Arbitration in Malaysia – Privacy & Confidentiality

Many consider that the main advantage of arbitration over litigation after perhaps the possible cost savings and the ability to have appointed arbitrators which possess a greater knowledge in the field of construction to be that arbitration proceedings offer privacy and are confidential in their process. Privacy means that the proceedings are not open to the public as is generally the case with litigation through the courts. In attendance at arbitrations are generally only arbitrators, the parties in dispute, their legal representation and advisors and witnesses which the parties may call. Confidentiality means the obligation of the Arbitrators and the parties in dispute not to divulge any information as to the award or indeed the content of any of the proceedings or documents in relation to the proceedings or award.

When parties agree to submit a dispute to arbitration by way of arbitration agreement they are at the same time submitting that the dispute is solely between the parties. This prevents the publication of the proceedings and the award, including any allegations such a professional incompetence, misrepresentation, bad faith, technical incompetence, inadequate financial abilities or similar which may otherwise be harmful to the future endeavours of a party. The concept that arbitration shall be conducted in private does not appear to have ever been disputed and was practiced in England for hundreds of years in respect of parties resolving disputes in respect of contracts between them.

Privacy in arbitration is now taken for granted as a consequence of adopting to settle a dispute through arbitration rather than through the courts regardless of the content of the dispute resolution provisions contained within a contract or any subsequent arbitration agreements.

Although confidentiality is similarly taken for granted it is dependent upon the parties and others who have been granted access to it to respect the confidentiality of the process. Arbitral tribunals and institutions together with third parties have access if not to totality of the award, in part with respect to evidence.

As a result, most standard or model arbitration rules incorporated into contracts or arbitration agreements make clear provision that everything that takes place at arbitration is confidential in that neither of the parties to the arbitration nor the arbitral tribunal shall, without the consent of the all the parties in dispute, disclose to third parties what has happened in the course of the arbitration unless such disclosure is required to facilitate the arbitration process in a proper manner. A strange exception to this is the provisions as contained within the PAM Arbitration Rules which allow the appointed arbitrator to the PAM Arbitration and Mediation Services Committee on PAM’s request. This may lead to those parties wish to maintain the full protection of confidentiality currently available in Malaysia considering an alternative form or amending it to mitigate the reduction in confidentiality this represents.

It is also important to take account that in some instances the contents of the proceedings and award may be required to be disclosed to third parties where such third parties have a legitimate interest in the outcome of part or all of the arbitration perhaps because than have a subsequent claim or share of any precedes or even share in the liability that may result from an award made in arbitration. In such a situation these third parties may elect to disclose the content of arbitration awards to support their own litigation or pursue their own legal interests.  Disclosure may also occur when a party is obliged by law to disclose to third parties details of any arbitration award such as maybe the case in respect of shareholders of a party to the arbitration, insurers where there may exist some exposure or claim, or to the public where the dispute is determined to be one which is of public interest as in the case of Esso Australia Resources Ltd v The Honorable Sidney James Plowman (Minister of Energy and Minerals) [1995] 128 ALR.

Similarly a party to the arbitration may be forced to disclose the contents of an arbitration award if they are required to enforce an award through litigation.

Thus it is evident that it is almost impossible to ensure entire or complete confidentiality in the arbitration proceedings and award.

In the case of Dolling-Baker v Merrett [1991] 2 All ER 890, [1990] 1 WLR 1205 at 1213, CA (Eng). The courts held that in the absence of an express term in an arbitration clause providing for confidentiality, the presumption of confidentiality applies as an implied term arising out of the very nature of the arbitral process.

All this being said and taking account of the ruling of the Australian Court under the premise of public interest, at this time the Malaysian Courts appear unlikely to follow suit and would tend to follow the precedents established in the English courts in supporting that one of the essential features of arbitration is that it is confidential and private. Under such circumstances an arbitrator would be open to misconduct proceeding in the event of disclosure of information to third parties and in the event that one of the parties similarly disclosed information they would be exposed to litigation by the other party.

In conclusion when privacy and confidentiality are of prime importance it is essential that dispute resolution provisions in contracts together with subcontracts and arbitration agreements are considered carefully to ensure the Malaysian Courts support to enforcing such.

MALCONLAW

One response to “Arbitration in Malaysia – Privacy & Confidentiality

  1. Pingback: Arbitration | Malaysian Construction and Contract Law

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