EXPERTS AND CONFIDENTIALITY: AN EMERGING DISJUNCTION IN ARBITRATION?

-Pratik Raj & Prasidhi Agrawal[1]


I. INTRODUCTION


Arbitration is opted as a suitable adjudication process because of its intrinsic quality of being confidential. Arbitration is informally considered to be confidential because unlike traditional courts, where information related to proceedings is easily accessible to a lot of people, in case of arbitration, subject to certain conditions, only the adjudicator and the parties are allowerd to be present during the proceedings which happens in a closed room, therefore, arbitration is rather a private affair. Therefore, given safeguarding the company's reputation and avoiding the inconvenience that may result from disclosure of trade secrets and other sensitive information, arbitration is a suitable choice. However, until very recently, active confidentiality provision was not a part of a statutory framework for arbitration. Confidentiality provision was introduced as Section 42-A by way of Arbitration and Conciliation (Amendment) Act, 2019 to the Arbitration and Conciliation Act, 1996 (‘the Act’).

It is imperative to understand that confidentiality exists in a very restricted atmosphere because it imposes the obligation of maintain confidentiality on a very few people and the Section also encompasses just one exception, which has been highlighted later in this research work. Therefore, the provision is certainly not comprehensive. Section 42-A imposes a duty upon arbitrator(s), parties to the dispute, and counsels representing the parties to not disclose any information concerning the arbitration proceedings. The only exception which has been accounted for, is the disclosure of arbitral awards in order to facilitate its implementation. Consequently, in more than one instance, this provision can come into direct conflict with other provisions of the act and the nature of Section 42-A being non-obstante, other provisions of the act will have to be undermined.


At this point, a pertinent question that arises is that what will be the case when the Act itself provides for the interference of any other person other than the parties to the dispute, their respective counsels and arbitrator(s), in arbitration proceedings? This question can be raised with respect to the problems that will be faced in the application of Section 26 of the Act that deals with the involvement of an expert in arbitration proceeding. This provision provides a legal framework for the systematic interference of such other people in arbitration proceedings as held by the apex court in the case of Ramesh Chandra Agrawal v. Regency Hospital Ltd.[2] However, a problem associated with the implementation of this provision is that confidentiality provisions will have to be breached to effectuate these provisions. This is because the involvement of such other persons in arbitration proceedings would mean disclosing information related to the arbitration proceedings with these people.


This research work specifically aims at (i) The analysis of Section 26 of the act (ii) Its effect on the newly introduced confidentiality clause,and (iii) An attempt has also been made in order to formulate suitable solutions for overcoming this problem.


II. SECTION 26: AN OVERVIEW


Section 26 of the Act facilitates the appointment of a neutral party as an expert in order to assist the arbitral tribunal on a technical point and it has also been substantiated in the case of Ramnathan v. State of Tamil Nadu.[3] This is also in compliance with Section 45 of Indian Evidence Act, 1872 which states that those facts which are otherwise not relevant become relevant when expressed by an expert.[4] Section 26(1)(b) states that the parties are required to furnish any relevant information or provide access to any documents, accounts, etc. to the expert, for the purpose of inspection. Further, Section 26(2) states that such an expert can also participate in oral hearings of the arbitration proceedings if the need arises. There is nothing inherently wrong with these provisions as it is both, developed on lines of UNCITRAL Model Law and also in consonance with Section 45 of Indian Evidence Act, 1872.

Further, these provisions do not undermine the authority of arbitral tribunal or the stand of complete arbitration proceeding because the opinion of an expert is not binding in nature, as highlighted by the Supreme Court in a plethora of judgments which include Fakhruddin v. State of Madhya Pradesh, Sultan Singh v. State of Haryana, Ramesh Chandra Agarwal v. Regency Hospital Ltd. among many others.[5] It is advisory in nature and completely depends on the will of the arbitral tribunal to accept it or to reject it. Therefore, the role of an expert is limited to only technical assistance and not the delivery of judgment. Further, the act is only concerned with the relevance of the expert's opinion as evidence and not its substance or merit which has also been the opinion of the Supreme Court in the case of Murari Lal v. State of Uttar Pradesh.[6] There is no requirement of corroboration in case of expert evidence. Therefore, the arbitral tribunal can conveniently seek the help of an expert without having its authority challenged, as also laid down in the landmark judgment of Vishnu v. State of Maharashtra.[7] However, the primary issue is regarding the coexistence of Section 26 with the confidentiality clause in a mutually inclusive environment.


III. THE BONE OF CONTENTION


Arbitration is a more suitable choice for technical disputes. Technical disputes, such as those that require knowledge about a specific field or those disputes that require deep assessment of accounts, are not preferred for being adjudged by traditional court setups. This is because it requires long hours of discussion and getting into extensive details, which cannot be afforded by the courtsas they are already overburdened with a large number of pending suits. Here arbitration becomes a suitable option for such issues because it makes the adjudication a private affair,[8] and is not as burdened as traditional court setup.It has expressed provisions for the appointment of an expert to discuss a technical matter,[9] and has the authority to make awards that can be implemented as decrees of courts.[10] Accordingly, Courts and Arbitral Tribunals have often opted for the opinion of an expert in cases where specific technical knowledge is required, which is not usually possessed by the courts (as has been the established precedent ever since the judgment in Folokes v. Chadal).[11] For instance, a dispute between companies which requires a proper assessment of accounts of the companies by a competent person where the arbitral tribunal cannot fit into the shoes of such a "competent person". Clause (2) of Section 42-A enables such an expert to attend the oral hearings where the parties can put questions to the expert with respect to his technical advice.


A direct implication of this provision is that the parties would be required to disclose important information to the expert. Some information like trade secrets, intellectual property, etc. would naturally be disclosed if the expert is allowed to be present in the oral hearings of the dispute. This provision is in direct conflict with the confidentiality clause as provided for in Section 42-A of the Act. Ultimately hindering the application of confidentiality provision and one of the very fundamental purposes of Alternative Dispute Resolution mechanism for which it is often opted for. This is because- parties tend to avoid adjudication through a traditional court setup. After all, arbitration provides a more cost and time-effective mechanism.


Further, in the case of arbitration, accessibility is allowed to a very limited number of people and thus, maintaining the confidentiality of the proceeding. As a result, parties are not required to disclose any sensitive information like trade secrets, books of account, contracts, etc. This not only enables the parties to prevent Intellectual Property Rights’ infringement but also enables the parties to maintain the reputation of their company in the eyes of the public. However, Section 26(1)(b) of the Act specifically grants power to the arbitral tribunal to order the party to give the expert any relevant information or to produce, or provide access to any relevant information, or goods or other property for inspection by the expert.


Therefore, this leads to a conflict between Sections 42-A and 26 of the Act. On the face of it, the solution to this problem is quite simple. Section 42-A invokes a non-obstante clause and therefore it will have an overriding effect, in case, it comes into conflict with other provisions of the same act or any other act(s). Therefore, there is a requirement of proper assessment in order to determine which provision should enjoy an upper hand because once the importance of both Sections 42-A and 26 have been highlighted, one can understand that neither of them can be given less importance.


IV. SUGGESTIONS


For the uncertainty surrounding the appointment of experts and the scope of the confidentiality in the arbitration proceedings, the situations demand a comprehensive and straightforward measure that needs to be adopted in order to avoid the risk of fragmentation of the backbone of arbitration proceedings.


1. Undertaking for Non-Disclosure


One of the measures to deal with the conflict can be that the experts must be directed to sign a confidentiality undertaking and declare expressly that they wouldn't disclose any information, documents, and files concerning the arbitration proceeding to an outsider, in order to uphold the confidentiality of the proceeding. Otherwise, such person/s would be charged with penal consequences like fines and imprisonment in accordance with specifically instituted law, which is expected be the international practice, as also laid down in Guyana v. Suriname.[12] This way it can be ensured that Sections 42-A and 26 can co-exist in a mutually inclusive environment. This model has already been successfully incorporated in 2021 Arbitration Rules of International Chamber of Commerce in the form of Article 1(6) of the Appendix.


However, a preliminary question that may arise in the present instance is that what will be the course of action when the undertaking or any of its laid terms as signed and agreed upon by the expert is breached? The answer to this can only be given when a substantial change is brought in the legal system by introducing certain comprehensive new rules of arbitration expressly providing for a judicial recourse ensuring strict penal action against any such offender who misuses his position. This will not only ensure that the concerned expert is well within their boundaries but would also ensure no risk to the parties and best exhibit the party-friendly and proactive attitude of the legal system in supporting this backbone of arbitration.


2. Amendment of Section 42-A


An alternative to undertaking for confidentiality would be an amendment to Section 42-A of the Act. The Section 42-A in its present form imposes an obligation upon the arbitrator(s), parties to the dispute, and their counsels to not disclose any information to outsiders (in consonance with the arbitration proceeding). However, if this obligation of non-disclosure can be extended to any other party which in the course of the arbitration proceeding, became a part of it, then it can be ensured without the aid of any additional provision, that experts appointed under Section 26 do not become the source for breach of confidentiality. This would also be a replication of 2021 Arbitration Rules of ICC, the Article 1 of Appendix II of which expresses the provision that any person who receives any information regarding arbitration proceeding has a legal obligation to keep it confidential and not publish it. Article 1 also mandates seeking permission of Secretary General of Arbitral Tribunal before handing over any document or information to an outsider. Since if the same is incorporated in the Indian Act, it would be a replication of International Model, and thus, would have more authority.


This is a more concrete and less frivolous solution as compared to other solutions because it will not require the signing of the undertaking, which essentially is a contract in form of a Confidentiality Undertaking or a Non-Disclosure Agreement. The legality of such agreements is determined by provisions of the Indian Contract Act, 1872. However, owing to the nature of Non-Disclosure Agreements, there cannot be general forms of contract to effectuate these agreements. It requires separate agreements for different purposes, with different terms of agreements. Not only this process will be more cumbersome, but invoking sanctions will also become subject to the terms of the agreement.


3. Taking Inspiration from International Model Law


Article 34.5 of UNCITRAL Model Law on International Commercial Arbitration has an indirect provision for confidentiality. The Article states that arbitral awards can be made public by consent of both the parties to the dispute. However, this provision is also not comprehensive in dealing with the issue of confidentiality and it merely states that an award can be made public subject to the consent of parties to the dispute. The model law places reliance on a plethora of international judgments, discarding the need for active provisions for confidentiality. This includes the Australian High Court’s judgment (Esso & Ors. v. Plowmann) that confidentiality is not an essential attribute of arbitration.[13] It also includes the United States' judgment (U.S. v. Panhandle et. Al) that there cannot be a uniform law for confidentiality in arbitration.[14] United Kingdom also does not have absolute provision for confidentiality which has been similarly held in a plethora of judgments, including Ali Shipping Corp. v. Shipyard Troggir and Emmott v. Michael Wilson & Partners Ltd[15] and the stand is similar in Singapore as well by virtue of judgment in the case of Yaung Chi Oo Co. Ltd. v. Win Win Nu.[16] Therefore, there is a general worldwide acceptance of the fact that there cannot be uniform objective rules for confidentiality in arbitration proceedings, because of the sheer amount of implications that may result from it.


Further there are other provisions as well which states appointment of experts for technical assistance in arbitration. This includes Article 27 of UNICTRAL Arbitration Rules, 2010, which only gives evidentiary value to expert witness. Further, Article 39 of the 2015 SHIAC Arbitration Rules also provides opportunity to arbitral tribunal to appoint an expert at its own discretion. Appointment of expert for witness is also warranted by 2021 ICC Arbitration Rules by virtue of its Section 25(2). All these provisions coexist with confidentiality clause in a mutually inclusive environment and their applicability can be assessed in order to develop a tailor-fit provision for the Indian arbitration regime where confidentiality and expert witness can peacefully coexist.


Co-relating the Indian law with various international model laws, a conclusion can be drawn that the Indian law is loosely based on various international provisions and more specifically is an embodiment of Article 26 of UNCITRAL Model. Even though this is not a very concrete solution and mostly suggestive in nature, nonetheless, the conceptualization of domestic framework on lines of international model law can ensure better applicability of the provisions. This can be used for the realization of the importance of provisions for the appointment of expert and how it cannot be undermined for the facilitation of a superfluous provision of confidentiality.


4. Redaction of Confidential Information


This is again not a very concrete solution however in many cases; it can be relied upon to ensure that Sections 42-A and 26 can peacefully coexist. If an expert is allowed only access to some information, which is necessary in order to obtain his technical assistance the question that arises is regarding the accuracy of the redaction as against the original document. ICC’s 2021 Arbitration Rules’ Article 1(6) of Appendix II provides for a similar arrangement wherein any information provided to an outsider is required to be returned or destroyed after its ‘limited use’ is over. This can be an inspiration for the Indian model as well.


However, this suggestion only has limited applicability. This is because Section 26 has extensive provisions which also allow such an expert to attend the oral proceedings of the arbitration, therefore allowing the greater risk of exposure to sensitive information. Thus, if any arbitration proceeding requires the expert to be present during the oral proceedings, then allowing redacted access to the expert will give rise to two new problems. Firstly, that there would be a breach of confidentiality and the other problem would be that even after breaching of confidentiality, an expert would be of no-good use as he had been provided redacted access to information in the first place. Secondly, this would seriously disable his application of knowledge to deal with an issue as an expert.


V. CONCLUSION


The watertight nature of the confidentiality provision under Section 42-A has made the applicability of this provision very limited, and many important provisions have been overlooked in the process of drafting of Section 42-A. As a result, this confidentiality clause fails to consider many exceptions and result in conflicting provisions. Section 42-A can be considered to be a visionary step rather than taken in haste.


The principle of confidentiality undoubtedly is and will be the backbone of arbitration proceedings. Confidentiality is a fundamental principle to avoid the peril that can be caused if the trade secrets and other sensitive information of parties are not well-protected and maintained during the adjudication process. The issue of confidentiality is gaining international recognition and significant developments have been made. However, it is pertinent to mention that effective practical implementation has remained a vital challenge because in the Indian legal setup, the provision for confidentiality under the Arbitration and Conciliation Act, 1996, comes into direct conflict with other provisions of the act.


The issue of convergence of Section 26 and Section 42-A as an individual legal right to confidentiality illustrates some important lessons. Given the escalation of use of arbitration for the purpose of settlement of disputes and the deficient attention to the parties right to confidentiality in the statute highlights to deal with this outstanding issue by the presence of a better and comprehensive textual provision is the need of the hour in order to do away with the stress of rules incertitude. The absence of this would pose a big question mark on the legal system and completely frustrate the objective of resorting to this mode of dispute settlement.


The amendment regrettably did little to progress in the realm of confidentiality. It did recognize the issue of confidentiality. However, the provision in order to deal with it has been designed in such a way (Non-obstante clause and limited exceptions) that instead of dealing with the crisis, it has started another crisis on its own.


At last, it can be said that the benefit of the confidentiality clause under the Arbitration and Conciliation Act, 1996 can be elucidated upon in a variety of ways. It can also be considered a remarkable step and a ray of light in the hope of achieving the status of the hub of International Commercial Arbitration for India. However, it comes with its own set of problems, primarily because of its conflicting nature with other provisions of the same act. With that, once this provision is customized to such an extent that it can have greater applicability without hindering the applicability of other provisions; the vision behind the conceptualization of confidentiality provision could be achieved.


[1] Pratik Raj and Prasidhi Agrawal both are 4th year students of B.A., LL.B. (Hons.) at Chanakya National Law University Patna. They can be reached at rajpratik229000@gmail.com and agrawalprasidhi16@gmail.com respectively. [2] AIR 2010 SC 806. [3] AIR 1978 SC 1204. [4] Indian Evidence Act, 1872, § 45, No. 1, Acts of Parliament, 1872 (India). [5] Fakhruddin v. State of Madhya Pradesh, AIR 1967 SC 1326; Sultan Singh v. State of Haryana, (2014) 14 SCC 664; Ramesh Chandra Agarwal v. Regency Hospital Ltd., AIR 2010 SC 806. [6] AIR 1980 SC 531. [7] AIR 2006 SC 508. [8] Arbitration and Conciliation Act, 1996, § 42-A, No. 26, Acts of Parliament, 1996 (India). [9] Arbitration and Conciliation Act, 1996, § 26, No. 26, Acts of Parliament, 1996 (India). [10] Arbitration and Conciliation Act, 1996, § 36, No. 26, Acts of Parliament, 1996 (India). [11] (1782) 3 Doug. K.B. 157. [12] ICGJ 370 (PCA 2007). [13] (1995) 128 A.L.R. 391. [14] (1998) 118 F.R.D. 346. [15] Ali Shipping Corp. v. Shipyard Troggir, [1998] 2 All. E.R. 136; Emmott v. Michael Wilson & Partners Ltd., [2008] E.W.C.A. Civ. 184. [16] [2003] S.G.H.C. 124.

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