitration is now widely accepted as the leading alternative to the dispute resolution process worldwide. Countries like Singapore, New Zealand are one step ahead by enacting statutes pertaining to confidentiality in Arbitration. Many countries acknowledge that the purpose of confidentiality needs to be balanced with the purpose of private arbitral justice.
The threshold for duty of confidentiality across various jurisdiction
The courts have respected the arbitration agreements while addressing the issue related to confidentiality, although the disclosure of the information is allowed for the Public interest.
Confidentiality under the Arbitration and Conciliation Act, 1996
The term confidentiality was only envisaged in Section 75 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as ‘Act’) which says that the conciliator and the parties shall keep all the matter related to the conciliation proceedings confidential. This obligation was only exempted for the purpose of implementation and enforcement.
Section 42A was introduced by the Amendment Act, 2019 which begins with a non-obstante clause, therefore, this provision is given an overriding effect over any other law for the time being in force. It extended the scope of confidentiality to the arbitration proceedings. This provision mandates the parties to the proceedings, arbitrator, and arbitral tribunal to uphold confidentiality. This provision is a non-derogatory and starts with the notwithstanding clause giving it an overriding effect over other laws within the country. There have been some contradictions between this clause and other laws. Most of the listed companies prefer arbitration for dispute resolution and SEBI requires them to make several disclosures, this could possibly lead to a conflict of laws.
Section 42A is a positive step towards building India a global hub in Arbitration. This provision is surrounded by a lot of ambiguity like arbitration is a creation of contractual obligation. Party autonomy must be valued in Alternative dispute resolution to boost confidence in the resolution method. This provision has implications with the other provisions of the Act, the impact of this provision on the other provisions should be carefully understood by the legislation and all of it must be harmonized.
These days public authorities also resort to arbitration in the event of a dispute arising out of contractual relationships. In India, it has been judicially acknowledged that all the public authorities will come under the definition of State and the public has the right to obtain information under the Right to Information Act pertaining to the affairs of public authorities as they are directly affected parties. It would be interesting to see the approach of the Indian judiciary while harmonizing the conflicts of Section 42A with other laws.
Section 42A obligates arbitrator, arbitral tribunal and parties to the arbitration to abide by the principle of confidentiality. However, it does not talk about the other concerned persons like witnesses, clerks, stenographers, people attending the proceedings, etc. these people might witness something confidential in nature. This provision craves out the exceptions to the allied proceedings carried under Section 8,9,11, 17, etc. whereby the parties approach the judicial authorities for reliefs under the respective section. Therefore, the ambiguity on confidentiality in arbitration proceedings still exists giving rise to conflicts between Section 42A and other provisions.
Analyzing the UNCITRAL rules in transparency
The United Nations Commission on International Trade Law (“UNCITRAL”) rules do not mention confidentiality but Article 34.5 recognizes implicit confidentiality wherein consent of both the parties is required for publishing the award. However, in July 2013, UNCITRAL adopted rules for treaty-based-Investor-State Arbitration. These rules include 8 articles whereby the scope of application, documents, submission to the third parties and publication of the law, etc. are governed.
These rules provide for specific regulations on arbitral tribunal’s discretion. Using discretionary power, an arbitral tribunal may take into consideration measures like public interest along with the interest of the parties leading to a fair resolution of a dispute. The tribunal is powered to decide the availability of exhibits during the arbitration proceedings or upon request by any of the parties to the proceedings.
Implied and express duty of confidentiality as per different countries (UK, USA, Australia, and New Zealand)
In the United Kingdom, the English courts ensure to make a balance between public interest and obligation on the parties pertaining to confidentiality. In the UK even in the absence of express agreement courts ensure that confidentiality is maintained. However, the parties may require consent before making the disclosure the consent may be expressed or implied by the parties to the arbitration agreement. As a part of general practice, it is ensured that the public interest is not affected while maintaining confidentiality.
In the USA, a blanket approach has been adopted relating to confidentiality. The right to confidentiality is not implied in the USA, if the parties to the arbitration are required to keep the proceedings and documents confidential then there must be an express contract for it between the parties. Likewise in Australia, there is no inherent duty of confidentiality on the parties unless the parties have expressly contracted for it.
New Zealand is a step ahead in protecting the right to confidentiality in arbitration. The Arbitration Act has recently amended wherein the extent of confidentiality has been extended to the allied proceedings as well, which is a major concern throughout the world. Allied proceedings have always posed threat to the confidentiality of the arbitration proceedings, but in New Zealand, the same obligation is expressly covered by allied proceedings.
Cases on confidentiality in other jurisdictions
In Oxford Shipping Co. LTD. v. Nippon Yusen Kaisha, it was observed that the notion of private arbitration basically originates from the intention of the parties to resolve the dispute between them and only between them to arbitration. Additionally, there is an implied obligation in the agreement which prevents third parties’ presence from being prohibited from the arbitration proceedings. In DOLLING-BAKER v. MERRETT and Another, English courts have laid down an extensive list of documents that were to be protected during the arbitration. The degree of strictness was also distinguished by the court. However, the Australian High Court approach in this regard highly depends on the principle of public interest. It was also observed that the obligation of confidentiality exists in some form on the parties.
Recently the UK Supreme Court in Halliburton Company v Chubb Bermuda Insurance Ltd, the statutory duty in English law under which arbitrators are required to disclose facts or circumstances which would, or might reasonably, give rise to the justifiable doubts to their impartiality was recognized for the first time. Additionally, it was observed that the arbitrator is like a judge and must be prepared to the probability of apparent bias. The only way an arbitrator could avoid the presumption is by disclosing issues which could probably give rise to real possibility of bias.
Transparency, as defined under Black Law Dictionary as “Degree of disclosure, is minimum for all verified agreements, practices and dealings”. An arbitration proceeding involves the disclosure of documents and other materials in presence of third parties which is a direct threat to confidentiality during the arbitration. The parties to the arbitration are most concerned about confidentiality, but the Act of 2019 only obligates parties to the arbitration, Arbitrator, and arbitration tribunal. Introducing transparency in arbitration would ensure that the documents are subject to a minimum degree of disclosure while protecting the right of the parties.
Since confidentiality is a new concept in domestic arbitration it would be interesting to see how well it is adopted by the parties and interpreted by the courts. Some problems have been envisaged above like conflicts between various laws and newly enacted Section 42A. It is believed that amendments and judicial interpretations will prevent this provision from doing more harm than good.
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