Switzerland: Confidentiality In Arbitration: From Myth To Reality*

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 participating in the proceedings.

For the purpose of this paper, we will focus on the confidentiality obligation binding on the parties. The obligation binding on the arbitrators and on the lawyers is indeed largely admitted, because it follows from the mandate that they have received.

Second, as regards the objective scope of confidentiality, the question arises as to what exactly is covered by confidentiality? Is confidentiality an unlimited obligation covering even the very existence of the arbitration proceedings? Or, in the contrary, is confidentiality limited to one or more of the following:

• What is said during the hearings;
• The deliberation of the arbitrators;
• The orders and awards of the arbitral tribunal;
• The submissions exchanged by the parties, including their exhibits;
• The identity of the parties involved in the dispute.

We will attempt to define the ground and scope of the obligation of confidentiality in international arbitration by examining the way that some leading countries have dealt with the issue.

United Kingdom

The approach to confidentiality in the United Kingdom is a reminder of the so called "classical view" on confidentiality, which – at an international level – remained unchallenged until the late 1980's³. According to this classical view, the private nature of arbitration obliges those participating in the proceedings to maintain confidentiality, without questioning its legal basis or scope⁴. In other words, the confidentiality of the arbitration proceedings is seen as an implied obligation, simply because arbitration is a private process⁵.

This classical view is notably expressed in a British arbitration case dating back to 1991⁶. The rationale developed in that case is the following: If two parties agree that their dispute is be decided in private (that is, without any third party being allowed to access the hearings), then this privacy would be emptied of its purpose if the submissions of the parties, or the minutes of the hearings, were to be communicated to the public. According to this view, the confidentiality that results from the privacy of the hearings should therefore extend to the entire arbitration proceedings.

The common view in English law is therefore that arbitration comes with an implied duty of confidentiality, which encompasses in principle the existence of the arbitration proceedings itself⁷. In some cases however, English courts have accepted limited exceptions to the implied duty of confidentiality: first, in cases where a party has no choice but to submit a document obtained during the arbitration to protect its interests against third parties⁸; second, in cases where there is a legitimate reason for disclosure, such as the duty of disclosure owed by a company to its shareholders, if the dispute is likely to affect the corporate accounts⁹. As we will see, these are the usual exceptions found in most legal systems.

France

In France, the issue of confidentiality in arbitration is not addressed in statutory law. The situation, however, used to be very similar as in the United Kingdom – where confidentiality is implied.

The leading case on this topic dates back to 1986¹⁰the very nature of the arbitral procedure"¹¹. The idea that arbitration comes with an implied duty of confidentiality has been confirmed several times since then. In particular, the same Court found again, in 2003, that a party who decided to communicate in the press about an ongoing arbitration violated its implied obligation of confidentiality¹².

However, many French scholars have criticized this approach, leading the Paris Court of Appeal to reconsider its approach. In a case dating back to 2004, it indeed stated that the confidentiality of arbitration could not simply be assumed, but must be explained and grounded in French law¹³. The current situation, in France, as to the existence of an implied duty of confidentiality in arbitration proceedings, is therefore unclear.

Australia

The "classical view" on confidentiality adopted in English common law has been radically rejected in Australia. The Australian courts decided to follow scholars who, as early as the 1990's, started to cast doubt about the interdependency of privacy and confidentiality¹⁴ – as advocated by defenders of the classical view, who consider that confidentiality flows from privacy.

In a 1995 decision of the Australian Supreme Court¹⁵, the notions of confidentiality and privacy were explicitly extracated from each other. The court held that:

• Privacy ensures that hearings take place behind closed doors. It must be understood as the right to exclude any foreign persons to the proceedings. Its scope is, however, limited to the hearings phase and does not relate to the entire arbitral process. Privacy simply sets a standard, according to which hearings are private, unless otherwise agreed upon by the parties.
• Confidentiality, on the other hand, is a much wider notion, which can be described as a state of secrecy attached to all materials created, presented and used in the context of the arbitration proceedings. Confidentiality thus reaches further in the proceedings, extending also to the pre and post hearing phases.
• Whenever the information disclosed in the context of an arbitration concerns public authorities or public services, there exists a presumption of disclosure even if the arbitration proceedings itself remains private¹⁶.

As a consequence of that holding, Australian courts consider that the obligation of confidentiality in arbitration cannot be simply assimilated or confused with the notion of privacy – which is a much narrower obligation – and thus that such an obligation exists only through an express agreement of the parties¹⁷.

USA

Australian courts are not alone in rejecting the idea of an implied duty of confidentiality in arbitration. There is indeed longstanding case law in the United States that makes clear that confidentiality cannot be presumed in arbitration¹⁸.

The leading case was rendered by the Federal Court of Delaware in 1988. In this case, the Government of the United States had requested that all documents relating to an ICC arbitration, which took place in Switzerland, to be released for use in the court proceedings¹⁹. The Delaware court ruled that this was possible, since neither the arbitration agreement nor the ICC Rules provided for confidentiality of the arbitration proceedings.

Since then, US case law appears stable in its reluctance to grant orders protecting confidentiality in arbitration, and persists in rejecting arguments that confidentiality may be considered as an implied obligation²⁰.

There is even a doubt as to the very admissibility of confidentiality agreements, within an arbitration clause: certain US courts have indeed held such agreements to be unenforceable as contrary to the public interest²¹. These cases often concern disputes where one of the parties is considered as a "regular player" of arbitration: this is typically the case in employment law disputes, where the employment contract contains an arbitration clause. The employer will always face the same sort of issues in front of arbitral tribunals, and thus acquire a knowledge that each single employee could never access if the arbitration case law were to remain confidential. For this reason, certain US courts have found that confidentiality of the arbitration would be contrary to the public interest.

Norway

Norway is one of the rare country where statutory law makes clear that unless the parties have agreed otherwise, the arbitration proceedings are not subject to a duty of confidentiality. Article 5 of the Norwegian Arbitration Act of 14 May 2004 indeed provides the following:

This is a rare example of a legal system where arbitration proceedings are deemed non-confidential, save for an express agreement of the parties.

Switzerland

Swiss law addresses arbitration under two different acts: whereas international arbitration is governed by the Chapter 12 of the Swiss Private International Law Act ("PILA"), domestic arbitration is governed by the Swiss Civil Procedural Code ("CPC"). Yet, neither the PILA nor the CPC contains any specific provision dealing with confidentiality.

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Footnotes

^{* Conference paper prepared for the 2015 Fall Meeting of the American Bar Association, International Section, in Montreal.}

^{3 Ileana M. Smeureanu, Confidentiality in International Commercial Arbitration, Kluwer Law International, 2011, p. 1.}

^{4 Idem.}

^{5 Alan Redfern/Martin Hunter/Nigel Blackaby/Constantine Partasides, Law and Practice of International Commercial Arbitration, Sweer & Maxwell, 4th ed. 2004, p. 28.}

^{6 Dolling Baker v. Merrett, (1991) 1 WLR 1205.}

^{7 David Caron/Lee Caplan/Matti Pellonpää, The UNCITRAL Arbitration Rules, a Commentary, Oxford University Press, 2006, p. 34.}

^{8 Hassneh Insurance Co. of Israel v. Mew, (1993) 2 Lloyd's Rep. 243.}

^{9 City of Moscow v. Bankers Trust Co, (2003) EWHC 1377.}

^{10 Decision of Paris Court of Appeal of 18 February 1986 (Aïta v. Ojjeh), in Rev. Arb. 1986, p. 583.}

^{11 Idem.}

^{12 Société True North v. Bleustein and others, Rev. Arb. 2003, p. 189 et seq.}

^{13 Decision of Paris Court of Appeal of 22 January 2004 (Nafimco v. Foster Wheeler Trading Company), cited in: E. Loquin, Les obligations de confidentialité dans l'arbitrage, Rev. Arb. 2006, n° 2, pp. 327-328.}

^{14 Jan Paulsson/Nigel Rawding, The Trouble with Confidentiality, 11-3 Arb. Int'l 303 (1995).}

^{15 Esso Australia Resources Ltd. v. Sidney James Plowman, (1995) 128 A.L.R. 391.}

^{16 Idem.}

^{17 Ileana M. Smeureanu, Confidentiality in International Commercial Arbitration, Kluwer Law International, 2011, p. 38.}

^{18 Christophe Müller, La confidentialité en arbitrage commercial international: un trompe-l'oeil?, in: ASA Bulletin, Vol. 23 No. 2 (2005), pp. 218-219.}

^{19 United States v. Panhandle Eastern Corp., 118 F.R.D. 346 (D. Del 1988).}

^{20 Contship Containerslines Ltd v. PPG Industries Inc. (SDNY, 23 April 2003); Lawrence E. Jaffee Pension Plan v. Household International Inc. (D Colo, 13 August 2004).}

^{21 Davis v. O'Melveny & Myers, 485 F.3d 1066, 9th Cir. 2007; Ting v. AT & T, 319 F.3d 1126, 9th Cir. 2003.}

^{22 Norwegian Arbitration Act of 14 May 2004, Article 5.}

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