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Keeping it under wraps: The limits on confidentiality in Arbitration

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Three recent judgments of the English High Court show contrasting approaches to the publication of judgments in arbitration claims.  In Tony Pulis v Crystal Palace [2016] EWHC 2999 and Symbion Power LLC v Venco Imtiaz Construction Company [2017] EWHC 348 (TCC), both concerning challenges under section 68 of the Arbitration Act 1996 (the “Act”), the court declined to withhold publication or anonymise the judgment on the application, while in P v (1) Q (2) R (3) S (4) U [2017] EWHC 148 (Comm) the court saw fit to publish an anonymised version of its reasons for dismissing a challenge under section 24 of the Act.  In this post, Nikki O'Sullivan considers the interface between arbitration and the courts and the extent to which this may affect the confidentiality of the arbitral process.

Background

Arbitration is big business because it allows users to resolve their disputes in private.  There is far less potential for exposure of trade secrets, proprietary information, business practices and negative PR material when those matters are kept out of the courts.

Under most institutional rules (see Article 30 of the LCIA Rules and Article 22 ICC Rules for example) as well as the UNCITRAL rules, the hearing, the materials on the record and the award itself are, subject to certain limited exceptions under applicable law, kept confidential by the parties and the arbitrators. Since arbitrators do not have inherent jurisdiction they do not need to be concerned about ‘justice being seen to be done’ as the courts do.

But under English procedural law, there is a limited but necessary interface between the arbitral process and supervisory role of the courts, in particular in the areas of challenging or enforcing an award. Users of arbitration should be alive to the fact that a dispute which is confidential to start with might not necessarily stay that way further down the line. Jacob J in Forbes v Smith [1998] 1 All ER 973 regarded the concept of a secret judgment as “abhorrent”, and there is undoubtedly a strong public interest in the publication of judgments.  However this public interest has to be weighed against arbitration users’ legitimate expectations that arbitral proceedings and awards will be confidential to the parties.

The current position

The starting point is CPR 62.10 which sets out its own specific regime in relation to arbitration claims.  Subject to any specific order made by the court as to whether a hearing should be in public or in private, determination of preliminary points of law, under section 45 of the 1996 Act, or appeals on a point of law under section 69 of the Act, are to be heard in public, whilst all other arbitration claims are to be heard in private.  This covers a large gamut of claims relating to many different issues arising in or out of arbitrations, including the section 68 and section 24 challenges that were the subject of the above three cases.  In all three cases therefore, the hearing of the relevant applications took place in private, in accordance with CPR 62.10.

However, as pointed out in the leading decision of Department of Economics Policy & Development City of Moscow v Bankers Trust Co [2005] QB 207, the judgment arising out of the application is another matter. The fact of a hearing taking place in private does not necessarily render the judgment itself private.

Mance LJ in Bankers Trust said, “There can be no question of withholding publication of reasoned judgments on a blanket basis of a generalised, and in my view, unfounded, concern that their publication would upset the confidence of the business community in English arbitration”.

In fact, even where section 68 challenges are concerned (which CPR 69.10 expressly states should be heard in private), Mance LJ said that the public interest in ensuring appropriate standards of fairness in the conduct of arbitrations militates in favour of a public judgment.  Practical suggestions made by the judge to avoid unnecessary disclosure of sensitive material include:

  • Judges framing judgments so as to concentrate on essentials and cover only limited aspects of the subject matter of the original arbitration
  • Anonymising judgments
  • Discussing the position in advance with counsel

Significantly, as matters currently stand, there is no need for a party asking the court to keep a judgment confidential to prove positive detriment beyond the undermining of its expectation that the subject matter would be confidential.  It is clear that in each case, the judge will undertake a balancing exercise between a party’s legitimate expectation of confidentiality on the one hand, against another party’s desire for publication and/or serving the public interest by giving a judgment in open court.

Recent applications of the decision in Bankers Trust

The Tony Pulis case concerned a challenge by Mr Pulis against an arbitration award given in proceedings against Crystal Palace on the basis of serious irregularity (section 68 of the Act).  In accordance with the provisions of CPR 62.10, the hearing of the section 68 challenge was in private.  The judge was satisfied, having considered the Bankers Trust case carefully, that this was an appropriate case whereby the judgment should be given in open court. No reasons were supplied for the judge’s reasoning but the decision may have been attributable to the subject matter of the arbitration claim (the early payment of a contractual bonus being procured through fraudulent misrepresentation) and Mance LJ’s comment that judgments on section 68 challenges militate in favour of publication.

Similarly, in the Symbion Power case, the judge concluded that there was no reason to anonymise the judgment on Symbion’s section 68 challenge.  The judge had previously expressed a concern about the extent to which the judgment revealed the content of the award in circumstances where it was not the subject of any challenge and the joint venture company was not a party to the section 68 proceedings. However, the judge concluded that her initial concerns were misplaced.  This was particularly the case given that the award was already in the public domain due to enforcement proceedings in the US which the respondent party was compelled to bring due only to Symbion’s failure to pay the award.

By contrast, P v (1) Q (2) R (3) S (4) U  is a good example of a judgment that has been anonymised in order to protect the confidentiality of the underlying arbitration proceedings.  This was an application to remove the Second and Third Defendants as arbitrators for misconduct, pursuant to section 24 of the Act. No party or arbitrator names have been used in the judgment and passages quoted from submissions and contemporaneous documents have all been edited to ensure that they do not contain any facts relating to the underlying dispute.  It is clear that such editing and anonymization in no way detracts from the fluency and usability of the judgment.

Conclusion

It is generally recognised that among the features long assumed to be implicit in parties’ choice to arbitrate in England are privacy and confidentiality.  Even though the Act itself is silent on this issue, the Departmental Advisory Committee (“DAC”) report on the Arbitration Bill acknowledged that users of commercial arbitration in England place much importance on privacy and confidentiality as essential features.

However, the entitlement to privacy and confidentiality in arbitration is not absolute, and where the courts become involved in exercising their supervisory role in particular, users should be alive to the possibility that some elements of the arbitration may well end up in the public domain. It is of course impossible to predict at the beginning of a dispute how the entire process will pan out, but raising issues of confidentiality early where the dispute involves sensitive material will help to ensure that judges can be prepared to anonymise judgments or where appropriate, withhold publication altogether.

This blog post first appeared on Practical Law Arbitration Blog on 2 May 2017.

 

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