Confidentiality In Arbitration: From Myth To Reality*

Author:Mr Saverio Lembo and Vincent Guignet
Profession:Bär & Karrer
 
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Introduction

Over the last decades, confidentiality in international business dispute resolution has become a growing concern. This can be explained by the conjunction of two factors: (1) the importance taken by immaterial assets, such as intellectual property, know-how and reputation, which, in today's interconnected world, count among the most valuable assets of the biggest multinational corporations. (2) the amount of detailed and often sensitive information that both parties are requested to exchange in the course of judicial proceedings. In this context, a dispute arising between important actors of the international business market may potentially prove to be very damageable for their immaterial assets. As a consequence of this growing need for confidentiality, one can observe a trend to favor arbitration as a dispute resolution mechanism.

Confidentiality is indeed often the first idea that comes to mind when asked to describe the advantages of arbitration. But is it really a given? Can a party truly expect a level of confidentiality equivalent to that afforded in more traditional judicial proceedings. And if so, where does confidentiality find a legal basis? What is its scope? Who exactly is bound by a confidentiality obligation? And what happens if such an obligation is breached?

The purpose of this short paper is to address these issues by analyzing the interplay between national laws, arbitration rules and agreements of the parties, in order to provide a basis for ensuring confidentiality when drafting a contract, especially when confidentiality is a primary concern for the parties involved.

We will first seek to clarify the grounds and scope of the confidentiality obligation, by providing a short overview of its application in some of the leading countries for arbitration (infra B). We will then analyze this issue under the most commonly used arbitration rules (infra C), before addressing the situation where a confidentiality obligation is breached (infra D). Finally, we will suggest ways to secure confidentiality in international arbitration (infra E), and present our conclusions (infra F).

Grounds and Scope of Confidentiality - An International Overview

Confidentiality is not a defined notion in the realm of international arbitration. Its scope therefore differs depending on the jurisdiction in question. Looking for a legal basis for confidentiality is thus also a way to delineate its scope - both subjectively and objectively. Indeed, considering that an obligation of confidentiality applies, several questions arise as to the scope of this obligation.

First, as to the subjective scope of the obligation, it is incumbant to determine who are the recipients of the obligation. The following persons may potentially be subject to a confidentiality obligation:

The parties, of course; The arbitrators and their staff; The lawyers; The arbitral institution and its staff (in case of an institutional arbitration); Finally, any third parties...

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