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CONFIDENTIALITY IN ARBITRATION PROCEEDINGS

Introduction
Arbitration as an alternate dispute resolution mechanism has seen a substantial rise in the last decade or so, not only in India but throughout the globe owing to the fact that arbitration allows greater party autonomy and is more cost effective and speedier as compared to litigation. The Arbitration and Conciliation Act, 1996 (“the Arbitration Act”) deals with the law relating to arbitrations in India and the Arbitration Act was amended recently in 2019 with the enactment of the Arbitration (Amendment) Act, 2019 wherein the principle of confidentiality of arbitration proceedings was introduced in India.
Confidentiality, as a principle, has been a part of the Arbitration Act since its inception in terms of Section 75 of the Arbitration Act. However, Section 75 of the Arbitration Act only related to conciliation proceedings and not arbitration proceedings. Section 75 of the Arbitration Act provides that the conciliator and the parties shall keep confidential all matters relating to the conciliation proceedings and such confidentiality shall extend to the settlement agreement except where its disclosure is necessary for purposes of implementation and enforcement.
In 2017, a High Level Committee headed by Justice B. N. Srikrishna was formed in order to review the institutionalization of arbitration mechanism in India which submitted a report suggesting various reforms and amendments to the Arbitration Act. One such recommendation by the High Level Committee was the introduction of the principle of Confidentiality in arbitration proceedings. Pursuant to the recommendations, the Arbitration and Conciliation (Amendment) Act, 2019 was enacted which introduced Section 42A wherein the principle of Confidentiality was extended to arbitration proceedings as well. Section 42A is reproduced below:
“42A. Notwithstanding anything contained in any other law for the time being in force, the arbitrator, the arbitral institution and the parties to the arbitration agreement shall maintain confidentiality of all arbitral proceedings except award where its disclosure is necessary for the purpose of implementation and enforcement of award.”
This article intends to analyse the concept of confidentiality (which has now been extended to arbitration proceedings) and seeks to provide an overview of the concept of confidentiality prevalent in the International scenario.
Meaning of Confidentiality
Confidentiality has not been specifically defined anywhere in the Arbitration Act. Oxford Dictionary defines the word “Confidentiality” as “a situation in which you expect someone to keep information secret”. Black’s Law Dictionary defines the word “confidential” as “intrusted with the confidence of another or with his secret affairs or purposes; intended to be held in confidence or kept secret”. Confidentiality, as a principle, is not unknown and is ingrained in the legal fraternity throughout the world in the form of client-attorney privilege. In India client attorney confidentiality has been provided expressly under Section 126 of the Indian Evidence Act, 1872 wherein counsel are forbidden from divulging any information provided to them by their client or any advice given by them to the client subject to certain exceptions. The concept of confidentiality introduced to arbitration proceedings vide Section 42A of the Arbitration Act provides that the arbitrator(s), the arbitral institution and the parties to the arbitration proceedings will maintain confidentiality with respect to the arbitration proceedings and the only exception being disclosure of the arbitral award for the purpose of its implementation and enforcement.
Confidentiality in International Scenario
The UNCITRAL Model Law on International Commercial Arbitration does not provide for any express provision dealing with confidentiality in the field of arbitration and instead allows the parties to the arbitration to incorporate a clause of confidentiality in the arbitration agreement if they wish to do so. Confidentiality has not been made mandatory under the UNCITRAL Model Law, on the contrary, party autonomy has been given a higher pedestal. Further, the UNCITRAL Arbitration Rules also, do not have any express provision dealing with confidentiality except for Article 32(v) which bars publishing of the award without the consent of the parties. Rule 34.6 of the Singapore International Arbitration Centre expressly provides for confidentiality.
As we are aware, many countries, including India, have formulated their laws dealing with arbitration based on the UNICTRAL Model Law and since it does not refer to confidentiality, the incorporation of confidentiality in arbitration varies in terms of its extent and scope throughout the globe. Great Britain, for example, does not provide for any statutory regulation dealing with confidentiality, however, confidentiality is an unwritten principle based on various precedents passed by the Courts of Great Britain. In contrast to the practice in Great Britain, the United States neither provides for a law dealing with confidentiality nor enforces the same as an unwritten practice.
Rationale behind incorporation of Section 42A
Confidentiality in arbitration proceedings are ideal for parties who wish to save the dispute involved from the glaring eyes of the media, competitors, etc. and it further protects the market position of parties involved in disputes dealing with intellectual property rights or trade secrets. The High Level Committee Report observed that there was no provision dealing with confidentiality in India and in contrast, confidentiality was being followed in some form or the other in various countries of the world. Since the amendments proposed by the High Level Committee intended to make India a hub for international and domestic arbitrations, it was considered prudent to incorporate the principle of confidentiality in the Arbitration Act itself. It is also necessary to point out that Section 42A begins with a non-obstante clause which means that it shall prevail over any other law for the time being in force and makes it mandatory for parties to abide by such provision, which in turn has a cascading effect on party autonomy as far as arbitrations are concerned.
Drawbacks of Section 42A
It is clear from a bare perusal of Section 42A that only the arbitrator, arbitral institution and the parties to the arbitration are obligated to abide by the principle of confidentiality. However, Section 42A does not talk about the witnesses, stenographers, transcribers and other persons who attend and/or are a part of the arbitration proceedings who might be witness to certain information which is confidential in nature and hence, the obligation of keeping information pertaining to the arbitration proceedings would not apply to them which in itself points to a glaring lacunae in the said principle. Section 42A does carve out an exception to the obligation of maintaining confidentiality and excludes from its purview, disclosure for the purpose of implementation and enforcement of the arbitral award. Whether the principle of confidentiality as envisaged under Section 42A is to be also applied to proceedings before the Court arising under the Arbitration Act such as proceedings under Section 9, 34,14, etc. has not been specified. This aforesaid exception is the standalone exception to the obligation of maintaining confidentiality as laid down by Section 42A of the Arbitration Act and is clearly not what the High Level Committee report suggested. The report intended to include disclosure related to the arbitration proceedings where it was necessary under law or to protect or enforce a legal right, or to enforce or challenge an award before a court or judicial authority. Section 42A, however, restricted itself only to one exception of disclosure. Suffice it is to say that the limited exception provided under Section 42A might lead to precarious or uncertain situations such as when it is necessary to disclose information related to such arbitration proceedings in the case of a Petition under Section 34 of the Arbitration Act for challenge to the arbitral award, an application under Section 9 of the Arbitration Act for interim measures, an appeal under Section 14 of the Arbitration Act challenging interim measures granted by the tribunal or an application under Section 14 of the Arbitration Act for termination of the mandate of the arbitrator, etc. Further, it would also be worthwhile to point out that there are no consequences of non-compliance of the provisions of Section 42A which raises serious doubts as to its effective adherence.
Conclusion
Since, the concept of confidentiality has recently been introduced in the domain of arbitrations in India, it would be interesting to see how the Courts interpret this provision and whether any further amendments to Section 42A are envisaged by the legislature keeping in view the drawbacks mentioned above.
Authors
Abhinav Agnihotri, Associate Partner

Dipan Sethi, Associate
Case Notes
Mankastu Impex Private Limited vs. Airvisual Limited, Arbitration Petition no. 32 of 2018, Decided on March 05, 2020
The issue related to the determination of the seat and venue of arbitration by Indian courts remain an unsettled proposition in the Indian arbitration law jurisprudence. Recently, the Supreme Court was to determine upon the seat and venue of an arbitration when an application was filed before the Supreme Court under Section 11(6) of the Arbitration and Conciliation Act, 1996 by an Indian company Mankastu (Petitioner) against Airvisual (Respondent) a Hongkong registered company. The arbitration clause which was a part of the MoU between the parties provided that “any dispute, controversy… shall be referred to and finally resolved by arbitration administered in Hong Kong” and “the place of arbitration shall be Hong Kong…”. Further, the governing law clause in the MoU provided that “this MoU is governed by the laws of India… and courts at New Delhi shall have the jurisdiction.” The question that was to be determined by the Supreme Court was whether by the terms of the contract, the parties had agreed upon the seat of arbitration to be Hong Kong?
It was contended by the Petitioner that by the terms of the agreement, since the law applicable was Indian law, therefore the seat of the arbitration was New Delhi. The Petitioner based its contention relying upon Hardy’s case1, wherein the Supreme Court held that by merely selecting the venue of arbitration as Kuala Lampur, did not provide that the seat of arbitration was also Kuala Lampur. Mankastu (Petitioner) argued that since Indian law was the governing law and courts at New Delhi had jurisdiction, the seat of arbitration was New Delhi, and accordingly, the Supreme Court could appoint a sole arbitrator. On the other hand, Airvisual (Respondent) contended that since the arbitration agreement provided that the place of arbitration shall be Hong Kong and such arbitration shall be administered in Hong Kong, the seat of arbitration was Hong Kong. Accordingly, Indian courts had no jurisdiction to appoint a sole arbitrator.
The Supreme Court while interpreting the contract “without regard to its conflicts of laws provisions and courts at New Delhi shall have the jurisdiction” ruled that by mere use of the word place of arbitration did not conclude that the intention of the parties was to designate Delhi as the seat of arbitration. The Court held that while the choice of venue of arbitration as Hong Kong would not be enough to deem Hong Kong as the seat of arbitration. However, since the parties had also agreed that the arbitration was to be administered in Hong Kong, the parties had impliedly chosen Hong Kong as the seat of arbitration.
1 Union of India vs. Hardy Exploration and Production (India) Inc., (2019) 13 SCC 472
Centrotrade Minerals and Metals Inc. Vs. Hindustan Copper Ltd., Appeals Nos. 2562 and 2564 of 2006, Decided on 02.06.2020
An appeal was filed before the Supreme Court by a U.S. corporation which had entered into a contract of sale of 15,500 DMT of copper concentrate which was to be delivered at the Kandla Port in the State of Gujarat. The arbitration clause between the parties provided for a two tier arbitration agreement where the first tier of arbitration was to be settled in India and in a situation either party was not satisfied with the award, the aggrieved party shall have the right to appeal for a second arbitration at the ICC, London. The arbitrator in India made nil award, which made the Appellant invoke the second tier of arbitration process at the ICC London. The London seated arbitration passed an award in favour of the Appellant.
The Supreme Court while ruling upon the enforceability of the award and commenting upon the legality of the two-tier arbitration arrangement between the parties, ruled that the award was enforceable and that two-tier arbitration contracts are legally valid in India. The Supreme Court relied upon the law as propounded in Centrotrade Minerals and Metals Inc. vs. Hindustan Copper Ltd (2006) 11 SCC 245 to reach to the conclusion the validity of the two-tier arbitration contracts. The next question that the Supreme Court had to answer was whether an award rendered in the appellate arbitration being a ‘foreign award’ is liable to be enforced under the provisions of Section 48 of the Arbitration and Conciliation Act, 1996?
The Supreme Court while discussing upon the scope of the execution of foreign awards in India ruled that India being a signatory to the ‘New York Convention” always intended to ensure that parties do not face difficulties in enforcing a foreign award in India. The Hon’ble Supreme Court observed that courts shall be very slow in interfering with the award unless prima facie the award cannot be justified in law or meet the required as laid down under Section 48 of the Arbitration and Conciliation Act, 1996.
Hamdard Laboratories India Vs. Sterling Electro Enterprises, Delhi High Court, Arb. P. 218/2020, Decided on 21.07.2020
The Delhi High Court in a recent judgement interpreted an arbitration clause on the aspect of the seat of the arbitration. The contract between the parties provided that in an instance of a dispute, only the courts in Delhi shall have the jurisdiction to determine the issue. The terms of the contract are reproduced below:
“Arbitration: Any dispute between the Parties, which cannot be settled amicably within 30 (thirty) days after receipt by one Party of the other Party's request for such amicable' settlement, may be submitted by either Party through arbitration. The arbitration shall be conducted as per the provision of The Arbitration and Conciliation Act, 1996, and any statutory modification or reenactment thereof. The arbitration proceedings shall be conducted in the English Language. The courts of law at Delhi alone shall have the jurisdiction.”
The question that was raised before the Delhi High Court was whether by conferring exclusive jurisdiction to the courts in Delhi, the parties have mutually as a necessary corollary also agreed that the seat of the arbitration shall be Delhi?
The Petitioner filed an application for the appointment of an Arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996 before the Delhi High Court. The Petitioner argued that since the parties in terms of the contract specifically mentioned that that in case of any dispute, the Courts in Delhi shall only have the jurisdiction to hear and decide the matter, the seat of arbitration should also therefore be Delhi. On the contrary, the Respondent challenged the jurisdiction of the High Court of Delhi and it argued that contract never prescribed that the seat of the arbitration shall be in Delhi and also as no cause of action arose in Delhi, the present application could only be filed in Aurangabad where the cause of action arose.
The Delhi High Court allowed the Petitioners application by relying upon law laid down by the judgement of the Supreme Court in Indus Mobile Distribution Private Limited vs. Datawind Innovations Pvt. Ltd (2017) 6 SCC 678 and by the Delhi High Court in Arka Sports (Arb. P. No. 662/2019) and held that since the arbitration clause provided jurisdiction to the Courts in Delhi to decide any ‘dispute’, \the parties by necessary implication had agreed to the seat of the arbitration to be Delhi.
National Agricultural Co-Operative Marketing Federation of India Vs. Alimenta S.A., Civil Appeal No.: 667 of 2012, Decided on 22.04.2020
A foreign arbitral award can be challenged in India on the grounds of the award being opposed to the “public policy” of India. The Supreme Court of India in the said case ruled on the scope of an award being contrary to the “public policy”. The terms of the contract provided that the Petitioner had to provide Alimenta (Respondent) commodities under a standard Federation of Oils, Seeds and Fats Association Ltd (FOSFA) Contract. However, the supply was contingent on the approvals from the Government. The Government prohibited the Petitioner from exporting and supplying the commodity to the Respondents which prevented the Petitioner from performing their part of obligation as per the contract. Arbitration was invoked and arbitral award was subsequently passed against the Petitioner. An application for execution was filed before the Delhi High Court which allowed the award to be executed, therefore the Petitioner approached the Hon’ble Supreme Court.
The law with respect to the enforceability of the foreign award has been settled by the Supreme Court in the latest judgement in Vijay Karia v. Prysmian Cavi E Sistemi SRL 2020 SccOnLine SC 177 which confirmed the position as stated in Renusagar Power Co. Ltd. vs. General Electric Co. Ltd. AIR 1994 SC 860. The Supreme Court of India went on to analyse the merits of the facts of the case and refused to enforce the award on the ground of it being opposed to the public policy of India as the supply of goods which was the subject matter of the contract was prohibited and therefore the award was contrary to the laws of India.
While setting the arbitral award, the Supreme Court ruled that, “[t]he matter is such which pertains to the fundamental policy of India and parties were aware of it, and contracted that in such an exigency as provided in clause 14, the Agreement shall be cancelled for the supply which could not be made. It became void under section 32 of the Contract Act on happening of contingency.  Thus, it was not open because of the clear terms of the Arbitration Agreement to saddle the liability upson the NAFED to pay damages as the contract became void.  … …Thus, it would be against the fundamental public policy of India to enforce such an award, any supply made then would contravene the public policy of India relating to export for which permission of the Government of India was necessary.
Sukhbir Singh Vs. Hindustan Petroleum Corporation Ltd., 266 (2020) DLT 612
The Delhi High Court recently ruled on the aspect of the importance of cross examination in arbitral proceedings. The issue that arose before the Delhi High Court was whether an arbitral award can be set aside under Section 34 of the Arbitration and Conciliation Act, 1996 on the ground that the Arbitrator did not permit cross examination of the witness in the arbitral proceeding.
The Delhi High Court while interpreting Section 24(1) of the Arbitration and Conciliation Act, 1996 held that whether oral proceedings are a subject matter upon which the parties the parties are free to mutually agree upon. In absence of any such terms in the contract, the discretion shall only then lie with the arbitrator to decide the mode of conducting the arbitral proceedings. However, the discretion exercised by the Arbitrator is subject to the condition of one of the parties requesting for an oral hearing. The Delhi High Court observed that the request for an oral hearing can only be declined in an exceptional circumstance. Setting aside the award the High court ruled that the circumstances as present in the matter did not make out an instance where the right to cross examination could have been denied by the Arbitrator.
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