Overview of The Cases of Confidentiality in The Arbitral Procedures

This essay will examine the case of John Foster Emmott v Michael Wilson & Partners Ltd, where the parties who took place were the claimant named John Foster Emmott and the defendant Michael Wilson and Partners Limited. In that case, the UK Court of Appeal elucidates that the privacy of records created in arbitration can be lifted in specific conditions. It was upheld the decision to approve a revelation of documents produced in English arbitration procedures, which they were needed for similar court proceedings in New South Wales and the British Virgin Islands. The specific case concerned the degree of confidentiality in the proceedings of arbitration as it is embraced and affiliated worldwide. In Emmott, case law has generated an implied necessity on the parties to not disclose any documents which were produced, formulated or used in arbitration. Nevertheless, this obligation has some exceptions where there was a risk that the foreign courts could be deceived. Hence, disclosure was necessitated not only for the benefit of justice but also for the public good. The specific case gives focus on the evolving case law on issues of classification and protection in assertions. The court pointed out that the limits of confidentiality in the arbitration shall not make unclear the certainty since the majority of the judgements that took place in England are managed with absolute discretion. Notwithstanding, it is appealing to bear in mind that this particular case 'goes further than any previous authority in permitting disclosure for the purposes of foreign proceedings' despite the fact that the claimant was not really involved with those procedures.

The Court of Appeal maintained a ruling authorising the disclosure of archives produced in the English arbitration proceedings. Arbitration is the legal way to resolve conflicts among two or more parties outside of the court proceedings, by whose intention is to agree to be bound and reach into a resolution. This paper will analyse in detail the methodology taken in the landmark decision of the English Court of Appeal in the referenced case, in connection to confidentiality. It will be given a detailed case analysis of Emmott, following with the decision of the Court, and will give focus on the judgments. Also, it will be explained how the tribunal reached into such conclusion along with the legislation that was considered. In addition, it will be explained the meaning of confidentiality, how it can be used, and the advantages that it has, as well as its disadvantages. Concluding, this essay will answer the question as to whether it is ‘necessary to preserve the duty of confidentiality in international commercial arbitration in the modern world’, by outlining its importance. Finally, it will be evaluated the circumstances in which a duty of confidentiality may have an impact on parties to arbitral procedures in England and Wales.

In 2001, the parties reached into a mutual agreement where the respondent joined the appellant's corporation which was consolidated in the British Virgin Islands, as an executive and senior legal counsellor. Five years later, in 2006, the respondent reached into the decision to go and work for two other companies instead of the appellant’s corporation, which likewise was incorporated by the British Virgin Islands. As a result of that action, the respondent company contended that the claimant's actions were not pure, however; they were part of his strategy to redirect its business in breach of contract and in breach of trust. ‘That led to arbitration in London, and court proceedings by the defendant in England for search orders and freezing orders in support of arbitration and in New South Wales, the British Virgin Islands, Jersey and Colorado’. The court proceedings of the claimant’s case, in New South Wales, the British Virgin Islands and the London arbitration were part of the same argument. During the strife, the litigant corporation had told the New South Wales court that the fundamental disputes in those procedures, were equivalent to the London arbitration proceedings.

The course of action that took place in the New South Wales court, requested modifications so that uniformity will be brought to the litigation in the New South Wales, the British Virgin Islands and the London arbitration. In London, arbitration claims emerged against the petitioner in regard to fraud, nevertheless; such assertions are still effective in the court of New South Wales. The plaintiff requested from the commercial court a disclosure, for the motivations behind continuing in New South Wales and the British Virgin Islands, of archives that were created in the London arbitration. The request was granted by the judge who believed that the disclosure was to be in the 'public interest' with the intention that foreign courts would not be deceived or possibly deluded were the cases that were being progressed in the different procedures were basically raising identical or alike claims. After the judge’s decision, the respondent appealed and the principal issues which emerged on the matter were whether the judge had the purview to make the orders, and provided that this is true, regardless of whether his choice on the merits was right.

The court ruled that the appeal should be dismissed and the limitation points of the obligation of confidentiality regarding arbitration were being established based on cases ‘on the authorities as they stood’. The key cases in which declaration would be acceptable established four permissible principles. Disclosure of documents will be admissible where (a) there was a consent, either that consent was expressed or implied; (b) where the court ordered or allowed for such declaration; however, that does not necessarily mean that the court had a general prudence to lift the liability of confidentiality; (c) where the lift of the obligation of confidentiality was undoubtfully mandatory for the security of the ‘legitimate interest of an arbitrating party’; and finally where (c) the unveiling of the documents was for the best interest of justice.

The arbitration that took place was private; however, that did not necessarily mean that the arbiter was confidential for all grounds. An implied obligation by law was enacted by the authorities which become apparent out of the substance of arbitration. That alluded responsibility referred on both parties to not reveal any documents or even use them for any other occasion if such records were assembled and used in the decision making. In addition to that, the parties had a liability to not disclose in any manner what proof was given to them by any witness in the arbitration. Regardless, such limitation had its exceptions. The court stated that in reality, that was ‘a substantive rule of arbitration law reached through the device of an implied term’. In the Emmott, such application should be considered as a claim for the revelation of documents as a result of the fact that the duty of privacy was not administered. The judge used other jurisdictions to decide the question of confidentiality. He identified and used the arguments and the defence arguments which were used in New South Wale and the British Virgin Islands and reached to the conclusion that in the uncommon occasions, a disclosure of confidentiality of the modified points of claim should be permitted. Taking into account the elements in the present case of the same disputes, the modifications to procedures to bring a level of equality and the rejection of fraud applications in the London arbitration, and the threat that the New South Wales court could be deceived, it was manifested that the disclosure of documents was required in the best interest of the justice. The interests of equity were not restricted to the interests of fairness in England.

Summarising of what was already mentioned, the claimant requested from the court an order to allow the disclosure of documents which had been created in a judgment in London, to the courts of New South Wales and the British Virgin Islands. The decision that occurred in the Court of Appeal, the defendant had initially made assertions of fraud against the claimant yet had later on withdrawn them. The Court of Appeal decided that the interests of equity required disclosure of documents produced in the arbitration proceedings in the procedures in New South Wales and the British Virgin Islands so as to keep those courts from being misguided. In the court procedures, claims of extortion were made against Mr Emmott, which had been pulled back in the settlement. Lawrence Collins LJ made clear that the responsibility to not expose documents, was created during the settlement of a dispute, and may rely upon the idea of the information and the circumstances in which it emerges. He gave a useful synopsis of the conditions where disclosure of such documents is allowed. Disclosure of documents can be applied where (a) the parties have expressed or insinuated their consent; where (b) the court gives its permission; (c) where it is important to secure the lawful interests of the parleying party; and (d) when the disclosure is for the benefit of the justice or for the benefit of the public.

Some troublesome practical issues can be raised by the confidentiality of arbitration with respect to the degree to which documents, evidence or awards can be uncovered to outsiders. In arbitration agreements, the duty of confidentiality is implied as a matter of law. It covers all legal papers generated in the arbitration, regardless of whether those records are by nature confidential. The duty of confidentiality can be diverse by agreement of the parties. Limitations to the duty of confidentiality consist of conditions (i) where there is assent by the parties, either by being expressed or implied; (ii) where there is a court order; (iii) where there is sensibly vital for the security of lawful interests of a parleying party; and finally (iv) where the need of disclosure of documents is for the best interest of justice or the public.

Throughout the years, numerous disagreements have been made for what are genuinely the advantages of international arbitration over local legal proceedings. Complaints, such as the cost, are set in motion about whether such factors truly remain a benefit or not. In an arbitration blog, the writer Lisa Bench Nieuwveld posted in 2012 her opinion, that privacy is one of the greatest advantages of worldwide business discretion for commercial aspects. It guarantees that legal complication in a single market does not influence the gainful undertakings in another. Domestic legal proclamations have caused a fracture in the comprehension of confidentiality. Britain gives suggested confidentiality in arbitral procedures where local courts further expand the legitimate routine by giving exemptions to the common rule of non-disclosure. On the other hand, the duty of confidentiality does not enforce a legal obligation. Taken this into consideration, arbitral institutions should strive to abstract uncertainties on privacy protection regime in multinational arbitrations.

Many individuals new to arbitration, are under the impression that confidentiality is for the best and presents the benefits that are offered by international arbitration. After gaining experience and more awareness on the topic, they learn that 'some jurisdictions protect confidentiality within dispute resolution'; heretofore, classification of the proceedings or even the presence of the arbitration itself may not be safeguarded automatically. She also paraphrased a presentation he attended with the main precentor Mr Rees, who gave attention to the fact that Australia 'was an example jurisdiction getting away from this protection and general counsel want this protection' particularly in ventures where a debate may emerge in one piece of the world between organisations while in another piece of the world friendly and gainful undertakings still continues.

Most arbitral establishments, address privacy in arbitration in their own specific manner; however, most of such institutions either urge the court to regard the secrecy of delicate information or require the parties to do so. Very few organisations enclose a compulsory confidentiality prevision. In addition to that, it is worth mentioning that the London Court of International Arbitration (LCIA), appears to have a clause like that in paragraph 30. Moreover, in 2012 the International Chamber of Commerce Arbitration Rules gives the green light to the arbitration board to act optionally if they wish to take the necessary measures to protect confidential matters and secrets on the subject of trade. Often such protection is not in place, having as a result of the courts not to attempt to keep safe the privacy of the involved parties. On top of that, significant arbitration acts of other jurisdictions differ to a big extent. For example, in the United States, the confidentiality is not addressed by the US Federal Arbitration Act, however; it has been recognised as significant to arbitration by the tribunals.

In the English law of international arbitration, confidentiality is not an undisputed component as one would believe. Dr Ioanna Thoma relates confidentiality in the English law of arbitration as ‘coherent and fragmentary at the same time’. In English law, confidentiality has motivated a number of people to deal with it and contrast its lineaments with external jurisdictions, particularly those which are denying its existence, such as Australia. Perspectives about how desirable confidentiality is in England varies to a big extent. Such views are addressed by both 'words and silence'.

Although arbitration has been practised a lot in London, before 1980, confidentiality was not really in practice in the judgements. After the 1980s, unexpectedly barristers began to argue in favour or against confidentiality, in accordance with their client’s commands while judges were called to create and contribute another tile for the common law. In the mid-1990s, the drafters of the arbitration act 1996, realised that the task they undertook, to adjusting confidentiality into an everyday basis, was proved to be 'controversial and difficult'. Many exceptions were needed to be made and qualifications which were necessary to be pursued, so as for confidentiality to work out. For this reason, that issue was assigned to the courts to be applied when is needed and in ‘concreto’ basis. Lord Mustill, expressed in the mid-1990s, a notice which was demoralising to the courts against the endeavour to depict confidentiality. In particular, he stated that: “To give an accurate exposition of confidentiality at large would require a much more wide-ranging survey of the law and practice that has been necessary for a decision on the narrow issue raised by the appeal and cannot in my opinion safely be attempted in the abstract”.

Until the latter half of the 20th century, the terms ‘confidentiality’ and ‘privacy’ in the arbitration has been used similarly. Despite that, the meaning of these terms has been clarified. Nowadays ‘privacy’ implies that no outsider can go to arbitral deliberations and hearings, while ‘confidentiality’ alludes to non-revelation of records in public. Private hearings do not really join confidentiality commitments to the parties to the arbitration. The general supposition is that the arbitration process is not only private but also secret, which is being corrected in that matter, in the 21st century. Therefore, one of the essential explanations behind intervention being the preferred option for the commercial dispute resolution is confidentiality of agreement.

The mentioned hypothesis moves from the customary comprehension of an arbitration agreement which is a private legally binding course of action. During the 1990s, this assumption changed with the Australian and Swedish courts rejecting any implied responsibility related to nondisclosure of legal agreements in arbitration. The Supreme Court of Sweden ruled that under the UK-ECE standards or the Swedish law, there was no implied duty of confidentiality existed in private arbitration. Furthermore, the Australian High Court identified that private arbitration hearings do not cover the disclosed details and other relevant documents which are confidential since confidentiality is missing in that country.

These points of reference make the confidentiality protection wider in a situation where parties aim to keep specific information private. Resulting in the principle of the application of privacy not to be alike universally. To make this clearer, several other jurisdictions created new laws on arbitration and some arbitral establishments amended their norms. Alix Partners which is a US consulting firm, along with a financial investor Kingsbridge Capital Advisors due to the unwanted focus they had, prompted to a discussion over the privacy of arbitral proceedings.

While in a few countries their framework is based on arbitration, it is known that implied privacy cannot be accepted in arbitration procedures. Other countries have followed an alternative approach on how to pursue an obligation on the parties, the authorities or even both. The idea of assertion procedures and degree of privacy relies on the seat of arbitration and the arbitral principles which are practicable to arbitration.

The point at issue of confidentiality is complex because of the contribution of different individuals acting in arbitration who are not administered by the arbitral standards or arbitration agreement; even though they approach and have access to classified information. Among nations and global arbitral foundations, there is no consistency in the scope of application of the principle of confidentiality. Despite that, the English Arbitration Act of 1996 does not mention confidentiality, and it outlines three standards. The first standard states that arbitration proceedings must be held in private. Therefore, confidentiality shall be implied in every settlement and such confidentiality is liable to specific exemptions, particularly court orders, the parties' approval, public interest and reasonable necessity. Those rules were formulated and defined in the Shipyard Trogir by the Court of Appeal for the first time.

The English legislation system the tribunals aim for the protection of privacy as long as this right does not act in disadvantage of equity and justice. In Emmott, all the classified information were separated into two parts, the first part was data that were classified by nature, such as trade secrets; and the second part was information which was secured by an insinuating duty of privacy with the end goal that similar discovers application just an assertion. Such exceptions to implied confidentiality were identified in the case of Shipyard Trogir.

By addressing the topic of how confidentiality can be preserved in international commercial arbitration the answer is that there is not a known way how to deal with keeping up confidentiality in arbitration worldwide. Nonetheless, parties can choose the level of privacy they want. Extraordinary supervision shall exist while drafting the arbitration provision to guarantee the privacy of parties' dealings and interests. Civil and common law courts have different views on various issues regarding confidentiality. A few examples that are listed, show their concerns to issues as to (a) whether the devoir of privacy reaches to every information which deals with procedures, or only to delicate information concerning the business, like trade. Furthermore, another point that the courts take into consideration, is whether the witnesses are compelled to preserve confidentiality? And (c) whether such privacy shall be retained in the course of court proceedings emerging out from arbitration.

Even though the institutional rules support confidentiality, the ICC Rules does not accommodate the equivalent, leaving it to the court's discretion to act accordingly. Because of the irregularities in domestic laws and institutional rules, parties must ensure that their interests are protected by having specific confidentiality provisions in arbitration agreement'. The arbitration provision should accommodate secrecy for all reports, those which were traded and those which are a step before the disclosure, in order to avoid the revelation of classified documents. This guarantee the non-exposure of business secrets. Where a disclosure happens in bad faith, the defaulting party will be at risk to remunerate the sufferer. These are the confidentiality requirements for documents. Third parties shall have obligations towards confidentiality in relation to ‘statements, tribunal’s deliberations and the final awards as they should be maintained as confidential by the tribunal, parties, witnesses, experts and administrative personal’ and all deponents ought to sign a confidentiality agreement document to be bound to these obligations. A lawful administration having strong confidentiality protection shall be the final point on ruling a secure arbitral law.

When the adopted arbitration rules neglect to give adequate protection order, these provision step in. If the commercial parties consider an extensive arbitration order harmful to the agreement, it must be inclusively discussed the terms at the primary stage. The involved people in the agreement must declare with comprehensibly the protection order required to guarantee successful drafting of the discretion provision.

As it has been observed, many different arbitral institutions become unsuccessful in providing alike standards because of the 'prevailing competition in arbitration business'. Often the involved parties select a non-exclusive mediation stipulation to avoid from concentrating on unexpected future conflicts, that is why an equable confidentiality protection mechanism is the need of great importance. Mr Samuel suggests that at the beginning of the settlement of the dispute, the courts should receive the approval of the parties on their view on confidentiality. In case the parties are not in an agreement, then it is recommended that the adjudicator shall proceed into a protective order which will be regarded as agreeable by both parties. Where individual claims that there is an infringement of the privacy agreement or protective order, then the court can resolve the issue immediately. In the event that such infringement occurs after finishing the arbitration settlement, the problem shall be resolved by the same arbitration board which is familiar with the dispute and the confidentiality agreement. It is recommended that a confidentiality agreement should include certain exception as to when shall be lifted. Regardless of whether parties are only embodying a conventional arbitration clause with no protective order, this clause will apply in any event. Because of this, parties can avoid referring to the courts where privacy agreements are breached. Nonetheless, the court will have no authority to pass an arbitration agreement without notifying the parties about the beginning of arbitration.

It is momentous to say that the United Kingdom courts, for the most part, ensure the protection and privacy of the procedures and other related documents; nonetheless, other countries like Australia, give no such confidentiality assumption without a specific arrangement for privacy in the settlement of dispute agreement. Even though this is not an assurance, it merits incorporating privacy protection in the arbitration provision. 

Concluding, after examining both views on confidentiality, this essay concluded that it is necessary to preserve such duty in the international commercial arbitration system to protect the individual’s private interests and their information. In situations where there is a breach, this shall only happen when the disclosure of the information is an abuse, or unethical towards another human being. Along these lines, it is basic to stick to the security arrangements and revelation control that was concurred with the information holding association preceding arrival of their information consistently.