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Confidentiality of arbitration in third-party proceedings: the law remains uncertain

The confidentiality of arbitration proceedings has long been recognised, and indeed this confidentiality is often cited as one of the key advantages of arbitration over litigation in circumstances where parties are keen to keep details of their dispute private. However, there are cases in which confidential materials generated during the course of an arbitration can be used during litigation proceedings, resulting in a loss of confidentiality over those materials.

Confidentiality as an implied term

Duties of confidentiality are not addressed by the Arbitration Act 1996, with the Government deciding that this was an area for which a body of case law should be allowed to develop. Whilst some (but by no means all) institutional rules impose obligations of confidentiality over materials relating to the arbitration (including the content of the hearing and of any documents generated or disclosed in the proceedings), the general position under English law is that confidentiality obligations are an implied term of the arbitration agreement (see, for example, Hassneh Insurance Co v Mew and Ali Shipping Corporation v Shipyard Trogir). This approach has been criticised (see, for example, Emmott v Michael Wilson & Partners Ltd), for reasons including the fact that there may be different duties attaching to different categories of material generated in arbitration proceedings, and a “one-size-fits-all” implied term approach is too restrictive to account for such differences. However, to date, it has not been overturned.

The exceptions

As such, the nature and scope of confidentiality obligations relating to arbitration proceedings continue to suffer from uncertainty. It is clear that the duty of a party to arbitration proceedings to keep those proceedings confidential is not absolute. There are a number of recognised exceptions to the duty of confidentiality, including allowing disclosure where:

  • The parties agree.
  • It is ordered by the court.
  • It is reasonably necessary to protect a party’s legitimate interests.
  • It is in the interests of justice.

Use of arbitration materials in litigation

Where litigation is underway in the courts, a party may seek disclosure of documents generated in an arbitration. This is relevant where one of the parties to the litigation was not a party to the arbitration, and so was not within the “ring of confidentiality” that surrounds arbitration proceedings. The court will only order disclosure of such material where it is necessary for the fair disposal of the case (that is, where it is in the interests of justice), and then only after taking account of the confidentiality of the documents (see, for example, Dolling Baker v Merrett).

In other circumstances, a party may seek to rely on material generated during the course of an arbitration to support a claim in court. In such circumstances, if a party has a legitimate interest in using the material, the court will allow it. In Westwood Shipping Lines Inc and another v Universal Schiffahrtsgesellschaft MBH and another, the court held that disclosure was justifiable where it was reasonably necessary for the protection of the claimants’ legitimate interests. Indeed, in that case, the court also found that disclosure of the material was in the interests of justice, and that:

“…in circumstances where there is, at least on the face of the material before the court, an arguable case of unlawful actions, unlawful conduct, having taken place, that the court should not allow confidentiality of arbitration materials in any sense to stifle the ability to bring to light wrongdoing of one kind or another”.

Insofar as the parties to the arbitration are also parties to the litigation, given that the arbitral tribunal has the power to rule on issues such as the scope of the arbitration agreement (including the implied term of confidentiality within it), it is generally accepted that the arbitral tribunal, rather than the court, should be the authority to determine issues of confidentiality between the parties. However, where one of the parties to the litigation is not a party to the arbitration agreement, or in circumstances where a final award has been issued by the tribunal and the tribunal is thus functus officio, the question remains whether the party wishing to rely on the confidential material must seek the permission of the court to adduce it.

Webb v Lewis Silkin

Webb v Lewis Silkin LLP examines whether a party can bring an action that necessitates the disclosure of documents from an arbitration, or whether the permission of the arbitrator or court should be sought.

A dispute arose between a partner (SLW) and the firm of solicitors (S), who were represented by Lewis Silkin LLP (LS), which was referred to arbitration. An award was granted in December 2014. In June 2014, however, SLW issued separate proceedings against LS. This was because LS had produced a list of documents in the arbitration that contained emails from SLW’s work email account. SLW alleged that these emails were accessed without her permission, which breached her confidentiality, was a misuse of her private information, and breached the Data Protection Act. This claim was largely based on statements in emails made by LS, which indicated that LS would not review SLW’s emails until the position had been agreed, and confirmed that LS had not commenced a review of the emails. In response, LS brought an action to stay the proceedings until a ruling had been obtained from the arbitrator that the new proceedings would not breach the confidentiality principle. LS was not a party to the arbitration in this instance, but was considered to be within the “ring of confidentiality”, given that it represented one of the parties.

As discussed, it is widely recognised that there are exceptions to the confidentiality principle, although it is not yet fully established what the parameters of these exceptions are. Each set of facts must still be examined on a case-by-case basis. The judge in Webb (Mrs Justice Proudman) made direct reference to inconsistencies in previous decisions. She came to the conclusion that the circumstances in which it would be acceptable for a party to rely on confidential matters arising during an arbitration when bringing other proceedings would be:

“…where it is reasonably necessary to do so to protect his legitimate claims, such as to make claims against third parties.”

Mrs Justice Proudman found that, in this instance, SLW did not need to seek permission of the arbitrator before commencing proceedings because the arbitration was no longer ongoing, and because LS was not a party to the arbitration proceedings. The judge noted that SL may have wanted, however, to seek an order from the court, as SL was in the position of having to balance defending itself versus not going so far as to breach the confidentiality principle.

Webb highlights that the issue of confidentiality is still a developing area of law, and that each case will need to be considered on its particular set of facts and circumstances. Some of the issues that will likely inform whether confidential information can be disclosed are:

  • Whether the parties to the arbitration are also parties to the litigation.
  • The matters to which the confidential documents pertain.
  • Whether disclosure would be in the interests of justice.
  • Whether the party proposing to use the information has a legitimate interest to protect.
  • The stage of the arbitration proceedings.
Kirkland & Ellis Laura Evans Jonathan Newman

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