More on the confidentiality of arbitration | In Principle

One of the arguments for submitting disputes to arbitration is the confidentiality of the award, which is important for businesses. But as the case law demonstrates, the state courts do not always get the message about the confidential essence of arbitration.

In our recent article “When an arbitration case winds up in state court,” we mentioned the judgment of the High Court of Australia in Esso Australia Resources Ltd v Plowman, 183 CLR 10 (1995), which sparked a lively discussion on the meaning and scope of confidentiality in arbitration cases. In Esso the court held, although not unanimously, that there is no broad duty to maintain the confidentiality of documents and information presented in, or in connection with, an arbitration proceeding. Given the extensive influence this ruling has had on case law and legislation around the world, we discuss the case in more detail below.

In that case, Esso supplied gas to two Australian public utilities, GFC and SEC. The supply contracts included a clause under which the price of gas would be adjusted to reflect changes in taxes, royalties and the like attributable to the production or supply of gas. Esso was required to provide the utilities with details of the increases or decreases in such royalties, taxes, etc., and the calculation of the price adjustments. In 1991 Esso demanded a price increase due to a new petroleum resource rent tax, but the utilities refused to pay the higher price and the matter went to arbitration.

Before commencement of arbitration, Esso failed to provide the details for calculation of the new price. It was assumed that this information would be presented in the arbitration. The Minister for Energy and Minerals of the State of Victoria sought access to this information, and brought an action accordingly against the parties to the arbitration, i.e. Esso, GFC and SEC, seeking a declaration that the information is not subject to any obligation of confidence, and may be disclosed to the minister as well as third parties. Esso refused to share the information detailing the calculations of the price increase with GFC and SEC until they signed a confidentiality agreement undertaking not to share the information with the minister or third parties, claiming that the calculations were commercially sensitive.

The court of first instance found that Esso had undertaken to furnish details of the increases to the utilities, and ordered it to do so without waiting until the utilities entered into a confidentiality agreement. On the issue of the privacy and confidentiality of arbitration, the court held that “the mere fact that parties to a dispute agree impliedly or expressly to have it arbitrated in private does not import any legal or equitable obligation not to disclose to third parties any information at all which may be said to have been obtained by virtue of or in the course of the arbitration.” The court also concluded that “there was no general legal or equitable obligation applicable to private arbitration which precluded a party to arbitration from using information obtained in the course of it except for the purposes of the arbitration.” The court of first instance accordingly granted the minister’s application and ordered Esso to provide the requested information.

The appellate court upheld this aspect of the ruling, which was subsequently appealed to the High Court of Australia. By four votes to one, the High Court upheld this ruling of the appellate court, confirming that there is no general obligation to maintain the confidentiality of information and documents disclosed in arbitration. On the issue of privacy and confidentiality, Chief Justice Anthony Mason, writing for the court, pointed out that arbitration “is private in the sense that it is not open to the public.” However, “for various reasons, complete confidentiality of the proceedings in an arbitration cannot be achieved.” First, “no obligation of confidence attaches to witnesses who are therefore at liberty to disclose to third parties what they know of the proceedings.” Second, there are various circumstances when an arbitration award must be disclosed in proceedings before the state courts. Third, “there are other circumstances in which an arbitrating party must be entitled to disclose to a third party the existence and details of the proceedings and the award,” for example to an insurer, to the tax authorities, or in performance of reporting obligations of public companies.

Based on these observations, Mason concluded that there is no general obligation to maintain the confidentiality of documents and information disclosed in arbitration. No such obligation arises by law or out of the private nature of arbitration. “An obligation not to disclose may arise from an express contractual provision,” he wrote. However, “such a provision would bind the parties and the arbitrator, but not others. Witnesses, for example, would be under no obligation of confidentiality.”

The conclusion that there is no duty to maintain the confidentiality of information from arbitration proceedings was wholly approved by the Supreme Court of Sweden in the Bulbank case (NJA 2000:79 s. 538), recognising that the confidentiality of arbitration may arise only from the intent of the parties. The Swedish court cited the Esso ruling from the High Court of Australia.

But an English ruling in a similar case took an entirely different position on the ability to disclose documents and information from an arbitration. In Ali Shipping Corp. v Shipyard Trogir, 2 All ER 136 (1998), the High Court had refused to permit disclosure of documents in one arbitration which derived from another arbitration, even though both parties to the proceedings were represented by the same persons. The court held that there was an implied obligation not to disclose documents and information obtained in arbitration, which directly follows from the privacy of the arbitration proceedings. The Court of Appeal upheld this position, but pointed out that there could be exceptions to this duty of confidentiality, such as:

• Consent, particularly where disclosure is made with the express or implied consent of the party who originally produced the material to be disclosed
• An order of the court, typically for disclosure of documents in post-arbitration proceedings
• Where reasonably necessary for the protection of the legitimate interests of an arbitrating party.

As may be seen from this brief analysis, the concept of the confidentiality of arbitration is interpreted variously. The Australian and Swedish courts have found an absence of a general obligation not to disclose information and documents obtained in arbitration, while such an obligation can be created between the parties through a confidentiality agreement. But the approach taken in the UK—and also for example in New Zealand, which following the Esso ruling by the High Court of Australia introduced broad guarantees of the confidentiality of arbitration in its own arbitration law—recognises the existence of confidentiality in arbitration, subject only to a few exceptions.

It should be pointed out that the Polish Civil Procedure Code lacks regulations governing the confidentiality of proceedings before arbitration courts. This means that theoretically either the English or the Australian understanding of such obligation could be followed in Poland.

Monika Hartung, Dispute Resolution & Arbitration Practice, Wardyński & Partners