Confidentiality in arbitration serves as both a shield to protect sensitive information and a sword to promote candour among disputing parties. Further, as the
The Pitfalls in the Existing Regime
After the recommendation of the B.N. Srikrishna Committee to include a new provision in Part I of the Arbitration Act designed to safeguard the sanctity of confidentiality in arbitral proceedings, Section 42-A of the Arbitration Act was introduced through the 2019 Amendment. This section stipulates that arbitrators, arbitral institutions, and parties to the arbitration agreement must maintain confidentiality throughout arbitral proceedings, except for the disclosure of the award when necessary for its implementation and enforcement. However, this provision falls short of fully implementing a mechanism to protect confidentiality for the reasons elucidated below:
Firstly, Section 42-A only imposes the obligation to maintain confidentiality in arbitral proceedings upon "the arbitrator, the arbitral institution and the parties to the arbitration agreement". However, parties often refer disputes to arbitration due to their complex nature. This requires involvement of non-signatories like expert witnesses for comprehensive adjudication of disputes. While such parties may not be actively involved in arbitrations, they are nonetheless part of the proceedings. Further, as per the
Secondly, Section 42-A only exempts the parties from the obligation of confidentiality in cases where "disclosure is necessary for the purpose of implementation and enforcement of award". However, parties often seek judicial intervention for interim relief under Section 9 of the Arbitration Act when the relief which could be granted by the arbitral tribunal under Section 17 of the Arbitration Act is deemed to be inefficacious. The provision does not address such situations or provide exception for the same.
Further, while confidentiality is essential for fostering candid discussions and protecting sensitive commercial information, there are instances where the public interest demands transparency. Therefore, confidentiality in arbitral proceedings cannot be absolute, and exceptions need to be codified to discard the obligation in cases where there arises a conflict between transparency and confidentiality. The exception of transparency to maintaining confidentiality has also been duly recognized by Foreign Courts in a catena of decisions[1].
Thirdly, the absence of a mechanism to enforce confidentiality obligations and the recourse available to the arbitral tribunal in cases of non-conformity with this provision is perhaps what renders this provision toothless. In theory, it could be argued that an award passed in a proceeding where the obligation to maintain confidentiality has been breached would be against the public policy of
Lastly, while the Arbitration Act 1996 recognizes the importance of confidentiality in arbitration, it lacks detailed provisions on privacy. The absence of explicit statutory guidelines leaves room for interpretation, leading to uncertainty and potential disputes over the scope of confidential information.
Suggested Remedies
Binding Non-Signatories
With regards to the extension of the confidentiality obligations to non-signatories, the authors believe that the
Necessary Exceptions
From the issues outlined above, it is evident that Section 42-A of the Arbitration Act does not account for the many situations where confidentiality obligations may need to be discarded. Hence, the authors propose the following exceptions:
Firstly, to address situations where parties seek judicial relief at an interim stage, the authors believe that the exceptions of disclosure necessary for protecting or pursuing a legal right or interest of the party can be borrowed from Section 18 of the Arbitration Act of
Secondly, where parties still want to maintain confidentiality while seeking interim relief, Section 22 and Section 23 of the Singapore International Arbitration Act ("
Thirdly, to further make the provision more robust with regard to exceptions to the confidentiality obligations, the authors also suggest that the exception of the 'disclosure being made with the consent of the parties, to the parties' advisor, for the protection of the legitimate interest of the third party, and by order of the court' be borrowed from Section 14B of the New Zealand Arbitration Act of 1996 to ensure party autonomy is protected and there is no conflict between the two cornerstones of arbitration.
Lastly, the exception of necessary disclosure in the interest of public or justice is necessary to align the statute and the jurisprudence on the issue.
Consequences of Breach
For the provision of confidentiality to be effective, it is necessary that it provides for consequences in case a party is found to be in breach of obligation. The consequences must depend on the degree of the breach and may range from grant of damages to invalidating the respective order/proceedings during which such breach takes place.
Conclusion
In conclusion, addressing the shortcomings in
Footnotes
1. AAY v. AZV [2012] SGHC 116;
2. No. 01 Civ. 5449(RO), 2001 WL 863566 (S.D.N.Y.
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