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Confidentiality of arbitration documents in collateral proceedings

The Delhi High Court has held that confidential arbitration records cannot be pressed into service in separate proceedings. What this means for parties drafting clauses today.

The statutory position

Section 42A was inserted into the Arbitration and Conciliation Act, 1996 by the 2019 amendment. It obliges the arbitrator, the arbitral institution and the parties to maintain confidentiality of all arbitral proceedings, subject to one exception: disclosure of the award where it is necessary for the purpose of implementation and enforcement. The provision is short, and the exception is narrow.

The issue in practice

Arbitration generates a great deal of material that a party may later find useful elsewhere: admissions in pleadings, valuations, internal correspondence produced on discovery, expert reports, and the reasoning of the tribunal itself. The temptation to deploy that material in a related civil suit, a winding-up petition, a complaint before a regulator, or in proceedings against a group company, is obvious. The Delhi High Court has now made clear that this temptation must be resisted, and that confidential arbitration documents cannot be used in separate proceedings.

Why the rule matters

Confidentiality is not incidental to arbitration; for many parties it is the reason they chose arbitration at all. If material disclosed under compulsion in an arbitration can be recycled into public litigation, the incentive to make full and candid disclosure collapses. Parties would begin to fight the discovery stage as though it were the trial, and the efficiency that arbitration promises would be lost.

What to do when drafting

Do not rely on Section 42A alone. It binds the parties and the tribunal, but it does not, in terms, address third parties, funders, insurers, auditors or group companies who may come into possession of the material. A well-drafted clause should: define confidential information expressly, and include pleadings, disclosure, evidence, transcripts, orders and the award; specify the permitted disclosures, which will usually include disclosure to legal advisers, auditors, insurers, funders and regulators, and disclosure compelled by law or by a court of competent jurisdiction; require that any permitted recipient be bound by equivalent obligations; and survive the termination of the arbitration and of the underlying contract.

What to do when a breach occurs

Move quickly. An injunction restraining the use of the material in the collateral proceeding, coupled with an application in that proceeding to strike the material from the record, is the appropriate response. Delay weakens both. Where the material has already been read by the collateral tribunal, the remedy narrows considerably, which is precisely why the application should be made at the first opportunity.

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