The Confidentiality of Arbitration Proceedings

This article discusses the nature and extent of the role of confidentiality in arbitration proceedings.

As opposed to litigation, arbitration proceedings have always been considered to be private in nature. Indeed, this has always been touted as one of its advantages. However, does the private nature of arbitration translate into an obligation of confidentiality that binds the parties to the arbitration and the arbitrator? The answer to this question has a significant impact, not only on whether documents used in one arbitration can later be disclosed in subsequent proceedings whether arbitral or litigious in nature, but also on the attractiveness of arbitration to potential disputants.

Until lately there has been no Singapore decision on this issue, and Australian and English courts have taken opposite views on the matter. Briefly, in England, the English High Court held in Dolling-Baker v Merrett [1991] 2 All ER 890 that parties to an arbitration proceeding were under an implied obligation to keep the proceedings and documents arising therefrom confidential, while in Australia, the Australian High Court in Esso Australia Resources Ltd v Plowman [1995] 128 ALR 391 came to the opposite conclusion. Recently, the Singapore High Court settled the position for Singapore in Myanma Yaung Chi Oo Co Ltd v Win Win Nu [2003] SGHC 124 where it chose to follow the English rather than the Australian approach.

It is therefore timely to consider this issue. Given the High Court’s decision, this article will not revisit the question of which constitutes the better approach. Instead, it will first analyze the English cases on this issue and look at how the recent Singapore decision applied the principles from those cases. Given that the English cases do not themselves set out a clear approach, it is hoped that this analysis will provide useful insights into how Singapore can adapt and adopt the English position. Lastly, in an attempt to do this, the article will try to pull together various principles that can be applied from the English cases in the light of the Singapore decision.

Analysis of the English Approach

Establishment of the principle: Dolling-Baker v Merrett

The traditional starting point in considering the English position is the English Court of Appeal’s decision of Dolling-Baker v Merrett. In that case, the plaintiff had applied for specific discovery and production and inspection of various documents in the defendants’ possession. Specifically, it wanted certain witness statements, transcripts of witness testimony and the arbitral award that arose from an earlier arbitration that the defendants had been involved in. The court held that parties to an arbitration were under an implied obligation not to use or disclose, without the consent of the other party or with the leave of court, all such documents. It further held that this implied obligation arose from the private nature of the arbitration.

The court then went on to consider how this implied obligation impacted on the discovery process. It held that in deciding whether to grant discovery of the requested documents, the court must have regard to this implied obligation. If it was satisfied that despite the implied obligation, disclosure and inspection were necessary for the fair disposal of the action, that consideration had to prevail.

It should be highlighted that here the court applied a two-stage process. First was the preliminary question of whether there was in fact some form of obligation on arbitral parties not to disclose, for want of a better term, arbitral documents. It found that there was indeed such an obligation. Next, the court then applied the usual test for determining questions of discovery of specific documents: whether it was necessary for the fair disposal of the action. A factor to be weighed in the balance in this test was the implied obligation.

Hassneh Insurance Co of Israel & Ors v Steuart J Mew

The next case in line for consideration is Hassneh Insurance Co of Israel & Ors v Steuart J Mew [1993] 2 Lloyd’s Rep 243, a decision of the English High Court. Again, what was at issue was the disclosure of transcripts, witness statements, pleadings and other documents arising in an earlier arbitration, as well as the arbitral award. The court essentially found that there was a duty of confidence attaching to all such documents. Its reasoning is particularly instructive.

With respect to documents created for the purpose of the hearing such as transcripts or pleadings, the court relied on the private nature of arbitration. It noted that as a matter of custom, arbitrations had been treated as private affairs. In order to effectively preserve this privacy, documents produced for the arbitration had to be considered private as well. This obligation of privacy arose by way of a contractual term implied through custom or business efficacy.

With respect to documents which are disclosed as produced by one party to another through the process of discovery, the court noted that in litigation, documents produced in discovery were subject to an implied ‘undertaking’ by each party not to use any such document for any purpose, save in relation to the litigation in which the document was disclosed. Such an obligation did not arise from any pre-existing contract but was regardless of this. It would therefore be applied to documents produced in discovery for arbitration proceedings as well.

With respect to the arbitral award, the court noted that an arbitral award had two critical characteristics: it was an identification of the parties’ respective rights and obligations and it was also potentially a public document for the purposes of supervision by the courts or enforcement in them. As any duty of confidence that attached to an arbitral award (and the reasons) could only arise from implication through custom or business efficacy, it could not be that a reasonable bystander would attach to the award a duty of confidence which did not take these characteristics into account.

The court then examined the duty of secrecy owed by a banker to his customer and the exceptions to that duty and noted that a similar qualification must be implied as a matter of business efficacy in the duty of confidence arising under an agreement to arbitrate. It therefore held, that, if it was reasonably necessary for the establishment or protection of an arbitrating party’s legal rights vis-à-vis a third party that the award should be disclosed to that third party in order to found a defence or as the basis for a cause of action, to so disclose it would not be a breach of the duty of confidence. It further held that similarly, it was an exception to the duty of confidence that one arbitrating party might bring the award and reasons into court for the purpose of invoking the supervisory jurisdiction of the court over arbitration awards and for the purpose of enforcement of the award itself.

The court then noted that whether the court would order disclosure of a document would depend on whether it satisfied the test for disclosure under the rules of discovery, namely, that the document had to be relevant and that disclosure was necessary for disposing fairly of the cause or matter or for saving costs. The court further noted that where a document was confidential, it was for the courts to resolve the conflicting interests on the one hand of protecting the confidential status of the documents and on the other of facilitating production of documents in compliance with the discovery obligation and for the purpose of protecting the rights of the party in possession.

The following observations of this decision should be highlighted:

Insurance Co v Lloyd’s Syndicate

In Insurance Co v Lloyd’s Syndicate [1995] 1 Lloyd’s Rep 272, the only document of which disclosure was sought was the arbitral award. The parties to the arbitration were the reassured and the leading reinsurance underwriter, who had acted together with a syndicate of five other reinsurers. The reinsurers had all denied liability for certain losses under the contract of reinsurance, and the reassured arbitrated its dispute against the first lead reinsurer first. The arbitrator had found in favour of the reassured who then sought to disclose the award to the remaining five reinsurers on the basis that, to do so would be helpful in its negotiations with them to persuade them to accept liability. The lead reinsurer took out an application to injunct the reassured from making such a disclosure. The court accepted the test for confidentiality of an arbitral award established in Hassneh Insurance Co of Israel v Mew: that parties to an arbitration were obliged to keep an arbitral award confidential unless it was reasonably necessary for the establishment or protection of an arbitrating party’s legal rights vis-à-vis a third party. The court held that it was not ‘reasonably necessary’ where disclosure was required because it was ‘commercially helpful’. In this case, the disclosure of the award would not establish the legal position against the other reinsurers; at most, it was persuasive.

It was then argued that, notwithstanding the confidentiality of the award, the court should be minded not to grant the injunction against the reassured as it was not established that disclosure would cause any damage to the lead reinsurer. The court held that the appropriate test in considering whether to grant such an injunction was not whether damage would be suffered if there was disclosure, instead it was whether some particular hardship would be caused by enforcement of the covenant of confidentiality that to enforce it would be unconscionable. In this case, the court held that the fact that the reassured would have to proceed separately against the other reinsurers was not sufficient to amount to an unconscionable hardship.

It is appropriate to highlight here that in deciding the question of whether the document, in this case the award, should be disclosed or not, still involved a two-stage process: the first, determining whether the document was protected by confidentiality; the second, whether there was any reason not to enforce the obligation of confidentiality.

London and Leeds Estates Ltd v Paribas Ltd (No 2)

London and Leeds Estates Ltd v Paribas Ltd (No 2) [1995] 2 EG 134, [1995] 1 EGLR 102 concerned an application for a subpoena to obtain certain expert witness proofs used in previous arbitrations. The expert witness in the previous arbitrations was also a witness in a current arbitration and one of the arbitral parties in the current arbitration wanted the earlier proofs to challenge the expert on various statements made in the current arbitration that were inconsistent with those made by him in the previous arbitrations. The parties to the previous arbitrations were not the same as those in the current arbitration. Although the parties to the previous arbitration had indicated a willingness to allow the expert witness proofs to be used in the current arbitration, the expert was himself not willing. The issue was therefore whether the parties in the previous arbitration owed a duty of confidentiality to the expert witness as to the evidence that he had given in the previous arbitration such that any disclosure of his proofs required his consent.

The court accepted that parties to an arbitration owed each other a duty of confidentiality. It also accepted that an expert witness owed a duty to the party instructing him to keep confidential the evidence which he gave in a previous arbitration. The court then stated that given the private nature of arbitration, an expert witness owed the other party a similar duty of confidentiality as well. Furthermore, the parties owed the witness a duty of confidentiality which was implicit from the private nature of arbitration. However, relying on Hassneh Insurance Co of Israel v Mew, this obligation was subject to the fact that one of the parties to the arbitration may either be compelled, or in its own interests may require, to deploy in other context proofs or other material deriving from the arbitration.

Accepting then that the witness had an interest in protecting the confidentiality of the proofs provided in the previous arbitration, the court then considered whether, notwithstanding the confidentiality of the document, the subpoena should be upheld. In this regard, it held that if a witness were proved to have expressed himself in a materially different sense on a prior occasion, that would be a factor that should be brought out in the interests of individual litigants and in the public interest. Accordingly, the court upheld the subpoena for production of the expert witness proofs.

It can be seen in this case that the obligation of confidentiality attaching to arbitral documents was extended far beyond that first set out in the three earlier cases. Whereas the obligation of confidentiality in those cases were expressed as being owed as between the parties to the arbitration by reason of an implied term in the arbitral agreement, the private nature of arbitration was being used here to extend obligations of confidentiality beyond the scope of privity. Hence, not only was an arbitral party and a witness instructed by it considered to owe obligations of confidentiality to each other (presumably on the basis of an implied term of confidentiality), but the witness and the counterparty in the arbitration also owed each other reciprocal duties of confidence, notwithstanding the lack of any privity between them.

However, it is important to note that the two-stage test was still applied: namely, determining whether there was a duty of confidence owed in the first place (subject to any limitations that might be imposed on this duty); and then determining whether this duty should be upheld in light of the separate principles applicable to an application for production of a document.

High-water mark: Ali Shipping Corp v Shipyard Trogir

Ali Shipping Corp v Shipyard Trogir [1998] 2 All ER 136, [1999] 1 WLR 314, [1998] 1 Lloyd’s Rep 711 can aptly be considered the high-water mark in England for the doctrine of confidentiality of arbitration proceedings. The case, a decision of the English Court of Appeal, involved an application for an injunction restraining the defendant from disclosing certain arbitral documents from an earlier arbitration, specifically, the award, the opening submissions and the transcripts of evidence. The defendant wished to use those documents in subsequent arbitration proceedings which raised related defences against companies which were related to the claimant in the earlier arbitration.

The court expressly held that the term of confidentiality was implied, not on the basis of business efficacy, but was implied by the law ‘as a necessary incident of a definable category of contractual relationship’. The effect of this was that, instead of seeking to adapt the general rule to fit the specific circumstances of each case by determining what each party would have intended at the time of entering into the agreement, the law would formulate ‘exceptions of broad application to be applied in individual cases’. In this regard, the court noted:

...English law has recognised the following exceptions to the broad rule of confidentiality: (i) consent, ie where disclosure is made with the express or implied consent of the party who originally produced the material; (ii) order of the court, an obvious example of which is an order for disclosure of documents generated by an arbitration for the purposes of a later court action; (iii) leave of the court. It is the practical scope of this exception, ie the grounds on which such leave will be granted, which gives rise to difficulty. However, on the analogy of the implied obligation of secrecy between banker and customer, leave will be given in respect of (iv) disclosure when, and to the extent to which, it is reasonably necessary for the protection of the legitimate interests of an arbitrating party. In this context, that means 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... Finally, in at least one decision, the English court has tentatively recognised a further exception (v) where the ‘public interest’ requires disclosure...

Significantly, the court also observed:

Unless the stance of the objecting party can be shown to be fraudulent or in the nature of an abuse of process, then the court should be prepared to grant injunctive relief, subject only to proof of a recognised exception to the rule of confidentiality.

In this case, the applicant had wanted to rely on the various arbitral documents to establish a defence of res judicata or issue estoppel. It also wanted to rely on the earlier testimony of witnesses at the earlier arbitration as these witnesses would be giving testimony as to the same facts in the subsequent arbitration. With respect to the defence of res judicata or issue estoppel, the court rejected on the facts that there was any viable defence along those lines. Accordingly, since there was no such viable defence, there was no reasonable necessity to disclose the documents which would only have been relevant if the defence had been viable. As to the reliance on the earlier testimony of witnesses, the court held that convenience and good sense were not in themselves sufficient to satisfy the test of ‘reasonable necessity’. The court also noted that those materials might satisfy the test if it transpired that those witnesses gave inconsistent testimony at the subsequent arbitration, but until and unless that happened, it was not the time to allow disclosure of their testimony.

While the eventual result and conclusions reached by the court could probably have been arrived at if the same tests as set out in the earlier cases had been adopted, the court essentially raised the bar as to the confidentiality of arbitral documents:

A retreat: Associated Electric and Gas Insurance Services Ltd v European Reinsurance Company of Zurich

If Ali Shipping Corp v Shipyard Trogir represents the zenith of the duty of confidence, then Associated Electric and Gas Insurance Services Ltd v European Reinsurance Company of Zurich [2003] UKPC 11 marks its retreat.

The case, a decision of the Privy Council, involved an application to disclose an arbitral award for the purposes of establishing an issue estoppel in a subsequent arbitration. This time, however, the parties had drawn up a detailed confidentiality clause as part of the arbitration procedures which provided for the confidentiality of the arbitration proceedings and all documents, including the arbitral result. The task before the Privy Council was to construe the confidentiality clause in order to determine whether disclosure of the arbitral award was indeed prohibited.

The Privy Council held that the confidentiality clause could not be construed so as to prevent a party from legitimately relying on the legal rights conferred on it by the arbitral award. To seek to disclose an arbitral award for the purposes of establishing an issue estoppel was a species of enforcement of the rights given by the award. Accordingly, the use of the arbitral award in this manner was not covered by the confidentiality clause.

Unsurprisingly, Ali Shipping Corp v Shipyard Trogir was much relied upon in the arguments before the Privy Council which had this to say about the case:

However Potter LJ, who delivered the leading judgment, having followed Dolling-Baker v Merrett (sup) affirming the privacy of arbitration proceedings, went on to characterise a duty of confidentiality as an implied term (p 326) and then to formulate exceptions to which it would be subject (pp 326-7). Their Lordships have reservations about the desirability or merit of adopting this approach. It runs the risk of failing to distinguish between different types of confidentiality which attach to different types of document or to documents which have been obtained in different ways and elides privacy and confidentiality. Commercial arbitrations are essentially private proceedings and unlike litigation in public courts do not place anything in the public domain. This may mean that the implied restrictions on the use of material obtained in arbitration proceedings may have a greater impact than those applying in litigation. But when it comes to the award, the same logic cannot be applied. An award may have to be referred to for accounting purposes or for the purpose of legal proceedings (as Aegis referred to it for the purposes of the present injunction proceedings) or for the purposes of enforcing the rights which the award confers (as European Re seek to do in the Rowe arbitration). Generalisations and the formulation of detailed implied terms are not appropriate. [emphasis added]

At a minimum, with respect to arbitral awards, it is at least reasonably clear that it is unlikely that Ali Shipping Corp v Shipyard Trogir remains good law. Unfortunately, as the Privy Council did not go further than doubting the approach adopted by Ali Shipping Corp v Shipyard Trogir, it remains to be seen whether the English courts will continue the approach evinced in that case, or whether the words of the Privy Council will be taken to heart.

Position in Singapore

In Myanma Yaung Chi Oo Co Ltd v Win Win Nu [2003] SGHC 124, the first defendant entered into a joint venture with Myanmar Foodstuff Industries (‘MFI’), an organisation owned by the government of Myanmar, to set up the plaintiff joint venture company. Subsequently, the plaintiff was wound up. The second defendant commenced arbitration proceedings against the government of Myanmar. Then the plaintiff and MFI sued the second defendant in Myanmar. The plaintiff also sued the defendants in Singapore.

The defendants applied to strike out the action or in the alternative stay the action pending the arbitration. In their application, the first defendant deposed affidavits in which she referred to the arbitration proceedings and exhibited documents from those proceedings. The defendant contended that disclosure was necessary to establish that the Singapore action was vexatious, oppressive and an abuse of the process of court as the same allegations of wrongdoing had been made against the first defendant in two pending actions before the courts of Myanmar, as well as the arbitration proceedings.

The plaintiff objected to the disclosures and applied to strike them out. The assistant registrar allowed the striking out. The defendants appealed. On appeal, the issue was narrowed to whether parties in arbitration proceedings have a duty to maintain confidentiality of the documents and whether leave of court was needed to disclose such documents and if so, whether it could be given retrospectively. It should be noted that at the time of the appeal, the arbitration proceedings had been terminated as the tribunal had decided that it had no jurisdiction to hear the case.

On the issue of whether there was a duty of confidentiality, the Singapore High Court adopted the English position, expressly rejecting the Australian approach, upholding the confidentiality of arbitral documents. Unfortunately, Associated Electric and Gas Insurance Services Ltd v European Reinsurance Company of Zurich was not cited to the High Court so it is unclear whether the views of the Privy Council would have swung the court’s views the other way. However, it is respectfully suggested that the court’s preference was likely correct. Further support for this can be found tangentially in ss 22 and 23 of the International Arbitration Act (Cap 143A) and ss 56 and 57 of the Arbitration Act (Cap 10). These sections provide that proceedings under those Acts can, on the application of any party, be made otherwise than in open court. Further, that where proceedings are made otherwise than in open court, the court may give directions as to whether any and, if so, what information relating to the proceedings may be published. These sections implicitly recognise the private nature of arbitration proceedings and, arguably, their confidential nature as well, and seek to preserve their privacy or confidentiality.

It is significant to note that, in deciding in favour of a duty of confidentiality, the court adopted the approach of an implied term arising from parties’ expectations, stating:

Parties who opt for arbitration rather than litigation are likely to be aware of and be influenced by the fact that the former are private hearings while the latter are open hearings. Rather than to say that there is nothing inherently confidential in the arbitration process, it is more in keeping with the parties’ expectations to take the position that the proceedings are confidential, and that disclosures can be made in the accepted circumstances.

As regards the question as to whether leave of court is required for disclosure, the court preferred to hold that:

The reasonable necessity exception is grounded on the implied agreement that when it is reasonably necessary to disclose the duty of confidentiality is lifted. If the duty does not apply leave of court is not required for disclosure.

Without expressly so stating, the court seems to have rejected the broader approach in Ali Shipping Corp v Shipyard Trogir.

The court then held that as the arbitration proceedings had been terminated, there was no reasonable necessity to refer to the arbitral documents; any oppression arising from the arbitration proceedings had been brought to an end with its cessation. Significantly, however, the court also stated that the assistant registrar should have allowed the disclosure of documents as at that stage of proceedings, disclosure would have been reasonably necessary (the arbitration proceedings still being alive at that stage).

Finally, as regards the process of disclosure, the court noted that if one party decided that disclosure was reasonably necessary and made disclosure, if the other party disputed this, it could apply to expunge the disclosure and the court would then determine if it was reasonably necessary and make an order to expunge if not. Notably, the court’s approach seems to endorse a single stage approach, all issues seemingly bound up in the singular question of ‘reasonable necessity’.

Drawing Together Applicable Principles

Drawing from Myanma Yaung Chi Oo Co Ltd v Win Win Nu and the English cases, the following tentative propositions can be assayed:

Lim Wee Teck
Rajah & Tann
E-mail: wee.teck.lim@sg.rajahandtann.com