London Maritime Arbitration

Clare Ambrose; Karen Maxwell and Michael Collett KC

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CHAPTER 13 Confidentiality in arbitration

A. Introduction

13.1 Confidentiality is one of the most valued features of London arbitration. Litigation ordinarily involves a public hearing and third parties will have access to court documents1 whereas the privacy of arbitration enables the parties to avoid their disputes becoming known to competitors, clients or the public. The Arbitration Act 1996 does not include any statutory principles of confidentiality because the drafters considered that it was a difficult area which could be better resolved by the courts on a pragmatic case by case basis.2 The parties to an arbitration agreement are also better placed to define any duties of confidentiality more clearly, in particular by choosing institutional rules with stipulations for confidentiality.3

B. The nature of the duty

13.2 Under English law4 it is clearly established that a general duty of confidentiality exists in relation to arbitral proceedings. Leggatt J in The Eastern Saga 5 explained that “The concept of private arbitrations derives simply from the fact that the parties have agreed to submit to arbitration particular disputes arising between them and only between them. It is implicit in this that strangers shall be excluded from the hearing and conduct of the arbitration”. Colman

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J in Hassneh Insurance Co v Mew 6 commented that parties to an arbitration are entitled to assume that the hearing will be in private and this assumption arises from a practice which has been universal in London for hundreds of years. The Court of Appeal in Ali Shipping Corporation v Shipyard Trogir identified the obligation of confidentiality in arbitration more specifically as an implied term of the arbitration agreement that attaches as a matter of law as an essential corollary of the privacy of arbitration.7 However, in Associated Electric Gas Insurance Services Ltd v European Reinsurance Company of Zurich,8 the Privy Council expressed reservations against categorising the duty of confidentiality as a specific implied term subject to exceptions because such an approach failed to reflect the different types of confidentiality which may attach to different documents. The Court of Appeal in Emmott v Michael Wilson & Partners 9 affirmed that the duty of confidentiality is implied into the arbitration agreement as a matter of law but also emphasised that the scope of the duty would depend on the context in which the dispute arise. 13.3 The concepts of privacy and confidentiality are closely related and the courts have generally used the terms interchangeably.10 The main practical distinction is that the terminology of privacy is readily attached to the hearing whereas confidentiality (with exceptions) is used with reference to documents generated by the arbitration. The Court of Appeal in Emmott v Michael Wilson & Partners 11 suggested that privacy in the conduct of an arbitration should be contrasted with more specific aspects of the law of confidentiality such as the protection of inherently confidential information (e.g., trade secrets) or the rule that documents disclosed in an arbitration can only be used for the purpose of that arbitration. 13.4 Confidentiality attaches to all aspects of the arbitration, in particular the hearing, the documents produced in the course of the arbitration and the award. It is more doubtful whether the duty would extend to the mere fact of having commenced arbitration or obtained an award. In Department of Economic Policy of the City of Moscow v Bankers Trust 12 it was common ground that either party could disclose the end result of an arbitration. However, in most cases parties may wish to prevent publicity as to the existence of an arbitration, its subject matter and the end result. 13.5 The most common issue to arise is whether documents generated in an arbitration can be disclosed to third parties. In defining the duty of confidentiality in arbitration the courts have sometimes drawn an analogy with the position regarding documents obtained on disclosure in court proceedings and also the duty of confidentiality owned by a banker to his

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customer.13 A person to whom documents are disclosed under court rules is under an implied obligation to the court not to use the documents for any purpose other than the proceedings in progress.14 The rationale for the obligation is the fact that the disclosure is compelled purely for the purpose of the proceedings.15 In arbitration a similar principle precludes the use of documents for any other purpose than the dispute in which they were obtained.16 13.6 The duty of confidentiality is owed by the parties to the arbitration agreement to each other. It is also owed by the arbitrator to the parties as an implied term of his appointment. A similar duty would also be imposed on legal advisors and expert witnesses17 as an implied term in their contract and also by reason of their notice of the confidential nature of arbitration.18 The duty of confidentiality may also be owed by other witnesses but it would be advisable to give them express advance notice of the confidentiality of the proceedings.

C. Exceptions

13.7 The duty of confidentiality in arbitration is not absolute. In Ali Shipping Corporation v Shipyard Trogir 19 the Court of Appeal gave guidance on circumstances where exceptions would arise but there are no blanket rules applicable to all documents: in particular an award may receive different treatment and is dealt with separately below.20 The principal exceptions to the duty of confidentiality are:

• the parties’ consent (express or implied);
• where there is an order or permission of the court;
• where it is reasonably necessary for the protection of the legitimate interests of an arbitrating party;
• the interests of justice and probably also
• the public interest.21

Consent

13.8 Consent would cover cases where the parties had agreed rules that allowed disclosure to third parties (e.g., paragraph 16(b) of the LMAA Terms) or terms implied by custom or business efficacy. This might include disclosing an award in non-contentious situations, for

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instance to insurers, auditors or to comply with stock exchange regulations. It would also include practices that had been established by custom.

In Owners of Hamtun v Owners of St John,22 Gross J found that the implied term of confidentiality in LOF arbitration agreements was qualified by the custom of awards being made available to judges, salvage arbitrators and lawyers with a view to promoting uniformity and consistency.

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