UK: Publicly Listed Companies And Arbitration: Can The Parties Really Expect Confidentiality?

Last Updated: 22 October 2010
Article by Bill Amos

Confidentiality is one of the hallmarks of arbitration. The desire to maintain the confidentiality of information which is commercially sensitive is a compelling reason for parties to turn to arbitration, and not the courts, to resolve disputes.

However, public companies involved in arbitration are often under disclosure obligations which may threaten the confidentiality of the proceedings. In particular, public companies are under legal and regulatory requirements to make proper financial disclosure of contingent liabilities in their annual reports. Both court and arbitration proceedings may be required to be disclosed – depending on factors such as the sums at stake, and the identity of the parties involved (e.g. if the opposing party is a major customer of the company). In addition, major litigation or arbitration proceedings are potentially price sensitive, and may call for disclosure.

The public interest served in making these disclosures is clear: shareholders and potential investors have the right to know of any material information affecting the performance of the company and, consequently, its share value. But what is less clear is the extent of permissible disclosure, and whether such disclosure infringes the confidence contemplated by the parties to arbitration.

A publicly listed company therefore faces the obvious conflict of, on the one hand, complying with requirements of regulatory bodies to make adequate disclosure of legal contingencies in its accounts, and on the other, ensuring it is not in breach of any duty of confidence in respect of arbitration.

Confidentiality in Arbitrations

The issue of confidentiality is less problematic where the arbitration agreement or clause contains express confidentiality provisions and safeguards. However, arbitration agreements are often either silent on the question of confidentiality, or include generic confidentiality clauses which fail to address a party's wider legal obligations of disclosure.

Arbitration statutes are generally silent on the issue of confidentiality. While major institutional rules of arbitration vary in their emphasis on confidentiality, they are on the whole vague when it comes to the nature and scope of the duty of confidentiality. The UNCITRAL Rules, for instance, only provide for the non-publication of the award (Art 32(5)). The ICC Rules permit the tribunal to "take measures for protecting trade secrets or confidential information" (Art 20(7)) but are otherwise silent on the confidentiality of awards and of materials produced in the proceedings. Drafters of institutional rules have been largely reluctant to specify the extent to which this obligation of confidentiality may extend, or alternatively, the information that might be subject to disclosure. The result is that it can be far from clear what exactly is to be kept confidential – the very existence of the dispute or arbitration proceedings; evidence produced or discovered during the process; or the award itself? It has therefore been largely left to the courts to delineate this duty of confidence.

Under English law, there is implied into every agreement to arbitrate a widely-drawn obligation of confidentiality. It is generally accepted that documents disclosed in the arbitration and prepared for the purposes of the arbitration are confidential – including any evidence given by a party or a witness in the arbitration. It is further not controversial that this confidentiality extends to the eventual issue of the award, and prohibits the unilateral publication or disclosure of the award by either party without the express consent of both parties. A frequently encountered question, and more pertinent to the topic of this article, is whether the very existence of the arbitration proceeding is confidential. After all, it is the existence of the arbitration which a publicly listed company may be under a regulatory duty to report. The generally accepted view is that reference limited to indicating the existence of arbitration proceedings in the annual report will not constitute a breach of confidentiality.

A Public Interest Exception?

Amongst the widely recognised exceptions to the duty of confidentiality – consent by parties, order of the court, protection of the legitimate interests of an arbitrating party and public interest – disclosure justified on public interest warrants discussion.

The boundaries of this 'public interest' exception have not been exhaustively explored but the English Court of Appeal (notably in Ali Shipping Corp.v.Shipyard Trogir [1994] 2 All. E.R. 136) has clearly recognised this as an exception for disclosure. This exception operates where there is information of legitimate or pressing concern to justify a real public interest in making disclosure. The existence of an arbitration which materially and significantly affects the financial position of a listed company would appear to meet this threshold of legitimate concern justifying a public interest to disclose, and which information should be available to shareholders, regulators and potential investors.

Practical Steps

Needless to say, the prudent course for ensuring compliance with a public company's regulatory obligations of disclosure without fear of breaching any duty of confidence as regards an arbitration is to include adequate confidentiality protections and exceptions in the arbitration agreement/clause. Any confidentiality clause should of course be drafted in a manner which would protect confidentiality to the maximum extent, whilst at the same time allowing limited circumstances where disclosure would be permitted namely, where a party is required to do so by law or by a competent regulatory body.

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.

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