The English High Court clarifies the extent of the duty of confidentiality in arbitration

Background

1. A Corporation and B Corporation were parties to an arbitration which eventually settled.
2. Firm B’s London office represented B Corporation in the arbitration.
3. C Corporation and D Corporation commenced separate English arbitration proceedings.
4. Firm B’s Asia Office acted for C Corporation in the second arbitration while the first one continued.
5. A Corporation and D Corporation were companies in the same corporate group.

A Corporation relied on the implied duty of arbitral confidentiality to seek interim injunctive relief restraining Firm B from acting for C Corporation on the basis that Firm B held information produced by A Corporation during the first arbitration which it had shared or might share with C Corporation in the second arbitration.

Decision

The Court refused the application.

As a matter of English law, parties to an arbitration agreement are taken to have impliedly agreed to an obligation of confidentiality (albeit the precise source of the obligation is still a matter for debate). The Court assessed two questions on the scope of that obligation:

(i) What material does the obligation of arbitral confidentiality extend to?

The Court clarified that the obligation of arbitral confidentiality extends to:

1. the hearing(s) in the arbitration, including transcripts or notes;
2. documents disclosed by a party in the arbitration to other parties in the arbitration in the hands of those other parties;
3. documents generated or prepared for and then used or produced in the arbitration (including pleadings, witness statements and expert reports, written submissions and correspondence between the parties or their representatives relating to the arbitration);
4. the arbitral award; and
5. to the extent that the documents in 1 to 4 above are themselves a source of confidential information, information derived from those documents.

However, the Court clarified that a party’s own documents which came into existence independently of the arbitral process do not become subject to an obligation of confidentiality merely because that party discloses them or relies on them in the arbitration.

Additionally, the fact that a commercial dispute leads to an arbitration does not make the existence of the dispute and the events which give rise to it confidential. For instance, if a party contracts to buy goods which it later concludes are defective, the fact of the contract and the purchaser’s complaint are not confidential just because the parties have opted to arbitrate the dispute. However, while a party is not subject to a duty of confidentiality in respect of the events giving rise to a dispute, it is not entitled to “disseminate” the statement of claim or evidence filed in the arbitration detailing its complaint. It is not the information itself which benefits from confidentiality, but the fact and manner of its deployment in an arbitration because the duty of confidentiality is intended to protect the private nature of the process.

The Court also held that:

• there is a “sliding scale of arbitral confidentiality” in which the disclosure of a party’s own filings or evidence is inherently less intrusive than disclosure of material produced by another party or which draws on that material; and
• the obligation of confidentiality extends to so-called “derived” information, i.e., information obtained with the use of confidential information, albeit the "derived" information does not disclose or incorporate the confidential information itself.

Finally, the Court distinguished between information protected by the obligation of arbitral confidentiality and the experience lawyers acquire from conducting arbitrations. Not everything that a lawyer learns from acting in an arbitration is barred from being used, particularly for disputes in areas that inevitably involve a small group of specialist practitioners, e.g. maritime arbitration. Although the distinction between information and “experience” is not always easily discernible, the Judge referred to examples of “experience” which would not be protected including:

1. knowledge about the type of documents generally available in relation to particular issues;
2. how repeat litigators in the field structure their businesses or record-assembly and keeping; and
3. the litigation strategies of particular opponents and their approach to contested issues.

(ii) Exceptions to arbitral confidentiality

 The Court did not undertake a comprehensive assessment of all of the possible exceptions to arbitral confidentiality, but observed that exceptions arise where:

1. there is consent or an order of the Court (although the Court does not have general discretion to lift the obligation of confidentiality);
2. it is reasonably necessary for the protection of the legitimate interests of an arbitrating party;
3. dissemination (as opposed to “publication”) is required to advance a party’s case in the arbitration in which the obligation of confidentiality has arisen (e.g., by disclosing material to lawyers, factual witnesses and experts); and
4. to a more limited extent, the purpose is to elicit fact evidence from a third party who is believed to have similar complaints against the opposing party or to attack a witnesses’ credibility.

The Court found that solicitors who are instructed by parties to an arbitration owe a similar duty of confidentiality to both parties and can in principle be restrained from deploying material which is subject to arbitral confidentiality for a non-permitted purpose. However, the nature of the information disclosed between Firm B’s London and Asia offices, which included the identity of B Corporation’s party-nominated arbitrator, the issues and allegations, material potentially used in formulating early disclosure requests and the fact that the first arbitration had settled, was such that there was either no breach of arbitral confidentiality or it fell within one of the exceptions. The Court found that passing on a settlement offer made by A Corporation was a breach of arbitral confidentiality but did not cause any prejudice and was not therefore grounds for an order restraining Firm B’s Asia office from acting.

Key Takeaways

• Parties can refer to the facts that led to an arbitration, the fact of the arbitration itself and the outcome (however only if there is a legitimate reason to do so and without details of the outcome) but cannot disseminate material prepared for or produced within the arbitration or confidential information within it.
• Parties can refer to their own documents if they came into existence independently of the arbitration.
• Parties should be mindful of how they treat documents containing information “derived” from the opponent’s confidential information.
• Disclosure of material produced by the opponent or documents which draw upon that material carries with it more risks than disclosure of one’s own material.
• Lawyers are entitled to draw upon experience, but not information, acquired from conducting arbitrations and cannot therefore pass on information gleaned from one arbitration for deployment in another.