Confidentiality in arbitration: to codify or not to codify? Perspectives from England and Scotland

January 2022 saw the twenty-fifth anniversary of the Arbitration Act 1996 coming into force in England & Wales. Marking that anniversary, the Law Commission of England & Wales was tasked with revisiting the Act to ensure that it remains "state of the art" and to consider whether any amendments might be required in the light of a quarter-century of experience of arbitration conducted under its auspices.

The Law Commission published its First Consultation Paper in September 2022 and its Second Consultation Paper in March 2023. The general consensus is that major reform of the Act is neither necessary nor desired by arbitration users and practitioners – a view which is, provisionally, shared by the Law Commission. Nonetheless, the Commission has curated a shortlist of discrete topics which it considers would benefit most from review, even if it were to reach a provisional conclusion that no reform is needed.

One of those topics is confidentiality, and specifically whether the confidentiality of arbitration in England & Wales should be codified in the Act.

In this article, we offer some observations on the Commission's preliminary conclusion that the Act should not attempt to codify confidentiality. In doing so we offer a comparative perspective with the position in England's nearest neighbouring jurisdiction – Scotland – and ask whether the Commission's preliminary conclusion signals a real divergence between the two jurisdictions' approach to confidentiality in arbitral proceedings.

Confidentiality of arbitration under the current law in England & Wales

In its current form, the English Act does not expressly address confidentiality. However, arbitrations seated in England & Wales (and thus subject to the English Act) are governed by general principles of confidentiality (and privacy).

That position was recently affirmed by the Supreme Court in Halliburton v Chubb [2020] UKSC 48, in which Lord Hodge suggested that a duty of confidentiality might be characterised as an implied obligation arising out of the nature of arbitration, or even as a rule of substantive law "masquerading as an implied term" (per Collins LJ in Emmott v Michael Wilson & Partners Ltd [2008] EWCA Civ 184 at [84]).

The Commission's initial view on codifying confidentiality

The Commission's initial view is that it would be unwise to attempt to create a statutory code of confidentiality. The Commission's reticence appears to stem from a concern that, whilst there would be no difficulty in stating the general rule that arbitration is subject to confidentiality, codifying the exceptions would be unworkable.

Therefore, the Commission's approach appears similar to that of the Departmental Advisory Committee on Arbitration, which was responsible for drafting what ultimately became the 1996 Act; in considering an express obligation of confidentiality, the DAC observed that "the exceptions are manifestly legion".

The Commission acknowledges that, internationally, there is a range of legislative approaches to confidentiality, and provides four pertinent examples of jurisdictions whose arbitration laws codify confidentiality to varying degrees: New Zealand; Australia; Hong Kong; and Scotland. If those jurisdictions successfully operate a codified duty of confidentiality, and if English law clearly recognises the obligation of confidentiality in arbitration, what explains the ongoing scepticism as to the utility of a codified obligation in England and Wales?

It is helpful at this juncture to look northwards to Scotland, which has had a codified obligation of confidentiality in arbitration since 2010.

The position in Scotland

Scotland's regime makes for an interesting comparative analysis for two reasons.

First, the Arbitration (Scotland) Act 2010 is one of the most modern arbitration regimes in the world: it entered into force almost fourteen years after the English Act. Secondly, the Scottish Act was modelled on the English Act. In other words, the Scottish Act might, itself, be described as reflecting to some extent what an updated English Act might look like (subject of course to necessary amendment to reflect the differences between the two legal jurisdictions).

Scotland has an opt-out confidentiality regime created by Rule 26 of the Scottish Arbitration Rules set out in Schedule 1 of the Scottish Act. It is a default rule, meaning that it applies unless parties agree otherwise.

Pursuant to Rule 26, disclosure by a party, the tribunal or any arbitrator of confidential information is actionable as a breach of confidence unless the disclosure:

(a) is authorised, expressly or impliedly, by the parties (or can reasonably be considered as having been so authorised);

(b) is required by the tribunal or is otherwise made to assist or enable the tribunal to conduct the arbitration;

(c) is required—

(i) in order to comply with any enactment or rule of law;

(ii) for the proper performance of the discloser's public functions; or

(iii) in order to enable any public body or office-holder to perform public functions properly;

(d) can reasonably be considered as being necessary to protect a party's lawful interests;

(e) is in the public interest;

(f) is necessary in the interests of justice; or

(g) is made in circumstances in which the discloser would have absolute privilege had the disclosed information been defamatory.

The approach taken in the Scottish Act is therefore to set a general rule of confidentiality, before setting out key exemptions to that rule, including those recognised under the law of England & Wales.

A real divergence?

If the drafters of the Scottish Act drew heavily on the English Act, why do the Acts diverge on the question of codifying confidentiality? And if what has been codified in Scotland essentially mirrors the English common law position, why does there remain resistance in England & Wales to a similarly codified duty of confidentiality?

The answer may lie in the uniquely deep body of case law on confidentiality in arbitration in England & Wales. In the leading English case of Emmott, Lawrence Collins L.J. observed that: "It is apparent that the English jurisprudence on this subject… is much richer than that of any other important arbitration centre, and that it constitutes a major contribution to the development of the law of international arbitration".

With the courts of England & Wales having played such a leading role in developing the law of confidentiality in arbitration, it is perhaps no surprise that arbitration users and practitioners south of the border have such confidence in the state of the law of confidentiality in arbitration, and in the courts' ability to deal with new issues that might arise. Ultimately, what matters to arbitration users is predictability as to how their arbitration will be conducted; arbitration users in England & Wales may feel that the existing judge-made law already offers a sufficiently clear and reliable regime and that codifying confidentiality would therefore carry little upside. In other words, "if it ain't broke, don't fix it".

If the Scottish Act drew heavily on the English Act and English jurisprudence, what led the framers of that Scottish legislation to diverge from the English position and include a codified duty of obligation? First, in contrast with the response to the current English consultation, the consultation in Scotland leading up to the Scottish Act showed a clear appetite for a codified confidentiality obligation. Second, the drafters of the Scottish Act took confidence from the fact that a clear confidentiality obligation in English law (albeit one based on an implied term rather than statute) worked well and considered that codifying a similar obligation into the Scottish Act was the most straightforward way of ensuring a similarly clear position. And third, the drafters were aware of a more general international trend towards codified confidentiality and saw no reason why Scotland should not form part of that growing consensus.

Ultimately, the divergent approaches taken to confidentiality obligations between Scotland and England & Wales simply amount to different routes to achieving the same objective. In England & Wales, decades of case law have created a position that is satisfactorily clear and certain while retaining flexibility. In Scotland, the Scottish Act seeks to achieve the same outcome by codifying a starting position which draws strongly on that same English jurisprudence.  

Confidentiality is one of the key features and benefits of arbitration; both the consultation leading to the Scottish Act and the current consultation regarding the English Act confirm that arbitration users on both sides of the border continue to rank confidentially as one of the most prized features of arbitration. The divergent approaches taken under the two Acts show that there is more than one way to achieve the clear and predictable approach to confidentiality that parties value.