How Confidential Are Arbitration Proceedings?

How Confidential Are Arbitration Proceedings?

How Confidential Are Arbitration Proceedings? 1200 797 Jonathan Gray
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It is often assumed that arbitrations are necessarily kept confidential.  Indeed, the assumed or perceived confidentiality of arbitrations is often put forward as a significant advantage of arbitration and one of the main reasons for parties often preferring it as a means of dispute resolution to litigation, where disputes are often heard in open Court and determined in judgments which are published and publicly available.

While some measure of confidentiality exists in most jurisdictions, the scope varies significantly from jurisdiction to jurisdiction – ranging from the fact of the very existence of arbitration proceedings, to the pleadings, the documents produced, witness statements, expert reports, and decisions and/or awards made by the tribunal, as well as the scope of persons to whom the confidentiality obligations apply.  Needless to say, information about an arbitration – in some cases, even information about the mere existence of arbitration proceedings – can be highly confidential and sensitive.

Before entering into arbitration agreements, parties would be well advised to consider carefully to what extent confidentiality can be preserved, what exceptions apply and the circumstances in which they might wish to disclose information relating to arbitration proceedings but may be prevented from doing so without the consent of the other party/parties (for example, disclosure to insurers, or in back to back arbitrations of the type common in construction or shipping matters, or in other circumstances) and, in appropriate cases, how this should be addressed specifically in the arbitration agreement.

Confidentiality in different jurisdictions

While in some jurisdictions – e.g. Hong Kong and New Zealand – confidentiality is specifically codified in the relevant legislation governing arbitrations, in many jurisdictions the relevant legislation governing arbitrations does not address confidentiality – possibly due to the fact that the UNCITRAL Model Law on International Commercial Arbitration followed in whole or in part by many countries contains no provisions in this regard.

It is also important to understand that even where confidentiality is addressed in arbitration legislation, in some cases the provisions may only be applicable on an ‘opt-in’ basis or subject to an ‘opt-out’.  For example, in France the relevant legislation imposes a duty of confidentiality for domestic arbitration but not for international commercial arbitrations unless the parties have agreed to it, while the Australian International Arbitration Act of 1974, on the other hand, allows parties to opt out of the provisions governing confidentiality.

In some jurisdictions confidentiality in arbitrations is protected by case law rather than legislation, with confidentiality seen as implied in the arbitration agreement.  For example, the English Arbitration Act of 1996 does not address confidentiality, but case law holds that parties to arbitrations are governed by an implied duty of confidentiality.  This, however, is subject to certain exceptions whereby disclosure is permitted by consent of the parties, in confirmation and enforcement proceedings, by court order in a subsequent action, by leave of the court where “reasonably necessary” to protect or pursue a legal right, and where disclosure would be “in the interests of justice” (see Ali Shipping Corporation v Shipyard Trogir [1998] 1 Lloyds Rep 643).

Elsewhere, in the United States the Federal Arbitration Act and the Uniform Arbitration Act – which form a model adopted by most States – do not impose confidentiality obligations, while US case law rejects any implied duty of confidentiality.

These differences in approach create uncertainty for parties to arbitrations.  Parties cannot assume, for example, that an arbitration held in Hong Kong will universally be subject to Hong Kong confidentiality requirements, because a dispute over confidentiality obligations from an arbitration held in Hong Kong will not necessarily be heard by the Hong Kong court.  It might be raised in enforcement proceedings elsewhere or in an overseas jurisdiction where confidential information is disclosed.

As regards institutional rules, many arbitration institutions now include confidentiality provisions, although treatment varies from institution to institution.  Some e.g. those of the Hong Kong International Arbitration Centre (“HKIAC”) include express provisions imposing general confidentiality obligations on the parties, as well as on the tribunal and its secretary (if any), emergency arbitrators, experts, witnesses and, in some cases, also on staff of the arbitration institution.

Other rules are less comprehensive – for example, the ICC Arbitration Rules only impose confidentiality obligations on arbitrators and staff of the International Court of Arbitration, but not on the parties, although under Article 22.3 the arbitral tribunal may, upon the request of any party, make orders concerning the confidentiality of the arbitration proceedings or of any other matters in connection with the arbitration and may take measures for protecting trade secrets and confidential information.

Position in Hong Kong

Arbitration Ordinance (Cap.609)

The Arbitration Ordinance (Cap.609) (the “AO”) specifically provides for a statutory obligation for confidentiality in arbitration.  In particular, Section 18(1) of the AO provides that “Unless otherwise agreed by the parties, no party may publish, disclose or communicate any information relating to – (a) the arbitral proceedings under the arbitration agreement; or (b) an award made in those arbitral proceedings”.

This duty of confidentiality is subject to certain exceptions in Section 18(2) of the AO which permit parties to disclose confidential information:

  • in legal proceedings before a court or other judicial authority in or outside Hong Kong, to protect or pursue a legal right or interest, or to enforce or challenge the award;
  • if the publication, disclosure or communication is made to any government body, regulatory body, court or tribunal and the party is obliged by law to make the publication, disclosure or communication; or
  • if the publication, disclosure or communication is made to a professional or any other adviser of any of the parties.

Implied obligation of confidentiality

In addition to the statutory obligations of confidentiality in arbitration under Section 18 of the AO, implied obligations of confidentiality are also recognised under Hong Kong case law, as confirmed in Housing Authority v Sui Chong Construction & Engineering Co Ltd [2008] 1 HKLRD 84 – but again, this is subject to exceptions, including that disclosure is permitted when and to the extent to which it is reasonably necessary for the protection of the legitimate interest of an arbitrating party, meaning reasonably necessary for the establishment or protection of an arbitrating party’s legal rights vis-à-vis a third party in order to found a cause of action against that third party or to defend a claim (or counterclaim) brought by the third party (referring to the English Ali Shipping case as authority).

HKIAC Administered Arbitration Rules

Many arbitrations in Hong Kong are conducted under the 2018 HKIAC Administered Arbitration Rules (“HKIAC Rules”), which impose confidentiality obligations on parties to HKIAC arbitrations similar to those imposed under the AO.

Article 45(1) of the HKIAC Rules is based on Section 18(1) of the AO but expanded to include parties’ representatives and emergency decisions made in arbitration proceedings as well as awards.

Articles 45.3(a) to (c) of the HKIAC Rules are based on Section 18(2) of the AO with some modifications.

Article 45.3(d) permits disclosure to any party or additional party and any confirmed or appointed arbitrator for the purposes of multi-party or multi-contract proceedings where there is joinder of additional parties, consolidation of arbitrations, a single arbitration under multiple contracts, or concurrent proceedings.

Disclosure to third party funders

Third party funding of arbitrations is permitted in Hong Kong, subject to the provisions in Part 10A (Third Party Funding) of the AO.  Obviously, seeking and/or obtaining third party funding requires the disclosure of confidential information to the would-be third party funder.  This is permitted under Section 98T(1) of the AO, which further provides that where third party funders or their professional advisers receive confidential information relating to an arbitration they must also keep such information confidential as if they were parties to the arbitration.  Article 45.3(e) of the HKIAC Rules also permits the disclosure of confidential information for the purposes of having, or seeking, third party funding.

Disclosure in legal proceedings before a court or other judicial authority  

Section 18(2)(a) of the AO permits disclosure to protect or pursue a legal right or interest, or to enforce or challenge the award, in legal proceedings before a court or “other judicial authority” in or outside Hong Kong.  It is unclear what is covered by “other judicial authority”, although it would not appear to cover or include an arbitral tribunal.

Disclosure by listed companies

Under the relevant provisions of the Securities and Futures Ordinance (Cap. 571), a company listed on the Stock Exchange of Hong Kong (“HKSE”) must disclose information to the public as soon as reasonably practicable after it becomes aware of “inside information”“Inside information” is defined as information about a company which is not generally known to the public, but which would if generally known be likely to materially affect the price of the listed securities.

A duty to disclose confidential information concerning an arbitration, therefore, will arise if the arbitration is considered likely to materially affect a party’s share price.  While, in such case, disclosure about the arbitration is made to the public via the HKSE, in practice it appears that the party can rely on the exception under Section 18(2)(b) of the AO (and Article 45.3(b) of the HKIAC Rules), namely, publication, disclosure or communication is made to any government body, regulatory body, court or tribunal and the party is obliged by law to make the publication, disclosure or communication.

The relevant rules and regulations do not specify what constitutes materiality.  In practice, a party deciding whether or not to disclose must exercise its discretion on the level of materiality.  Further difficulties include there being no clear guidance on what information must be disclosed or what is required for disclosure “as soon as reasonably practicable”.

Listed companies subject to regulatory oversight and disclosure obligations entering into arbitration agreements are advised to include express language within the arbitration agreement permitting regulatory disclosures rather than relying on the statutory exception in Section 18(2)(b) of the AO.  If, subsequently, disclosure of information relating to arbitration proceedings is, or may be, required, the company should exercise caution and seek advice regarding the timing and scope of any disclosure.

Injunctions to restrain breach of confidentiality

What can a party do when another discloses confidential information, or threatens or is likely to do so, in breach of its confidentiality obligations?  Hong Kong law recognises that injunctions can be granted to prevent or restrain the improper disclosure of confidential information, provided the applicant meets the applicable procedural requirements applicable to all forms of application for injunctive relief in respect of confidential information, including making out a serious issue to be tried on the merits, adequate particularisation of the relevant items of information to be restrained, and sufficient evidence (on a “serious issue to be tried” basis) as to the nature and extent of any actual or threatened breach of the relevant confidentiality obligations (§62, Housing Authority v Sui Chong Construction & Engineering Co Ltd).

Conclusion

While Hong Kong recognises confidentiality in international commercial arbitrations, this is subject to the exceptions made in the AO and to the exceptions recognised at common law.  Parties seeking to preserve confidentiality to the extent possible should seek proper advice regarding the applicable laws and applicable institutional rules when drafting the arbitration agreement, bearing in mind the jurisdictions in which disputes over confidentiality obligations may be brought.

 

Our team at Hugill & Ip has extensive experience in dealing with Dispute Resolution matters – so kindly get in touch with us to find out how we can help.

This article is intended only to provide a summary of the subject covered. It does not purport to be comprehensive or to provide legal advice. No person should act in reliance on any statement contained in this publication without first obtaining specific professional advice.

Jonathan Gray

Jonathan specialises in dispute resolution, acting for clients in a wide range of general commercial disputes covering both litigation and arbitration. He also advises on both contentious and non-contentious employment law matters.

All articles by : Jonathan Gray
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