The title of this article may mislead the reader, since the author borrowed it from the famous painting by the surrealist Belgian artist René Magritte. Definitely, this was not the intention. Indeed, this is really not an article, but rather a spontaneous reaction of a panellist when confronted with a topic dealing with confidentiality in arbitration. A text short in length but intended to address a contemporaneous concern surrounding arbitration worldwide.

For decades, scholars and practitioners communicated far and wide that confidentiality was one of the main features of arbitration. While court proceedings were public, as a rule, and anyone could have access to their contents, arbitration proceedings were in turn deemed to be a matter of private knowledge restricted to the parties and arbitrators. At the time, it was assumed that in essence arbitration proceedings rhymed with confidentiality.

Nonetheless, as a result of the decisions adopted by the Australian and Swedish courts during the 1980s denying the confidential nature of arbitration, confidentiality has become an issue. Courts have said that arbitration is confidential only insofar as the parties attribute such a nature to it. Thus, confidentiality, which had always been taken for granted as an intrinsic feature of such dispute resolution mechanisms, has shifted into the area of the parties' autonomy.

The main question facing any arbitrator, practitioner or prospective party is whether such judicial decisions have stopped and will be restricted to Australia and Sweden or whether this is a global trend that will see similar decisions adopted by other national courts.

Why is confidentiality at issue? What are the reasons for publicizing the dispute, the proceedings and, especially, the contents of the award?

As a matter of principle, we are forced to admit that for decades, or even centuries, the matters dealt with in arbitration proceedings were of restricted interest. In other words, the discussion of arguments and the core dispute was only of interest to the parties concerned. More recently, however, third parties foreign to the dispute have become more and more interested in the outcome of proceedings and the different ways in which the arbitrators settled the underlying disputes.

What has actually changed? What are the new developments in the business arena that have given rise to the interest of outsiders? How much of an outsider is any party to a foreign arbitration? Does globalization have anything to do with this drastic change to the previous scenario?

The response to this last question seems to be affirmative.

Globalization has led to a situation in which all business transactions are intertwined with international mechanisms to a certain extent. Although independent, contractual instruments backing transactions tend to follow increasingly similar standard models accepted worldwide. This is true in any jurisdiction, even though the basic structure may vary, as in the case of civil and common law systems. Despite appearances, there is no contradiction here, just as there is none in Magritte's painting.

It is very hard to argue convincingly that, at a certain level, a business transaction is entirely domestic and has no international links. This is a fair justification for civil law business contracts following the standards developed under common law jurisdictions. In essence, most of the provisions contained in certain international model contracts would be deemed unnecessary at the domestic level since the aspects they address are generally covered by the local civil and commercial codes.

There is, however, an important aspect to be taken into account. In all the transactions completed in the business arena, a tendency may be ascertained whereby the amount of funds required for the implementation of huge projects of an industrial or infrastructural nature is met less and less using sources related to the sponsors. Sponsors of these types of projects, in turn, are committing to invest, but this commitment is based primarily on securing funding through third-party loans and other leveraged instruments. Hence, projects encompass not only the main parties but also lenders and financiers who make such investments financially viable. Structured transactions have for the most part replaced sponsors' capital investments, which are being reduced to a small percentage representing the sponsors' minimum required commitment.

Furthermore, most of the transactions in the domain of mergers and acquisitions count on the presence of new players - such as private equity funds - in association with successful entrepreneurs or even certain going concerns entirely owned by them. In the latter case, the nature of the investments is far removed from an alliance of strategic investors who are all familiar with the given industry and its best operating practices.

Various international associations and entities have therefore developed model contracts that are spread around worldwide. The world is moving towards a form of standardization in this area. oil and natural gas contracts, construction contracts and share purchase agreements tend to be very similar on all continents and in all jurisdictions, irrespective of the legal system prevailing in the jurisdiction concerned.

The bankability of a structured project depends mainly on the supporting contracts following the standard model provisions that are known to lenders and financiers and under which they feel comfortable allocating their funds. on the other hand, lenders and financiers are adamant in requiring that any disputes that may arise during the life of any structured project are settled by arbitration rather than by recourse to national courts. What is the reason for this?

Lenders and financiers always focus on the economic features of any transaction throughout its life cycle, with a view to securing a reasonable and proper return on the investment made. Default, breaches and disputes are deemed accidents that may disrupt the economic balance of a transaction, affecting the forecasted rate of return. Arbitration is thus a mechanism for the settlement of disputes that is capable of minimizing the damages associated with such disruption and restoring the equilibrium as a way to preserve, inasmuch as possible, the rate of return associated with the project. The features of arbitration, in particular the symmetry of information and knowledge that exists between the arbitrators and the parties in each given industry, do actually contribute to a general perception that this mechanism offers the most competitive transaction costs. Indeed, it is a matter of economy.

Thus, the construction and interpretation of a given contractual provision in the context of a certain arbitration may be of interest to the entire industry, especially if this construction tends to prevail in the majority of the cases. The repeated construction of a given provision may lead the industry to redesign the applicable provision, making it more specific or even broader, as the circumstances require.

Outsiders also have an interest in the outcome of arbitral proceedings, since it may recommend the revision of standard model provisions contained in the contracts that formed the core issue in a certain dispute. Having access to such information can help to restore the competitiveness of previously determined transaction costs.

Another issue that deserves analysis is the degree of confidentiality protection envisaged by the parties in any arbitration. It is fair to question what interests parties wish to protect under confidentiality and why they wish to do so. It may be claimed that the nature of these interests ranges from the existence of the dispute to the existence of the arbitration and even to the details of the dispute itself.

Indeed, there is no standard response, as there is no standard list of interests that deserve protection per se. The answers on these matters may vary, as they often do.

This leads to the conclusion that, despite appearances to the contrary, confidentiality is rarely absolute. The extent of the protection granted by confidentiality must be determined by tempering its scope and effects.

Any determination of this kind is based on stated criteria, and it is therefore of paramount importance to investigate the elements that allow one to discharge this duty.

Assuming, despite the most recent judicial developments, that confidentiality is the general rule, albeit not an absolute one, as discussed above, exceptions will arise in the presence of an interest with a broader application than any interest of a more limited scope. Hence, the nature of the underlying interest is a valid criterion for tempering the assumed stringency of the confidentiality protection.

Some national legal systems and laws provide for cases where confidentiality is limited to certain issues, but in others disclosure is mandated. In some cases, however, confidentiality is banned and set aside in the name of an interest that goes beyond the convenience of the parties.

This applies, for example, in the following two cases.

First and foremost, it applies whenever a dispute involves a state or any of its agencies, instrumentalities or companies. In such cases, a suitable mechanism for complying with the law and avoiding uncontrolled public announcements would involve disclosure and subsequent updating by the state or state-related party to the relevant state control entity, as in the case of the general accounting office or similar instrumentality entities. Any solution along these lines would help to preserve another aspect associated with confidentiality, but which may not be treated interchangeably, namely the privacy of the proceedings. Although disclosure may be mandatory, privacy may be preserved without prejudice to the disclosure requirements.

The second case in which confidentiality is banned is where any arbitral proceeding deals with disputes involving listed companies. Depending on the outcome, a given arbitration may increase or reduce the enterprise value of a listed company. The outcome of the arbitration may thus affect the trading of listed shares positively or negatively. The limitation on confidentiality in such cases is aimed at protecting a valuable intangible asset. It is the interests of the community of shareholders to be kept abreast of events that may affect the listed company and ultimately the access to information, the latter being an important pillar of public markets. In such cases, the regulatory agencies in charge of capital markets offer standard communication systems for this specific purpose.

In the two above-mentioned cases, the salient developments in international business and the effects of globalization play an important role. Suffice it to say that states are increasingly interacting with private players, especially in certain regions of the world. The number of efforts undertaken jointly by states and private investors is increasing throughout the world. Public-private partnerships and other forms of joint effort businesses are a reality, and in such instances the state assumes a quasi-entrepreneurial role. Public and private funds are gathered to fund investments in public projects, although under private control. Despite such a quasi-entrepreneurial face, the states must adhere to constitutional and legal principles and rules on disclosure and transparency applicable to the management of their funds in response to the preponderant interests of taxpayers.

Capital markets are growing and stock exchanges are receptive to the listing and trading of shares of foreign companies on their trading floors. Capital markets are more and more globalized, and information is indeed a right conferred upon the community of shareholders and investors.

It is needless to say that, despite the existing disclosure duties, certain privileged information related to intangible assets, such as business secrets and information associated with the market position of the target companies, has to be protected. under these principles, a confidentiality shelter shall be recognized in certain circumstances, i.e. the precedence of an interest of a broader scope. Again, it is not what it seems to be. There is no contradiction in such cases, much like René Magritte's painting does not actually contain a contradiction.

In conclusion, it seems fair to conclude that confidentiality is still a feature of arbitration but, at the same time, that it is far from being absolute. In a globalized world, where flows of public and private capital are increasing, confidentiality is increasingly affected by exceptions. Certain interests will always have precedence over others: the limited interest will wane whenever a broader interest comes into play.

It is therefore useful and wise to investigate to what extent confidentiality rhymes with globalization.