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CONFIDENTIALITY OVER TRANSPARENCY? THE IMPORTANCE OF CLOSED-COURT PROCEEDINGS IN ARBITRATION

INTRODUCTION

The case of Amazon v. Future Retail[1] is the highlight of 2021, which gained spotlight due to the prominent question of law raised by it i.e., the validity of emergency arbitration and as such is pending in the Supreme Court of India but apart from this explicit inadequacy, it highlighted another important shortcoming of the Indian arbitral regime which is the lack of confidentiality of an arbitral dispute in the light of open court proceedings in India.

The issue of confidentiality is two-fold in this case, wherein the parties are disputing over the disclosure of Singapore arbitral award in the public domain[2] while another issue lurks in the dark that is the violation of their confidentiality in the court of law.

As soon as the case went into court, the dispute became public, which not only caused humiliation to the parties due to the media trial but also led to great turbulence in the market. This recent fiasco has thrown light on one of the biggest defects of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as The Act), which is silent on the issue, and favours disclosure to the court of law, notwithstanding anything to the contrary[3].

Firstly, the author will deal with the legal provisions or the lack thereof in India while comparing with the views of Indian courts on the related matter, followed by a brief analysis of the confidential regimes as Hong Kong and Singapore in the second part. Thirdly, the author will submit recommendations to modify the situation to bring it at par with the pro-arbitration nations.

THE LEGAL ARENA OF COURT-ROOM CONFIDENTIALITY

Confidentiality is one of the compelling reasons for selecting arbitration over litigation[4] so much so that it is imbibed with the submission of disputes to arbitration[5]. It is “the very nature of arbitral proceedings [requires] that they ensure the highest degree of discretion in the resolution of private disputes”[6]

In the international regime, the variation exists from being silent on the matter, though allowing for the inclusion of a confidentiality clause in the UNCITRAL Model[7] to ‘implied confidentiality’ in jurisdictions as England[8].

INDIAN JURISPRUDENCE

In India, the Act provides for Section 42A, incorporated by the 2019 amendment, which necessitates confidentiality in arbitral proceedings except for enforcement or implementation of the award. The reason behind incorporating was to do away with a confidentiality clause[9], which was the only way of ensuring confidentiality before the amendment.

However, the amendment brought with it a plethora of challenges[10] as its language is quite ambiguous.

  • One such aspect is the lack of confidentiality when the case goes to court. It surely has mandated confidentiality to the arbitrator, arbitral institution, and parties but fails to maintain and protect it when it is moved to the courts, thus only providing limited protection.
  • Another shortcoming of the amendment is that the section only provides for disclosure of information for enforcement but it does not specify whether this disclosure is limited to courts and other judicial authorities or the public as well.

As the section has provided that in case of enforcement or implementation of the award, confidentiality cannot be a restrictive factor but is it efficient considering the principle behind the whole ADR mechanism into consideration?

In the case of Rama Aggarwal v. Delhi State Legal Services Authority[11], the CIC allowed the mediation to remain confidential in the larger public interest as otherwise, it would reduce the faith of parties in the ADR mechanism, thus droving the parties to courts, thereby neutralizing the very driving factor of ADRs i.e., to reduce the burden on courts.

Arbitration is also an ADR mechanism and confidentiality is one of the prominent reasons which leads to people choosing it, thus it can be fatal to ignore it at any level, be it the preliminary tribunal level or the advanced court level.

It even falls above the provisions of the RTI Act on the grounds of unwarranted invasion of the privacy of the individual under Section 8(1)(j) of the RTI Act, just like mediation[12] as the basic principle remains the same and thus, even an RTI should not violate the sanctity of ADR, much less the default mechanism of open court hearings.

THE CONFIDENTIAL REGIMES IN INTERNATIONAL FORA

There are certain regimes that follow complete confidentiality, both through statutory confidential arbitrations and closed court proceedings, thereby preventing any kind of leakage of information in the general public.

HONG-KONG MODEL

Hong Kong presents a strong model of confidential regimes wherein it is a statutory duty of the parties to maintain confidentiality in arbitral proceedings, which are governed by The Arbitration Ordinance (Cap. 609).

Section 18 of the Ordinance is similar to Section 42A of the Act, which allows for disclosure to courts or other judicial authorities to protect the legal rights or enforce or challenge an award[13].

The language of these two sections are quite similar and if they are analyzed on the same grounds, it would simply mean allowing disclosure to the courts and other judicial authorities only and not to the public, which is ensured by Section 16, 17 of the Ordinance.

Section 16 specifies that the proceedings are not be heard, otherwise than in open courts, except on the application of parties or if the court feels like it, while Section 17 talks about the publication of these closed court proceedings, which cannot be permitted except of course on the permission of all the parties or the satisfaction of courts. The court can also allow for publication if it is of major public interest, however, the parties still reserve the right to move to court for the non-publication of any specific matter, which can, later on, be concealed.

These sections are very important to maintain the confidentiality of the disputes moved to arbitration as they prevent any form of media trial by providing for closed court proceedings and non-publications.

SINGAPORE MODEL

Section 56 & 57 of The Singapore Arbitration Act, 2001 also provides for closed court proceedings and limitation on publication respectively.

The language is almost similar in Hong Kong and Singapore legislation, providing for the same protection and rights in terms of maintaining the rights of private parties to confidentiality in arbitral disputes.

The only difference that flows between the Hong Kong and Singapore laws is that in Hong Kong, the mechanism of closed court proceedings is the default position[14] while in Singapore, the parties have to apply for the proceedings to be in closed settings, otherwise the default position is open courts only.

These two models provide ideal positions which can be followed by the Legislature in India on its ascent to become a pro-arbitration regime.

RECOMMENDATIONS

  • The Act should be amended accordingly to provide for closed court proceedings when the matter falls in the domain of the Act, at least for the courts of original jurisdiction as the Indian Constitution provides the hearings in Supreme Court to be in open courts. The default can be kept at transparency, which would be applicable if parties fail to make an application for such proceedings and confidentiality, as in Singapore.
  • Party autonomy should be given preference[15], either in the agreement or later on when a dispute arises because at the end of the day, an arbitration agreement is the result of the concurrence of parties only and thus, they should possess the right over them.
  • Confidentiality should be kept above transparency, especially in commercial arbitration when a dispute occurs between private parties, affecting their private rights. Differentiation can be provided when State is a party to the dispute[16]because it affects the public rights directly[17] or when the dispute involves a matter of public interest.
  • To balance confidentiality and transparency, anonymised awards, which were proposed by Sir Bernard Rix, can be published on the court and parties volition, which will help in the development of law as is done by the Lloyd’s Maritime Law Newsletter which published the awards related to maritime since 1979.

VV v VW[18] is one such example where the matter was reported along with the award without publishing the names of the parties.[19]

CONCLUSION

The debate over confidentiality and transparency is not novel were arguments both in favour and against in the form of limiting the development of precedents[20] to securing the private information of the parties with respect to IP and others[21] float. But what remains to be seen is the relevance and context of partial confidentiality, when the matter is confidential by law in any arbitral proceeding but the same loses its confidentiality as soon as it comes in the court of law, when the parties, their rights, their contracts remain the same as what good a partial or limited confidentiality do when total confidentiality is the arbitral norm.

Enforcement of any arbitral award in India is only possible through courts, where complete transparency is followed, thereby declining any benefit of a confidential arbitration agreement entered into by the parties and making their interests public. This can be a major flaw of the Indian arbitral regime, especially when India is striving to be pro-arbitration and as such should be taken up by the Legislature.

Author(s) Name: Manvi Raj (University School of Law and Legal Studies, GGSIPU)

References:

[1] Amazon.com NV Investment Holdings LLC v. Future Retail Ltd. and Future Coupons Pvt. Ltd, 2021 SCC OnLine Del 1279.

[2] ‘Amazon-Future Retail spar over violation of confidentiality clause’ (MoneyControl, Oct. 28, 2020) < https://www.moneycontrol.com/news/business/amazon-future-retail-spar-over-violation-of-confidentiality-clause-6027881.html> accessed 20 June 2021.

[3] Tariq Khan, ‘The who, why and when of confidentiality in Arbitration Proceedings’ (The SCC ONLINE Blog, Jan. 21, 2021) <https://www.scconline.com/blog/post/2021/01/21/the-who-why-and-when-of-confidentiality-in-arbitration-proceedings/> accessed 20 June 2021.

[4] White & Case ‘2015 International Arbitration Survey: Improvements and Innovations in International Arbitration’ (October 6, 2015) accessed 22 June, 2021..

[5] Alexis C Brown ‘Presumption Meets Reality: An Exploration of the Confidentiality Obligation in International Commercial Arbitration’ (2001) 16(4) AUILR 969 at 974.

[6] Aita v. Ojjeh Revue de L’arbitrage, 583 (1986).

[7] UNCITRAL Arbitration Rules, art. 32(5).

[8] Emmott v. Michael Wilson & Partners, [2008] EWCA (Civ) 184 (C.A.).

[9] Justice B.N. Srikrishna, ‘Report of the High Level Committee to Review the Institutionalisation of Arbitration Mechanism in India’, (July 30, 2017).

[10] ‘Emperor’s New Clothes? Arbitration And Conciliation (Amendment) Bill, 2019’, (Nishith Desai Associates, July 18, 2019) https://www.nishithdesai.com/information/research-and-articles/nda-hotline/nda-hotline-single-view/article/emperors-new-clothes-arbitration-and-conciliation-amendment-bill-2019.html?no_cache=1&cHash=9d65c2d380dcaa4b97111692787bc0fb last accessed 18 June 2021.

[11] CIC/SA/A/2015/000305

[12] Ibid.

[13] The Arbitration Ordnance, Section 18(2).

[14] Edward Liu and Jonathan Hooi, ‘Confidentiality under the Arbitration Ordinance’ (Hong Kong Lawyer, Nov., 2017) http://www.hk-lawyer.org/content/confidentiality-under-arbitration-ordinance accessed 24 June 2021.

[15]  Krrishan Singhania and Alok Vajpeyi, ‘India: Confidentiality In Arbitration: An Indian Outlook’ (Mondaq, Aug., 2019) https://www.mondaq.com/india/arbitration-dispute-resolution/832720/confidentiality-in-arbitration-an-indian-outlook accessed 23 June 2021.

[16] Luke Eric Peterson, ‘The Expanding Audience for Open Arbitration Hearings’ (Kluwer Arbitration Blog, Feb., 2012) < http://arbitrationblog.kluwerarbitration.com/2012/02/06/the-expanding-audience-for-open-arbitration-hearings/> accessed 21 June 2021.

[17] Esso Australia Resource Ltd. v. Plowman, (1995) 183 CLR 10.

[18] [2008] 2 S.L.R. 929 (HC)

[19] Garimella, Sai Ramani., ‘Revisiting Arbitration’s Confidentiality Feature’ (2017) at 106.

[20] Francois Dessemontet, ‘Arbitration and Confidentiality’, (1996) 7 TARIA 299 at 303.

[21] Supra note 3.

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