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Hide & Seek in Winter Wonderland: “Confidentiality in Arbitration”

By - Rhea Susan Verghese on November 6, 2019

Arbitration- Not a one-man show? Neither is it a show of the times of today! The legendary Gary Born calls it the ‘Game of Tribunals’; he at the same time is right when he says that, Arbitration has enjoyed a long golden summer only to face the impending dark winter nights without a knight! Arbitration is a peoples’ game that renounces ingression to state courts. Having said so, Arbitration though known for its confidentiality perspective in the positive never really materialized on a fair note in India for many reasons. Also, Confidentiality in Arbitration while being a sensitive pointer would play otherwise for companies for the many disclosures they would require to make; e.g. under SEBI Laws which may eventually lead to a potential Conflict of Laws.

Statutory Framework

The statutory fabric in India with reference to the Arbitration and Conciliation Act of 1996 does not throw light on any provision in specificity with regard to Confidentiality in Arbitration but in Conciliation which is reflected in Section 75 of the Act. There is a need to understand the distinctive difference between Confidentiality and Privacy before delving deep into the aspect of the same. Privacy, on one hand, bars the interloping of third-party externals to arbitrating parties in Arbitration. Confidentiality is an obligatory provision that finds its roots in the agreement itself [1] where persons involved in the process do not divulge any material which pertains to the proceedings or award. Upholding confidentiality would only relate to the documents or evidence used to advance one’s case.
Delving into the different facets of Confidentiality in Arbitration would mean understanding private Arbitration as well. Private Arbitration in itself is straightforward and doesn’t need further interpretation for it’s taken to be implied fragment of the process of Arbitration. Ideally, Arbitration is sought for keeping in mind the confidentiality facet but again perception of how confidentiality is understood is also an important fact to bear in mind.

A “Confidential Hello” From the Other Side

The aspect of Confidentiality in Arbitration outside of the territory of India is looked at in a very different way as compared to in India. Where on one hand, in a country like U.K (Emmott v. Michael Wilson & Partners Ltd. [2008] EWCA Civ. 184 at [81] per Collins LJ), confidentiality is looked at as an implied obligation[2] ; USA, Sweden and Australia look at it otherwise. Arbitration being a peoples’ process and Party Autonomy being the fulcrum upon which Arbitration lays its base, people pronounce that confidentiality shouldn’t be made an express provision stating Confidentiality as a statutory requirement. Confidentiality in a perspective blink would mean a choice to the parties who are in dispute as to whether if they want to maintain the Confidentiality clause. In International Commercial Arbitration, most jurisdictions have based their inland legislatures on the UNCITRAL Model Law and the same does not pronounce any confidentiality clause in specificity. It pays heed to the aspect of party autonomy and should a party want to maintain confidentiality they may incorporate the same in the contract to arbitrate. “Protection to an individual’s legal rights” is an exception which most foreign courts have drawn to the so-called perspective of Confidentiality being an implied obligation. UNCITRAL Arbitration Rules also do not have any provisions in particular which state the same with the exception to the Award which can be made known to civic but with the consensus of the parties in agreement. 

The Indian Knock-Out

Confidentiality was always a taken for granted concept and thought to be a part of the agreement impliedly. The Arbitration amendment bill of 2019 brought along with its changes and improvements, the aspect of confidentiality in specificity which is a whole new addition in the field of Arbitration. Section 42-A of the new bill puts force on Arbitrator, the parties to the agreement and the institution to abide by the notion of confidentiality. Section 42-A comes along with a disclosure exception that the award will be disclosed for the purpose of enforcement and set aside proceedings and this provision cannot be compromised with.

 Where Confidentiality could hold in positivity to some, it also poses to be a threat in terms of conflicts of laws. The very exception to Section 42-A inclusive of the same being a compulsion with no opt-out only brings to show no clarity in publication of award, given the fact that the parties may wish to oppose or simply sanitize the award to a huge extent. A negative hold up of the like will infringe the sanctity of the very base principle of Arbitration i.e. Party Autonomy. There are certain aspects of the new proposed amendment which draw a lacuna as to the disclosure aspects or whether if the parties would agree to an abridged award. Also drawing light on the question of how the institution maintains a cache of Arbitral awards overrides Section 42-A of the new bill in many uncanny ways. Also, Section 42-A of the bill overrides Section 27 of the Arbitration and Conciliation Act 1996 and there is a need to harmonize the confidentiality order.

It’s the Beginning Not the End

As discussed above, the problems that stick with the confidentiality facet are multitudinous and the option as provided would be opting for either Ad-hoc arbitrations which give one the choice of inserting the confidentiality clause or Institutional arbitrations which come imbedded with the clause as a stick-on. Under the belt, the underlying notion would mean to reconsider this facet in a diplomatic way so as to not jeopardize the rights of the parties. We would be bringing disbalance if the implications of the same are not contemplated upon or we don’t widen the scope of the exceptions. In due course we will have lined the aspect of confidentiality with party autonomy.

  • [2] ‘Stephen Balthasar’,”Kingsbridge Capital Advisors V. Alix Partners: What Confidentiality in Arbitration?” (Feb 3rd 2012)

Contributed By - Rhea Susan Verghese
Designation - Associate

King Stubb & Kasiva,
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