Jan, 18 2024

It's critical to comprehend the precise definition of arbitration before diving into the transparency vs. confidentiality debate. Arbitration is a part of alternative dispute resolution mechanisms that are mostly used where the dispute is commercial. In the procedure of arbitration, a neutral third party that is referred to as an arbitrator or the arbitration tribunal hears the contentions of both the parties or all the parties in a multi-party dispute and renders a legally enforceable award. The United Nations Commission on International Trade Law (UNCITRAL) provides the rules and procedures for arbitration.  [1] It defines an arbitration agreement and governs the entire procedural aspect of arbitration, from the appointment of the arbitrators to the commencement of the arbitration proceedings. In an arbitration proceeding, the decision of the arbitration tribunal is always binding on the parties.

Talking about another aspect of arbitration, the parties' consent to the arbitration is important, and therefore it is necessary to maintain transparency between the parties so that there is no issue of any over-arching conflict. The nature of arbitration proceedings is private, and hence the arbitration proceedings are meant to be kept confidential, unlike regular litigation proceedings, which are out and about to the public. Two crucial ideas that are frequently at odds with one another in arbitration proceedings are transparency and confidentiality. When we talk about confidentiality in arbitration, it refers to the duty to maintain the privacy of the specificity of the agreement, the arbitration process, and the arbitral award. This implies that, without the consent of the contracting parties, the information exchanged during the arbitration may not be revealed to other parties or any third parties. Transparency in arbitration, as opposed to confidentiality, refers to the process's openness and ability to make information accessible to the parties engaged in the dispute. More transparency has the potential to enhance parties' trust in the impartiality and efficiency of arbitration as a means of resolving disputes. [2] With greater use of institutional arbitration, technology in arbitration and the budding field of Online Dispute Resolution, there’s also rise of faceless hearings. The process can bring more fairness, but to the contrary if there’s no transparency about the structure (who is pulling the threads), functioning (how decisions such as appointment of Arbitrator are made), and financing ( who are de facto beneficiaries) of institutions and ODR service providers, these instruments - institutions and technology solutions can be subjected to abuse. Transparency is therefore imperative in this respect also. The confidentiality aspect appeals to the contracting parties since it safeguards their proprietary information. Although confidentiality comes with additional benefits for the contracting parties as well, it reflects the autonomy of the contracting parties, which is the essence of arbitration. The protection of the privacy of parties' information helps them shield their reputations from any sort of harm or public intrusion. Section 42A of the Arbitration and Conciliation Act of 1996 also mentions the confidentiality clause. The parties to the arbitration proceedings, the arbitrator(s), and the arbitral institution shall maintain confidentiality regarding the arbitration proceedings, with the sole exception being the public release of the award of arbitration for its execution and enforcement, as per Section 42A of the Act.  [3] The confidentiality clause is particularly important in international commercial arbitrations, as a revelation to the public might damage ties to regulators, customers, and stakeholders.

It's challenging to find a balance between confidentiality and transparency. Even the Arbitration and Conciliation Act, 1996 of India, requires that any person who is being appointed as an arbitrator must reveal in writing if they have had any sort of relationship or connection with the disputants, legal counsel, subject matter, or arbitral decision that could reasonably raise questions about the arbitrator's independence and neutrality.  [4] Ensuring transparency in arbitration processes is crucial for adhering to the ideals of fairness, equality, and justice. Not only this but maintaining openness can help arbitrators make well-reasoned judgments and follow procedural standards by allowing for examination from an array of parties.

In conclusion, transparency is just as vital in arbitration as confidentiality. Maintaining fairness in the arbitration process and the parties' confidence in the arbitrator calls for finding a balance between the two. While considering the nuances of both parameters, institutes should ensure that certain principles are not abridged, and the parties should always take into consideration aspects like the nature of the dispute, the number of parties to the dispute, and binding treaty provisions when it comes to international arbitration.  While confidentiality has been regarded as one of the important elements of international commercial arbitration, in recent times, it has been suggested that transparency is necessary for arbitration to succeed as an effective and reliable means of conflict settlement.

 

 

 

 

 

---

[1] Confidentiality and transparency in international commercial arbitration... at: https://journals.law.harvard.edu/hnlr/wp-content/uploads/sites/91/HNR203_crop-1.pdf

[2] The RMLNLU Law Review Blog (2021) Sanitizing arbitral awards: Transparency V. confidentiality, The RMLNLU Law Review Blog. Available at: https://rmlnlulawreview.com/2018/02/01/sanitizing-arbitral-awards-transparency-v-confidentiality-2/

[3] Arbitration and Conciliation Act, No. 26, 1996, India § 42A

[4] Gupta, S. (2020), Independence & impartiality of arbitrator- scheme under the Arbitration & Conciliation Act, 1996 - Arbitration & Dispute Resolution -India)a, Independence & Impartiality of Arbitrator- Scheme Under The Arbitration & Conciliation Act, 1996 - Arbitration & Dispute Resolution - India. Available at: https://www.mondaq.com/india/arbitration--dispute-resolution/959426/independence--impartiality-of-arbitrator--scheme-under-the-arbitration--conciliation-act-1996