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Presumption of confidentiality in international commercial arbitration

In a recent article, Constantine Partasides QC and Simon Maynard argued that the presumption of confidentiality in the English Arbitration Act 1996 (AA 1996) should be reversed. According to the authors, this would not prevent parties who wish to opt for confidentiality from doing so, but would hopefully address the concerns which the public at large has about arbitration (in particular, investment arbitration at the time of writing). Frankly, I do not believe that this would be the case.

I have to confess that I do believe that confidentiality in a commercial setting should remain acceptable in 10, 20 or 30 years’ time. I do, however, agree with the authors’ concern about lack of information being replaced by an abundance of misinformation when it comes to investment treaty or state-to-state cases. Obviously, those disputes attract the attention of the wider public, and rightly so. At the end of the day, the state risks taxpayers’ money; it should therefore be transparent about the way it tries to protect taxpayers. This is certainly not the case for the vast majority of commercial cases. In reality, almost all commercial cases are of no interest at all to the wider public. Some might be of interest to the relevant industry. Many might be of interest to the parties’ partners and competitors. Almost certainly, this interest is stoked by social and mass media. However, media interest may be somewhat artificial; in reality, information may only be reported if case details leak and there is nothing better to report or discuss. So why feed online trolls by making every boring commercial case public?

The authors also suggest that England remains one of the few jurisdictions where the confidentiality of arbitration is presumed as a matter of law. The authors’ cite Russia as among the many jurisdictions where this is not the case, but I think that this might not be entirely correct.

I have to confess that, before I read this, it never occurred to me that we had no provision on confidentiality in our arbitration legislation. I did go and check and this appeared to be somewhat true. Indeed, the Russian Law on International Arbitration (which is based on the UNCITRAL Model Law) does not mention confidentiality at all. At the same time, the former law on domestic arbitration mentioned confidentiality amongst the principles of arbitration. The new law on domestic arbitration (which entered into force on 1 September 2016) specifically provides for a confidentiality obligation. Accordingly, there is no presumption of confidentiality in Russian international arbitration. However, there is such a presumption in Russian domestic arbitration. As a matter of practice, it does not really matter (and this hopefully explains my ignorance about the lack of a confidentiality provision in Russian international arbitration law).

Confidentiality of arbitration is assumed in Russia. It is assumed by the parties, their counsel, the tribunal and the arbitral institution. Additionally, it is provided for in the arbitration rules of the leading Russian arbitral institutions (both international and domestic). By adhering to the relevant arbitration rules, the parties agree to the confidentiality of their arbitrations. Surprisingly, this undertaking is usually complied with and any reports on pending or completed commercial cases are extremely rare.

Starting from 2014, there was a great number of cases where the courts sought to limit the arbitrability of disputes relating to the activity of the authorities and state owned companies (starting from lease of the forest land plots by municipal authorities all the way to subcontracts with contractors who win public procurement tenders or a tenders conducted by state-owned companies). Recently, the Supreme Court referred a case on this issue to the Constitutional Court. One of the courts’ main arguments is that arbitral proceedings are confidential. They say that this is incompatible with any activity relating to budget expenditure (including when it comes to the money of state-owned companies). Interestingly, there is no attempt to say that arbitrability of such matters would not be limited in international commercial arbitration cases, where confidentiality is not presumed as a matter of Russian law.

Other arguments in favour of more transparency in commercial arbitration are well known. Proponents usually argue that transparency would allow for the publication of awards, which would enhance predictability of outcomes of commercial disputes going to arbitration. In the English law context, this is also often suggested as the way to address the concern of the lack of development of the English common law (as noted by Lord Chief Justice Thomas in 2016).

I may be exaggerating here, but I do not think that English lawyers would be particularly happy about the way English law is applied by international arbitrators (particularly in mixed or civil law prevailing tribunals). Most certainly, they would not be excited about foreign lawyers seeking to develop English common law through their awards.

In terms of enhancing predictability, Russia may again be a good example. The International Commercial Arbitration Court at the Russian Chamber of Commerce and Industry (ICAC) regularly publishes excerpts from its cases, but great care is taken to get them anonymised to the greatest extent possible. You would never be able to guess who the parties or arbitrators were in the reported cases. Nevertheless, in practice, the parties quite often cite previous decisions of the ICAC tribunals in their pleadings, and the arbitrators sometimes do the same in the award. While predictability is still an issue, where previous awards do not constitute precedents, even knowing that tribunals sitting under the same rules have already decided similar question one way or another is of great help. As the ICAC’s example shows, this does not require that the notion of confidentiality is abandoned. The only thing which is needed to allow the institutions to publish the excerpts from the awards is to introduce a provision allowing them to do so, unless the parties specifically agree to the contrary.

What would change if the presumption of confidentiality under the AA 1996 is reversed? The change could be so radical as to require the parties specifically to agree on confidentiality in their arbitration agreements. In this case, less sophisticated parties, in the absence of a specific agreement to the contrary, will likely be taken by surprise when they find out that their arbitration is no longer confidential. If, however, the confidentiality of arbitration could be reinstated by virtue of selecting arbitration rules which provide for confidentiality, the reversal of the AA 1996’s presumption would not change anything.

Norton Rose Fulbright Andrey Panov

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