6 January 2009 01:46

Confidentiality in dispute resolution – Advantage arbitration?

You may have tried negotiation and mediation and got nowhere. You may have tried adjudication but are not satisfied with the result. You want a full and final legally binding and enforceable decision. So what are the options?

Arbitration v Litigation

The two prime means of resolving disputes in contract or tort with a binding decision are arbitration and litigation. Both have their pros and cons and of course their partisan supporters. Those drafting a contract, including consultants’ appointments, are advised to make a decision as to which forum will apply in the event of a dispute. Users of standard forms of building contracts will need to check which is the default forum. By way of example the 2005 JCT contracts make litigation the default forum, and as a result if you want arbitration to apply you will to positively confirm this in the document.

Whilst effective and used extensively I am ignoring adjudication in this article. This is for the reason that although a dispute may be referred and quickly decided via adjudication, the adjudicator can only provide a “interim binding decision” pending final resolution by either arbitration or litigation.
In other words if you want a decision which should settle matters once and for all you need to go for either litigation or arbitration.

This article does not aim to look at the numerous claimed advantages of either arbitration or litigation over the other. There is one advantage of arbitration however which has recently become an even stronger “trump card” namely the prized commodity of “confidentiality”.  

Confidentiality

Arbitration is generally held with only the parties to the dispute and their witnesses present. The press and the public are generally not around and there is no publishing of the parties’ pleadings ie the statement of case and defence and counterclaim, or for that matter the arbitrator’s award. Beyond that, the parties themselves have an implied duty not to disclose what went on at the tribunal, although there are exceptions to this for instance the parties may agree to disclose documents or a court may order documents to be disclosed. The duty of confidentiality also extends to the arbitrator.

By contrast in a court of law, the press, a member of the public (which might include an interested competitor), could theoretically attend court and hear all the evidence relating to the dispute. The publicity which surrounds a court case may not be the sort of message that a firm wants to send and may in that event have a significant bearing on deciding where there is a choice where to have the dispute heard. If the issue of confidentiality is a high priority, then recent changes to the law in respect of litigation may have made arbitration even more attractive and at the same time litigation less so.

So what has changed?

As a result of CPR rule 5.4, since October 2006 it has been possible for a member of the public to request and obtain from the Court Service copies of the parties pleadings. This means, in general, that anyone can obtain a claimant’s Particulars of Claim or a defendant’s Defence, including the Counterclaim if there is one. Both of these may contain extremely detailed and sensitive information which could for instance be very interesting to a competitor or may be very embarrassing to the protagonists. Whilst witness statements and expert reports are not being made accessible, it is more than conceivable that the opportunity afforded to obtain copies of the parties pleadings may alone be sufficiently damaging.

Am I bothered?

Unless confidentiality, or the lack of it, is of fundamental importance then confidentiality should be only one of a number of factors to take into consideration in making the decision to incorporate litigation or arbitration in the agreement. Clearly that decision should fully take into account what type of business you are in, including the likely or actual nature of the matter in dispute, and in particular the details which will come before the judge or arbitrator. If in doubt take expert legal advice before you make your choice.

Frank Rayner

March 2007

 

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