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This is the second article in Clyde & Co’s latest international arbitration series covering the topic of confidentiality in international arbitration. In this piece, associate Sofía Rivas and trainee lawyer Michelle Donovan from our Madrid office provide the legal perspective from Spain.
Confidentiality is one of the fundamental pillars of the arbitration institution, and a necessary element for its development. In fact, it is considered by many to be a great advantage over judicial proceedings.
This is not a trivial issue, as it is an inescapable duty of all those who participate in it, which contrasts with the requirement of publicity of judicial proceedings as provided for in Article 120 of the Spanish Constitution. Furthermore, a breach of confidentiality can entail both civil and criminal liability for those who are legally obliged to respect it.
By means of this paper we intend to give an approach on the importance of confidentiality in arbitration proceedings from the Spanish legal perspective.
Confidentiality in arbitration aims to ensure protection of: (i) the personal data of the parties; (ii) the documents and information provided in the proceedings, including the award; and (iii) any commercial and/or industrial secrets that may be revealed during the proceedings.
As stated in the Judgment of the High Court of Justice of Catalonia of 5 May 2014, "the fundamental purpose of the secrecy of the deliberations of the arbitral tribunal lies in the need to maintain the equality of the parties in the proceedings and to safeguard their right of defence, as well as to preserve the independence of the arbitrators themselves, in addition to being an inevitable consequence of the duty of confidentiality of the information contained in the arbitral proceedings".
Confidentiality may cover any matter that the parties consider appropriate. Specifically, in accordance with the principle of party autonomy, the parties to an arbitration may agree on any matter relating to the nature and scope of confidentiality in the proceedings (Article 68.e of the 2019 Spanish Arbitration Club Code of Good Practice).
Thus, in its Explanatory Memorandum, the Spanish Arbitration Act 60/2003 itself is based on the premise that the autonomy of the will of the parties must prevail and establishes as the only limits the right of defence and the principle of equality, which are established as fundamental values of arbitration.
In accordance with the Spanish Arbitration Act 60/2003, its Article 24.2 states that "the arbitrators, the parties and the arbitral institutions, where appropriate, are obliged to keep confidential the information they learn through the arbitral proceedings".
This obligation is also included in the Code of Practice from the Spanish Club of Arbitration and in the Rules of the Barcelona Court of Arbitration (Articles 27.6, 25 and 20.5 respectively), which state that those who participate in the arbitration proceedings must act "in accordance with the principles of confidentiality and good faith".
Similarly, Article 62.2 of the Rules of the Madrid International Arbitration Centre ("MIAC") states that "the arbitral tribunal, the parties and their counsel and representatives, and the Court shall be bound to keep confidential shall be under an obligation to keep confidential any confidential information that comes to their becomes known to them in the course of the arbitral proceedings".
This has been confirmed by the Judgment of the High Court of Justice of Madrid of 19 February 2014, and the Judgments of the High Court of Justice of Catalonia of 6 July 2015 and 12 February 2021.
As we can see, this is not only a global obligation that affects everyone who takes part in the proceedings, but also an institutional obligation that must be fulfilled by the president of the Court, the Secretary General or management body, the arbitrator, the lawyers, the experts, and the parties.1
As we have been saying, arbitration is a means of conflict resolution which, unlike the courts, avoids the publicity of the arbitration procedure. Therefore, it is a principle implicit in the very nature of arbitration.
However, despite its importance, we find that neither Spanish legislation nor international treaties, in general, have deeply regulated the duty of confidentiality in arbitration.
If we focus only on Spanish legislation, we see that confidentiality is only regulated in Article 24 of the Spanish Arbitration Act 60/2003 which mentions, on a single occasion, that the arbitrators, the parties, and the arbitration institutions are obliged to keep the confidentiality of the information they know.
The content of this article is very general and has been qualified by case law and the Personal Data Protection Act. This is because Spanish legislation does not provide for specific rules beyond Article 24 of the Spanish Arbitration Act.
It is worth highlighting the Spanish Supreme Court Judgment of 29 October 2001 in which it was stated that the duty of confidentiality and secrecy entails "the prohibition to disclose the private data of a person that have become known through the professional activity of the person disclosing them".
Likewise, the Constitutional Court Judgment of 8 November 1999 established that confidentiality and privacy is a guarantee that entails "a right of control over data relating to one's own person" and "the citizen's opposition to certain data being used for purposes other than the legitimate purpose for which they were obtained".
The above is complemented by the Spanish Data Protection Act, - Organic Law 15/1999 of 13 December ("SDPA") - Article 3 which defines personal data as any information concerning identified or identifiable persons.
Specifically, the issue of the protection of confidentiality affects, above all, arbitration institutions that open and maintain data files on the natural or legal persons involved in the arbitration. This obliges them to take the utmost security measures and to keep the duty of secrecy, in the terms required by the SDPA (Articles 9 and 10).
In fact, as stated in the Judgment of the High Court of Justice of Catalonia of 5 May 2014, the breach of the duty of confidentiality "could give rise to the nullity of the Award in accordance with article 41.1 (d) of the LA".
In view of the above, it should be added that the principle of confidentiality must be preserved in all the elements that make up the arbitration process, including the following:
There is one exception to the above, and that is only if the parties agree to the publication of the award. For this purpose, all references to the names of the parties, as well as their personal data, must be deleted. This is required by Article 54 of the Rules of the MIAC and Article 48.4 of the Rules of the Barcelona Court of Arbitration.
In accordance with the above, in Spain, confidentiality in arbitration is very much subject to the autonomy of the parties. This makes it a very flexible type of arbitration that leaves the nature and the scope of confidentiality to the parties in each specific proceeding.
The same applies to case law, as the Spanish courts have made general pronouncements on the duty of confidentiality but not on the specific subject matter of arbitration.
The starting point for this liability for breach of the duty of confidentiality is to be found in Article 21.1 of the Spanish Arbitration Act 60/2003, which provides as follows: "Acceptance obliges the arbitrators and, where appropriate, the arbitration institution, to faithfully fulfil the assignment, and if they fail to do so, they shall incur liability for any damages and losses caused by bad faith, recklessness or fraudulent intent".
Therefore, the arbitrators have a special liability if they breach their duty of confidentiality, as it implies the omission of that due diligence that is required of them by the acceptance of the assignment assumed before the parties.
In general terms, the liability of arbitrators is contractual, as it derives from the arbitration contract, by which the parties bind themselves to each other and agree with the arbitrators that they will judge and settle the disputes raised by the parties.
This is how it was defined by the Supreme Court Judgment of 3 March 1989 when it said that “arbitration jurisdiction is based on a private law contract and is aimed at the settlement of a disputed legal relationship, so that the will of the parties, (…) is the sole cause of the arbitration".
This same judgement goes on to argue that, once the private contract has been concluded and the assignment accepted, arbitrators can impose their opinion and the award is binding on the parties. In this sense, the judgment concludes that "the granting of the commitment obliges the parties to be bound by the stipulations in accordance with the general rules of contracting".
That said, failure to comply with the stipulations of the arbitration contract may result in contractual liability of the arbitrator.
In conclusion, confidentiality is a fundamental part of the arbitration procedure which, as we have seen, affects all those who take part in it. In practical terms, it extends from the protection of the parties' personal data to the possible commercial and industrial secrets that may be discussed in the proceedings.
Finally, the importance of confidentiality is reflected in the liability that may arise, if it is not respected. This makes arbitration a very secure dispute resolution system for those who decide to opt for it.
This series will continue next week with the position from England & Wales.
1 Spanish Arbitration Club Code of Good Practice of 2019. Arts. 24.c, 27.e, 102 to 104, 130, 131, 152 and 153.