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.
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.
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,  EWCA (Civ) 184 (C.A.).
9. International Coal Pte Ltd v. Kristle Trading Ltd and Another and Another Suit,  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.  2 Lloyd's Rep. 243.
16. Hwang, supra note 5.
17. Centrotrade Minerals & Metals Inc. vs. Hindustan Copper Ltd., (2006) 11 SCC 245.
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