Court of Appeal affirms principle of arbitral confidentiality by endorsing decision to hold case management conference in private

In a decision dated 15 December 2021 in CDE v NOP (full party names anonymised in the interests of maintaining confidentiality), the Court of Appeal upheld in part an order made by the Commercial Court. Specifically, it upheld the part of the order stipulating that, owing to conflicts of confidentiality relating to an LCIA arbitral award, a case management conference in related Court proceedings should be held in private, as an exception to the general principle under CPR 39.2 that such hearings are to be held in public.

Background

The claimants in this case had previously succeeded in an LCIA arbitration against companies said by the claimants to be connected to the defendants. The claimants commenced court proceedings against the defendants arising out of the same circumstances that gave rise to the arbitration. The claimants allege that the LCIA award was also binding on the defendants, because privity exists between the defendants and the companies that were party to the arbitration. The defendants deny that the LCIA award is binding on them and argued that the award was in any case inadmissible in the court proceedings. At the time of the Court of Appeal decision, this issue was intended to be determined at an impending summary judgment hearing and was referred to as the “privity application”.

The claimants argue that it is in the public’s interest that the arbitral award is made public. The defendants maintain that it should remain confidential, at the very least until the privity application is resolved. The defendants argue that if they are successful in rebuffing the privity application, there would be no need, nor authority, for the LCIA award to be used in the current proceedings, and no justification for it to be publicised.

This is the context in which the parties approached a case management conference before Mr Justice Knowles in July 2021. The claimants were of the position that the case management conference, as well as the privity application (at the time unissued), should both be held in public, in the usual way. However, the defendants disputed this – a hearing concerning the debated confidential nature of the arbitral award, if held in public, would inevitably reveal what the arbitrators had decided.

The Commercial Court Order

In relation to the issues of whether: a) the case management conference and b) the privity application should be held in public, Mr Justice Knowles produced an ex tempore judgment, determining as follows:

1. The case management conference, which refers to the LCIA award, and any application heard that same day referring to the contents of the LCIA award, were to be heard in private. In his order, it was noted that this was simply the position at the early stage after the recent issue of the LCIA award, and was not an indication that the same position would necessarily hold in light of the privity application or otherwise.
2. As for the privity application, the judge did not make an assessment as to whether the hearing was to be heard in public or private. Rather, the order stipulated that all parties at any hearing in the proceedings not taking place in private (i.e. taking place in public), should for the time being refrain from relying or referring to any parts of the contents of the LCIA award without first seeking a determination from the court as to whether and to what extent those proceedings ought to be conducted in private.

Effectively, the judge therefore decided that the case management conference was to be held in private, and in the second part of the order postponed a determination of whether the privity application could be heard in public to a later point.

The Claimant’s Appeal and Relevant Issues

The claimants appealed against the judge’s order, submitting the following points:

1. The judge was incorrect in both his assessments that the case management conference should be held in private, and that a further determination was needed from the court to ascertain whether the privity application could be held in public. In addition to the reasons below, the claimants were opposed to this because requiring this further determination (specifically as phrased in the order) ignored the principle that a public hearing is the general rule to be excepted, and unfairly predisposed the court to ascertaining that the privity application should be held in private;
2. Additionally, the judge failed properly to apply the test in CPR 39.2 to give proper weight to the fundamental principle of open justice, and
3. He failed to take account of, or gave insufficient weight to, various factors, and he took into account or placed excessive weight on various irrelevant factors.

The Court of Appeal’s Decision

In the leading judgment in the Court of Appeal, Lord Justice Males (with whom Lord Justices Popplewell and Warby agreed) identified the relevant sources and principles of law. He confirmed that CPR 39.2, containing the general principle that hearings are to be held in public, was indeed the relevant rule.

Amongst the various exceptions to CPR 39.2, such as publicity defeating the object of the hearing and national security, Lord Justice Males determined that the only relevant exception was CPR 39.2 (3)(c), which stipulates that a hearing may be exempt from the general rule where “it involves confidential information (including information relating to personal financial matters) and publicity would damage that confidentiality”.

CPR 62.1, which stipulates that those claims qualifying as ‘arbitral claims’ are also exempt from the general rule, was not relevant to the case at hand. Nevertheless, Lord Justice Males acknowledged that the rule has contributed to a legislative and common law concept of arbitral confidentiality.

He also emphasised the express confidentiality agreement contained within Rule 30 of the LCIA rules which stipulates that:

“The parties undertake as a general principle to keep confidential all awards in the arbitration, together with all materials in the arbitration 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 legal proceedings before a state court or other legal authority.”

Was the judge wrong to hold the case management conference in private?

Lord Justice Males reaffirmed the well-established principle of open justice as enshrined in CPR 39.2, and the importance of limiting exceptions to that principle. He emphasised that any departure from that principle must both fall within the authorized exception (confidential information) and be necessary for the proper administration of justice; and necessity is a demanding test. Lord Justice Males accepted that the case management conference would inevitably contain confidential information, and reiterated that arbitral confidentiality is recognized by English law as “significant and worthy of protection”, and “engages the public interest as well as the private interests of the parties”. Considering the express obligation of confidence imposed by the LCIA rules, and the fact that the purpose of the case management conference was to give further instructions on the proceedings, thus unavoidably requiring reference to the LCIA award, “it was necessary for the judge to sit in private to secure the proper administration of justice”. Necessity was apparent in these circumstances because existing publicity about the proceedings would inextricably reveal confidential information even if precautions were taken in a public hearing.

Was the judge wrong to make orders to ensure that the award would not become public until the court had determined that it should?

However, Lord Justice Males agreed with the claimants’ argument that the way the Commercial Court judge phrased the order in relation to the privity application “may suggest that the starting point for any further consideration of the matter should be the confidentiality of the award” and that was principally wrong. The starting point should be that the hearing is held in public, and the defendants must persuade the judge at the hearing for the privity application that a hearing in private is necessary; the default position cannot be a hearing in private. Lord Justice Males amended this part of the judgment accordingly.

Conclusion

This decision shows that the court is willing to respect and uphold the principle of arbitral confidentiality and will indeed dispense with the general rule that hearings must be held in public if the facts are such that a hearing in private is necessary. Nevertheless, Lord Justice Males did emphasise that the mere fact arbitral confidentiality is engaged does not necessarily equate to a hearing in private – it will still be vital to show necessity on the facts.

For further information, please email the authors or your usual CMS contact.

Article co-authored by Sarojah Sathivelu, Trainee Solicitor at CMS.