UK: Facing Cybersecurity Head On: The Arbitration Community Develops Guidance On How To Tackle This Difficult Issue

Last Updated: 3 December 2018
Article by Nicholas Peacock, Vanessa Naish and Charlie Morgan

There is an emerging consensus among the arbitration community that parties, arbitral institutions and tribunals in individual arbitration matters must give greater attention to cybersecurity in order to minimise the risks of a successful attack.

International arbitrations can involve parties that are prominent targets or potential targets of cyberattacks. As part of the arbitral process, those parties may share material which is not in the public domain and access to which may have the potential to influence individuals, employees, share prices, corporate strategies and government policy. Similarly, the outcome of an arbitration can have significant repercussions in the financial markets, meaning that obtaining draft forms of arbitral awards could be very lucrative for cybercriminals. As such, the arbitral process is a prime target for cyberattacks, particularly if hackers can identify a weak link in the chain of custody.

Over the last year several tools have become available to assist stakeholders in the arbitral process address issues of cybersecurity, including the draft Cybersecurity Protocol produced by a working group from International Council for Commercial Arbitration (ICCA), the New York City Bar Association (NYC Bar) and the International Institute for Conflict Prevention and Resolution (CPR) (see here), and the International Bar Association's (IBA) Cybersecurity Guidelines (see here).

The threat of cyber attacks

The number of cyberattacks against all types of organisations has rocketed in the last 3-5 years. A UK government survey published on 25 April 2018 found that over 40% of businesses experienced a cybersecurity breach or attack in the last 12 months (accessed here). The survey concluded that cybersecurity is a high priority item for directors or senior managers of 74% of companies.

The sophistication and motivations of hackers range from criminal opportunism all the way to nation-state level attacks. Some hackers are seeking financial gain, while others are motivated by ideology (and some by a mixture of the two). In addition, cyber breaches can arise from inside as well as outside an organisation: the Court of Appeal recently dismissed an employer's appeal against the High Court's finding that it was vicariously liable for an employee's deliberate data breaches. The first instance decision was upheld notwithstanding the employer having appropriate safeguards in place to protect employee personal data and the employee's specific aim to damage the employer's reputation and cause financial loss – see here for further detail on Wm Morrisons Supermarkets Plc v Various Claimants [2018] EWCA Civ 2339.

Regardless of their motivation and relationship with the target, hackers carrying out cyberattacks present a very real threat and they are increasingly looking for ways to circumvent businesses' cyber-defences.

Cybersecurity in arbitration: what can be done?

Given this threat, it is broadly accepted that cybersecurity should be addressed early in the international arbitration process and that reasonable cybersecurity measures should be required of all stakeholders. However, considerable questions remain as to the responsibilities of each participant in the process, the parties' autonomy to agree what cybersecurity measures to implement, the impact of any inequality of arms between the parties in seeking to tackle cybersecurity threats, and the consequences of a party's failure (or for that matter a failure by any participant in the arbitral process) to comply with the cybersecurity directions that are made.

The ICCA Cybersecurity Protocol

In order to progress the discussion in this area, a working group made up of representatives from ICCA, the NYC Bar and CPR produced a draft Cybersecurity Protocol. This draft is currently undergoing a broad consultation process. In the meantime, the draft offers parties to arbitration a starting point for considering these issues with their counterparties, institutions and tribunals. Several arbitral institutions are also considering what further guidance, duties or powers to provide in this context for arbitrations that they administer.

Much in the same way as the IBA rules on the taking of evidence can be adopted in any given arbitration, the draft Cybersecurity Protocol outlines a framework which parties would need to agree to apply to their arbitral process (either in their arbitration agreement or after the arbitration has crystallised).

The Protocol does not recommend specific technological or organisational measures to ensure that cybersecurity protections are in place in an arbitration, nor does it establish any liability regime for breaches of its terms. Instead, the Protocol proposes to give overall authority to the tribunal to determine what cybersecurity measures are "reasonable" on a case by case basis, even where the parties themselves are otherwise in agreement on what measures should be taken (see Article 13). The commentary on this Article expressly states that the parties "cannot bind the arbitral tribunal" or the "institution administering the arbitration" in this regard.

The IBA Cybersecurity Guidelines

Further guidelines have recently been issued by the IBA, which were developed by the 'Presidential Task Force on Cybersecurity'. The Guidelines are aimed at lawyers. The Task Force assumed that "large law firms will have implemented cybersecurity strategies" and, therefore, identified single practitioners and smaller firm as their primary audience. However, these recommendations are worth consideration by all stakeholders in the arbitral process. They include, for instance:

  • Technology: ensuring the use of secure networks, device encryption, access control, audit logs;
  • Organisational processes: mandating password protections, periodic system testing, implementing a cybersecurity policy, considering cyber liability insurance; and
  • Training: raising awareness about the importance of cybersecurity and common threats, giving staff essential cybersecurity tips and advice

The Guidelines acknowledge that appropriate and proportionate cybersecurity measures in any scenario will depend on the applicable risk profile. This requires consideration, for example, of the sensitivity of retained data, the size of the organisation(s) and the cost-effectiveness of the security measures proposed. In light of that, appendices D to G of the Guidelines seek to provide cybersecurity recommendations according to the size of the firm in question. These recommendations could also, by analogy, help parties to arbitration determine what cybersecurity measures are required to be implemented by all participants, in the light of the sensitivity of data to be exchanged.

Filling the gaps: do the new HKIAC rules herald greater institutional involvement?

Together, the ICCA draft Protocol and the IBA Guidelines provide a useful roadmap for all stakeholders to address cybersecurity issues in arbitrations. The placeholders in the draft Protocol (e.g. where the working group stops short of spelling out what measures should be implemented) can be filled in, at least to some degree, by reference to the Guidelines.

Virtually all international arbitrations are currently managed, at least in part, through online digital communications. As the digitisation of the arbitral process continues (with an increasing number of arbitrations being run in a 'paperless' way), institutional rules and guidance will need to keep up with this trend and ensure they address what cybersecurity measures are appropriate in each case and how responsibility will be allocated between stakeholders in the arbitral process to ensure that those measures are implemented.

The latest acknowledgment of this trend is found in the new Hong Kong International Arbitration Centre (HKIAC) Rules due to enter into force on 1 November 2018, which specifically include as a recognised means of communications the upload "to any secured online repository that the parties have agreed to use" (Article 3.1(e) of the HKIAC Rules, accessed here). Other arbitral institutions are considering what changes might be needed to their rules, and provisions which seek to highlight and/or facilitate cybersecurity are expected to feature more prominently in future versions.

Conclusion

All participants in arbitrations need to be aware of how they receive and store data, and of the technical complexities and costs associated with various cybersecurity measures. The proportionality of any given cybersecurity measure will depend on confidentiality requirements and the commercial sensitivity of the data, as well as the stakeholders' individual data protection obligations (including, for instance, under the EU General Data Protection Regulation (GDPR)). Awareness of the technological, organisational and procedural options available to increase cybersecurity will facilitate a meaningful debate in many arbitrations cybersecurity measures that are required, and provide cogent grounds for tribunals to make an appropriate order where the parties disagree.

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
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must 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