Confidentiality arbitration UK law

09 June 2006

Sharon Gerbi

English surveys have shown that the single most important feature of arbitration for the parties involved is the confidentiality that is generally viewed as being attached to the process.

It will doubtless come as a surprise to many potential users of arbitration, therefore, that confidentiality is not always a “given” in an arbitration procedure. This article seeks to examine to what extent an arbitration process under the local laws of England and Wales can be said to be truly confidential.

The parties’ express agreement

Arbitration is a consensual procedure. The first port of call will therefore always be to examine any express agreement between the parties. If privacy and confidentiality are of great importance to the parties, the best way to ensure this is achieved is to make specific provision in the arbitration agreement. Such a provision can, if necessary, be supported by an appropriate order of the Tribunal. Clarity is the key. Those drafting arbitration clauses need to clearly state who is bound by it (if third parties are to be bound they will have to enter into separate confidentiality agreements) and exactly what is to be treated as confidential. In the absence of such express obligation of confidentiality, the parties must look to the applicable law.

Confidentiality under Common Law

It is a commonly held view that arbitrations in England and Wales are private and confidential. Whilst there is no statutory provision in the Arbitration Act 1996 which deals with such issues, arbitration is generally considered by the English Courts to be a private means of dispute resolution. English law recognises that it is an implied term of arbitration agreements that the proceedings are private and confidential. This broad position is, however, subject to a few notable exceptions discussed below.

Confidentiality attaching to documents

In the case of Ali Shipping Corp v Shipyard Trogir [1] the Court of Appeal considered the exceptions to the general rule of confidentiality. The court set out the following exceptions recognised under English law:

  • Disclosure made with the express or implied consent of the party who originally produced the material;
  • Where there is an order of the Court, for example where an order is made for disclosure of documents generated by an arbitration for the purposes of a later Court action;
  • Where leave of the Court has been given. Potter LJ recognised here that difficulties would arise with the question of what grounds would give rise to such leave being given;
  • Disclosure when and to the extent reasonably necessary for the establishment or protection of an arbitrating party’s legal rights vis-à-vis a third party; and
  • Disclosure required in the public interest.

This principle of confidentiality attaching to documents created for or disclosed in an arbitration was taken a step further by the Court in the 2005 case of Glidepath BV and Others v John Thompson and Others [2]. In that case, a third party applied for copies of certain documents under the English Procedural Rules. The agreement in dispute between the parties contained an arbitration clause and the proceedings were stayed by the Court in favour of arbitration under section 9 of the Arbitration Act 1996. Before the proceedings were stayed, a Claim Form and Particulars of Claim had been served and the Claimants had made applications for freezing injunctions. The third party sought access to these documents on the Court file, on the basis that they were necessary to assist in establishing a separate claim.

The Court considered and applied Ali Shipping Corp v Shipyard Trogir [3] and held that arbitration proceedings and materials produced were treated as confidential to the parties and the arbitrator, subject to certain exceptions. Even at the stages before the Court ordered a stay, the private and confidential nature of proceedings ancillary to the arbitration process ought to be protected. The permission of the Court to a third party, i.e. a stranger to the arbitration and to the proceedings in which the stay had been ordered, to inspect the documents on the Court file should not be granted unless all the parties to the arbitration consented or there was an overriding reason in the interests of justice.

Confidentiality attaching to the award

Under English law, whilst the duty of confidentiality extends to the award itself, there is an important exception which must be borne in mind, namely the disclosure of the arbitral award in separate proceedings to enforce or protect the legal rights of a party to the arbitration agreement.

In the case of Hassneh Insurance Co. of Israel and others v Mew [4], the Court had to decide whether a party to an arbitration could disclose an arbitral award in separate court proceedings against a third party in order to justify its claim against that third party. In the event, the Court decided that the award could be disclosed (setting aside the general duty of confidentiality) in circumstances where the disclosure was reasonably necessary to establish or protect a party’s legal rights against a third party.

The Court held that unlike other documents used in an arbitration, an award determines the parties’ rights and obligations and is also potentially a public document in the context of supervision or enforcement by the Court. This decision was considered and applied by the Court in the later case of Insurance Co. v Lloyd’s Syndicate [5].

This issue of the extent of confidentiality attaching to an award was considered further by the Privy Council in the 2003 case of Associated Electric and Gas Insurance Services Ltd (“Aegis”) v European Reinsurance Co. of Zurich [6].

In this case the issue was raised as to whether an express confidentiality agreement relating to an earlier arbitration between two parties prevented one of those parties referring to the earlier award in a later arbitration between them. The Privy Council considered that the rationale for the duty of confidentiality was to determine disputes between parties to the arbitration in a manner that did not involve the disclosure of information to parties with interests adverse to those involved in the arbitration. The Privy Council held that the use of the earlier award in a later arbitration between the same parties would not give rise to this danger. Their Lordships went on to hold that to prohibit any disclosure of the award would frustrate a fundamental purpose of the arbitration by preventing enforcement of the award.

A further exception exists under English law to the general duty of confidentiality of the Award. If an application is made which seeks to invoke the Court’s supervisory powers in relation to the arbitration, or if the Court’s assistance is sought with regard to the enforcement of the award, a party may put the award and any reasons before the Court. In relation to the judgment itself, the Court held that in cases where publication of the Court’s judgment could result in the disclosure of sensitive or confidential information and/or where one of the parties can show that it will be prejudiced by the publication, the Court may order that its judgment should be released only to the parties involved or the Court may frame its judgment in a way so as to ensure no confidentiality is lost.

Summary and conclusion

English law recognises an implied term in arbitration agreements that proceedings are confidential which also gives rise to an obligation not to disclose or use documents obtained in arbitration for any other purpose. In addition, arbitral awards are also considered confidential, though there is an important exception to this where disclosure of the award in separate proceedings is required to enforce or protect legal rights. The safest course of action, therefore, for parties wishing to arbitrate any dispute in an entirely confidential manner is to ensure that a suitable confidentiality provision is specifically inserted into any arbitration agreement.

[1] [1999] 1 WLR 314

[2] [2005] EWHC 818 (Comm)

[3] [1999] 1 WLR 314

[4] [1993] 2 Lloyd’s Rep 243

[5] (1994) CLC 1303

[6] [2003] 1 WLR 1041