Principle of Confidentiality in Arbitration Proceedings

Principle of Confidentiality

Arbitration as an alternate dispute resolution mechanism has seen a substantial rise in the last decade or so, not only in India but throughout the globe owing to the fact that arbitration allows greater party autonomy and is more cost-effective and speedier as compared to litigation. The Arbitration and Conciliation Act, 1996 (“the Arbitration Act”) deals with the law relating to arbitrations in India and the Arbitration Act was amended recently in 2019 with the enactment of the Arbitration (Amendment) Act, 2019 wherein the principle of confidentiality of arbitration proceedings was introduced in India.

Confidentiality and privacy are often touted as major benefits of arbitration in resolving disputes compared to litigation, which is neither private nor confidential. In civil courts, proceedings and documents are generally open to the public and this would be unappealing to parties who desire to keep certain information away from public scrutiny, be they allegations arising from disputes or commercially sensitive information.

Confidentiality, as a principle, has been a part of the Arbitration Act since its inception in terms of Section 75 of the Arbitration Act. However, Section 75 of the Arbitration Act only related to conciliation proceedings and not arbitration proceedings. Section 75 of the Arbitration Act provides that the conciliator and the parties shall keep confidential all matters relating to the conciliation proceedings and such confidentiality shall extend to the settlement agreement except where its disclosure is necessary for purposes of implementation and enforcement.

The Limits of Confidentiality

Confidentiality is wide enough to cover the arbitration proceedings (including witness’ testimony), the arbitral award and its reasons as well as materials disclosed, discovered and created in the proceedings (including pleadings, reports, documents submitted, witness statements, transcripts, notes of evidence and written submissions). However, confidentiality is not absolute and is subject to various exceptions.

Under the UK position, Potter LJ in Ali Shipping Corp’s case listed the following exceptions where disclosure can be made:

  1. Where the party who originally produced the material expressly or impliedly consents;
  2. Disclosure pursuant to an order of the court or with leave of court;
  3. Disclosure to the extent reasonably necessary for the protection of a party’s legitimate interests, in particular in establishing or defending a claim against or from a third party; and
  4. Disclosure where the interests of justice requires it. His lordship differentiated this from “public interests” to avoid the suggestion that the exception extended to cases of public interest as in Esso Australia.

As a practical matter, one can imagine many other situations where confidentiality in arbitrations can be compromised whether legitimately or otherwise. Some of the reasons would include: winning parties may be tempted to reveal proceedings or awards to non- parties and statutory bodies, a party may have to disclose to comply with legal regulations, police enquiries or insurance policies, expert witnesses may engage third party assistance in producing reports who would then know of the arbitration or parties may internally inform related or holding companies.

There are some measures which can be taken to protect confidentiality in arbitration. One suggestion would be to expressly incorporate a confidentiality clause in the arbitration agreement, stating the extent of confidentiality and remedies for breach. Contracts of engagement for transcribers and interpreters should similarly incorporate such obligations.

Another step to protect confidentiality would be to communicate the obligation, particularly to witnesses and permitted individuals who are not subject to any contractual obligation so as to expressly warn of a tortuous obligation not to disclose confidential information. Parties can also limit the copies of documents used in the arbitration proceedings to avoid unwanted disclosure.

Conclusion

There are so many exceptions to the general rule of confidentiality in arbitration that it is clear confidentiality is not absolute. Whilst the limits of confidentiality in arbitration have yet to be tested in Malaysian courts, parties to arbitrations would do well to take extra precautions in protecting confidentiality, especially if there is sensitivity involved with the arbitrations proceedings and materials arising therein.

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