Scott D. Marrs and Joseph W. Hance III 2014-01-23 09:52:43
What you thought you knew could hurt you. Confidentiality applies to all arbitrations—right? Wrong. Most attorneys and clients assume that arbitration, by its very nature, is confidential. However, although arbitration provides greater privacy and confidentiality than litigation, not all arbitration rules require confidentiality. Therefore, it is important to understand the distinctions made in the rules of the applicable arbitration forum, as well as how to obtain confidentiality when those rules don’t provide for it. INTRODUCTION This article provides practical guidance on how domestic and international arbitration forums and various countries address confidentiality in arbitration proceedings. We will discuss the three largest arbitration forums in the United States: (1) the American Arbitration Association, (2) the Judicial Arbitration and Mediation Services, and (3) the International Institute for Conflict Prevention & Resolution. On the international end, we will survey the three largest international arbitration forums: (1) the International Chamber of Commerce, (2) the London Court of International Arbitration, and (3) the United Nations Commission on International Trade Law. Finally, we will discuss how various countries treat confidentiality in arbitration. This analysis will enable counsel to determine whether a particular forum’s rules provide for confidentiality, and, if they do not, how to obtain it if desired. The analysis is organized in chart fashion for easy reference by advocate and client alike. We also offer a number of tips, sample provisions, and practice notes along the way. The Myth of Confidentiality. Most arbitration forums do provide that arbitration proceedings shall be conducted in private. However, there is a distinction between privacy of the proceedings and confidentiality of filings, discovery, evidence submitted, and the award. Although most arbitration proceedings (such as hearings) are not open to the public and press, and third parties may not participate, this degree of privacy does not mean that the arbitration as a whole is confidential. Parties may specifically agree to confidentiality, but absent such an agreement, the forum’s applicable rules must be consulted. While most arbitration forum rules do provide that the forum and the arbitrator must hold such proceedings as a whole in confidence, most do not place the duty of confidentiality on the parties themselves. DOMESTIC ARBITRATION State Protections. Recognizing the conflict between the public perception of confidentiality and the reality of various forums’ rules, some states have enacted statutes or rules governing confidentiality in arbitral forums. For example, at least four states have general statutory protections for arbitration confidentiality: Arkansas [Ark. Code Ann. § 16-7-206 (1999)]; California [Cal. Evid. Code § 703.5]; Missouri [Mo. Ann. Stat. § 435.014]; and Texas [Tex. Civ. Prac. & Rem. Code Ann. § 154.073]. Other states, such as Florida [Fla. B. R. 14-7.1(b)], Georgia [Ga. R. & Regs. St. B. R. 6-701], and New York [N.Y. Standards and Administrative Policies, Rules of the Chief Administrator of the Courts §137.10] have confidentiality statutes for mediations and arbitrations concerning attorneys’ fees disputes. Analysis of the Three Largest Arbitration Forums in the United States. The three largest arbitration forums in the United States—AAA, JAMS, and CPR— have differing rules on privacy and confidentiality. The following chart emphasizes these differences. INTERNATIONAL ARBITRATION Analysis of the Largest International Arbitration Forums. The largest arbitration forums outside the United States are the International Chamber of Commerce, the London Court of International Arbitration, and the United Nations Commission on International Trade Law. The chart below analyzes the differing rules on privacy and confidentiality for the ICC, LCIA, and UNCITRAL. ARBITRATION IN VARIOUS COUNTRIES Long on History, Short on Uniformity. The use of arbitration dates back to a method of resolving disputes among the ancient Greeks recorded by Plato. Arbitration in the United States took place long before its birth as a nation— almost 300 years before the passage of “modern” arbitration statutes in the 1920s.3 Despite this rich historical backdrop, there is a noticeable lack of uniformity in how various countries—and even some states—address the confidentiality issue. Some countries impose an implied duty of confidentiality to all matters related to arbitration. Some apply a limited rule, while others have no such rule. This lack of uniformity creates growing uncertainty in our global economy. Multinational governmental bodies and international arbitration forums should propose and support a uniform confidentiality rule to create more certainty in cross-border transactions. The chart on the following page summarizes the rules of confidentiality in countries with the most active arbitration forums. CONCLUSION If Confidentiality Is Desired, Always Separately Provide for It. Although arbitration proceedings are generally private, they are not necessarily confidential, unless the parties specifically contract for confidentiality or the applicable forum’s rules (or a state statute/rule or country rule) dictate confidentiality. If confidentiality is desired, always include a separate confidentiality sentence in your arbitration provision—never simply incorporate the forum’s rules. Consider inserting the following sample sentence for confidentiality: “The parties shall maintain the confidential nature of the arbitration proceeding and the award, including the hearing, except as may be necessary to prepare for or conduct the arbitration hearing on the merits, or as may be necessary in connection with a court application for a preliminary remedy, a judicial challenge to an award or its enforcement, or unless otherwise required by law or judicial decision.” NOTES 1. The AAA was formed in 1926 by a merger of three groups one year after Calvin Coolidge signed the Federal Arbitration Act (the AAA’s international division, the International Centre for Dispute Resolution was established in 1996). JAMS was formed by the late Orange County Judge H. Warren Knight in 1979. CPR, also formed in 1979, was created by a coalition of leading general counsels. 2. The International Chamber of Commerce, based in Paris, was established in 1923. The London Court of International Arbitration was originally created as the City of London Chamber of Arbitration in 1891 (after passage of the English Arbitration Act in 1889), and was renamed the LCIA in 1903. The United Nations Commission on International Trade Law was established by the General Assembly in 1966. As of 2013, it had 60 member countries. 3. “Arbitration in New Netherlands in the 17th century ... was frequent, swift, and relatively simple compared to the English common law.” An Exploration of the Impact of Modern Arbitration Statutes on the Development of Arbitration in the United States, Benson, Journal of Law, Economics, & Organization, Vol. 11, No. 2, (Oct., 1995), pp. 479-501, Oxford University Press Stable. Merchants established arbitration arrangements in the American colonies, and the New York Chamber of Commerce made provisions for arbitration at its first meeting on April 5, 1768 (during the British occupation of New York, all civil disputes were referred to the chamber’s arbitration committee by the British occupation forces). The Supreme Court addressed arbitration in 1804, when it indicated a willingness to overturn an arbitration decision due to procedural matters even when no evidence of fraud existed [Maybin v. Coulon, 4 U.S. 298 (1804)], and the New York Stock Exchange formally provided for arbitration in its 1817 constitution. Id. Modern arbitration arose from the enactment of arbitration statutes by New York (1920), New Jersey (1923), Oregon (1925), Massachusetts (1925), the federal government (passage of the FAA in 1925), Pennsylvania (1927), and California (1927). These statutes dictated that courts that were previously hostile to arbitration honor contracts to arbitrate disputes. These developments spurred the growth of the private ADR business, such as the AAA, which was created in 1926, the year following passage of the 1925 Federal Arbitration Act. SCOTT D. MARRS is a partner in Beirne, Maynard & Parsons and an arbitrator with the American Arbitration Association, the International Chamber of Commerce, the Institute for Conflict Prevention & Resolution, and the London Court of International Arbitration. He has more than 20 years of domestic and international experience in disputes, trials, and arbitrations involving energy, intellectual property, commercial, and product liability issues. He can be reached at firstname.lastname@example.org. JOSEPH W. HANCE III is an associate with Beirne, Maynard & Parsons and is involved in a wide variety of civil litigation matters at both the trial and appellate levels. His areas of practice include arbitration, bankruptcy, construction, employment, and energy. He can be reached at email@example.com. © 2014 Beirne, Maynard & Parsons, L.L.P. All Rights Reserved. A Comparison of How Various Countries Address Arbitration Confidentiality Australia Australia considers arbitration nonconfidential. The High Court of Australia held that confidentiality, unlike privacy, is not “an essential attribute” of commercial arbitration. See Esso Australia Res. Ltd. v. Plowman, 128 A.L.R 391, 183 C.L.R. 10 (Austl. 1995). Dubai Dubai (home to the Dubai International Arbitration Centre and the Dubai International Finance Centre) requires all information relating to arbitration proceedings be kept confidential, except when disclosure is required by order of the DIFIC Court. England England (home of the LCIA) does not have legislation governing confidentiality (the Arbitration Act of 1996 does not address it) but does have case precedent indicating that arbitration proceedings are confidential (unless agreed otherwise). In Ali Shipping Corp. v. Shipyard Trogir, 11 2 All E.R., 1 Lloyd’s Rep. 643 (Eng. Ct. App. 1998), the court held that an obligation of confidentiality is implied in every arbitration agreement as “an essential corollary of the privacy of arbitration proceedings.” This obligation extends to the award and to all “pleadings, written submissions, and the proofs of witnesses, as well as transcripts and notes of the evidence given in the arbitration.” Id. at 651. France France (home of the ICC) Civil Code provides that the arbitrator’s deliberations are confidential but does not extend this duty to the parties themselves. See Aita v. Ojjeh, 1986 REVUE DE L’ARBITRAGE 583 (Cour d’appel de Paris, Decision of Feb. 18, 1986). Hong Kong Hong Kong (home of the Hong Kong International Arbitration Centre) provides that unless otherwise agreed upon by the parties, a party is not entitled to publish, disclose, or communicate any information relating to the arbitral proceedings or any award, unless required to do so by law or to pursue a legal right. New Zealand New Zealand extends a specific legislative duty of confidentiality on the parties. New Zealand’s Arbitration Act of 1996 provides that unless agreed otherwise, “the parties shall not publish, disclose, or communicate any information relating to arbitral proceedings under the agreement or to an award made in those proceedings.” It is understood that the New Zealand Arbitration Act was passed in response to Australia’s Esso decision to clarify that, unlike Australia, New Zealand supported a general duty of confidentiality. Singapore Singapore (home of the Singapore International Arbitration Centre) requires only confidentiality of court proceedings brought under particular arbitration acts if requested by the parties. Case law does, however, recognize a general duty of confidentiality for the hearing and award. Sweden Sweden (home of the Stockholm Chamber of Commerce) does not impose confidentiality on the parties. See Case No. T 1881-99 (Swedish Sup. Ct. 27 Oct. 2000). United States The United States does not impose an implied duty of confidentiality in arbitration—see United States v. Panhandle E. Corp., 118 F.R.D. 346 (D. Del. 1988)—leaving it in large measure to the parties to specifically contract for it.
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