When you want your dispute to stay outside the public domain

We have already discussed flexibility as a key advantage of arbitration proceedings. Arbitration provides the parties with an opportunity to maintain control of their dispute, as they can manage the entire process and select the arbitrators and rules specifically for a particular dispute. An equally important advantage of arbitration is confidentiality. In business relations, it is often not only the outcome of the dispute that matters but also whether the related details become public, reach the media or are disclosed to competitors.

Court proceedings are public, arbitration is confidential

Arbitration is essentially a private and non-public process, which makes it significantly different from traditional court proceedings. Before court, hearings are usually public, court decisions are published, and court files may be accessible to third parties. As a result, sensitive information that the parties would prefer not to disclose may come to light in court proceedings.

It is precisely the protection of information that is the reason why many companies choose arbitration to resolve their disputes. Ensuring confidentiality is a fundamental requirement for many companies, whether because they are in dispute with a strategic partner, they wish to protect their own reputation, or because the matter involves sensitive business information such as prices, technology, or terms of cooperation.

What exactly does confidentiality of arbitration proceedings entail?

In practice, confidentiality comprises two aspects – private nature of the proceedings and confidentiality obligation. Privacy means that the proceedings are attended only by the parties, their legal representatives, arbitrators (arbitral tribunal), witnesses or experts, and, where applicable, interpreters, etc.

Confidentiality covers information about the dispute as such and the facts that form subject of the proceedings. All documents used in the proceedings, exhibits, written submissions, correspondence, minutes of hearings, and the arbitral award itself are confidential. The confidentiality obligation typically applies to the parties, as well as the arbitrator or arbitral institution and its administrative staff, but it can also be extended to witnesses and experts.

What is the basis of confidentiality

Confidentiality is not automatically granted even in arbitration proceedings, and special attention must be paid to ensuring it. Although confidentiality of proceedings may be ordered directly by the law at the place of arbitration, an agreement between the parties is essential.

Thanks to the party autonomy, business partners can provide for confidentiality of arbitration directly in the arbitration clause. The key is to establish the procedural rules governing the proceedings. The rules of arbitration institutions usually provide for a confidentiality obligation for arbitrators, the arbitration institution and its staff, as well as confidentiality of information and documents on the record and the arbitral award. However, this is not always the case, and one must carefully verify the specific rules and, if necessary, establish confidentiality subsequently in the proceedings.

For example, the ICC Rules do not stipulate a general confidentiality of arbitral proceedings. Confidentiality is expressly set forth in relation to the work of the arbitral tribunal; on the other hand, basic information on the arbitration proceedings and subsequently also the arbitral award are expected to be made public. In specific proceedings, it is therefore necessary that the tribunal rules on confidentiality of the proceedings or specific information and documents. Objections may be raised against the publication of the arbitral award, thereby preventing it.

The VIAC Rules, on the other hand, provide that confidentiality must be maintained in relation to all aspects of the proceedings, and the awards are also confidential. VIAC may only publish anonymized summaries or parts of awards in its publications, and objections may also be raised against it.

In the Czech Republic, the Rules of the Arbitration Court attached to the Economic Chamber and the Agricultural Chamber stipulate that proceedings are not public and that a confidentiality obligation applies, but they also allow the Arbitration Court to publish certain significant anonymized decisions.

Why confidentiality is not absolute

The duty to respect confidentiality of arbitration proceedings and arbitral awards has its limits. First, the parties may expressly agree on disclosure. The obligation to disclose information from the arbitration file may be required by the law, for example, vis-à-vis regulators or in the case of publicly traded companies. In proceedings for the recognition or enforcement of arbitral awards in court, third parties may access information about the proceedings and the arbitral award, when they become parts of the court file. Exceptions may also include cases of public interest, such as suspected corruption or other illegal activities.

Confidentiality as protection for business

Confidentiality makes the arbitration an environment in which disputes can be resolved professionally, without damaging reputations, and often without interfering with an ongoing cooperation between the parties. A properly drafted arbitration clause and procedural strategy will ensure that trade secrets remain where they belong – between the parties to the dispute.