India: Confidentiality In Arbitral Proceedings: An Indian Perspective

Introduction

Lord (Peter) Goldsmith had said in the Delhi Arbitration Weekend 2023 that, "if confidentiality of the arbitration proceedings is extended to court proceedings it would respect party autonomy which can lead parties to avoid their frail finances being discussed in open court." This statement had provided lots of food for thought to arbitration practitioners in India.

One of the key reasons parties prefer arbitration over court litigation is the confidentiality that is accorded to arbitral proceedings. Confidentiality is arguably a necessity in arbitration proceedings, and in alternate dispute resolution mechanisms in general, for its ability to promote efficient and impartial resolution, discouraging sensationalism or attempts to gain undue advantage through media exposure. It reduces the risks associated with the disclosure of commercially sensitive information to competitors, customers, and other third parties. Confidentiality also plays a vital role in facilitating settlement by minimising public posturing and allowing parties to negotiate in a more cooperative and sincere manner.

As many an author before us have cautioned, however, confidentiality must not be conflated with privacy - while arbitral proceedings are necessarily private, implying they're not open to third parties and the public, confidentiality is the obligation that parties impose upon themselves, to not disclose the content, documents or information in general, regarding the proceedings to third parties or to the public at large.

Limited statutory protection under the Indian regime

While confidentiality provisions can be and are generally stipulated in contracts themselves, given the importance accorded to such provisions, most arbitral institutions also acknowledge and regulate confidentiality obligations. The obligation is also protected statutorily under some regimes, including India wherein the law has been codified in the form of the Arbitration and Conciliation Act of 1996 ("Arbitration Act"). However, it must be noted that the Arbitration Act initially acknowledged the importance of confidentiality in conciliation proceedings alone, through Section 75. This protection was not extended to arbitral proceedings, leaving parties to rely on contractual provisions, arbitral rules of various institutions and rather vague principles under the Indian Evidence Act, 1872.

Introduction of Section 42A

To address this issue, the Justice Srikrishna Committee recommended the inclusion of a new provision in the Arbitration Act, explicitly providing for confidentiality of arbitral proceedings. Three exceptions were suggested to be carved out to this obligation though- disclosure mandated due to a legal duty, disclosure to protect or enforce a legal right, and disclosure to enforce or challenge an award before a court or judicial authority. However, the subsequent Arbitration and Conciliation (Amendment) Act, 2019 ("Amendment Act"), introduced Section 42A, which limits the exception of confidentiality to disclosures for the implementation and enforcement of arbitral awards. Section 42A reads as follows:

Conspicuously, two out of the three exceptions suggested by the Justice Srikrishna Committee were not incorporated, and a single exception - disclosure for implementation and enforcement of an arbitral award - was carved out. While a strict reading of Section 42A of the Amendment Act suggests that the parties may not derogate from the principles of confidentiality, the Arbitration Act seems to be suspiciously silent on the consequences of a possible breach or non-compliance. In the absence of such a provision, uncertainty shrouds the enforceability of confidentiality obligations.

The Uncertainty around 'Arbitral Proceedings'

It has been pointed out previously by others that Section 42A of the Arbitration Act limits the confidentiality obligations to the tribunal and the parties. The absence of third parties, including witnesses, stenographers, transcribers, tribunal secretaries and other persons who attend and/or are a part of the arbitral proceedings has been flagged as a cause of concern by many. This post, however, is limited to a different, arguably critical shortcoming evident in the Arbitration Act. This is the lack of clarity surrounding the term 'arbitral proceedings' and whether it includes court proceedings related to arbitration. The Arbitration Act does not define this term, leading to ambiguity. Some interpretation was attempted by Justice Nariman in the case of Board of Control for Cricket in India v. Kochi Cricket Private Limited.¹ However, while determining the applicability of the Amendment Act as provided for in Section 26, he proceeded under the assumption that 'arbitral proceedings' are divorced from court proceedings held 'in relation to' an arbitration.

Consequences of the restrictive interpretation of 'Arbitral Proceedings'

While the semantical approach adopted in BCCI v. Kochi may be a topic of discussion on another day, the implications of the assumption made in the judgment are, however, far reaching.

If court proceedings related to arbitration are not covered by confidentiality obligations, it could result in the exposure of confidential information to the public domain. All documents placed before a court for the purposes of say, securing interim relief under Section 9 of the Arbitration Act, or the agreement containing the arbitration clause filed to seek reference to arbitration or appointment of an arbitrator under Section 8 or Section 11 of the Arbitration Act, would no longer be covered by the confidentiality obligations stipulated in Section 42A. Such an interpretation would undoubtedly be perverse, and could undermine the sanctity of arbitral proceedings, violating both privacy and confidentiality obligations.

The English case of Department of Economics, Policy and Development of the City of Moscow v Bankers Trust Co. would provide a good case study to understand the implication of a restrictive reading of 'arbitral proceedings'.² In this case, an arbitral award was published only to the parties (London Bankers Trust Co. and the Moscow Government). London Bankers Trust Co. had lost the arbitration to the Moscow Government. It filed an application for setting aside the arbitral award. The application of London Bankers Trust Co. was also subsequently dismissed. In light of the dismissal by the English court, the Moscow Government sought to publish the judgment to showcase to the international financial community that the English courts had also undertaken a detailed scrutiny of the arbitral award and upheld the same in its favour. However, the judgment itself had also recorded that it should remain private to the parties, given the fact that it contained a detailed analysis of the award, which raised highly sensitive political issues.

The English Court of Appeal, before which the judgment was challenged, was faced with a dilemma – while the arbitral process is usually undertaken because there exists an implied duty of confidentiality, any challenge before a court can hardly be termed consensual. The principle that courts must administer justice publicly is well-settled. However, a yet more fundamental principle exists that the chief object of courts of justice must be to secure that justice is done. In fact, the appeal mechanism exists in public interest and is not a mere extension of the consensual arbitral process. However, parties exercise their autonomy while choosing a private forum like arbitration for dispute resolution and expect that confidentiality obligations surround such arbitral proceedings. It was observed that the courts can take into account the parties' expectations regarding privacy and confidentiality while pronouncing a judgment. While a blanket ban on publication of court judgments could not be justified, cases where a party could suffer real prejudice from such a publication could clearly be excepted. On the basis of this understanding, the English Court of Appeal upheld the order directing the parties to maintain confidentiality around the judgment.

Understandably, the principle of publicity must yield in appropriate cases, where to sit in public would destroy the very subject matter of the dispute.³

The Public Interest Exception

What happens when disclosure of perhaps a criminal nature is made during arbitral proceedings? The exception carved out in Section 42A seems to be limited to disclosure of the award. Can transcripts, therefore, not be released in public?

Perhaps the public interest exception needs to be carved out as well. This exception has previously been recognised by the English Court of Appeals in Emmott v. Michael Wilson & Partners,⁴ in Hong Kong in Section 18(2) the Hong Kong Arbitration Ordinance,⁵ and even in Singapore, where in AAY v. AAZ, the court found that there was legitimate public interest in making the judgment in a previous proceeding public, albeit with appropriate redaction, as the judgment discussed the latest jurisprudence on the issue of confidentiality in arbitration.⁶ In Australia, the Supreme Court of Victoria in Esso Australia Resources Ltd. v. Plowman had held that there may be instances where the public might have a legitimate interest in knowing what has transpired in an arbitration, and in such a case, there existed a "public interest" exception to the duty of confidentiality.⁷

However, the dismissal of the three exceptions suggested by the Justice Srikrishna Committee seems to be deliberate and indicative of the Legislature's intent to not allow any such disclosure, even where there exists a legal duty. Clearly, the obligation of confidentiality was intended to be strictly enforced in India.

Conclusion

The Indian regime has attempted to provide confidentiality obligations in arbitral proceedings through Section 42A of the Arbitration Act. However, the provision as it stands today, appears to be riddled with gaping holes that need to be addressed at the earliest. Perhaps a closer judicial scrutiny in an appropriate case could provide a better understanding of how the provision is to be enforced. Till such time, or till a subsequent appropriate amendment, the provision is likely to play out in different forms and manner.

Footnotes

1. (2018) 6 SCC 287.

2. [2005] QB 207.

3. Scott v. Scott, [1913] AC 417.

4. John Forster Emmott v. Michael Wilson & Partners Ltd., 2008 EWCA Civ 184.

Pertinently, two exceptions were carved out:

1. Where disclosure is necessary for protection of the legitimate interests of an arbitrating party; and
2. Where disclosure is necessary to serve public interest, or the interests of justice.

5. As per Section 18(2), disclosure of confidential information can be made for:

1. Protection and pursuance of a legal right or interest of a party;
2. Enforcement or challenge of an arbitral award;
3. Satisfying obligations under law;
4. Seeking professional or any other advice.

6. [2011] 2 SLR 528

7. (1995) 183 CLR 10.

The content of this document do not necessarily reflect the views/position of Khaitan & Co but remain solely those of the author(s). For any further queries or follow up please contact Khaitan & Co at legalalerts@khaitanco.com