India: Confidentiality In Arbitration: An Indian Outlook

Last Updated: 2 August 2019
Article by Krrishan Singhania and Alok Vajpeyi

Co-authored by Gauri Bharti (Intern)

The Arbitration & Conciliation (Amendment) Bill, 2019 was passed by Rajya Sabha on 18th July 2019 with the intent of making India the hub of International and Domestic Arbitration and promoting institutional arbitration. A previous bill was cleared by Lok Sabha in August 2018 but could not be passed by Rajya Sabha and lapsed following the dissolution of the 16th Lok Sabha. The bill contains various substantive changes and focus of this article is to analyze one such change that has been envisaged by the Bill in the form of Section 42A.

This clause of the bill pertains to confidentiality of information and imposes an obligation on the parties to maintain the confidentiality of the arbitral proceedings. It encapsulates one exceptional situation in which disclosure shall be permissible – for the purpose of implementation and enforcement of the award. The authors in this article have discussed the concept of Confidentiality in Arbitration and have critically engaged with the stipulations of this section.

I. Understanding Confidentiality

In order to better understand confidentiality, first and foremost, it is necessary to distinguish confidentiality from a like concept known as privacy. While both are two sides of the same coin, the difference is only as to their scope and ambit. Privacy as opposed to confidentiality is a narrower concept and only refers to concealing information from third parties by disallowing them to participate in the arbitral proceedings.1 The objective of privacy is to repel any kind of third party intervention in the arbitral proceedings.

Duty to maintain confidentiality on the other hand imposes an obligation on the parties to not disclose any information pertaining to the arbitral proceedings to third parties. This may include information relating to witnesses, pleadings, submissions, transcripts, etc. So confidentiality as opposed to privacy places a larger burden on the parties' to the Agreement by not only discouraging third party intervention in the hearings but also by disallowing them to disclose any information.2

Most jurisdictions across the globe have focused upon protecting the arbitral awards from the general public and keeping them confidential. In addition to this, there are two other aspects to Confidentiality in Arbitration – (i) the confidentiality of the Arbitration proceedings; and (ii) Confidentiality of the documents or evidence submitted before the Arbitral Tribunal.3 The former involves imposing an obligation to maintain confidentiality on all those who are either parties to the dispute and are present during the proceedings; or have obtained any knowledge of the same by virtue of being a witness before the Tribunal or by virtue of being an employee/an administrative personnel/counsel of the parties to the dispute. All these persons are bound to not disclose any information that they may possess. However, it should be noted that not all jurisdictions impose a duty to not disclose on the witnesses testifying before the Arbitral Tribunal.

Maintaining the Confidentiality of the documents or evidence submitted before the Tribunal pertains to all the documents prepared by the parties to advance their case, on which they place reliance. This includes any evidence that has been adduced or any disclosures made in court by any party.4 As will be evident from the discussion in part II of this article, there is little consensus around the globe on the scope and ambit of confidentiality when it comes to Arbitration. Each jurisdiction has differing views on the same. However, before examining the scope and ambit of confidentiality it is important that we first understand the nuances of the concept that are relevant to Arbitration.

Party Autonomy is one of the fundamental principles of arbitration. It is for this reason that most people opine that there should be no express statutory provision imposing confidentiality as an obligation. Instead, the parties should be at liberty to decide whether they wish to maintain confidentiality in the arbitral proceedings or not. When it comes to maintaining confidentiality in Arbitration, several questions should be contemplated upon. Some of these include –(1) who should be made aware about the Arbitration; (2) Is it only the parties, their counsels, the Tribunal that has been constituted by the parties; (3) Should the general public not even have the slightest of hints about an ongoing Arbitration proceeding; (4) To what extent should the witnesses testifying before the Tribunals be made aware of the happenings before the Tribunal; (5) Should confidentiality be absolute or limited with certain exceptions like disclosure of information in the interests of justice, etc.5 These are some of the questions that must necessarily be borne in mind by the legislature before regulating confidentiality in arbitration.

II. Model Law And International Scenario

The UNCITRAL Model Law on International Commercial Arbitration on which most jurisdictions have based their domestic legislations has no provision dealing with confidentiality. It gives importance to party autonomy and the drafters of the Model Law have clearly stated that the parties are free to determine whether or not they want to impose such a confidentiality obligation on the parties. The parties may accordingly incorporate such a clause in their agreement to arbitrate.6The UNCITRAL Arbitration Rules also do not have express provisions with regard to confidentiality except in respect to the award that can be made available to the general public only with the parties' consent.7

There are some jurisdictions that have adopted the approach of imposing "implied confidentiality obligations." This approach has been adopted by English,8 Swiss and Singaporean Courts9. English law is the oldest standing authority on this subject and it has been held that the reason why parties opt for Arbitration is to ensure they do not attract public attention, which has the potential of hindering the successful completion of the proceedings. Keeping in mind this objective behind opting for Arbitration in the first place, there is an implied duty to maintain confidentiality. The Courts have recognized one exception to this implied duty of confidential and that exception is "to protect a party's legal rights."

On the contrary, there are some jurisdictions that have rejected this approach and called upon for disclosure of information or material produced before an Arbitral Tribunal. These include Australian, Swedish, French and U.S. Courts. It is pertinent to mention that while they have rejected the implied confidentiality obligation approach, they do not endorse absolute disclosure. These jurisdictions have instead enumerated several exceptions to the confidentiality principle. For example, Australian laws permit disclosure by consent of both the parties, or to professionals advisors, or in instances where it is necessary to safeguard a party's legal right, etc.10

III. Indian Aspect

In India, confidentiality has only been contemplated in one provision of the Act i.e. Section 75 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as 'the Act').11 However this provision involves only Conciliation and not Arbitration. The 2019 Amendment Bill that envisions confidentiality of Arbitration is therefore a first of its kind. As per proposed Section 42A, an obligation of confidentiality shall be imposed on the parties to the Arbitration Agreement, the arbitrator and the Arbitral Institution. It is evident from the stipulations of this provision that this is a non-derogable provision with only one exception. Under this exception, the award may be disclosed for the purpose of enforcement or setting aside proceedings.

It is worthwhile to mention that Section 42A begins with a non-obstante clause and therefore this provision of the bill will prevail over any other law for the time being in force. The implications of such a provision will be numerous, especially given the fact that many Companies opt for Arbitration over litigation. Listed Companies are required to make several disclosures under various laws such as the SEBI laws. Therefore, what this provision could lead to is a potential state of conflict of laws. Further one other contradiction is also there as one of the functions of the proposed Arbitration Council of India is to maintain the Depository of arbitral awards. How such function will be performed in the light of Section 42-A should have been contemplated by the Legislature. Therefore, it is imperative that before this Bill is passed in the Lok Sabha, there should be substantive debate on it to weed out such contradictions.

If India is to realize the confidentiality dream in its national arbitration legislation, it is of paramount importance that Section 42A of the bill be reconsidered. There is more than one exception that needs to be carved out from the confidentiality obligation, and it must not be forgotten that Arbitration is after all a contractual creation. Party autonomy must be given the value it truly deserves in such a dispute resolution mechanism. Therefore, first and foremost, in order to prevent this provision from seeing red flags it should be made derogable.

However, the above mentioned are not the only exceptions that must be appended to this provision. There are several other considerations that must be taken account of, the 2015 Arbitration & Conciliation (Amendment) Act also allowed for joinder of parties by virtue of Section 8 of the Act. Further, the 2015 Amendment has also allowed for an application of interim measures under Section 9 regardless of whether Part I is applicable to a particular dispute or not. How will Section 42A affect the proceedings under Section 8 and Section 9 is a question that remains unanswered. In addition to this, the proposed Section 42A will also have consequences on Section 27 that relates to seeking assistance of the Court in taking evidence. It is clear that Section 42A has repercussions on several other provisions of the Act. The implications of this provision of the bill on all other provisions of the Act should be carefully understood, and together all of these should be harmonized.

IV. Looking Forward

In Arbitration, imposing confidentiality obligations on the parties has several aspects. Many argue that it only adds to the various benefits of opting for Arbitration over Litigation. In addition to speedy and efficiency disposal of the dispute, it also protects the privacy and interests of the Parties. This is held especially true for Companies as they get a chance to protect "commercially sensitive information." It is also remarked that such an obligation prevents "trial by media."12

So while the advantages of such an obligation are several, we cannot ignore but acknowledge that there are myriad disadvantages. The first of these disadvantages revolves around the issue of carving out exceptions. To begin with the issue of legitimate public interest is a pertinent one. This is an exception that will require interpretation by the judiciary of any jurisdiction. In the Indian scenario, this exception, if actually appended to Section 42A has the capacity to reach a similar situation like the public policy ground under Section 34 of the Act.

There could be countless instances in which the public may have a legitimate interest in the happenings before an Arbitral Tribunal. These could include disputes in which the State is a party. In such circumstances, the public has a right to know the stance taken by the State and the behavior exhibited by it. Therefore imposing restrictions on disclosure of such information would tantamount to violation of such right. A case in point is the High Court of Australia decision in the case of Esso Australia Resource Ltd. v. Plowman13 in which the Court held that the public has a right to obtain information "about the affairs of the public authorities" as it directly affected their interests.14

Second, disclosure may be necessary for the purpose of protecting the rights of third parties. Recalling what has been stated in the preceding part, Section 8 of the Act allows for joinder of parties. There is a need for the legislature to ensure that confidentiality obligations do not jeopardize the rights of third parties. Perhaps the necessity test enumerate by the English Court in the case of Hassneh Insurance Co. of Isral and Others v. Steuart J. Mew15 could be followed in India. In this case, the English Court held that disclosure of any document may be sought if it is necessary in order to give rise to a cause of action or to give a third party a valid defense before an Arbitral Tribunal. The learned judge held that while determining whether a case falls within the exception several factors surrounding necessity could be taken into account. These include – "the nature and purpose of the proceedings for which the material is required...the practicality and expense of obtaining such evidence or information elsewhere,"16

There are other exceptions to confidentiality obligation that require the attention of the legislature. These include – question of disclosures in parallel arbitrations (or two tier Arbitrations)17 in which the both the parties and the Tribunal maybe the same but the subject matter of the dispute be different; instances in which there is an obligation of disclosure for example insurance companies may be under an obligation to disclose to make disclosures to each other or different stakeholders in a company may be required to make disclosures amongst each other; disclosures to legal professionals such as counsels or other advisers; extent of disclosure to the third party funder in case one of the parties is receiving funding, etc.

V. Conclusion:

As it is evident from the above discussion the problems with imposing confidentiality obligations are myriad. The arbitration regime of the country has faced lot of issues in the past decade; such an amendment is only going to make matters worse. Under the Act, parties have a choice of opting for either Ad hoc Arbitration or Institutional Arbitrations. If the former is opted for, the parties have a choice to insert a confidentiality clause in the Agreement and if the latter is opted for, they can always select those Institutional rules that have confidentiality obligation. Either way the parties are exercising their autonomy.

As it has been have already pointed before, there are certain problems with the envisaged provision like its conflict with Section 8 stipulations and disclosures sought by other laws such as SEBI Regulations, etc. it is important that more exceptions be introduced to Section 42A before the Act is amended. The bottom-line therefore is that such a statutory provision does more harm than good if not carefully reconsidered and contemplated upon.

Footnotes

1. Collins, Privacy and Confidentiality in Arbitration Proceedings, 11 Arb. Int'l 321, 322-23 (1995).

2. Chapter 20: Confidentiality in International Arbitration', in Gary B. Born , International Commercial Arbitration (Second Edition), 2nd edition, pp. 2779 – 2831.

3. Donggen Xu; Huiyuan Shi, Dilemma of Confidentiality in International Commercial Arbitration, 6 FRONTIERS L. CHINA 403, 417 (2011).

4. Xu & Shi, Id.

5. Michael Hwang, Katie Chung, et al., Chapter 2: Defining the Indefinable: Practical Problems of Confidentiality in Arbitration (Second Kaplan Lecture, 17 November 2008), in Hong Kong International Arbitration Centre (ed), International Arbitration: Issues, Perspectives and Practice: Liber Amicorum Neil Kaplan, pp. 21 – 78.

6. Chapter 20, supra note 2.

7. UNCITRAL Arbitration Rules, art. 32(5).

8. Emmott v. Michael Wilson & Partners, [2008] EWCA (Civ) 184 (C.A.).

9. International Coal Pte Ltd v. Kristle Trading Ltd and Another and Another Suit, [2008] SGHC 182.

10. International Arbitration Act 1974, § 23 D.

11. The Arbitration and Conciliation Act of 1996, § 75.

12. Chapter 20, supra note 2.

13. 183 CLR 10.

14. Hwang, supra note 5.

15. [1993] 2 Lloyd's Rep. 243.

16. Hwang, supra note 5.

17. Centrotrade Minerals & Metals Inc. vs. Hindustan Copper Ltd., (2006) 11 SCC 245.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
Link Legal India Law Services
 
In association with
Practice Guides
by Mondaq Advice Centres
Relevancy Powered by MondaqAI
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Link Legal India Law Services
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions