By our Guest Contributors, Matt Gatenby and Jackie Martin, of TravLaw.
Whether we like it or not, disputes are a common factor in modern life. There are many ways to resolve disputes – and that is an article in itself! For the purposes of today this article focuses on a theme that often arises in any dispute situation – that of confidentiality.
Certainly parties in disputes are increasingly more aware of factors such as overall resolutions times and costs. There is a calculation to be made on all of that, but another notable point is that issue of confidentiality.
What Is Confidentiality?
Confidentiality means the obligations and agreement between both parties with regards to the disclosure of private information. This extends to any information used throughout the proceedings and includes key documents such as witness statements, evidence, judgements, settlements and so on along with the personal and business details of both parties.
Why is confidentiality in Arbitration different to Court based litigation?
There are big differences between confidentiality in arbitration and litigation proceedings. The key factor being that litigation proceedings are conducted in the public arenas of the courts where most private information is made available to the world at large - potentially, leaving the door open for a strong media presence and publicity which neither party can opt out of! In contrast, parties to arbitration proceedings have the freedom to negotiate and agree upon their chosen position with regards to confidentiality before proceedings take place.
This is because an arbitration tribunal cannot commence without a written Agreement to Arbitrate – signed by both parties. The drafting of the Agreement to Arbitrate gives both parties an opportunity to negotiate the confidentiality of documents. The Agreement should conclude whether any private documents can be made public or if they must remain strictly private between both parties and the Arbitrators only. However, even in the case of a poorly drafted Agreement whereby a confidentiality clause is missing, Arbitration Rules indicate that the default position of the tribunal is that all proceedings should remain strictly private and confidential. The parties can even go so far as to include compensation clauses whereby, compensation is payable by a party in breach of the confidentiality agreement, so certainly not an area to become complacent.
What are the Pros & Cons with Confidentiality in mind?
There are advantages to both private arbitration and public litigation proceedings which should be considered when choosing which route of dispute resolution to take.
For example, public proceedings have benefited the travel industry in recent years by raising the profile of fraudulent claims to travel businesses and ultimately, helping to stamp out the fraudulent sickness claims plaguing the industry just a couple of years ago! Notably, a heavy media presence surrounded Christopher Byng and three others when Jet2 responded to their false sickness claims with litigation proceedings. One can only assume that if the publication of the evidence used in court which included photographs taken from the claimant’s social media accounts, releasing their faces (and other body parts!) to the world, was not enough to deter other potential fraudsters from attempting to cash in – although their publicised four month jail sentences and £20k legal fees may have been more persuasive…see here for more details of that case.
However, there can also be negative connotations to having such public proceedings. Such as, damaging assertions made against your business and the particulars of your business operations being laid bare, rightly or wrongly. So, before proceeding, the implicitly of any statements and documents to be used in court should be considered, most of which will become public property and open to scrutiny from your competitors. The advantage of arbitration is that it can abolish this vulnerability – as discussed above, typically all elements of an Arbitration remain private.
What Should Parties Consider?
It is not uncommon for an agreement to arbitrate to be concluded long before a dispute arises. This is because Arbitration Clauses can be added to Agreements and are binding for both parties. Therefore, it is important that the parties consider at the negotiation stage, how the Arbitration Clause could affect the confidentiality of their business in the future. For example, in Agreements whereby an Arbitrator’s decision is not binding litigation could be the next step, with all that brings. Therefore, the implied confidentially of arbitration proceedings could be compromised. That said, case law has defined some basic principles regarding confidentiality in these circumstances. For example, where public judgements are made and where possible, confidential information should not be disclosed unless it is considered within the public’s interest - so there is still some protection, albeit to a lesser degree of Arbitration. (City of Moscow v Bankers Trust [2005] QB 207).
In Closing…
So, to conclude, you can be confident when choosing the arbitration method of dispute resolution that with a correctly drafted Arbitration Clause and unless agreed otherwise, any documents used will remain private and proceedings will be conducted behind closed doors. Therefore, giving you full control over the publicity of your personal and business details!
As always, individual situations will differ - If you are a travel business with thought on this or any other matter please feel free to reach out to Jackie@Travlaw.co.uk or Matt@Travlaw.co.uk or call 01132 580033.