Switzerland: Confidentiality In Arbitration: From Myth To Reality*

Last Updated: 21 March 2016
Article by Saverio Lembo and Vincent Guignet

Most Read Contributor in Switzerland, July 2019

Introduction

Over the last decades, confidentiality in international business dispute resolution has become a growing concern. This can be explained by the conjunction of two factors: (1) the importance taken by immaterial assets, such as intellectual property, know-how and reputation, which, in today's interconnected world, count among the most valuable assets of the biggest multinational corporations. (2) the amount of detailed and often sensitive information that both parties are requested to exchange in the course of judicial proceedings. In this context, a dispute arising between important actors of the international business market may potentially prove to be very damageable for their immaterial assets. As a consequence of this growing need for confidentiality, one can observe a trend to favor arbitration as a dispute resolution mechanism.

Confidentiality is indeed often the first idea that comes to mind when asked to describe the advantages of arbitration. But is it really a given? Can a party truly expect a level of confidentiality equivalent to that afforded in more traditional judicial proceedings. And if so, where does confidentiality find a legal basis? What is its scope? Who exactly is bound by a confidentiality obligation? And what happens if such an obligation is breached?

The purpose of this short paper is to address these issues by analyzing the interplay between national laws, arbitration rules and agreements of the parties, in order to provide a basis for ensuring confidentiality when drafting a contract, especially when confidentiality is a primary concern for the parties involved.

We will first seek to clarify the grounds and scope of the confidentiality obligation, by providing a short overview of its application in some of the leading countries for arbitration (infra B). We will then analyze this issue under the most commonly used arbitration rules (infra C), before addressing the situation where a confidentiality obligation is breached (infra D). Finally, we will suggest ways to secure confidentiality in international arbitration (infra E), and present our conclusions (infra F).

Grounds and Scope of Confidentiality – An International Overview

Confidentiality is not a defined notion in the realm of international arbitration. Its scope therefore differs depending on the jurisdiction in question. Looking for a legal basis for confidentiality is thus also a way to delineate its scope – both subjectively and objectively. Indeed, considering that an obligation of confidentiality applies, several questions arise as to the scope of this obligation.

First, as to the subjective scope of the obligation, it is incumbant to determine who are the recipients of the obligation. The following persons may potentially be subject to a confidentiality obligation:

  • The parties, of course;
  • The arbitrators and their staff;
  • The lawyers;
  • The arbitral institution and its staff (in case of an institutional arbitration);
  • Finally, any third parties participating in the proceedings.

For the purpose of this paper, we will focus on the confidentiality obligation binding on the parties. The obligation binding on the arbitrators and on the lawyers is indeed largely admitted, because it follows from the mandate that they have received.

Second, as regards the objective scope of confidentiality, the question arises as to what exactly is covered by confidentiality? Is confidentiality an unlimited obligation covering even the very existence of the arbitration proceedings? Or, in the contrary, is confidentiality limited to one or more of the following:

  • What is said during the hearings;
  • The deliberation of the arbitrators;
  • The orders and awards of the arbitral tribunal;
  • The submissions exchanged by the parties, including their exhibits;
  • The identity of the parties involved in the dispute.

We will attempt to define the ground and scope of the obligation of confidentiality in international arbitration by examining the way that some leading countries have dealt with the issue.

United Kingdom

The approach to confidentiality in the United Kingdom is a reminder of the so called "classical view" on confidentiality, which – at an international level – remained unchallenged until the late 1980's3. According to this classical view, the private nature of arbitration obliges those participating in the proceedings to maintain confidentiality, without questioning its legal basis or scope4. In other words, the confidentiality of the arbitration proceedings is seen as an implied obligation, simply because arbitration is a private process5.

This classical view is notably expressed in a British arbitration case dating back to 19916. The rationale developed in that case is the following: If two parties agree that their dispute is be decided in private (that is, without any third party being allowed to access the hearings), then this privacy would be emptied of its purpose if the submissions of the parties, or the minutes of the hearings, were to be communicated to the public. According to this view, the confidentiality that results from the privacy of the hearings should therefore extend to the entire arbitration proceedings.

The common view in English law is therefore that arbitration comes with an implied duty of confidentiality, which encompasses in principle the existence of the arbitration proceedings itself7. In some cases however, English courts have accepted limited exceptions to the implied duty of confidentiality: first, in cases where a party has no choice but to submit a document obtained during the arbitration to protect its interests against third parties8; second, in cases where there is a legitimate reason for disclosure, such as the duty of disclosure owed by a company to its shareholders, if the dispute is likely to affect the corporate accounts9. As we will see, these are the usual exceptions found in most legal systems.

France

In France, the issue of confidentiality in arbitration is not addressed in statutory law. The situation, however, used to be very similar as in the United Kingdom – where confidentiality is implied.

The leading case on this topic dates back to 198610the very nature of the arbitral procedure"11. The idea that arbitration comes with an implied duty of confidentiality has been confirmed several times since then. In particular, the same Court found again, in 2003, that a party who decided to communicate in the press about an ongoing arbitration violated its implied obligation of confidentiality12.

However, many French scholars have criticized this approach, leading the Paris Court of Appeal to reconsider its approach. In a case dating back to 2004, it indeed stated that the confidentiality of arbitration could not simply be assumed, but must be explained and grounded in French law13. The current situation, in France, as to the existence of an implied duty of confidentiality in arbitration proceedings, is therefore unclear.

Australia

The "classical view" on confidentiality adopted in English common law has been radically rejected in Australia. The Australian courts decided to follow scholars who, as early as the 1990's, started to cast doubt about the interdependency of privacy and confidentiality14 – as advocated by defenders of the classical view, who consider that confidentiality flows from privacy.

In a 1995 decision of the Australian Supreme Court15, the notions of confidentiality and privacy were explicitly extracated from each other. The court held that:

  • Privacy ensures that hearings take place behind closed doors. It must be understood as the right to exclude any foreign persons to the proceedings. Its scope is, however, limited to the hearings phase and does not relate to the entire arbitral process. Privacy simply sets a standard, according to which hearings are private, unless otherwise agreed upon by the parties.
  • Confidentiality, on the other hand, is a much wider notion, which can be described as a state of secrecy attached to all materials created, presented and used in the context of the arbitration proceedings. Confidentiality thus reaches further in the proceedings, extending also to the pre and post hearing phases.
  • Whenever the information disclosed in the context of an arbitration concerns public authorities or public services, there exists a presumption of disclosure even if the arbitration proceedings itself remains private16.

As a consequence of that holding, Australian courts consider that the obligation of confidentiality in arbitration cannot be simply assimilated or confused with the notion of privacy – which is a much narrower obligation – and thus that such an obligation exists only through an express agreement of the parties17.

USA

Australian courts are not alone in rejecting the idea of an implied duty of confidentiality in arbitration. There is indeed longstanding case law in the United States that makes clear that confidentiality cannot be presumed in arbitration18.

The leading case was rendered by the Federal Court of Delaware in 1988. In this case, the Government of the United States had requested that all documents relating to an ICC arbitration, which took place in Switzerland, to be released for use in the court proceedings19. The Delaware court ruled that this was possible, since neither the arbitration agreement nor the ICC Rules provided for confidentiality of the arbitration proceedings.

Since then, US case law appears stable in its reluctance to grant orders protecting confidentiality in arbitration, and persists in rejecting arguments that confidentiality may be considered as an implied obligation20.

There is even a doubt as to the very admissibility of confidentiality agreements, within an arbitration clause: certain US courts have indeed held such agreements to be unenforceable as contrary to the public interest21. These cases often concern disputes where one of the parties is considered as a "regular player" of arbitration: this is typically the case in employment law disputes, where the employment contract contains an arbitration clause. The employer will always face the same sort of issues in front of arbitral tribunals, and thus acquire a knowledge that each single employee could never access if the arbitration case law were to remain confidential. For this reason, certain US courts have found that confidentiality of the arbitration would be contrary to the public interest.

Norway

Norway is one of the rare country where statutory law makes clear that unless the parties have agreed otherwise, the arbitration proceedings are not subject to a duty of confidentiality. Article 5 of the Norwegian Arbitration Act of 14 May 2004 indeed provides the following:

"(1) Unless the parties have agreed otherwise, the arbitration proceedings and the decisions reached by the arbitration tribunal are not subject to a duty of confidentiality. (2) Third parties may only be present during arbitral proceedings when and to the extent that follows from the agreement between the parties"22.

This is a rare example of a legal system where arbitration proceedings are deemed non-confidential, save for an express agreement of the parties.

Switzerland

Swiss law addresses arbitration under two different acts: whereas international arbitration is governed by the Chapter 12 of the Swiss Private International Law Act ("PILA"), domestic arbitration is governed by the Swiss Civil Procedural Code ("CPC"). Yet, neither the PILA nor the CPC contains any specific provision dealing with confidentiality.

To continue reading this article, please click here

Footnotes

* Conference paper prepared for the 2015 Fall Meeting of the American Bar Association, International Section, in Montreal.

3 Ileana M. Smeureanu, Confidentiality in International Commercial Arbitration, Kluwer Law International, 2011, p. 1.

4 Idem.

5 Alan Redfern/Martin Hunter/Nigel Blackaby/Constantine Partasides, Law and Practice of International Commercial Arbitration, Sweer & Maxwell, 4th ed. 2004, p. 28.

6 Dolling Baker v. Merrett, (1991) 1 WLR 1205.

7 David Caron/Lee Caplan/Matti Pellonpää, The UNCITRAL Arbitration Rules, a Commentary, Oxford University Press, 2006, p. 34.

8 Hassneh Insurance Co. of Israel v. Mew, (1993) 2 Lloyd's Rep. 243.

9 City of Moscow v. Bankers Trust Co, (2003) EWHC 1377.

10 Decision of Paris Court of Appeal of 18 February 1986 (Aïta v. Ojjeh), in Rev. Arb. 1986, p. 583.

11 Idem.

12 Société True North v. Bleustein and others, Rev. Arb. 2003, p. 189 et seq.

13 Decision of Paris Court of Appeal of 22 January 2004 (Nafimco v. Foster Wheeler Trading Company), cited in: E. Loquin, Les obligations de confidentialité dans l'arbitrage, Rev. Arb. 2006, n° 2, pp. 327-328.

14 Jan Paulsson/Nigel Rawding, The Trouble with Confidentiality, 11-3 Arb. Int'l 303 (1995).

15 Esso Australia Resources Ltd. v. Sidney James Plowman, (1995) 128 A.L.R. 391.

16 Idem.

17 Ileana M. Smeureanu, Confidentiality in International Commercial Arbitration, Kluwer Law International, 2011, p. 38.

18 Christophe Müller, La confidentialité en arbitrage commercial international: un trompe-l'oeil?, in: ASA Bulletin, Vol. 23 No. 2 (2005), pp. 218-219.

19 United States v. Panhandle Eastern Corp., 118 F.R.D. 346 (D. Del 1988).

20 Contship Containerslines Ltd v. PPG Industries Inc. (SDNY, 23 April 2003); Lawrence E. Jaffee Pension Plan v. Household International Inc. (D Colo, 13 August 2004).

21 Davis v. O'Melveny & Myers, 485 F.3d 1066, 9th Cir. 2007; Ting v. AT & T, 319 F.3d 1126, 9th Cir. 2003.

22 Norwegian Arbitration Act of 14 May 2004, Article 5.

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
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Related Articles
 
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