Drawing the Line Between Transparency and Confidentiality in International Commercial Arbitration

Often confidentiality is adduced to swing with other benefits of arbitration including — efficiency (in terms of time and money), the ability to execute resulting awards in foreign countries, significant party autonomy and foreseeability in terms of which forum the dispute will be heard and jurisdictional issues. However, practitioners and scholars fail to explain why confidentiality is so valuable and if such value changes in the context of arbitration. Though, if the latter is true then it opens up a lot of new possibilities of essentially making the arbitrations more transparent in some contexts, without undermining other valuable aspects of arbitration.

According to a study by Richard Naimark and Stephanie Keer, where participants were asked to rank eight issues in order of importance including – privacy, arbitrator expertise, a fair and just outcome, monetary award, speed of outcome, the finality of decision and continuing relationship with the opposing party. Less than ten per cent selected privacy as one of the most important issues. Sample for this research were participants and arbitrators in the cases of the American Arbitration Association from January 2000 to November 2000. This is in no way indicative that confidentiality in arbitration is not important but merely suggesting that it might be less important than some of the other traits.

Why Confidentiality?

There are various reasons that demonstrate the real value of maintaining a certain degree of confidentiality. First, parties in arbitration do not want their company secrets to be made public. For instance, in the Airbus-Boeing trade dispute, the parties insisted that public records do not reveal any of the technological developments of the two respective companies. Second, parties to an arbitration will be more comfortable taking certain positions privately that essentially do not conform to moral norms of the public or any other issue likewise. Third, Parties to an arbitration may not want to reveal certain claims to the public including, lack of adequate resources, incompetence, misrepresentation and allegations of bad faith. Fourth, if the parties have pending disputes for the same issue, they wouldn’t want a loss publicized as that will most certainly affect the claims and defences in pending disputes.  

Further, the treatment of parties’ duty of confidentiality in International Commercial Arbitration, differs based on the institutional rules. The International Chamber of Commerce, UNCITRAL Arbitration Rules, Arbitration Rules of the London Court of International Arbitration, America Arbitration Association, China International Economic and Trade Arbitration Commission (CIETAC) Rules and Japan Commercial Arbitration Association (JCAA), protect the confidentiality of the hearings and as well as the evidence produced in these hearings. While, World Intellectual Property Organization (WIPO) is an exception, barring the parties from disclosing the existence of the arbitration altogether.

Investment Arbitration and Lessons Learned 

In the case of International Investment Arbitration, transparency is seen as, both, something that fosters legitimacy, and a condition of legitimacy itself. Since investment arbitrations involve state parties and the result tend to affect the general public as, if the liability is imposed on the state, it will have to make amendments to the laws and regulations. The award would be paid off by the citizens in the form of tax revenues through public funds. Further, it will help in enhancing democratic ideals as the public will have the opportunity to hold accountable who they elect to represent their interests.

While the ICSID system and Investment Arbitration is generally seen to bear presumptive openness, in the case of commercial arbitration, greater transparency is likely to increase understanding and knowledge of the process, hence improving the legitimacy of the use of international arbitration. Some of the benefits it would likely result in — first, the publication of awards will help other parties learn from their mistakes and avoid future disputes. Second, the publication of awards shall also help other parties assess how has a certain arbitrator handled the dispute and if they would be appropriate for handling any future dispute. Third, transparency gives practitioners and academicians an opportunity to analyze, critique and improve the dispute resolution system at hand. Fourth, the publication of awards will increase confidence in the general public of the process being fair and thus making the implementation of the award more likely.       

Conclusion

However, there are potential costs to loss of confidentiality. First, confidentiality is one of the primary factors that distinguishes judicial litigation from arbitration and if that is to be taken away, arbitration could become more like litigation. Second, if parties desire for a certain degree of confidentiality to be followed and if their choice is not respected then arbitration would become less beneficial. 

Thus, we should take a more nuanced approach to the issue of confidentiality in arbitration and allow transparency in an arbitration proceeding where the parties and the community have the potential to benefit from. Where the International Chamber of Commerce, SIAC, and some other Arbitral Institutions consider publishing the arbitral award unless both parties object to it in advance, this serves as a critical step to ensure transparency, while protecting the values of confidentiality. 

It is also pertinent to note that one may very well argue that most cases of arbitration are taken forward to the judiciary, for either annulment or enforcement of the arbitral award. Where once the matter is in the judicial fora, the decision passed by the judiciary may often disclose certain aspects of the award, making confidentiality under arbitration practically superfluous. 


Garv Sultania is a fourth-year law student of the B.B.A., LL.B. (Hons.) programme at the Jindal Global Law School, O.P. Jindal Global University.

Image: iStockPhoto (modified for reuse)

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