A. Confidentiality in International Arbitration: Myth or reality?

There is little doubt that users of international commercial arbitration perceive confidentiality of the parties, content, matters produced or generated in the course of arbitration and the award as an advantage of arbitration over litigation. This has been recorded in various studies. For example:

(a) Christian Buhring-Uhle, whose study showed that "… Over 60% of the respondents considered confidentiality to be either 'highly relevant' or 'significant'".1

(b) The 2006 study of the School of International Arbitration in conjunction with Price Waterhouse Coopers: "Privacy, perhaps unsurprisingly, was also ranked highly. International arbitration is considered by many as an effective way to keep business practices, trade secrets, industrial processes, intellectual property, as well as proceedings with a possible negative impact to the brand, private."2

(c) Lord Neill, who said he could think of nothing that would cause more damage to England as a seat for arbitration than to deny the confidentiality of arbitration proceedings.3

Whilst the perception may exist, not all matters can and do remain confidential.4 This is well illustrated by the almost daily coverage of what is happening in the arbitration world, as recorded and discussed in the various daily or periodic arbitration news and legal reports.5 How do these publications obtain this information: from parties, lawyers or arbitrators?

In reality, in the heat of the arbitration, parties will often not be concerned about confidentiality and may use confidentiality as a tool for their own purposes. In fact, parties often use the press to push their point of view and to pressure the other party. What is not disputed and is generally accepted is that arbitrations are private,6 in the sense that no third party has a right to have input into, interfere with or attend the hearings without the consent of the parties. On the other hand, there are no absolute guarantees of confidentiality over information disclosed or produced in international arbitration.7

Over the past 25 years, academics and courts around the world have spilled a great deal of ink attempting to define the legal basis, scope and limits of the obligation of confidentiality over information disclosed, produced or generated in the course of arbitrations. The arguments are split into two camps.

The 'express' camp argues that obligations of confidentiality can arise only by express choice of the parties to the arbitration agreement. This is a natural corollary of the paramount principle of party autonomy in international commercial arbitration. If the parties want to impose obligations of confidentiality then they are free to do so by express inclusion of a confidentiality agreement in the arbitration agreement or in some other agreement, for example the terms of reference in an ICC arbitration, by the choice of a law to govern the arbitration or by the choice of arbitral rules that include obligations of confidentiality. It is for the parties to determine the limits and scope of confidentiality appropriate to the particular situation. In the absence of such an agreement, this camp contends that the arbitration process is not confidential.

By contrast, the 'implied' camp argues that confidentially is a necessary corollary to the private character of arbitrations. The starting point is that everything about the arbitration is private and confidential. This is not because of any inherent confidentiality in the material or information itself, but rather because the parties, by the mere fact that they have chosen to resolve their dispute by arbitration, have inherently indicated their preference to have the matter kept private, confidential and even completely secret. An implied obligation of confidentiality is thought to best meet the expectations of the parties.8

This chapter addresses the following issues:

(a) What is confidential in the arbitration context?

(b) What laws and rules regulate the duty of confidentiality in arbitration?

(c) What are arbitrators' obligations of confidentiality and are there exceptions?

B. What Is Confidential?

In general terms, an obligation of confidentiality means that a person must not disclose information that comes into his knowledge. This confidentiality obligation will have its source in a law, rule or contract binding on the parties, arbitrators and others, which also should determine the extent to which the confidentiality is absolute and the exceptions. However, absent any law or contract, the starting point is that information that comes to a person's knowledge is not confidential and may be freely imparted from one person to another.9 Even where such a duty does arise on its face, the exceptions to enforcement of confidentiality are (in the words of Lord Saville) "manifestly legion".10 The difficulty lies in defining the limits and legitimate exceptions to confidentiality obligations in the particular circumstances of each case.

What issues, in the context of arbitration, are subject to confidentiality obligations? Specifically can the arbitrator disclose the following without the parties consent?

• the existence of the arbitration

• the arbitrator has been appointed as an arbitrator

• nature of the case

• names of counsel, witnesses and experts in the arbitration

• parties' submissions, exhibits or transcript

• tribunal deliberations

• he or she was approached as an arbitrator

• names of parties, institution or arbitration rules

• specific factual or legal issues to be determined

• status of the case

• the award

• content of the award/general discussion on the award

Although not expressly addressing the particular position of arbitrators, it is worth noting Cooke J's view in Department of Economic Policy and Development of the City of Moscow v. Bankers Trust Co,.11 where he said:

"It is clear from the authorities that not all disclosure to third parties is debarred, particularly where there is a commercial necessity or legitimate commercial interest. Indeed, an application to the court made in respect of an arbitration, is a form of disclosure and this in itself cannot be a breach of any duty of confidentiality. There can in my judgment be no breach of duty in disclosing the fact of commencement of arbitration, the existence of an arbitration or the result of that arbitration where there is any legitimate reason to do so. Equally, the existence of any challenge to an award, the existence of litigation relating to it and the result of that litigation would for similar reasons not amount to a breach if disclosed."

C. What Regulates Confidentiality in International Arbitration?

In answering the above questions, it is worthwhile to review the sources of obligations of confidentiality in international arbitration. These are:

• the agreement of the parties

• confidentiality obligations in the arbitration rules chosen to govern the arbitration

• the national law governing the arbitration, either expressly chosen or the law of the seat of the arbitration

• ethical or other professional rules

• generally accepted arbitral practice

Each of these sources, depending on their terms, may apply in varying degrees to all the participants in an international arbitration, namely the parties, their counsel, the tribunal, the secretariat of the administrative institution, witnesses and experts, and other third parties. The obligations imposed by these laws and rules will also attach in varying degrees to the type of information that is sought to be disclosed.

(a) Express Agreement in the Contract

Where the parties expressly agree to confidentiality, the scope of the confidentiality obligations will depend on what they agreed. In such a case, the confidentiality obligation generally cannot bind third parties, such as witnesses, experts and the arbitrators.12

An example of a strict and express confidentiality agreement that binds all involved is the Technical Assistance Agreement (TAA) used where one of the parties to the arbitration carries out its business in a field that is regulated by the US International Traffic in Arms Regulations (ITAR).13 The ITAR restrict sharing of information and material related to specified defence and military related technologies. Such information may only be shared with US persons unless authorization from the department of State is received or a special exemption is used. Heavy fines can be imposed if US persons have, without authorization or the use of an exemption, provided foreign (non-US) persons with access to ITAR-protected defence articles, services or technical data. These regulations apply to sharing information - which includes evidence that would fall within ITAR - with arbitrators who are non-US persons in appropriate cases. This is overcome by a TAA approved by the US authorities. Even an administering authority, such as the ICC International Court of Arbitration, is generally required to enter into a TAA in respect of the institution's secretariat that will have access to confidential information.

In the United Kingdom, individuals contracting with government departments may be required to sign confidentiality agreements as part of compliance with the UK Baseline Security Standard. Where a dispute that arises out of such contracts is submitted to arbitration, the arbitrators may also be required to sign a confidentiality agreement of this kind.

Even where express agreements exist and apply, they are subject to exceptions, in particular if issues arising in arbitration are brought before a court.14 Another difficulty is that express confidentiality obligations can be difficult to draft or enforce for the very reason that there may be many legitimate exceptions to a clause that is drafted too broadly. The other is that parties may change their minds regarding the desirability of obligations of confidentiality between the time of negotiating and signing the confidentiality agreement in the arbitration and the time when the arbitration or litigation arises.15

(b) Arbitration Rules

International arbitration rules vary as to imposition of obligations of confidentiality on different actors involved in international arbitrations.

• Some rules deal with the issue in general terms or only apply to the tribunal or secretariat but not to the parties.16

• Others provide detailed provisions for confidentiality and specifically address obligations of the parties, the tribunal, witnesses and counsel.

• Arbitral institutional rules generally prohibit publication of awards in the absence of consent of the parties.17

Some examples of the wording of different institutional rules that impose obligations of confidentiality are as follows:

• Rule 46 of the 2010 Arbitration Rules of the Arbitration Institute of the Stockholm Chamber of Commerce (SCC Rules) provides simply: "Unless otherwise agreed by the parties, the SCC and the Arbitral Tribunal shall maintain the confidentiality of the arbitration and the award." The rule does not apply to the parties and does not state specifically to what information it applies or exceptions to confidentiality obligations.

• Rule 30(1) of the 1998 London Court of International Arbitration Rules (LCIA Rules) refers expressly to awards and materials prepared for the arbitration, for example to written submissions and witness statements, the deliberations of the tribunal and publication of the award, but does not apply to witnesses. It provides:

"Unless the parties expressly agree in writing to the contrary, the parties undertake as a general principle to keep confidential all awards in their arbitration, together with all materials in the proceedings created for the purpose of the arbitration and all other documents produced by another party in the proceedings not otherwise in the public domain - save and to the extent that disclosure may be required of a party by legal duty, to protect or pursue a legal right or to enforce or challenge an award in bona fide legal proceedings before a state court or other judicial authority.

30.2 The deliberations of the Arbitral Tribunal are likewise confidential to its members, save and to the extent that disclosure of an arbitrator's refusal to participate in the arbitration is required of the other members of the Arbitral Tribunal under Articles 10, 12 and 26.

30.3 The LCIA Court does not publish any award or any part of an award without the prior written consent of all parties and the Arbitral Tribunal." [emphasis added]

• Rule 35 of the 2010 Rules of the Singapore International Arbitration Court applies to the parties and the arbitrators but does not apply to the SIAC, witnesses or experts. It also lists exceptions to the confidentiality obligation and specifies the issues to which it relates. Rule 35 provides:

"35.1 The parties and the Tribunal shall at all times treat all matters relating to the proceedings and the award as confidential.

35.2 A party or any arbitrator shall not, without the prior written consent of all the parties, disclose to third party any such matter except:

a. for the purpose of making an application to any competent court of any State to enforce or challenge the award;

b. pursuant to the order of or a subpoena issued by a court of competent jurisdiction;

c. for the purpose of pursuing or enforcing a legal right or claim;

d. in compliance with the provisions of the laws of any State which are binding on the party making the disclosure;

e. in compliance with the request or requirement of any regulatory body or other authority; or

f. pursuant to an order by the Tribunal on application by a party with proper notice to the other parties.

35.3 In this Rule, 'matters relating to the proceedings' means the existence of the proceedings, and the pleadings, evidence and other materials in the arbitration proceedings and all other documents produced by another party in the proceedings or the award arising from the proceedings, but excludes any matter that is otherwise in the public domain.

35.4 The Tribunal has the power to take appropriate measures, including issuing an order or award for sanctions or costs, if a party breaches the provisions of this Rule." [emphasis added]

• Rule 26 of the 2010 Scottish Arbitration Rules goes further. It makes unauthorized disclosure a breach subject to damages. It provides:

"(1) disclosure by the tribunal, any arbitrator or a party of confidential information relating to the arbitration is to be actionable as a breach of an obligation 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 needed 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.

(2) The tribunal and the parties must take reasonable steps to prevent unauthorised disclosure of confidential information by any third party involved in the conduct of the arbitration.

(3) The tribunal must, at the outset of the arbitration, inform the parties of the obligations which this rule imposes on them.

(4) 'Confidential information', in relation to an arbitration, means any information relating to -

(a) the dispute,

(b) the arbitral proceedings,

(c) the award, or

(d) any civil proceedings relating to the arbitration in respect of which an order has been granted under section 15 of this Act, which is not, and has never been, in the public domain." [emphasis added]

• The 1998 Arbitration Rules of the german Institute of Arbitration (dIS) apply to the parties, arbitrators, specific involved administrators at the dIS and to counsel. Rule 43(1) provides:

"The parties, the arbitrators and the persons at the DIS secretariat involved in the administration of the arbitral proceedings shall maintain confidentiality towards all persons regarding the conduct of arbitral proceedings, and in particular, regarding the parties involved, the witnesses, the experts and other evidentiary materials. Persons acting on behalf of any person involved in the arbitral proceedings shall be obligated to maintain confidentiality." [emphasis added]

• Rules 73 and 74 of the 2002 World Intellectual Property Organisation (WIPO) Rules provide in detail:

"Article 73

(a) Except to the extent necessary in connection with a court challenge to the arbitration or an action for enforcement of an award, no information concerning the existence of an arbitration may be unilaterally disclosed by a party to any third party unless it is required to do so by law or by a competent regulatory body, and then only:

(i) by disclosing no more than what is legally required; and

(ii) by furnishing to the Tribunal and to the other party, if the disclosure takes place during the arbitration, or to the other party alone, if the disclosure takes place after the termination of the arbitration, details of the disclosure and an explanation of the reason for it.

(b) Notwithstanding paragraph (a), a party may disclose to a third party the names of the parties to the arbitration and the relief requested for the purpose of satisfying any obligation of good faith or candour owed to that third party.

Article 74

In addition to any specific measures that may be available under Article 52, any documentary or other evidence given by a party or a witness in the arbitration shall be treated as confidential and, to the extent that such evidence describes information that is not in the public domain, shall not be used or disclosed to any third party by a party whose access to that information arises exclusively as a result of its participation in the arbitration for any purpose without the consent of the parties or order of a court having jurisdiction.

For the purposes of this Article, a witness called by a party shall not be considered to be a third party. To the extent that a witness is given access to evidence or other information obtained in the arbitration in order to prepare the witness's testimony, the party calling such witness shall be responsible for the maintenance by the witness of the same degree of confidentiality as that required of the party." [emphasis added]

• The 2010 International Bar Association Rules on the Taking of Evidence in International Arbitration are limited to documents prepared for or produced in the arbitration and apply to the parties and the arbitrators. Article 3.13 provides:

"Any Document submitted or produced by a Party or non-Party in the arbitration and not otherwise in the public domain shall be kept confidential by the Arbitral Tribunal and the other Parties, and shall be used only in connection with the arbitration. This requirement shall apply except and to the extent that disclosure may be required of a Party to fulfil a legal duty, protect or pursue a legal right, or enforce or challenge an award in bona fide legal proceedings before a state court or other judicial authority. The Arbitral Tribunal may issue orders to set forth the terms of this confidentiality. This requirement shall be without prejudice to all other obligations of confidentiality in the arbitration." [emphasis added]

• The 1998 ICC Rules of Arbitration do not impose a general obligation of confidence on the parties or the arbitrator but only on the Secretariat. However, Article 20(7) provides that the Tribunal "may take measures for protecting trade secrets and confidential information".18

(c) Law Governing the Arbitration/Law of Arbitral Seat

Similarly, the parties and the tribunal will be bound by the obligations of confidentiality under the law that governs the arbitration and/or the law of the seat of the arbitration, if different.

As with arbitration rules, arbitration statutes of different countries vary as to the scope of the obligation of confidentiality and applicability of such rules to the various participants. In some countries, the statutes are silent. This applies, for example, to England.19 France imposes obligations of confidentiality limited to the deliberations of the arbitrators.20 Other legislation is drafted in broad terms. For example, Peruvian Legislative decree No 1071 Regulating Arbitration applies to the tribunal, secretary of the tribunal, arbitral institution, witnesses, experts and any others, including representatives of the parties and their legal advisors. However, the rule is not absolute and allows for exceptions. It provides:

"1. Unless otherwise agreed, the arbitral tribunal, the secretary of the arbitral tribunal, the arbitral institution and, when appropriate, the witnesses, experts and any others who intervene in the arbitral proceedings shall keep the arbitral proceedings, including the award, confidential, as well as any information of which they become aware through the proceedings.

2. This obligation of confidentiality also extends to the parties and their representatives and legal advisers, except when there is a legal need to make public the proceedings or, when appropriate, the award to protect or fulfil a right, to file an application to set aside or to enforce the award in court.

3. In all arbitrations governed by this Legislative decree in which the Peruvian State intervenes as a party, the arbitral proceedings shall be subject to confidentiality and the award, once the proceedings have ended, shall be public."21

In other countries, for example New Zealand and Scotland, the law contains detailed default rules imposing obligations of confidentiality on the parties and the tribunal unless otherwise agreed by the parties.22 By contrast, in Norway, the arbitration statute expressly rules out confidentiality obligations in the absence of an agreement of the parties. Section 5 of the Norwegian Arbitration Act of 14 May 2004 provides:

"Unless the parties have agreed otherwise, the arbitration proceedings and the decisions reached by the arbitration tribunal are not subject to a duty of confidentiality.

Third parties may only be present during arbitral proceedings when and to the extent that follows from the agreement between the parties."23

(d) ICSID Cases

The justification for imposing confidentiality on the basis that arbitration is a private process between private parties applies less strongly to investment treaty arbitration and in particular in ICSId arbitrations. This is due to the fact that a state party will always be one of the parties to the dispute. For that reason, ICSId arbitration is said to be subject to greater transparency requirements than apply to private international commercial arbitration. In fact, all ICSId arbitrations, once validly commenced, are registered and can be seen on the ICSId website.

In Procedural Order No 3 in Giovanna a Beccara and Others v. The Argentine Republic,24 the tribunal acknowledged that that there "… is no uniform practice concerning the use of 'orders' or 'provisional measures' with regard to confidentiality in international investment arbitration"25 and that

"In the absence of any agreement between the parties on this issue, there is no provision imposing a general duty of confidentiality in ICSId arbitration, whether in the ICSId Convention, any of the applicable Rules or otherwise. Equally, however, there is no provision imposing a general rule of transparency or non-confidentiality in any of these sources."26

After reviewing the decisions reached in various ICSId cases, the Tribunal determined:

"In conclusion, the Tribunal deems that the ICSId Convention and Arbitration Rules do not comprehensively cover the question of the confidentiality/transparency of the proceedings. Thus, in accordance with Article 44 of the ICSId Convention and Rule 19 of the ICSId Arbitration Rules, unless there exist an agreement of the Parties on the issue of confidentiality/transparency, the Tribunal shall decide on the matter on a case by case basis and, instead of tending towards imposing a general rule in favour or against confidentiality, try to achieve a solution that balances the general interest for transparency with specific interests for confidentiality of certain information and/or documents."27

The approach taken above accepts that, in ICSId cases where confidentiality is asserted or sought to be enforced in the absence of express agreement on confidentiality between the parties, the tribunal will be required to undertake a balancing exercise to determine whether or not the justification for maintaining confidentiality obligations outweigh the interest in disclosure.

D. The arbitrator's Obligation of Confidentiality

It is generally accepted in international arbitral practice that arbitrators and arbitral tribunals are bound by an obligation of confidence.28 This follows from "a prerogative inherent in their judicial function…".29 However, how far and to what does this obligation extend? And to what extent can it be enforced? Can an arbitrator specifically acknowledge that he was approached to be an arbitrator or has been appointed as an arbitrator in a particular case or the deliberations and reasons for the decision reached (other than those given in the award itself)? On this point, gaillard and Savage note that "ensuring compliance with this obligation is an altogether more difficult matter".30

As outlined above, different arbitral rules and laws impose different obligations of confidentiality on arbitrators. However, in addition to express agreement, arbitration rules or arbitration laws, other sources also mandate confidentiality of arbitrators. Arbitrators may be expected and bound to keep details of the arbitration confidential by:

• Professional bodies - Professional ethics may directly apply to an arbitrator via his or her membership of a domestic professional body.31

• Rules developed by various international arbitral institutions or associations.32 For example, AAA/ABA guideline Code of Ethics for Arbitrators, Canon VI states: "An Arbitrator should be faithful to the relationship of trust and confidentiality inherent in that office."33

• Ethical rules for arbitrators. For example, Article 9 of the IBA Rules of Ethics for International Arbitrators provides for confidentiality of the deliberations and the award as follows:

"The deliberations of the arbitral tribunal, and the contents of the award itself, remain confidential in perpetuity unless the parties release the arbitrators from this obligation. An arbitrator should not participate in, or give any information for the purpose of assistance in, any proceedings to consider the award unless, exceptionally, he considers it his duty to disclose any material misconduct or fraud on the part of his fellow arbitrators."34

There are certain situations where arbitrators may need or be required to say something about a particular arbitration. The most obvious is where arbitrators are asked about their experience of certain types of case, under the rules of a particular institution. generally, this presents no problem. They are also asked about their knowledge of the parties and if they have a conflict of interest at the beginning of every case and before accepting appointment. declarations of independence where a disclosure is made may involve naming a party, for example that an arbitrator is/was involved in another case in which one of the parties is/was involved. This may be an actual party or a related person or entity. Although the general view is to disclose any such conflict, there will be occasions where a potential arbitrator may need to decline nomination rather than disclose that he is an arbitrator with one of the parties.

It is generally accepted that it is not for arbitrators to release the award to third parties or websites.35 In fact, in institutional arbitration, it is the institute that sends out the award. Occasionally, arbitrators may be asked for a copy by the lawyers, the press or research students or to comment on an award, its content or meanings. Such inquires or the urge to comment on aspects of an award, arbitration or conduct of the parties may also arise on internet chat sites and blogs. In these circumstances, arbitrators may be asked for comment or an explanation: they should be wary of doing so.36

There will be very rare situations where a tribunal can or should disclose to a third party the submissions, exhibits and transcripts prepared and submitted for the purpose of the particular arbitration. This could occur where agreed by the parties or if ordered to do so by a court.

It is widely accepted that the arbitrator's deliberations are confidential and should not be disclosed. For example:

• Article 1469 of the French New Code of Civil Procedure provides: "The deliberation of arbitrators shall be in camera."

• Rule 30(2) of the LCIA Rules states: "The deliberations of the Arbitral Tribunal are likewise confidential to its members, save and to the extent that disclosure of an arbitrator's refusal to participate in the arbitration is required of the other members of the Arbitral Tribunal under Articles 10, 12 and 26."37

In the Himpurna award several years ago the tribunal stated:

"It is improper for any party to probe the secrecy of deliberations. That confidentiality, a fundamental element of the arbitral process, is intended to ensure that each arbitrator is able to exercise his or her independent judgment in a collegial context free of any outside influence."38

Similarly, the AAA/ABA Code of Ethics Canon VI(C) states:

"It is not proper at any time for an arbitrator to inform anyone of any decision in advance of the time given to all the parties. In a proceeding in which there is more than one arbitrator, it is not proper at any time for an arbitrator to inform anyone about the substance of the deliberations of the arbitrators. After an award has been made, it is not proper for an arbitrator to assist in proceedings to enforce or challenge the award."39

Like all rules on confidentiality, even confidentiality of deliberations is subject to exceptions. A noteworthy example was in the well-known CME v. Czech Republic case,40 where the Svea Court of Appeal held that the obligation to testify before the Swedish Court overrode principles of confidentiality applicable to arbitrators' deliberations. The Court stated that it would not impose penalties for failure to answer questions from the Court but that adverse inferences could be drawn if the arbitrators did not provide evidence.41 Effectively, the Court gave the arbitrators a modified form of a 'right to silence'. All three arbitrators testified.

Another example is the Mond case in the Australian courts, where all three arbitrators were called to give evidence before the court and were questioned about the content of their deliberations. The court was critical of the differences between the recollections and explanations of the arbitrators.42

When an award is examined in court for the purposes of challenges and enforcement, judges express views as to what they understand the tribunal intended or must have understood. In fact, it will not always be possible to comprehend what a tribunal intended in its reasons. The dispositive section should be clear, granting remedies, by way of conclusions, declarations and orders. However, reasons will not always be clear on the face of the award where the tribunal has been immersed in the facts of an arbitration. Also, courts will look at an award from a natural and parochial viewpoint which may not reflect the multinational and different legal backgrounds of the tribunal and parties. The reasoning and intentions will be the result of the arbitrators' deliberations. In the United States, arbitrators' evidence cannot be called upon to explain an award where that award is being challenged.43

An arbitrator who gains access to confidential information in the course of an arbitration proceeding has no right to make that information public or communicate that information to a stranger to the arbitration proceedings, except in exceptional circumstances where the public interest requires such disclosure.44 Nor should any arbitrator be entitled to use confidential information for any collateral object (e.g. for personal gain).45 To do so would fundamentally undermine the legitimacy of the arbitration process.

For the above reasons, arbitrators should not ordinarily disclose information falling within the scope of the applicable confidentiality rules to the press or other officious bystanders or disinterested third parties.

E. Exceptional Circumstances - Duty to Report Matters of Transnational Criminality?

Where issues of bribery, corruption, money laundering, fraud, tax evasion or the like arise in arbitration, there may be another range of questions where documents are sought and there is concern as to their confidentiality being maintained. This may raise a conflict between the tribunal's ethical or legal obligations to report such matters to the relevant authorities and the tribunal's duty to resolve the dispute presented by the parties within the confines of its arbitral mandate. The particular case of money laundering, discussed below, demonstrates this potential problem.

(a) What is Money Laundering and How Does It Impact on Arbitrators?

The precise definition of money laundering varies from country to country, but money laundering invariably involves processing the proceeds of criminal activity.46 The scope of conduct included in criminal activity varies. It almost always includes drug trafficking but can also include proceeds from arms sales, tax fraud or prostitution.47 In arbitration, the classic way in which this process may be achieved and dirty cash legitimized is via issuance of an arbitral award.48 Arbitrators must be alert to cases that give rise to such issues.

Money laundering is established as an issue of transnational public policy and has been internationally criminalized.49 As such, money laundering is a serious issue and has been the subject of various initiatives by international institutions, such as the United Nations, and governments worldwide aimed at combating this crime.50 The targets of such legislation are often the intermediaries who are likely to come into contact with money-laundering activities, such as banks and other financial institutions, real estate agents, casinos, accountants and lawyers.51

The obligation of 'regulated entities' is to be vigilant for suspicious transactions,52 to refuse to implement the transaction (and abstain from aiding or abetting the transaction)53 and to report the suspicious activity to the relevant authorities.54 Some national laws provide immunity from civil and criminal prosecution for any person who reports suspicious transactions.55 However, there are also prohibitions against tipping off the suspected launderer by communicating to that person or third parties that an investigation into the activities has been reported.56

(b) Do International Arbitrators Have a Duty to Report Money Laundering to the Authorities?

In spite of the proliferation of legislation targeted at combating international crime, the money-laundering directives and acts, on their terms, do not directly apply to arbitrators and arbitral tribunals. For example, directive 2005/60/EC applies where independent legal professionals participate or assist in the planning or execution of transactions for their client concerning, amongst other things, the buying and selling of real property or business entities or the managing of client money.57 The position is unclear whether arbitrators must report suspected money laundering to the appropriate authorities; this question will depend on national law.

In the United Kingdom, Section 328 of the Proceeds of Crime Act 2002, which implements directive 2005/60/EC, is drafted in broader terms and provides:

"(1) A person commits an offence if he enters into or becomes concerned in an arrangement which he knows or suspects facilitates (by whatever means) the acquisition, retention, use or control of criminal property58 by or on behalf of another person.

(2) But a person does not commit such an offence if -

(a) he makes an authorised disclosure under section 338 and (if the disclosure is made before he does the act mentioned in subsection (1)) he has the appropriate consent…".59

A question may arise as to whether a tribunal is criminally liable if, in issuing an award, it "becomes concerned in an arrangement" if it "knows or suspects" when it issues the award that the award "facilitates" money laundering. This is improbable as arbitrators will not become involved in facilitating "the acquisition, retention, use or control of criminal property" even if the tribunal's award will give effect to such rights.

In Bowman v. Fels,60 the English Court of Appeal provided guidance on Section 328 of the Proceeds of Crime Act 2002, but the judgment did not directly address the position of arbitrators. The Court ruled that Section 328 does not extend to the involvement of lawyers in the "ordinary conduct of litigation" or its "consensual resolution".61

It is not clear in Bowman v. Fels what is meant by the "ordinary conduct of litigation", but it is suggested by the English Bar Council that an example of 'extraordinary' litigation would be bogus or sham litigation, where the lawyer instructed "came to suspect that there was no genuine dispute between the parties, but a dispute concocted as a cover for the transfer of ill-gotten gains".62

There is no reason to exclude an international arbitral tribunal from this rationale. In some jurisdictions where a tribunal suspects or knows that the arbitration has been 'concocted' for the purpose of laundering money, it should be careful before issuing a consent award in accordance with the parties' wishes. There is no clear authority that an arbitral tribunal must report its suspicions to the relevant authorities. This may not be the case where a relevant national mandatory law requires disclosure.63

(c) Suggested Approach in Cases of Serious Criminality

There is no clear answer as to whether an arbitral tribunal that suspects illegal activity such as money laundering must or even may report issues of illegality to the authorities, in light of the obligations of confidentiality to which it is subject.

Fundamentally, the jurisdiction of an arbitrator is derived from the agreement of the parties. An arbitral tribunal is not a branch of a national executive government or a national court; it is an autonomous and non-national entity that is established and exists only to determine the dispute between the parties. The tribunal's role is not to be an investigative police force but, equally, international "arbitrators have no duty to sanction crime".64

The tribunal's role is to determine the dispute between the parties within the scope of the arbitration agreement. If the tribunal concludes an arbitration to be a sham (i.e. there is no real dispute) or that the contract is tainted by bribery or other serious illegality on the evidence that is available to it, it should refuse to grant the substantive relief sought and dismiss the arbitration. Many arbitration rules leave the tribunal with the discretion to refuse a consent award if it is not satisfied of the bona fides of the parties' settlement.65 The tribunal may also decide that the whole contractual arrangement does not exist or is void and/or unenforceable in whole or in part. In such circumstances, the tribunal would have to decide how far to explain its conclusions in its award.66

There may be exceptional circumstances where the applicable law requires the tribunal to disclose certain information to the relevant authorities. Such an obligation could only be imposed by clear legislative rules applicable at the seat of the arbitration or to the members of the tribunal. Even in such circumstances, arbitrators would need to consider and be guided by the relevant legal and ethical principles discussed in this chapter.

1
This study is referred to by Michael Pryles, Ch. 24 'Confidentiality', in Richard d.Hill and Lawrence W. Newman, The Leading Arbitrators' Guide to International Arbitration (Juris Publishing, 2008).

2
Queen Mary University in conjunction with PriceWaterhouseCoopers, International Commercial Arbitration: Corporate Attitudes and Practices 2006, p. 6, available at: <http://www.arbitrationonline.org/docs/IAstudy_2006.pdf> (last visited 7 September 2010).

3
Lord Patrick Neill QC, 'Confidentiality in Arbitration' Arb. Int'l 12(3) (1996) pp. 287-317, 316-317.

4
Queen Mary University in conjunction with White and Case, 2010 International Arbitration Survey, Choices in International Arbitration: "The responses indicate that confidentiality is important to users of arbitration, but it is not the essential reason for recourse to arbitration. 50% of respondents erroneously believe that arbitration is confidential even where there is no specific clause to that effect in the arbitration rules adopted or the arbitration agreement and 12% did not know whether arbitration is confidential in these circumstances." (at p. 3)

5
For example, in the daily global Arbitration Review, available at: <http://www.globalarbitrationreview.com>.

6
AAA/ICdR Rules, Article 20(4); ICC Rules, Article 21(3); ICSId Rules, Article 32(2); CIETAC Rules, Article 33(1); HKIAC Rules, Article 23(7); SCC Rules, Article 27(3); VIAC Rules, Article 20(4); LCIA Rules, Article 19(4); Swiss Rules, Article 25(4); UNCITRAL Rules (2010), Article 28(3).

7
The Statement of Ethical Principles for the American Arbitration Association states: "An arbitration proceeding is a private process. In addition, AAA staff and AAA neutrals have an ethical obligation to keep information confidential. However, the AAA takes no position on whether parties should or should not agree to keep the proceeding and award confidential between themselves. The parties always have a right to disclose details of the proceeding, unless they have a separate confidentiality agreement. Where public agencies are involved in disputes, these public agencies routinely make the award public. While individual arbitrations are confidential if the parties so determine, the AAA's rules and procedures are available to the public on its Web site and in hard copy." Available at: <http://www.adr.org/sp.asp?id=22036> (last visited 17 November 2010).

8
The two camps are illustrated in Annex 1, International Law Association Hague Conference (2010): 'Confidentiality in International Commercial Arbitration', available at: <http://www.ila-hq.org>.

9
Poudret and Besson, Comparative Law of International Arbitration, 2nd edn. (Sweet & Maxwell, 2007) at § 369: "Since confidentiality implies a restriction to freedom of expression, it is necessary that it has a sufficiently clear basis". Attorney General v. Guardian Newspapers (No. 2), [1990] 1 AC 109, 281 (HL), per Lord goff - "… confidential information comes to the knowledge of a person (the confidant) in circumstances where he has notice, or is held to have agreed, that the information is confidential, with the effect that it would be just in all the circumstances that he be precluded from disclosing the information to others."

10
Lord Saville of Newdigate, 'department Advisory Committee on Arbitration Law: 1996 Report on the Arbitration Bill', 13(3) Arbitration International (1997) pp. 275-316, § 16.

11
Department of Economic Policy and Development of the City of Moscow v. Bankers Trust Co., [2003] EWHC 1377 (Comm), § 51.

12
Arbitrators may be bound by other ethical, professional or legal rules imposed by the law of the arbitral seat or arbitration institutional rules or to which they are personally subject.

13
The International Traffic in Arms Regulations 2010 are available online from the US department of State at: <http://www.pmddtc.state.gov/regulations_laws/itar_official.html> (last visited 30 November 2010).

14
See, e.g., Television New Zealand v. Langley Productions Ltd., [2002] 2 NZLR 250, § 39 where Robertson J said: "In order for the cloak of confidentiality which attached to the private dispute resolution of the parties to necessarily apply to subsequent proceedings in the High Court, would in my judgment require a clear and unambiguous determination of Parliament."

15
In Television New Zealand v. Langley Productions Ltd., ibid., one party wanted full confidentiality at the time the parties agreed to the arbitration agreement but the other did not. By the time an award had been made and leave to appeal to the High Court filed, the parties reversed their positions. The Court ordered that the award be made public.

16
See, for example, Article 34 of the American Arbitration Association (AAA) International Centre for dispute Resolution (ICdR) International Arbitration Rules (2009): "Confidential information disclosed during the proceedings by the parties or by witnesses shall not be divulged by an arbitrator or by the administrator. Except as provided in Article 27, unless otherwise agreed by the parties, or required by applicable law, the members of the tribunal and the administrator shall keep confidential all matters relating to the arbitration or the award." Available at: <http://www.adr.org/sp.asp?id=36913>. See, similarly, Article 8 of the Chamber of National and International Arbitration of Milan, International Arbitration Rules (2004). Cf. Article 8 of the Milan Rules 2010; Article 5(3) of the Rules of Arbitration and Conciliation of the International Arbitral Centre of the Austrian Federal Economic Chamber (2006); Article 46 of the Stockholm Chamber of Commerce Arbitration Rules (2010).

17
AAA Rules, Article 27(4); HKIAC Rules, Article 39(3); 2004 Milan Rules, Article 8(2); LCIA Rules, Article 30(3); Swiss Rules, Article 43(3); dIS Rules, Article 37(9); UNCITRAL Rules 1976, Article 32(5). Article 34 of the UNCITRAL Rules 2010 provides: "An award may be made public with the consent of all parties or where and to the extent disclosure is required of a party by a legal duty, to protect or pursue a legal right or in relation to legal proceedings before a court or other competent authority." See, by contrast, Art 8(2) of the Milan Rules 2010, which provides: "For purposes of research, the Chamber of Arbitration may publish the arbitral award in anonymous format, unless, during the proceedings, any of the parties objects to publication."

18
Yves derains and Eric Schwarz, A Guide to the ICC Rules of Arbitration (Kluwer Law International, 2005) pp. 284-286, contending that 'confidential information' in Rule 20(7) is sufficiently broad to extend to documents produced for the purpose of the arbitration including "pleadings, witness statements, and the Award, or other information relating to the arbitration or even its existence, to the extent appropriate."

19
English Arbitration Act 1996, US Federal Arbitration Act, Uniform Arbitration Act.

20
Article 1469 of the French Code of Civil Procedure.

21
Article 51 of Legislative decree No. 1071 of 2008, translated in Jan Paulsson, ed., International Handbook on Commercial Arbitration (1984, last updated december 2009) Supplement No. 57, pp. 1-31.

22
Sections 14A-14I of the New Zealand Arbitration Act 1996 (as amended in 2007) (default rule); Scotland Arbitration Act 2010 (default rule set out in Rule 26, Schedule 1); Australian International Arbitration Act (as amended 2010) (opt-in provisions in Section 23C-g).

23
Section 5 of the Norwegian Arbitration Act 2004.

24
ICSId Case No. ARB/07/05, dated 27 January 2010, available at: <http://icsid.worldbank.org/ICSId/FrontServlet?requestType=CasesRH&actionVal=show doc&docId=dC1390_En&caseId=C95> (last visited 8 december 2010).

25
Ibid, § 63.

26
Ibid, § 67.

27
Ibid, § 73.

28
Emmanuel gaillard and John Savage, eds., Fouchard, Gaillard, Goldman on International Commercial Arbitration (Kluwer Law International, 1999) § 1132; gary B. Born, International Commercial Arbitration Volume I (Kluwer Law International, 2009) p 1631; Poudret and Besson, Comparative Law of International Arbitration (Sweet & Maxwell, 2007) p. 320; Lew, Mistelis and Kröll, Comparative International Commercial Arbitration (Kluwer Law International, 2003) §§ 12-20; Bocksteigel, Kröll and Naciemento, Arbitration in Germany (2007) pp. 803, 824; ICC Bulletin, Final Report on Status of the Arbitrator, Vol. 7(1), May 1996, p. 30; Schwarz and Konrad, The Vienna Rules (Kluwer Law International, 2009) § 7-063.

29
Gaillard and Savage, ibid, § 1167.

30
Gaillard and Savage, ibid, § 1132.

31
For example, bar and law societies, institutes of chartered accountants, engineers, architects or arbitrators.

32
For example, the International Bar Association Rules of Ethics for International Arbitrators, § 9, available at: <http://www.int-bar.org/images/downloads/pubs/Ethics_arbitrators.pdf> (last visited 24 January 2011).

33
American Bar Association, The Code of Ethics for Arbitrators in Commercial Disputes, available at: <http://www.abanet.org/dispute/commercial_disputes.pdf> (last visited 24 January 2011).

34
Similarly, Canon VI(B) of the AAA/ABA Code of Ethics for Arbitrators in Commercial disputes, ibid., states: "The arbitrator should keep confidential all matters relating to the arbitration proceedings and decision. An arbitrator may obtain help from an associate, a research assistant or other persons in connection with reaching his or her decision if the arbitrator informs the parties of the use of such assistance and such persons agree to be bound by the provisions of this Canon."

35
See note 17.

36
See Perenco Ecuador Ltd v. The Republic of Ecuador & Empresa Estatal Petroleos del Ecuador, PCA Case No. IR-2009/1, 8 december 2009, where an arbitrator was successfully challenged for giving interviews to a magazine expressing views about one of the parties to the arbitration on which he was appointed. Available at: <http://ita.law.uvic.ca/documents/PerencovEcuador-Challenge.pdf> (last visited 13 december 2010).

37
ICSId Arbitration Rule 15: "The deliberations of the Tribunal shall take place in private and remain secret." Swiss Arbitration Rules, Rule 43(2); IBA Rules of Ethics for International Arbitrators, Article 9.

38
Himpurna Calif. Energy Ltd v. Republic of Indonesia, Interim Ad Hoc Award (26 September 1999), XXV Y.B. Comm. Arb. (2000) pp. 112, 151. 39. See note 33.

40
Svea Court of Appeal, Sweden, Case No. T8735-01, 15 May 2003, available at: <http://www.sccinstitute.com/filearchive/2/21294/ CME_tjeckiska_republiken.pdf> (last visited 2 december 2010).

41
Observations by Hans Bagner on CME v. Czech Republic, p. 244, available at: <http://www.sccinstitute.com/filearchive/2/21294/ CME_tjeckiska_republiken.pdf>.

42
Mond & Mond v. Dayan Rabbi Isaac Dov Berger, [2004] VSC 45. Other examples include Attorney-General for Manitoba v. Kelly, [1922] 1 AC 268 (PC) and Perriam v. Newmans Tours Ltd., [1991] 2 NZLR 663 (CA).

43
See Domke on Commercial Arbitration (Thomson Reuters, 2011) § 27:2; see also Attorney-General for Manitoba v. Kelly, [1922] 1 AC 268 (PC).

44
Such circumstances may be where there is evidence of fraud, money laundering, tax evasion or where the arbitrator is ordered to disclose information by a national court. Such cases are discussed further below.

45
Canon VI(A) of the AAA/ABA Rules of Ethics provides: "An arbitrator is in a relationship of trust to the parties and should not, at any time, use confidential information acquired during the arbitration proceeding to gain personal advantage or advantage for others, or to affect adversely the interest of another."

46
Directive 2005/60/EC of 26 October 2005 defines money laundering as "(a) the conversion or transfer of property, knowing that such property is derived from criminal activity or from an act of participation in such activity, for the purpose of concealing or disguising the illicit origin of the property or of assisting any person who is involved in the commission of such activity to evade the legal consequences of his action; (b) the concealment or disguise of the true nature, source, location, disposition, movement, rights with respect to, or ownership of property, knowing that such property is derived from criminal activity or from an act of participation in such activity; (c) the acquisition, possession or use of property, knowing, at the time of receipt, that such property was derived from criminal activity or from an act of participation in such activity; (d) participation in, association to commit, attempts to commit and aiding, abetting, facilitating and counselling the commission of any of the actions mentioned in the foregoing points."

47
See recital 7 of direction 2005/60/EC of 26 October 2005: "there has been a trend in recent years towards a much wider definition of money laundering". Kristine Karsten, 'Money Laundering: How It Works and Why you Should Be Concerned', in ICC dossier, Arbitration: Money Laundering, Corruption and Fraud (ICC Institute of World Business Law, 2003) pp. 15-27 at p. 16.

48
This can be achieved by the launderer establishing a company A in country X and another company B in country y. Money is then deposited into company B's bank account in a series of small amounts of cash. Company A then brings an arbitration claim against company B. Company B either raises a weak defence to the claim and then loses the arbitration, or shortly after the claim is commenced and during the procedural stages of the arbitration the parties advise the a consent award that requires payment of money from company B to company A. In this manner the receipt of a large amount of cash by company A may be legitimized.

49
Bernado Cremades and david J.A. Cairns, 'Transnational Public Policy in Arbitral decision Making', in ICC dossier, Arbitration: Money Laundering, Corruption and Fraud (ICC Institute of World Business Law, 2003) pp. 65-93 at p. 72.

50
Directive 2001/97/EC of 4 december 2001 on prevention of the use of the financial system for purpose of money laundering (amending EC directive 91/308); directive 2005/60/EC of 26 October 2005; USA Patriot Act 2001; UK Proceeds of Crimes Act 2002; New Zealand, Anti-Money Laundering and Countering Financing of Terrorism Act 2009.

51
For example, see Article 1 of directive 2005/60/EC of 26 October 2005.

52
Ibid., Article 20.

53
Ibid., Article 21(1).

54
Ibid., Article 22(1).

55
Section 337 of the UK Proceeds of Crimes Act 2002. Section 44(2) of the New Zealand, Anti-Money Laundering and Countering Financing of Terrorism Act 2009 provides: "Subsection (2) applies to a person who (a) discloses or supplies any information in any suspicious transaction report; or (b) supplies any information in connection with any suspicious transaction report, whether at the time the report is made or afterwards. (2) No civil, criminal, and disciplinary proceedings lie against a person to whom subsection (1) applies - (a) in respect of the disclosure or supply, or the manner of the disclosure or supply, by that person of the information referred to in that subsection; or (b) for any consequences that follow from the disclosure or supply of that information."

56
Article 28 of directive 2005/60/EC of 26 October 2005 provides: "The institutions and persons covered by this directive … shall not disclose to the customer concerned or to other third persons the fact that information has been transmitted in accordance with Articles 22 and 23 or that a money laundering or terrorist financing investigation is being or may be carried out." The original Section 333 of the UK Proceeds of Crimes Act 2002 provided: "Tipping off - (1) A person commits an offence if (a) he knows or suspects that a disclosure falling within section 337 or 338 has been made, and (b) he makes a disclosure which is likely to prejudice any investigation which might be conducted following the disclosure referred to in paragraph (a)." However, that provision was repealed in 2007 and replaced with Sections 333A to 333d, which only apply to those in the regulated sector.

57
Article 2 of EC directive 2005/60/EC of 26 October 2005. See also, for example, 'designated services': Australia Anti-Money Laundering and Counter-Terrorism Financing Act 2006, § 6; 'reporting entity': New Zealand, Anti-Money Laundering and Countering Financing of Terrorism Act 2009, § 2.

58
Criminal property is defined at Section 340(3) of the Proceeds of Crime Act 2002. The UK Bar Council, Proceeds of Crime Act 2002, guidance 2008, notes that it is a wide definition. Property is criminal property if (a) it constitutes a person's benefit from criminal conduct or represents such benefit (in whole or part and whether directly or indirectly), and (b) the alleged offender knows or suspects that it constitutes or represents such a benefit. For example, property that represents the benefit of the nonpayment of tax constitutes criminal property for the purposes of the Act. See: <http://www.barcouncil.org.uk/guidance/proceedsofcrimeact2002>.

59
Section 334 provides that breach of this provision may result in imprisonment on summary conviction for a period of up to six months and on indictable conviction for a period of 14 years.

60
[2005] EWCA Civ 226.

61
Ibid., § 83.

62
UK Bar Council, Proceeds of Crime Act 2002, guidance 2008, available at: <http://www.barcouncil.org.uk/guidance/proceedsofcrimeact2002>.

63
It should also be noted that Section 337 of the Proceeds of Crime Act 2002 provides for immunity from liability (at least from suit in England) for disclosure of any such information. Section 337 provides: "(1) A disclosure which satisfies the following three conditions is not to be taken to breach any restriction on the disclosure of information (however imposed). (2) The first condition is that the information or other matter disclosed came to the person making the disclosure (the discloser) in the course of his trade, profession, business or employment. (3) The second condition is that the information or other matter - (a) causes the discloser to know or suspect, or (b) gives him reasonable grounds for knowing or suspecting, that another person is engaged in money laundering."

64
See Cremades's comment in ICC dossier, Arbitration: Money Laundering, Corruption and Fraud (ICC Institute of World Business Law, 2003) p. 181.

65
ICC Rules 1998, Article 26: "If the parties reach a settlement after the file has been transmitted to the Arbitral Tribunal in accordance with Article 13, the settlement shall be recorded in the form of an Award made by consent of the parties if so requested by the parties and if the Arbitral Tribunal agrees to do so." LCIA Rules, Article 26.8: "In the event of a settlement of the parties' dispute, the Arbitral Tribunal may render an award recording the settlement if the parties so request in writing (a 'Consent Award'), provided always that such award contains an express statement that it is an award made by the parties' consent." SIAC Rules 2010, Rule 28.8: "In the event of a settlement, if any party so requests, the Tribunal may render a consent award recording the settlement." SCC Rules 2010, Article 39(1): "If the parties reach a settlement before the final award is made, the Arbitral Tribunal may, upon the request of both parties, record the settlement in the form of a consent awards." UNICTRAL Arbitration Rules 2010, Article 36(1): "If, before the award is made, the parties agree on a settlement of the dispute, the arbitral tribunal shall either issue an order for the termination of the arbitral proceedings or, if requested by both parties and accepted by the tribunal, record the settlement in the form of an arbitral award on agreed terms." Article 34(1) of the UNCITRAL Rules 1976 is in the same terms.

66
By corollary, one commentator stated that "perhaps the greatest mistake an arbitral tribunal can make when faced with a suspicion of bribery, money laundering or serious fraud is to ignore it…". Bernardo Cremades and david J Cairns, 'Transnational Public Policy in International Arbitral decision Making: The Cases of Bribery, Money Laundering and Fraud', in ICC dossier, Arbitration: Money Laundering, Corruption and Fraud (ICC Institute of World Business Law, 2003) pp. 65-93 at p. 85.