India: Changing Landscape Of Confidentiality In International Arbitration

Confidentiality of arbitral proceedings is often attributed as the driving force behind the growth of international arbitration in the last sixty years. But, as Redfern and Hunter mentions, though confidentiality still remains a key attraction of arbitration "...the oncegeneral confidentiality of arbitral proceedings has been eroded in recent years..."¹. Recently, in the 2018 International Arbitration Survey: The Evolution of International Arbitration, conducted by White & Case and Queen Mary University of London, 87% of respondents believed that confidentiality in international commercial arbitration is of importance. However, confidentiality is not of itself the single biggest driver behind the choice of arbitration.²

Professor Gary Born suggests that due to an absence of international norms prescribing a duty of confidentiality, the national legal systems have taken widely differing approaches on whether international arbitration proceedings are confidential, and the scope of any implied confidentiality obligations³.

The UNCITRAL Model Law is silent on confidentiality in international arbitration, and therefore many jurisdictions, such as the United Kingdom, Korea, Japan, the Federal Arbitration Act in the United States, the Swiss law do not stipulate any express obligations. However, some arbitral institutions, such as London Court of International Arbitration (LCIA)⁴ and Singapore International Arbitration Centre (SIAC)⁵ prescribe that arbitral proceedings shall remain confidential. The International Chamber of Commerce (ICC) rules prescribes that upon the request of a party, the arbitral tribunal may make orders concerning the confidentiality of the arbitration proceedings or of any other matters in connection with the arbitration and may take measures for protecting trade secrets and confidential information.⁶

One important distinction which should be kept in mind, is between 'privacy' and 'confidentiality' of the arbitration proceedings.  Privacy of international arbitration proceedings would mean that third parties, or parties not connected to the arbitration proceedings except the counsel, the expert witnesses or the transcribers would not be allowed to sit in the arbitration proceedings. This is almost always applied and must be distinguished from the duty of confidentiality, which means that disclosures about the arbitration proceedings cannot be made to any third party, without prior consent.

Position in India

The Indian Arbitration and Conciliation Act, 1996 (Act) has gone through a sea change in the recent past. In the 2019 amendments, an express duty of confidentiality has been incorporated in the Act. In terms of the newly inserted Section 42A of the Act the parties, the arbitrators and the arbitral institution are duty bound to maintain confidentiality of all arbitral proceedings, except when the disclosure of an arbitral award is necessary for the purposes of implementation and enforcement of an award. The origin of the newly inserted provision can be traced back to the high-level committee chaired by Justice B N Srikrishna (Retired Judge, Supreme Court of India), which had suggested reforms for improving institutional arbitration in India. The report suggested insertion of the confidentiality provisions along with certain exceptions, such as: disclosure required by legal duty, to protect or enforce a legal right, enforcement or challenge to an arbitral award before a court or judicial authority⁷.

The limited exception to the confidentiality obligation, i.e., for implementation and enforcement of an award, poses serious challenges to the process of arbitration. In turn it also makes the confidentiality obligation under law more susceptible to violations. For example, the provision does not take into consideration that disclosure of the arbitral proceedings may be required in case of seeking interim protections or several other court proceedings in relation to the conduct of the arbitration. Disclosure may also be required in cases where experts are engaged to work on a dispute, third party funding is required or disclosures relating to an arbitration are necessitated under applicable laws. While the newly inserted provision obligates arbitrators, parties and arbitral institutions to maintain confidentiality, it is silent on the obligations of counsel, witnesses, transcribers, tribunal secretary etc. in this regard. Further, there is no penalty prescribed for a breach of the obligation and it is also not clear as to which forum will adjudicate a breach of such an obligation.

Position outside India

In the United Kingdom, there are no express obligations on confidentiality of arbitral proceedings, and confidentiality is presumed unless the arbitration agreement states otherwise. The exceptions have been set out in the decision of Ali Shipping Corporation⁸ and include:

(a) disclosures made with express or implied consent of the  party who produced the material; (b) by order or permission of the court; (c) when reasonably necessary for the protection of the legitimate interests of an arbitrating party; (d) when disclosure is necessary in public interest.9 In Glidepath BV v Thompson¹⁰, the Court observed that a stranger to the arbitration should not in general be given access to the documents, unless an exception as aforementioned is attracted.

In Singapore, the (Singapore) Arbitration Act and the (Singapore) International Arbitration Act do not explicitly impose a duty of confidentiality, and there is always an implied duty subject to the limitations. The position is similar to the UK, and the High Court of Singapore in Myanma Yaung Chi Oo Co Ltd v Win Win Nu¹¹, after relying on the decision of the English Court in Ali Shipping Corp, has held that the leave of the court is not required in circumstances where disclosure of information is reasonably necessary for the protection of a party's legitimate interest.

Transparency v. Confidentiality

As the world moves towards transparency, do we need confidentiality as an express statutory obligation, or are we better off if the arbitral awards are published thereby lending more transparency to the process? The UNCITRAL Rules on Transparency in Treaty–based InvestorState Arbitration (2014)¹² provides an answer to this conundrum, by applying the test of "what to disclose" instead of "when or to whom to disclose". The Rules advocate greater transparency in investment arbitration to further public interest and provide for public access to 'key documents' prepared during the course of arbitral proceedings. At the same time, confidential or protected information has been adequately safeguarded under the exception to the rules.

A similar threshold could also be contemplated for international commercial arbitrations. Arbitral awards could be published after redacting any information which is commercially sensitive or which may disclose or jeopardise the business interest. Parties may not disclose sensitive redacted information except under exceptional circumstances such as during challenge or enforcement proceedings or for interim reliefs. Greater transparency in this manner would benefit international arbitration by bringing in more accountability for the arbitrators and helping in development of a jurisprudence on certain points of law. Although unlike national courts, the decision of the arbitral tribunal is not binding, guidance can certainly be taken from the rulings of the prior tribunals on the same issue. Parties may be able to avoid investment of substantial time and money if arbitral awards written by leading practitioners are available to the public.

However, while promoting transparency, the importance of confidentiality must not be lost or undermined and a balanced approach is essential. It must be recognized that parties to an international commercial arbitration go to great lengths to protect their business interests. In fact, many a time they choose arbitration to ensure that adverse awards do not become public. Alongside, arbitrating parties also must acknowledge that in the age of social media and legal publishers such as Global Arbitration Review or Investment Arbitration Reporter, which frequently reports about the nature, stage, the parties involved, the sum involved in the arbitral proceedings, there is very little to hide about the existence of the arbitration proceedings or even its outcome. Therefore, instead of projecting confidentiality and transparency as arch nemeses, the legislators, arbitrators and parties must align the two principals to further the development of international arbitration.

Footnotes

1 Chapter 1. An Overview of International Arbitration', in Blackaby Nigel, Constantine Partasides, et al., Redfern and Hunter on International Arbitration (Sixth Edition), 6th edition (Oxford University Press 2015) pp. 30.

2 Available on https://www.whitecase.com/sites/whitecase/files/files/download/publications/qmul-international-arbitration-survey-2018-19.pdf (accessed on 28 November 2019).

3 Gary B. Born, International Commercial Arbitration (Second Edition), 2nd edition, Chapter 20: Confidentiality in International Arbitration', Kluwer Law International 2014, pp.. 2784 and 2785.

4 See Article 30 of the LCIA Rules, 2014.

5 See Rule 39 of the SIAC Rules, 2016.

6 See Article 22 (3) of the ICC Rules, 2017.

7 Page 72, Report of the High Level Committee to Review the Institutionalisation of Arbitration Mechanism in India, available at http://legalaffairs.gov.in/sites/default/files/ Report-HLC.pdf  (accessed on 28 November 2019).

8 Glidepath BV v Thompson [2005] EWHC 818 (Comm).

9 Ali Shipping Corp v. Shipyard Trogir, [1998] 2 All ER 136.

10[2005] EWHC 818 (Comm).

11 [2003] SGHC 124.

12 For a detailed analysis, please see 'UNCITRAL brings in new transparency rules with effect April 1, 2014 in treaty based investor state arbitration', available on http://www. nishithdesai.com/information/research-and-articles/nda-hotline/nda-hotline-single-view/article/uncitral-brings-in-new-transparency-rules-with-effect-april-1-2014-in-treatybased-investor-state-a.html?no_cache=1&cHash=d1a716f314a5dc88c269b0a5f6eba054

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