Are Arbitrations Private & Confidential in Hong Kong?

Business people often prefer to settle their disputes quietly without public scrutiny. Though they may provide for confidentiality in their agreements, the courts generally favour open justice, with the result that any resolution of disputes through the courts may result in commercial information, including the fact of a dispute involving particular parties, being aired publicly.

Arbitration offers a more discreet option for resolving disputes. Unlike the courts, arbitral tribunals have no tradition of ensuring that justice is not only done but seen do be done. In Hong Kong, though an arbitral tribunal reserves the discretion to regulate its own procedures, such discretion must accord with the agreement of the parties and the law of the arbitration and in the absence of any agreement to the contrary, the assumption is that the parties have agreed to privacy. Thus, arbitral hearings are normally closed to the public and the arbitral tribunal does not normally publish reasons for an award, if any. To this extent, in the absence of an agreement to the contrary, arbitral hearings are normally private.

The Arbitration Ordinance seeks to provide greater assurances in this regard to the parties. First, so far as arbitration privacy is concerned, the legislation establishes a framework which governs when a party needs to call upon the courts to support the arbitration, whether to preserve assets, to gather evidence or to enforce an arbitral award. Secondly, so far as arbitration confidentiality is concerned, the legislation seeks to define the circumstances in which an arbitration party may make disclosures, such as, for example, to comply with regulatory obligations.

Non-Disclosure by Parties to Arbitration

Under the Arbitration Ordinance, unless otherwise agreed by the parties, no party may publish, disclose or communicate any information (“confidential arbitration related information”) relating to the arbitral proceedings under the arbitration agreement or an award made in those arbitral proceedings. However, a party may publish, disclose or communicate confidential arbitration related information in the following circumstances:

• Protection of Legal Right – The party is taking legal proceedings before a court or other judicial authority in or outside Hong Kong to protect or pursue a legal right or interest or to enforce or challenge an arbitral award.

• Legal or Regulatory Disclosure – The party is publishing, disclosing or communicating the confidential arbitration related information to a government body, regulatory body, court or tribunal and the party is obliged by law to make the disclosure or communication.

• Professional Advice – The publication, disclosure or communication is made to a professional adviser to any of the parties.

Contrary Agreement

The duty of the parties not to publish, disclose or communicate confidential arbitration related information is subject to any agreement of the parties. It is unclear whether such an agreement refers only to exceptions found in the express terms of the arbitration agreement or whether it includes exceptions implied into the arbitration agreement. In the latter case, it is unclear to what extent, if any, such exceptions would expand the scope of the statutory exceptions. Given this uncertainty, if absolute confidentiality is required, it may be desirable to clarify the position in the arbitration agreement.

Disclosure in Legal Proceedings

A party to an arbitration may disclose confidential arbitration related information either to protect or pursue a legal right or interest or to enforce or challenge an arbitral award in legal proceedings before a court or “other judicial authority in or outside Hong Kong”. As discussed below, in Hong Kong, the default position is that court proceedings under the Arbitration Ordinance are held on a closed door basis. Whilst the default position applies to a Hong Kong court, where the assistance of a court outside Hong Kong is required, the position governing the other court is unclear. Equally, where the court proceedings are separate from arbitral proceedings under the Arbitration Ordinance (e.g. a party wishes to disclose in court proceedings materials obtained in a prior arbitration), the position is unclear.

Investor Disclosures

Though the matter is not entirely clear, where one of the parties to the arbitration is a company listed on the Stock Exchange of Hong Kong (“SEHK”), the confidentiality of an arbitration may be compromised under the legal or regulatory disclosure exception. In this case, it is clear that such a company is obliged by law to make a potential disclosure as the Securities and Futures Ordinance requires such a company to disclose inside information. However, the SFO merely provides that such disclosure “must be made in a manner that can provide for equal, timely and effective access by the public” and that dissemination through an electronic publication system operated by the SEHK suffices for this purpose. In this case, the disclosure is in fact made to the public at large, rather than specifically to a “government body, regulatory body, court or tribunal”. Nevertheless, as the electronic publication system is operated by a regulatory body, it is possible that the exception applies.

Where the disclosure obligation is one made pursuant to the rules of an exchange rather than legislation, it is even less clear whether disclosure is permissible as it is unclear whether the “party is obliged by law” to make such disclosure.

In the circumstances, a listed or public company subject to investor disclosure requirements would be well advised to follow the well established practice of including an express carve-out for regulatory disclosures within the arbitration agreement rather than to rely upon the statutory exception to ensure arbitration privacy and confidentiality.

Disclosure to Third Party Funders

In Hong Kong, third parties (i.e. persons who are not themselves a party to an arbitral proceedings) (“third party arbitration funder”) may provide funding to a party to an arbitration for the purpose of receiving a financial benefit if the party being funded succeeds in the arbitration.

Under the Arbitration Ordinance, where a party receives or wishes to receive such third party funding, it may disclose confidential arbitration related information to the third party arbitration funder or a prospective third party arbitration funder for the purpose of having or seeking such third party funding. Where a third party arbitration funder receives confidential arbitration related information, it must hold such information in confidence as if it were a party to the arbitration.

Where the third party arbitration funder is based outside of Hong Kong, it is doubtful if it would be bound by the statutory duty in Hong Kong to not disclose confidential arbitration related information received. As a result, it may be desirable in arbitration agreement to provide for such a duty, bearing in mind that a party to an arbitration who secures third party funding is only obliged to disclose that fact to the other parties to the arbitration after the funding has been secured.

Other Disclosures

Other than disclosures or communications to professionals and advisers, the Arbitration Ordinance itself does not expressly clarify that disclosures or communications of confidential arbitration related information may be made for the purposes of the arbitration, such as to a witness in the arbitration. It may be that such an exception is an implied term of the agreement between the parties or it may be that the exception for disclosures in legal proceedings before a “judicial authority” may be construed as including disclosures in arbitral proceedings (as a form of legal proceeding) before an arbitral tribunal (as a judicial authority).

Equally, though the Arbitration Ordinance specifically contemplates disclosures or communications to third party funders, the position of insurers who may be providing indemnity to one of the arbitrating parties is unclear. Again, it may be that such an exception is an implied term of the agreement between the parties or it may be that the arbitral tribunal will need to make a decision on such disclosure.

Where disclosures or communications may be permitted to third parties, except in the case of third party funders, it is unclear the extent, if any, to which the recipients of such disclosures or communications would be bound by duties of confidentiality. The Arbitration Ordinance itself only provides for a duty of confidentiality in respect of a “party” to the arbitration.

Closed Court Proceedings

As alluded to above, court proceedings are sometimes required to support arbitral proceedings. Such court proceedings may be needed, for example, to gather evidence, to preserve assets or indeed, to enforce an arbitral award.

The default position is that the Hong Kong courts will hear cases relating to arbitral proceedings under the Arbitration Ordinance otherwise than in open court (i.e. in camera). However, the court may order proceedings to be heard in open court on the application of any party or if, in any particular case, the court is satisfied that those proceedings out to be heard in open court.

Publication of Information Relating to Proceedings

Under the Arbitration Ordinance, in closed court proceedings, upon the application of a party, a Hong Kong court may give directions as to what information relating to those proceedings may be published. In this regard, a court should only publish such information where:

• Agreement of Parties – All parties to the arbitration agree that the information may be published.

• Anonymity – The court is satisfied that the information, if published, would not reveal any matter (including the identity of any party) that any party reasonably wishes to remain confidential.

Publication of Judgments of Major Interest

If a court gives a judgment in respect of closed court proceedings and the court considers the judgment to be of major legal interest, the Arbitration Ordinance requires the court to direct that reports of the judgment may be published in law reports and professional publications. However, in this case, upon the application of any party who reasonably wishes to conceal any matters in those reports (including the fact that the party was such a party):

• Suppression of Sensitive Matters – The court may make a direction as to the action to be taken to conceal those matters in those reports.

• Delay in Publication – If the court considers that concealment would be ineffective, it may direct that publication of the report may be deferred until after the end of a period, not exceeding 10 years, that the court may direct.