News and insights

Introduction

The Commercial Court recently issued a judgment providing helpful insights on the obligation of confidentiality in relation to arbitrations and, specifically, the extent to which information and documents relating to one arbitration can be used in another arbitration.

The judgment is of particular relevance in the context of maritime disputes, which often involve multiple arbitrations dealing with interconnected factual and legal issues.

Background

The London office of Firm B acted for B Corporation in an arbitration reference between A Corporation and B Corporation in respect of a dispute concerning the sale of Vessel 1 (“Vessel 1 Reference”). The Vessel 1 Reference had been settled.

The Asia office of Firm B also acted for C Corporation in an arbitration reference between C Corporation and D Corporation in respect of a dispute concerning the sale of Vessel 2 (“Vessel 2 Reference”).

A Corporation and D Corporation were companies under the same ultimate ownership.

A Corporation’s Application 

A Corporation alleged that the London office of Firm B disclosed various confidential information concerning the Vessel 1 Reference to Firm B’s Asia office and/or C Corporation in breach of the confidentiality obligation of Firm B’s London Office.

A Corporation applied for the following interim injunctive relief against Firm B and Mr W (a partner of Firm B’s London office involved in the conduct of the Vessel 1 Reference) requiring:

• Firm B (including all its branches) to cease acting for C Corporation in the Vessel 2 Reference.
• Firm B to procure an independent partner of Firm B to “cleanse” its Vessel 2 Reference file of all information concerning the Vessel 1 Reference that were subject to a duty of confidentiality.
• Firm B to refrain from providing any confidential information concerning the Vessel 1 Reference to C Corporation or anyone assisting C Corporation in the Vessel 2 Reference.
• An affidavit be sworn by a partner of the London office of Firm B giving details of the extent to which confidential information in the Vessel 1 Reference had been provided to Firm B’s Asia office, C Corporation or others.

The application was opposed by Firm B.

As to this, Firm B conceded that it was in breach of its confidentiality obligation in passing on an early settlement offer of A Corporation in the Vessel 1 Reference to C Corporation. Except the aforesaid, Firm B denied that it had acted in breach of its confidentiality obligations in passing on other information concerning the Vessel 1 Reference which A Corporation said were confidential.

Legal Principles on Arbitral Confidentiality

Foxton J summarised the applicable principles concerning the duty of confidentiality in arbitration as below.

• The duty of confidentiality applies not only to documents disclosed in an arbitration, but also to information contained in such documents.
• A party’s own documents which came into existence independently of the arbitration do not become confidential in the party’s own hands simply because that party had disclosed the said documents in an arbitration.
• The commencement of an arbitration in respect of a commercial dispute does not make the existence of the commercial dispute and the circumstances leading to the dispute confidential. Thus, for example, a shipowner is not precluded from disclosing to a third party the existence of a charterparty or a complaint made by its charterers simply because the charterers have commenced arbitration in respect of their complaint.
• The disclosure of the commencement, existence or outcome of an arbitration or the existence or outcome of any challenge to an arbitral award will not be a breach of the confidentiality obligation, if there is a legitimate reason for such disclosure.
• However, particulars of claim, factual witness evidence and expert reports created for an arbitration are confidential, even if they did not contain or derive from information that are inherently confidential or information disclosed by the other party in the arbitration.
• The duty of arbitral confidentiality is subject to various exceptions, including where disclosure of confidential information is reasonably necessary to protect the legitimate interest of an arbitrating party. Such exception extends to disclosure made for the purpose of making claims against or defending claims by a third party.

The learned judge also stressed that there is “sliding scale of arbitral confidentiality, with the ease of establishing exceptions and the appropriateness of injunctive relief varying accordingly”. For example, disclosure of a party’s own materials is normally less intrusive than disclosure of the materials produced by the other party.

Consideration of the Alleged Breaches of Arbitral Confidentiality 

Foxton J considered the prejudice caused by the conceded breach of confidentiality obligation regarding the early settlement offer of A Corporation as limited for the following reasons:

• There could be no prejudice to A Corporation because A Corporation had already settled the Vessel 1 Reference.
• Even assuming prejudice to D Corporation as a company in the ultimate ownership as A Corporation was relevant, the significance of A Corporation’s offer to the Vessel 2 Reference was limited because of the significant difference in quantum and factual circumstances between the Vessel 1 Reference and the Vessel 2 Reference.

In respect of the disputed “confidential” information, Foxton J held, inter alia, that:

• Firm B’s London office did not act in breach of any confidentiality obligation in informing its Asia office of the identity of B Corporation’s own counsel and experts, nor of the identity of its party-appointed arbitrator, or in recommending C Corporation to appoint that arbitrator.
• Firm B did not breach confidentiality by informing its Asia office that the Vessel 1 Reference had settled, and that B Corporation were pleased that it did.
• While various other alleged breaches of confidentiality were arguable, Firm B had the better of the arguments that it was not in breach of its duty of confidentiality. In particular, it was strongly arguable that (a) the factual allegations as to the Vessel 1’s condition on delivery and the information provided to B Corporation prior to entering into the sale contract of Vessel 1 were not subject to arbitral confidentiality (being information that came into existence independent of and/or prior to the Vessel 1 Reference) and/or (b) the sharing of these information fell within one of the exceptions to arbitral confidentiality.

Upon reviewing the evidence, Foxton J was also satisfied that there was no realistic possibility of any lawyers of Firm B involved in the Vessel 1 Reference disclosing any further confidential information to C Corporation.

Decision of the Commercial Court

Accordingly, the learned judge dismissed each and every aspect of the injunctive relief sought by A Corporation for the following reasons:

• With the exception of the settlement information, Firm B had the better of the arguments that there was no breach of confidentiality.
• The settlement information was of limited utility to C Corporation in the Vessel 2 Reference.
• Injuncting Firm B from acting in the Vessel 2 Reference would cause significant prejudice to Firm B (given its existing client relationship with C Corporation) and C Corporation (who would be precluded from instructing the lawyers of its own choosing that had been acting for them for over a year). In contrast, not granting the injunction would cause A Corporation no prejudice and very limited prejudice to D Corporation (even assuming its prejudice was relevant to the analysis). Thus, balance of convenience was against granting the injunction.
• On the evidence, Mr W and another member of Firm B’s London office had already “cleansed” Firm B’s Vessel 2 Reference file of any confidential information from the Vessel 1 Reference. There would be no utility for requiring another independent partner of Firm B to repeat the task.
• Mr W had already sworn an affidavit on the information that had been shared to other parties. No further affidavit was therefore required in this regard.

Comments

This case discusses a common question in commercial arbitrations: when and to what extent can information concerning Arbitration A be used in Arbitration B?

In the shipping context, such question frequently arises, for instance, for a disponent owner in the middle of 2 arbitrations in a charterparty chain or where an owner is seeking to rely on information relating to an arbitration commenced by the cargo interests in the owners’ recourse action against its charterers.

In these circumstances, the decision of the Commercial Court suggests that the party “in the middle” can generally:

• disclose in Arbitration B the underlying circumstances leading to the dispute in Arbitration A (and vice versa), which are unlikely to be confidential.
• rely on confidential information relating to Arbitration A in Arbitration B (and vice versa) if the party “in the middle” is required to do so in order to pursue or defend the claim in Arbitration B (which will likely fall within one of the established exceptions to arbitral confidentiality).

However, there is no “one size fits all” answer. Each piece of potentially confidential information must be evaluated individually in order to ascertain whether the information is confidential and, if so, whether any of the established exceptions to arbitral confidentiality is applicable.

Specifically, caution should be given when disclosing in Arbitration B document created or disclosed by the other party in Arbitration A and when disclosing any information concerning settlement discussions.

In this regard, it is of interest that the Commercial Court leaves open the question whether the sharing of information about “without prejudice” settlement discussions between two parties “involved in similar claims with a common enemy” would be in breach of arbitral confidentiality (which Foxton J said was “not wholly straightforward”). This is therefore an issue that may merit further consideration by the Court when it arises in future cases.

Read the judgement here