The concept of confidentiality is an important aspect of alternative dispute resolution mechanism. Arbitration procedures is based on autonomy, the parties decide the procedure for the process. In order to understand confidentiality, we must first understand the difference between confidentiality and privacy. There is a very thin line of difference between these two terms. Privacy is a much narrow concept than confidentiality. Privacy is not allowing the third parties to participate in the arbitration proceedings, basically its preventing third party intervention. Whereas, confidentiality is the obligation on the parties to not disclose any information about the arbitration proceedings to any third party.
There are two types of confidentiality in arbitration: (a) confidentiality of the arbitration proceedings and (b) confidentiality of the documents presented to the tribunal.
Confidentiality in Indian perspective
The aspect of confidentiality is governed by Section 75 of the Arbitration and Conciliation Act, 1996. But, that section is applied only in the case if of conciliation and not arbitration. Therefore, by the virtue of the 2019 amendment, Section 42A was introduced, which states that confidentiality should be maintained by the parties, the arbitrators and the arbitral institution. Under this section an award can be disclosed only if it is going to be set aside or for the purpose of enforcement of the award.
Importance of confidentiality:
- Parties might not want the general public to know the dispute, as it might damage their reputation.
- Confidentiality protects the party’s trade secrets from their competitors.
- If confidentiality is not maintained, it may lead to financial losses if the general public knows about the dispute in hand.
Disclosure in Public Interest
In certain situation it is important that public interest is considered than party confidentiality. If there is a dispute involving an public company, then the financial information should be disclosed. There is also a duty that the parties disclose any award against the party in case there is a fiduciary relationship between them. This includes shareholders, creditors, partners or people having major interest in the company. These public interests should be considered before going ahead with the principle of confidentiality.
Confidentiality plays a major role in arbitration process. During the recent times arbitration has gained more popularity due to the concept of confidentiality. Even though there are a lot of advantages, sometimes it might be in par with the concept of public policy. Therefore, it is important that the parties follow partial confidentiality and partial transparency for the interest of public at large.