Whether Confidentiality is good or bad in Arbitration

Posted: January 5th, 2023

Table of Contents

Introduction………………………………………………………………………………….2

Issue………………………………………………………………………………………….3

Background of Privacy and Confidentiality in Arbitration………………………………….4

Privacy and Confidentiality in Arbitration Today…………………………………………….5

Reasons for Practicing Confidentiality in KSA……………………………………….……..6

Rule…………………………………………………………………………………………..7

Confidentiality in SCCA Rules………………………………………………………7

Confidentiality in other Arab Countries……………………………………………..8

Application/Analysis……………………………………………………………..….9

Conclusion……………………………………………………………….…………………10

Works Cited…………………………………………………………………………………12

Student’s Name:

Tutor’s Name:

Course Title:

Date:

Whether Confidentiality is good or bad in Arbitration

Introduction

Alternative dispute resolution (ADR) techniques are becoming increasingly applicable because of their many advantages. Overall, many conflicting individuals and groups prefer ADR to court proceedings because the process is cost-effective, time-efficient, flexible, and allow the conflicting sides more authority over the mitigation process and outcome.[1] ADR does not require the availability of expert witnesses or lawyers, which makes it less time-consuming and cost-effective. Parties can choose to use ADR approaches such as adjudication, arbitration, building consensus, mediation, negotiation, and arbitration.[2] The study focuses on the issue of confidentiality when using arbitration, which is a private initiative where conflicting groups agree that one or more individuals can make decisions about the disagreement after gaining necessary evidence and hearing from both sides. The primary difference between mediation and arbitration is that the neutral arbitrator has the power to make a decision about the wrangle. The process of arbitration is almost the same to a trial because participating sides can give open remarks and provide evidence to the arbitrator. Compared to conventional trials, it is easier and much faster to complete arbitration using less formal ways. For instance, often the wrangling sides do not have to adhere to federal or state regulations of evidence and, in some instances, the arbitrator may not be obliged to apply the governing laws. The study pays particular attention to the notion of confidentiality, which together with privacy, form key components of arbitration. Many jurisdictions in the Arabic world have created regulations that permit for confidentiality when engaging in arbitration processes. Nevertheless, confidentiality as opposed to privacy, is not good in arbitration because it creates room for engagement in deals that could evoke conflicting reactions and unfair judgement.

Issue

The issue that many people debate is whether it is good to encourage confidentiality when participating in arbitration. Groups using arbitration to address their domestic and international disputes did not differentiate between privacy and confidentiality until the 1980s.[3] Instead, they chose to develop a casual association between the two or regarded both aspects as being equal. The overall view was that the private nature of arbitration significantly required those taking part in the proceedings to uphold confidentiality, without inquiring into its legal scope or basis, or connecting it to the nature of arbitral communications.[4] More specifically, arbitrary proceedings, encompassing the hearings, were a private issue between the groups and the arbitrators from which other groups were generally omitted. It was self-apparent that, because the hearings were held privately, the groups were forbidden from explaining the details of their misunderstanding to unknown people.[5] Many regarded a private arbitration as being confidential at the same time.

Background of Privacy and Confidentiality in Arbitration

The present controversies surrounding privacy and confidentiality when using arbitration trace their origin to the beginning of 1980s. The issue became evident in Oxford Shipping Co. Ltd. v. Nippon Yusen Kaisha (1984) when Oxford Shipping moved to court seeking to find out whether arbitrators could conduct concurrent hearings in parallel arbitrations before the same panel (Smeureanu 2). The intervening Court groups in an arbitration were not likely to argue that evidence from one issue could be scrutinised and tested by another side other than the affiliate to the arbitration process, or would be refuted by evidence presented, or arguments presented by a third party (Smeureanu 2). The Court affirmed by stating that in an arbitration process, it was imperative that those who do not have anything to do with the case be omitted from the hearings. It is evident that the jury in Oxford Shipping equated the privacy of hearings with the confidentiality of arbitration. However, the Court in Dolling Baker v. Merrett (1990) created a clear distinction between confidentiality and privacy (Smeureanu 2). The ruling argued that confidentiality was established from privacy in arbitration processes in what came to known as the classical view. The distinction between the two concepts became more evident in Esso v. Plowman (1995) where an Australian court held that confidentiality of arbitration and privacy of hearings could be treated as different concepts (Smeureanu 2). The High Court of Australia held that the simple fact that the sides to a disagreement agree expressly or impliedly to have the wrangle arbitrated or mitigated in private does not borrow any legal or equitable obligations not to notify third parties about any information which may be termed as having been acquired by virtue of arbitration or in the course of the process.

Privacy and Confidentiality in Arbitration Today

Today, those who use arbitration clearly distinguish between privacy and confidentiality. Often associated with the private state of arbitral proceedings, privacy and confidentiality are two concepts formed to regulate third parties gain access to the arbitral process. Both emanate from the key features and objectives of the arbitral proceedings, which is the resolution of particular groups’ conflict in a centralized, commercially-viable, and one proceeding.[6] Other thinkers perceive privacy and confidentiality as two sides of the same coin. The ruling in Esso v. Plowman held that the privacy of an arbitrary process only exists to uphold confidentiality of the dispute which the warring sides have opted to apply arbitration. When considering the addressees and scope of confidentiality and privacy, the separation between the two legal terms becomes easily separable.[7] It emerges that arbitration conducted pursuant to the agreement is private in the way it is not open to the public. Privacy is focused on a person’s rights other than the third parties, their witnesses and representatives, and arbitrators, to be part of the arbitration and to know about the process.[8] Nearly under all national arbitration rules and statutes, privacy provides the chance to conduct hearings behind confined settings, excluding people whose presence or contribution is not essential for the proceedings. Privacy, nevertheless, does not affect the entire arbitral process, but only affects the hearing process. Therefore, it is only possible to argue that privacy only applies to instances where actual hearing takes place. Confidentiality, on the other hand, relates to the participating sides only secondarily, and chiefly in regard to those who it may impact or concerns.[9] Confidentiality divides into items safeguarded or capable of fortification, such as of the arbitration process, arbitrators, facts and information presented in the arbitration, written and oral submissions, awards, and other evidentiary provisions. Confidentiality also relates to addressees bound by an obligation to uphold a secret over safeguarded components, such as the arbitral team, arbitral stations, participating sides and their representatives, and expert witnesses among others.[10] Thus, confidentiality refers to a state of secrecy emerging and establishing in the arbitrary process in its entirety.

Reasons for Practicing Confidentiality in KSA

The Kingdom of Saudi Arabia (KSA) introduced the Executive Regulations, which details the Arbitration Law. The Regulations were published in the Saudi Gazette and came into action on June 2017. Arbitration in the country is regulated by the Arbitration Regulation provided under Royal Decree. Moreover, Article 43 of the KSA arbitration law argues that the arbitral process shall be confidential unless the participating sides agree to give out some information. However, the law does not give any specific guideline concerning the confidentiality of the process. Moreover, the Saudi Centre for Commercial Arbitration (SCCA) addresses the issue of confidentiality through its regulations. The regulations indicate that parties in KSA that use arbitration practice confidentiality with the purpose of achieving particular goals.

Various factors drive arbitrating groups in KSA to allow for confidentiality in their processes. One of the primary reasons is to uphold the key aspects of arbitration, which are privacy and confidentiality. Groups that choose the approach feel that the issue ought to remain within the affected persons and should not proceed to third parties that have little or no concern in the case. The teams applying confidentiality in their arbitration processes endorse the practice because they believe it saves them tainting their reputation, especially when the matter is of grave concern. More fundamentally, parties in KSA support confidentiality and observe the regulations that permit the practice because it allows them to safeguard their interests and to build a strong bargaining base for their case. Finally, operators in KSA practice confidentiality for the purposes of meeting the requirements of investment arbitration, which aims at resolving wrangles between hosts and foreign investors. Saudi Arabians understand that regulations on arbitration vary significantly, and it is possible to engage in arbitration with investors from countries where confidentiality is a vital component of arbitration.

Rule

Confidentiality in SCCA Rules

The SCCA, as already mentioned in the previous section, provides considerable guidance on how to practice confidentiality in KSA. Article 38 of Section IV provides guidance on how to apply confidentiality when participating in arbitration processes in the country. The Article directs that any confidential information revealed during the arbitration process by the witnesses or conflicting parties shall not be exposed by the arbitrator or any other team taking part in the exercise.[11] Information from the arbitrating team can only get out of the group by following the directives outlined in Article 22. The Article (22) stipulates that the arbitrator should consider applicable guidelines of privilege, such as those entailing the confidentiality of communication between a client and his or her attorney.[12] When the participating teams, their attorneys, or their documents would be exposed under relevant law to various rules, the tribunal employ similar rules across the sides, giving preferences to the rules that offer the highest level of fortification.[13] The regulation implies that unless permitted by applicable legislations or allowed by participating groups, the administrator and members of the tribunal team are obliged to maintain confidentiality in all matters dealing with the award or arbitration process. Besides, Article 38 of the SCCA directs that unless the teams agree contrary, the committee in charge of the arbitration may give orders relating to the confidentiality of the entire process or any issues related to the with the initiative and may take measures for safeguarding secrets and confidential material.[14] Thus, the tribunal should be in the forefront if promoting confidentiality when steering arbitration processes to earn trust and confidence from team members and others monitoring the intervention.

Confidentiality in other Arab Countries

Even though not many Arab nations have developed advanced structures to uphold confidentiality when people engage in arbitration, some states have developed structures to guide the practice, although they do not create clear distinction between privacy and confidentiality. The domestic law in the UAE, for example, does not give any general guideline for confidentiality.[15] However, the Dubai Court of Cassation held in one of the notable cases in 2009 that arbitration is a private practice to be carried out in secrete unless the participating sides come up with a special plan to suit their arbitration needs. Besides, the Dubai International Arbitration Centre provides additional guidance regarding confidentiality, and works closely with the ADCCAC (Abu Dhabi Commercial Conciliation and Arbitration Centre) to ensure that all parties entering into arbitration observe regulations on confidentiality.[16] Article 14 of Dubai International Financial Centre stipulate that it is only possible to discuss matters regarding the arbitration process when all parties into the process give their consent. Other Arabic nations follow the suit of the UAE, though national laws on arbitration tend not to be so loud on the issue of confidentiality.[17] Bahrain is another Arabic country that develops structures to determine how arbitrators practice confidentiality. Bahrain introduced Arbitration Law No. 9 in 2015 and addresses, though silently, the issue of confidentiality. It receives the backing of the Bahrain Chamber for Dispute Resolution, which reaffirms that all arbitration processes should be held privately unless the participating sides agree to give out particular information.[18] The attempts by various Arab nations to develop regulations on confidentiality suggest that many prefer to keep their activities a secret, but it is essential to draw the line between confidentiality and privacy.

Application/Analysis

Even though confidentiality appears to be a widely practiced act when participating in arbitration, it is imperative to come up with structures that speak or campaign against the act because of the possible limitations associated with embracing the act. The description of confidentiality by Smeureanu implies that contrary to privacy that seeks to prevent the improper dispersal of information from the arbitration process, confidentiality focuses on safeguarding the interests of particular groups, especially for personal gains.[19] Permitting confidentiality without developing clear guidelines to distinguish with the application of privacy could create room for improper deals where more influential teams coerce with the arbitrator to make one-sided decisions.[20] Furthermore, encouraging confidentiality could offer the chance for a particular or both sides to withhold vital information that could help to address the matter at hand.[21] A situation where either of the sides feels less engaged or secluded may derail the efforts to find an amicable solution, and can result in withdrawal of the affected side in extreme cases.  

The possible limitations associated with confidentiality calls on jurisdictions to come up with effective remedies that would help to achieve the best results when taking part in arbitration. First, nations should, especially Arab countries, need to review their current policies on privacy and confidentiality and ensure that they distinguish between the two concepts.[22] State officers and other groups in charge of developing laws that govern arbitration should create awareness to ensure that members of the public are conversant with the differences between privacy and confidentiality as applicable in arbitration.[23] Lack of adequate knowledge on the way the two concepts differ, chiefly because they are often used interchangeably lead many people to miss the chance of fair hearing or engagement because the other party engages in secretive deals that safeguard their personal interests.[24] Even though the law does not forbid confidentiality, it is important to remind all groups the possible demerits associated with enjoying the privilege.

Conclusion

The study pays particular attention to the concept of confidentiality, which is a key aspect of arbitration alongside privacy. The study elaborates how the SCCA allows for confidentiality in Article 38, and how it is the duty of the arbitrator to ensure that what team members discuss remain confidential. Many would prefer to keep some information confidential when taking part in arbitration, but the study provides evidence to show how provision could introduce other adverse effects that could yield negative effects during the process. The report explains how confidentiality allows for secretive deals to prevail between team members and how this may affect how other engage in the initiative or receive fair judgement. Different regions allow for confidentiality when taking part in confidentiality and come up with various regulations to define how the process happens. However, it essential to remind members of the public, especially those intending to use arbitration about the need to be honest to avoid using confidentiality for the benefit of one party while disregarding the other.

Works Cited

Arfin, Miriam. “The Benefits of Alternative Dispute Resolution in Intellectual Property Disputes.” Hastings Communications and Entertainment Journal, Vol. 17, no. 4, 2005, pp. 895-915.

Lominack, Reyburn. “Examining Alternative Dispute Resolution in the International Business Domain.” South Carolina Journal of International Law and Business, vol. 1, no. 1, 2003, pp. 17-26.

Mistelis, Loukas and Shore Laurence. Arbitration Law and Practice in the Middle East. Jurisnet LLC, 2020.

Reuben, Richard. “Confidentiality in Arbitration: Beyond the Myth.” Kansas Law Review, vol. 54, 2006, pp. 1255-1300.

Saudi Center for Commercial Arbitration. SCCA Arbitration Rules. Saudi Center for Commercial Arbitration Saudi Center for Commercial Arbitration, 2016.

Saudi Center for Commercial Arbitration a. “Arbitration Rules.” SCCA, 2021. https://sadr.org/ADRServices-arbitration-arbitration-rules?lang=en. Accessed 18 March, 2021

Smeureanu, Ileana. Confidentiality in International Commercial Arbitration, International Arbitration Law Library. Kluwer Law International, 2012.

---

[1] Arfin, Miriam. “The Benefits of Alternative Dispute Resolution in Intellectual Property

                Disputes.” Hastings Communications and Entertainment Journal, vol. 17, no. 4, 2005,

                pp. 899.

[2] Lominack, Reyburn. “Examining Alternative Dispute Resolution in the International Business

                Domain.” South Carolina Journal of International Law and Business, vol. 1, no. 1, 2003,

                pp. 21.

[3] Saudi Center for Commercial Arbitration a. “Arbitration Rules.” SCCA, 2021.

                https://sadr.org/ADRServices-arbitration-arbitration-rules?lang=en. Accessed 18 March,

                2021

[4] Ibid

[5] Saudi Center for Commercial Arbitration a. “Arbitration Rules.”

[6] Smeureanu, Ileana. Confidentiality in International Commercial Arbitration, International

                Arbitration Law Library. Kluwer Law International, 2012, 2

[7] Ibid, 2

[8] Ibid, 2

[9] Smeureanu, Ileana. Confidentiality in International Commercial Arbitration, International

                Arbitration Law Library. Kluwer Law International, 2012, 3.

[10] Ibid, 3

[11] Saudi Center for Commercial Arbitration. SCCA Arbitration Rules. Saudi Center for Commercial Arbitration Saudi Center for Commercial Arbitration, 2016, 36

[12] Saudi Center for Commercial Arbitration. SCCA Arbitration Rules, 36

[13] Ibid, 36

[14] Ibid, 36

[15] Mistelis, Loukas and Shore Laurence. Arbitration Law and Practice in the Middle East. Jurisnet LLC, 2020, 79.

[16] Mistelis, Loukas and Shore Laurence. Arbitration Law and Practice in the Middle East. Jurisnet LLC, 2020, 79.

[17] Ibid, 79

[18] Ibid, 82

[19] Smeureanu, Ileana. Confidentiality in International Commercial Arbitration, International

                Arbitration Law Library. Kluwer Law International, 2012, 2.

[20] Reuben, Richard. “Confidentiality in Arbitration: Beyond the Myth.” Kansas Law Review, vol.

                54, 2006, pp. 1257.

[21] Ibid, 1257

[22] Ibid, 1258

[23] Ibid, 1258

[24] Reuben, Richard. “Confidentiality in Arbitration: Beyond the Myth.” Kansas Law Review, vol.

                54, 2006, pp. 1258