In prior posts here at FITCH, we have discussed some of the reasons that parties choose international arbitration over litigation for their cross-border disputes. Over the next few months, we will be taking a deeper dive into the advantages of international arbitration. One such advantage is confidentiality.
Businesses generally do not like bad press. Even more importantly, they don’t like to have their trade secrets or intellectual property publicly disclosed and litigated under the hot lights of the business press. So keeping disputes and business dealings confidential can be an important consideration in how they decide to have their disputes resolved.
In litigation, there is a general right for the public to access the proceedings, be present for trial, obtain the filings, and read the court’s determination. Although courts do have important safeguards in place allowing for certain filings and proceedings to occur under seal or confidentially, they are the exception rather than the rule.
By contrast, in arbitration by default the public does not have any right to access the proceedings. Most arbitral rules do not allow for public attendance at an arbitral hearing or for the public to access the parties’ filings in the case. In addition, the parties can agree to (or the arbitrators can order) greater levels of confidentiality, including that the parties not discuss the case publicly (except as required by law, such as reporting required from publicly traded companies) and that all documents from the case be confidential and not be used for any purposes outside the arbitration.
The only circumstance in which an arbitration is not confidential is if enforcement by a court is needed. Normally, the arbitral award must be publicly filed with the court (with certain exceptions, i.e., if the award itself contains trade secrets or confidential business information); in such cases the parties’ dispute may become a matter of public knowledge. Because the grounds for annulment of an arbitral award are quite narrow, however, the great majority of awards are voluntarily complied with by the losing party, so this concern can be limited. In addition, if there are particularly sensitive issues that should not be disclosed in a public filing, the parties can alert the arbitrators to that fact so that they may draft the award in such a way to limit reference to sensitive information.
For these reasons, if confidentiality is important-as it is for many business transactions, arbitration offers a key advantage over the alternative of litigation in the courts.
Parties themselves can take steps to ensure the confidentiality of dispute resolution proceedings to which they are party by including certain provisions in their arbitration contacts or clauses. While there is a default presumption of non-publicity in arbitration, greater levels of confidentiality will depend on the law of the contract, the law of the forum where the arbitration is held, and any separate agreement by the parties. If confidentiality is particularly important (such as in intellectual property disputes), then the parties may want to draft specific confidentiality protections into the arbitration clause.