Resolving disputes with discretion: Analysing confidentiality in arbitration proceedings

CZT v CZU[1]

Introduction

Inherent in an arbitration proceeding is the concept of confidentiality. It is one of the key contributing factors to an increasing number of parties – particularly multinational and transnational organizations opting for arbitration as a preferred mode of dispute resolution. Confidentiality is one major aspect that distinguishes arbitration from court-held litigation. However, the importance placed on and the extent to which the concept of confidentiality is enforceable has varied across different jurisdictions. While jurisdictions like Singapore[2], Australia[3] as well as India[4] statutorily recognize confidentiality in arbitration proceedings, jurisdictions like the United States of America and Canada do not provide for any statutory recognition. Regardless, majority jurisdictions acknowledge confidentiality in arbitration proceedings as an implied obligation of law.

Recently, the Singapore International Commercial Court of the Republic of Singapore (Singapore Commercial Court) in the case of CZT v CZU explored this concept of confidentiality in relation to production of the record of deliberations of arbitrators that led to the award.

A nod to confidentiality by the Singapore Commercial Court

The Plaintiff in the said case obtained an unfavorable award under an arbitration administered by the International Chamber of Commerce. While the majority (of two arbitrators) held against the Plaintiff; the minority arbitrator favored the Plaintiff and accused the majority of engaging in serious procedural misconduct and concealing the true ratio decidendi from the parties. Treating the views of the dissenting arbitrator as a smoking gun, the Plaintiff filed a challenge to the award and in the said proceedings preferred applications seeking production of the record of deliberations of the three arbitrators.

The Singapore Commercial Court after deliberating on the position of confidentiality in the Singapore Law inter alia held:

• While the Singapore law statutorily recognizes confidentiality in arbitration proceedings, the law on confidentiality in deliberations of the tribunal is silent. However, the Singapore Commercial Court has held that confidentiality of deliberations, like the confidentiality of arbitration proceedings exists as an implied obligation in law;
• The court agreed with the majority arbitrators in stating that freedom from outside scrutiny enables the arbitrators to reflect on the evidence without restrictions, to draw conclusions untrammeled by any subsequent disclosure of their thought processes, and where they are so inclined, to change these conclusions to further reflection without fear of subsequent criticism or need of subsequent explanation;
• A case would fall within the exception of protection of confidentiality of deliberations in the rarest of rare cases, if the facts and circumstances are such that the interest of justice, in ordering production of records, outweigh the policy reasons for protecting the confidentiality of deliberations;
• Protection of confidentiality does not apply where the challenge is to essential process (for example, if the allegation is that a co-arbitrator has been excluded from the deliberations) but rather to the substance of deliberations (for example, substantive disagreements).

Basis the above analysis, the Singapore Commercial Court rejected the applications on the ground that the dissent by the minority arbitrator fails to provide compelling reasons as to why the interests of justice in ordering production of the records of deliberations outweigh the policy reasons for protection of the confidentiality deliberations. The court directed the Plaintiff to proceed to challenge the award based on arbitration record only.

Confidentiality in arbitration proceedings in India

The High-Level Committee to review the institutionalization of arbitration mechanism in India, popularly known as Justice Srikrishna Committee in its report dated 30.07.2017 proposed the introduction of Section 42A to the Arbitration and Conciliation Act, 1996 (Act) to provide for confidentiality of arbitral proceedings unless disclosure is required by legal duty, to protect or enforce a legal right, or to enforce or challenge an award before a court or judicial authority. While the exceptions to confidentiality in the proposal were broad, the section as it appears today[5], is rather restrictive. Section 42Amandates the arbitrator, the arbitral institution and the parties to an arbitration agreement to maintain confidentiality of all arbitration proceedings except the award, where its disclosure is necessary for the purpose of implementation and enforcement. Hence, the sole exception contemplated for infringing confidentiality in an arbitration proceeding is the disclosure of the award for purposes of its implementation and enforcement. While Section 42A attempts to bring about a statutory recognition of the concept of confidentiality in arbitration proceedings, there are reservations on the merits of this section. In India for example, parties regularly file details of the arbitration proceedings while seeking an extension of time for making of an award under Section 29-A of the Act or for seeking assistance of the court in taking evidence under Section 27 of the Act. Will this be constituted as a violation of the principle of confidentiality? The judiciary is largely silent on this front.

Indian authorities on confidentiality

In 2019, one R.S. Sravan Kumar had filed an application under the Right to Information Act, 2005 before the Central Public Information Officer, Department of Space, Bengaluru (CPIO) seeking information pertaining to the international arbitration initiated by Devas Multimedia Pvt Ltd against Antrix Corporation (the commercial arm of Indian Space Research Organisation). This information included inter alia (i) details of the legal team who represented India in the said arbitration (ii) details of fees paid to the legal teams (iii) details of damages awarded to Devas Multimedia Pvt. Ltd and whether this amount was paid and (v) whether there was any limitation to the payment of the award. The CPIO rejected this application. In appeal, the Central Information Commission interpreted Section 42A of the Act and held that since the arbitration award was not passed in the said case, the information sought at point 3 and 4 herein, is exempted under Section 42A of the Act. However, carving out another exception to Section 42A of the Act, the Commission held that since Antrix Corporation is a public authority, expenditure incurred by it on legal fees and the name of the person who represented India in the arbitration, ought to be disclosed.

Section 42A of the Act was also considered by the Competition Commission of India (CCI) in the proceedings against Amazon.com NV Investment Holdings LLC[6] (Amazon) by Future Coupons Private Limited (FCPL). In the said proceedings, FCPL sought to rely on pleadings filed in the pending arbitration proceedings. Amazon disputed the same, contending that this was in contravention to Section 42A of the Act. However, CCI rejected the said objection and held there are facts that are relevant to both the CCI and the arbitration proceedings and the legal issued for determination in the arbitration proceedings and the proceedings before the CCI are mutually independent. The CCI held that it is not concerned with the dispute between the parties barring the violation of the Competition Act, 2002 and stated that if the parties were to allege violation of the provisions of any law other than the Competition Act, 2002 they are free to pursue legal recourse before the appropriate forum.

Promoting confidentiality

While confidentiality has been recognized as an inherent obligation in law, the statutory recognition for the same still appears to be lagging in Indian jurisprudence. The application of this concept continues to vary across jurisdictions. However, the Singapore Commercial Court has laid down an important precedence for authorities dealing with issues pertaining to protection of confidentiality in arbitration proceedings. This precedent will serve as a guiding factor in defining the boundaries of protection of confidentiality in arbitration proceedings and proceedings emanating from the arbitration.

Drawing inspiration from the Singapore Commercial Court, Indian authorities have the potential to be proactive in recognizing Section 42A of the Act and the underlying principle thereto. Recently the Department of Legal Affairs has constituted a committee led by former law secretary T K Vishwanathan to recommend reforms to the Act. In the current circumstances, it is crucial for Indian authorities and the Expert Committee to provide clarification on the functioning of Section 42A of the Act and revise the restrictive interpretation that has been attributed to it by the judiciary. This is important to promote resolution of disputes with discretion.

Disclaimer: The information contained in this document is intended for informational purposes only and does not constitute legal opinion or advice. This document is not intended to address the circumstances of any individual or corporate body. Readers should not act on the information provided herein without appropriate professional advice after a thorough examination of the facts and circumstances of a situation. There can be no assurance that the judicial/quasi-judicial authorities may not take a position contrary to the views mentioned herein.

We hope you have found this information useful. For any queries/clarifications please write to us at insights@elp-in.com  or write to our authors:

Ashishchandra Rao, Partner – Email – AshishchandraRao@elp-in.com
Tvisha Desai, Senior Associate – Email – TvishaDesai@elp-in.com

References:
[1] [2023] SGHC (I) 11
[2] Section 22, Singapore International Arbitration Act, 1994
[3] Section 23, Australian International Arbitration Act, 1974
[4] Section 42-A of the Arbitration and Conciliation Act, 1996
[5] Section 42-A of the Arbitration and Conciliation Act, 1996 was brought into effect through circular dated 30.08.2019
[6] 2021 SCC OnLine CCI 63