Transparency in Institutional Arbitration Awards
The author, Dhvani Vora, has completed her LLM specialising in Comparative & International Dispute Resolution.
Transparency in international commercial arbitration (ICA) proceedings has become common due to the changing expectations of the users of the competitive arbitral system and the system’s need to maintain its legitimacy. However, the same is not without controversy. This is because the trend towards transparency has the potential to bring about changes to the features that are traditionally associated with ICA, including but not limited to the scope of confidentiality.
This piece particularly analyzes the role of the international arbitral institutions in equalizing the need for transparency and expectation of confidentiality in international commercial arbitral awards through the prevalent institutional policies and practices.
The spectrum of confidentiality offered by the leading international arbitral institutions is highlighted to determine the scope for accommodating transparency. At the extremes, while some institutions provide no arbitral information, other arbitral institutions publish redacted arbitral decisions along with information on the average costs incurred by the parties and the time taken to pass awards under their administration. This disparity exists because each arbitral institution is primarily profit oriented and is desirous of providing distinct services in a competitive market.
There are no express transparency institutional provisions because the proposition brings collateral issues with itself. Majorly, an increase in administrative costs, time, and effort along with the threat to the business of the arbitral institutions.
Costs are incurred to determine the confidential matter to be redacted before publishing arbitral information. This, in itself, is a herculean task since the arbitral institutions differ in their provisions of confidentiality. While some provide for a certain degree of confidentiality, the others are silent on the subject.
Simultaneously, increased resources are required to identify which arbitral awards attract public interest. Even cosmopolitan legal theorists admit that while transparency is an essential virtue of decision making, the public at large could not be interested in all the arbitral information. Therefore, in the absence of express confidentiality provisions, only a specific subset of cases having an element of public interest must be disclosed.
Most importantly, the arbitral institutions are primarily administrative bodies rendering services for monetary gains. They are threatened by the likelihood of the flight of users from the institutional system if the confidentiality of the process is compromised. Consequently, the institutions may incur a loss in business unless a balance is struck between transparency and confidentiality.
The most popular but most controversial means of promoting transparency is the publication of awards.
The argument for publication of awards was initially made over thirty-five years ago, wherein the systemic publication of awards was encouraged. The reasons set out were two-fold. First, that publication would help develop arbitral case law, which would provide certainty and predictability. This, in turn, would change the negotiating attitudes and commercial decisions of the parties. Second, that publication would conclusively prove that arbitration is not only an alternative to national courts, but also the most appropriate forum to resolve international commercial disputes.
In this context, the Secretary General of Milan Chamber of Arbitration (CAM) asserts that since arbitrations conducted under the supervision of institutions render justice, such institutions play a social role and have an impact on the society. Therefore, arbitral institutions must make these arbitrations more accessible and transparent through the publication of awards. Further, the institutions must also provide arbitral information, of which awards are an essential part, to build case law, provide information on the arbitrators and monitor institutional performance.
In the same breath, it is also clarified that the institutions are the first actors to ensure that the confidentiality of the proceedings is protected. Therefore, while transparency aims to promote research and improve the quality of arbitration, it does not intend to showcase the details of the parties involved in an arbitration. Consequently, the sanitization of awards or redaction of the parties’ identities and sensitive factual information is undertaken.
A superficial survey observed that the arbitrators sparsely use published awards as precedents on substantive law matters or matters dealing with international instruments. However, countering these results, the President of the International Chamber of Commerce (ICC) Court of Arbitration put forth that an arbitral tribunal would be unable to establish the consistency of a rule of law or usage of a published award since an overwhelming majority of them remain unknown.
In more recent comprehensive surveys undertaken, the corporate users of the system have voiced their discontent towards arbitrators’ performance. The users desired that arbitral institutions must publish awards, even in a redacted form, to obtain an insight into an individual arbitrator’s decisions on substantive and procedural issues. While some users stated that the arbitral institutions were best suited for publication, they did not provide plausible methods for the same.
Another hurdle in the way of publication of awards is that a considerable number of ad-hoc arbitrations are conducted under privately fashioned rules. The parties who choose ad-hoc arbitration are unlikely to publish awards.
It is now apparent that the arbitral institutions are almost exclusively the legitimate sources of publishing awards while simultaneously protecting confidentiality. An enumeration of the advantages and disadvantages of publication by institutions provides a window into the conflicting views that make the subject controversial.
The most frequent arguments in favor of publication of awards by the institutions are two-fold. First, that the publication of awards rendered under the auspices of an institution enhances its reputation in the market. The parties can gauge which institution is most appropriate administer a dispute and be confident that the institution can manage their dispute reliably and efficiently. This leads to the promotion of healthy competition for arbitrator services in the market. Second, the institutions develop a homogenous body of substantive case law and fill in the gaps between theory and practice.
Inversely, the principal arguments against publication of awards by arbitral institutions are also two-fold. First, the publication directly threatens the institution’s profit-making business due to the additional costs and time incurred to maintain repositories and employ resources for the redaction of confidential information. Further, the sporadic redaction and third parties’ knowledge of the on-going dispute threatens the confidentiality expectations since the award can be traced back to the parties. Additionally, the loopholes in the suggestions put forth to tackle publication-related issues retain the risk of some users fleeing from institutional arbitration, causing a loss in market share. For instance, if the institutions are to make up for the costs incurred in publication, the same would have to be charged to the parties’ accounts. Once again, this would intimidate the parties, and the existence of institutional arbitration may be endangered. Second, the publication erodes the confidentiality concept in arbitration, whereby a party’s competitors can use technical and business data. This may give rise to further litigation.
Due to the preceding conflict and in anticipation of any loss in business, most institutions provide that the arbitral awards are confidential unless agreed otherwise by the parties. Provisions are made for publication of awards with the consent of the parties only under certain circumstances (such as legal duty) and additionally, upon obtaining written consent from the arbitral tribunal.
As far as the increased costs are concerned, the arbitral institutions must maintain a repository of awards digitally rather than keeping physical records that require increased resources. In this regard, the Case Law on United Nations Commission on International Trade Law (UNCITRAL) Texts (CLOUT) is an apt example of an electronically consolidated database of awards.
Further, the arbitral institutions must amend their rules to include express provisions for the publication of reasoned awards. At the same time, model confidentiality clauses should also be provided to the parties. The confidentiality clause proposed in the UNCITRAL Notes of Organizing Arbitral Proceedings can be used as guidance.
Moreover, the institutions that have publishing experience must be looked at as a guiding force. In this regard, the CAM guidelines is a commendable and useful example.
Lastly, the institutions should provide an ‘opt-out’ option to the parties before publication. The award should also be published after a certain period has elapsed. This provides a clear passage for the unsuccessful party to challenge the award before a national court without it being subject to public opinion, leading to lesser chances of the public identifying the parties in a redacted award. Accordingly, the parties’ expectations of confidentiality are protected, and the threat of their flight from institutional arbitration is decreased to a great extent.
In line with the above, the ICC, through its revised Note to Parties and Tribunals now provides for publication of arbitral awards with the view of promoting transparency. Through this Note, the ICC also put to rest the notion of implied confidentiality within its users.
Even though arbitral awards were already made available in the form of abstracts by the ICC, the system’s users are likely to be inclined to use the official unabridged materials on a database maintained by the arbitral institution itself.
An analysis of ICC’s decision displays an endeavor to strike a balance between transparency and confidentiality. On the one hand, the Note provides that final awards shall be published by the Secretariat no less than two years from the notification of the award to the parties. On the other hand, the parties can object at any time before the publication or even request for pseudonymized or anonymized versions of the award to be published.
In the presence of a confidentiality clause in the arbitration agreement, an inverse ‘opt-in’ mechanism is applicable whereby the consensus of both parties is required before publication.
The ICC promotes transparency by imposing the presumption of publication of the final award unless the parties choose otherwise. Concurrently, the ICC offers an option of confidentiality to the parties through an ‘opt-out’ mechanism along with considerations of anonymizing the parties’ private dealings.
While this initiative of the ICC makes its users more alert to add a confidentiality clause in their arbitration agreement to prevent any surprise publication of an award, the ‘opt-out’ mechanism may make this initiative futile if the parties choose to ‘opt-out’ of publication as a default rule. Furthermore, the ICC has not incorporated the above transparency policy in its institutional rules. Therefore, the ICC appears to be testing the efficacy of such a policy by assessing the reaction of its users as well as the competing international institutions. Subsequently, the effect of transparency on the institution’s business can be also gauged.
Nonetheless, this move towards transparency serves its purpose to the system’s users and participants directly. However, more than a single institution is required to implement such a transparency policy concerning the publication of awards. The concepts are adversaries, rather it seeks to find an equilibrium between the two in institutional arbitration.
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China International Economic and Trade Arbitration Commission (CIETAC) Rules 2014
Hong Kong International Arbitration Centre (HKIAC) Administered Arbitration Rules 2018
International Chamber of Commerce (ICC) Arbitration Rules 2017
London Court of International Arbitration (LCIA) Rules 2014
Milan Chamber of Arbitration (CAM) Rules 2010
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Stockholm Chamber of Commerce (SCC) Arbitration Rules 2017
United Nations Commission on International Trade Law (UNCITRAL) Arbitration Rules (revised in 2010)