The reach of confidentiality

Establishing limitations cooperates with the success of the procedure

Cristiano Cardoso Dias
Vamilson José Costa
Marina Gabriela Santos Fusinato

Confidentiality, one of the most esteemed advantages of arbitration, is undeniably a legitimate expectation of the ones who use said mechanism to solve conflicts. Moreover, it is a key element in the execution of the arbitration clause. It is important to stress that as a rule, confidentiality comprises the entire procedure, the very own existence of the litigation, the amount involved, the evidence produced, the documents presented, the outcome and the content of the arbitration award, in addition to any other details that allow the identification of the parties.

However, frequently the parties forget – mostly when writing the arbitration clause – to establish the confidentiality duty to which they are subjected during and after the procedure, which can lead to discussions and violations.

Considering that the confidentiality involved in arbitration is mainly a contractual matter, the reach of the confidentiality duty will vary according to the parties’ will, the orders of the arbitration tribunal or the rules of the elected arbitration institution.

Therefore, if the contractual relation is especially sensitive or if the purpose of the agreement comprises secret information, the arbitration cause should already establish the confidentiality duty of the arbitration procedure, in addition to determining its extent.

In this case, a more sophisticated and secure clause shall also provide the exceptions of the confidentiality principle, traditionally related to disclosure duties, public domain information, exercise of right to defense, enforcement and annulment of the arbitration award. The establishment of the consequences and penalties applicable in case one party breaches said provisions may avoid future headaches.

It is important to mention that the confidentiality duty involved in arbitration must not be mistaken for the material secrecy, which comprises, by law or by the parties’ will, certain documents and privileged information. Therefore, “non-disclose agreements” and traditional confidentiality and secrecy clauses tend not to assure the protection of procedural confidentiality or of the arbitration as a whole.

Anyway, the term of reference shall encompass the matter to better establish the confidentiality obligations imposed to the parties, but also to the other actors involved in the procedure, such as arbitrators, experts, witnesses and employees of the arbitration institutions.

In case there is a reasonable fear or risk of violation of the secrecy involved in the procedure, the party potentially violated may request an emergency measure or specific execution to maintain the confidentiality and imposition, for instance, of fine in case of transgression.

However, even if the confidentiality duty is clearly established, avoiding the illegal disclosure of information related to the arbitration is, actually, impossible.

The remedies and sanctions corresponding to the violations of the confidentiality duty will depend on specific facts – quantity, quality and level of the damage caused by the information disclosed – and may be applied by the own arbitration tribunal or by the Judiciary. In fact, arbitrators and judges may apply punitive measures and order the transgressing party so to compensate the damages caused to the other party. In many cases, the violation of the confidentiality duty involved in the arbitration is understood as a contractual breach, facing the same legal and contractual remedies. Procedural sanctions and even the annulment of the arbitration award remain unusual and polemic, but have already been employed by foreign courts and arbitration tribunals.

Confidentiality in arbitration is a matter in full expansion, and there still are many uncertainties involved. Therefore, anticipating possible problems related to the breach of confidentiality are relevant even before the rise of the litigation and the commencement of the arbitration procedure.