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Confidentiality standard in ICSID arbitration
Practical Law Legal Update 3-501-4948 (Approx. 5 pages)
Confidentiality standard in ICSID arbitration
by PLC Arbitration
| Law stated as at 17 Feb 2010 • International, USA |
An update on Giovanna a Beccara and others v Argentina (ICSID Case No ARB/07/05) - Procedural Order No 3 (Confidentiality Order) of 27 January 2010, which considered confidentiality orders in an ICSID arbitration.
Speedread
In Giovanna a Beccara and others v Argentina (ICSID Case No ARB/07/05), the claimants were Italian bondholders who sought a confidentiality order against Argentina. They succeeded. The tribunal found that:
- There was no general duty of confidentiality in an ICSID arbitration unless the parties agreed otherwise. Instead, the tribunal had to establish the applicability of particular principles of confidentiality in any given case, taking into account the type of information or document in question as well as the stage of proceedings.
- The present claimants had a legitimate interest in establishing specific rules concerning the respondent's use of information concerning individual claimants, which had been compiled in an online database. Such interest followed from the Italian or EU law applicable to the database, which required specific security measures. The tribunal granted the respondent access to the online database, but imposed conditions regarding the use of the information.
- The respondent could not use as evidence certain documents from other investment arbitrations to which the respondent (but not the claimants) had been a party. That would have violated the principle of party equality, and the use of such evidence to seek to impeach experts was excessive.
The case is a good illustration of the flexibility of procedures available in an ICSID arbitration. It also shows that the tribunal can tailor obligations of confidentiality to suit the requirements of justice in particular cases.
Background
The last sentence of Article 44 of the ICSID Convention provides:
"If any question of procedure arises which is not covered by this Section or the Arbitration Rules or any rules agreed by the parties, the Tribunal shall decide the question."
Rule 19 of the ICSID Arbitration Rules provides:
"The Tribunal shall make the orders required for the conduct of the proceeding."
Rule 34(1) of the ICSID Arbitration Rules provides:
"The Tribunal shall be the judge of the admissibility of any evidence adduced and of its probative value."
In Biwater Gauff (Tanzania) Ltd vs Tanzania (ICSID Case No. ARB/05/22) - Procedural Order No 3 of 29 September 2006 (Biwater), the tribunal dealt with a request for provisional measures preventing the respondent from publishing certain documents produced in those proceedings. The tribunal analysed different categories of documents and information concerning the case, and imposed certain confidentiality restrictions aiming to strike a balance between transparency and confidentiality of the proceedings. The aim in doing so was to:
- Reduce the risk of aggravation and exacerbation of the dispute.
- To prevent any harm that might arise with regard to procedural integrity of the case.
Facts
The underlying dispute was based on the bilateral investment treaty (BIT) between Argentina and Italy and concerned claims of Italian investors (the claimants) for damages in connection with an alleged default by Argentina (the respondent) on the payment of the bonds which the respondent had issued.
The application and order (the subject matter of this update) involved three issues:
- General confidentiality restrictions in ICSID arbitration.
- The protection of information concerning individual claimants, compiled in an online database in Italy (the database).
- The admissibility of 21 expert opinions and transcripts from other treaty arbitrations involving the respondent (the exhibits).
The claimants agreed to grant the respondent direct access to the database, provided the parties signed a confidentiality agreement. The claimants said that such a provision was necessary because the law applicable to the database imposed strict requirements concerning protection of electronic data and this level of protection was not incorporated within the ICSID legal framework. The respondent refused to sign the confidentiality agreement and the claimants requested the tribunal to order the parties to treat as confidential information or documents relating to individual claimants.
The claimants asked the tribunal to prohibit the use of the exhibits from other arbitrations. They argued that the exhibits had been submitted in breach of confidentiality duties which applied in other arbitrations, and that they had been presented "out of context" and "selectively" contrary to the principle of equality of the parties.
Later in the proceedings, the claimants expanded their request for confidentiality and also asked the tribunal to limit access to the "record of this proceeding". The claimants argued that, in the light of the respondent's contention that there was no general principle of confidentiality in ICSID arbitration, an express order was necessary. They further submitted that they suspected the respondent might have been leaking information about the case to the press.
Decision
The tribunal held that:
- Absent any agreement on confidentiality or transparency, and absent any confidentiality provisions in the BIT, it could decide the issue of confidentiality on the basis of Rule 19 of the ICSID Arbitration Rules and Article 44 of the ICSID Convention.
- There was neither a general duty of confidentiality nor a general duty of transparency in an ICSID arbitration.
- It was not appropriate to impose any general rule of confidentiality as requested by the claimants. The proper approach to confidentiality in a particular case would depend on the type of information or document in each case, as well as the stage of the proceedings.
Ultimately, the tribunal applied the principles set out in Biwater, and imposed the following restrictions until the conclusion of the proceedings:
- Parties' general discussion about the case in public. This was allowed, provided, among other matters, it was restricted to "what [was] necessary" and did not render resolution of the dispute potentially more difficult.
- Awards. No confidentiality as both parties agreed on publication.
- Decisions, orders and directions of the tribunal (other than awards). There was a presumption in favour of publication, "in the absence of any specific contrary ground".
- Minutes and records of hearing. These were confidential, unless the parties agreed otherwise or the tribunal directed otherwise.
- Pleadings, written memorials, other written submissions (including correspondence between the parties and the tribunal on substantive issues), as well as witness and expert statements attached. These were confidential, unless the parties agreed otherwise or the tribunal directed otherwise.
- Documents and exhibits relating to pleadings, written memorials or other written submissions. If there was a confidentiality obligation attached to those documents and exhibits, their disclosure should be governed by the law or rules imposing such obligation. If no such confidentiality obligation was attached, a party should, in principle, be free to publish its own documents but could generally use the opposing party's documents only for the purpose of the arbitration.
- Correspondence between the parties and/or the tribunal exchanged in respect of the arbitral proceedings. This was confidential where it related to the mere conduct of the case.
Use of information about individual claimants subject to terms and conditions set by the tribunal
The tribunal found that the relevant legal provisions (Italian law and EU law) concerning the online database:
- Required the controller of the database to take specific security measures preventing certain risks.
- Restricted transfer of data from the database to non-EU countries which ensured adequate protection of such data.
The tribunal found that the requirement of adequate protection was fulfilled by the respondent. However, balancing the claimants' right for continued data protection and the respondent's right to access all information necessary to defend the case, the tribunal granted the respondent access to the database, subject to personal, substantive and temporal conditions.
The use of exhibits from other arbitrations violated the principle of equality
The tribunal ordered that the exhibits, as well as any other exhibit relating to an expert report or transcript of expert examination issued in another arbitration, should not be:
- Admitted as evidence.
- Used in cross-examination.
The tribunal assessed the admissibility of the exhibits in accordance with the Rule 34(1) of the ICSID Arbitration Rules. The tribunal based its decision on the principles of equality and found that lack of access to the original context of the exhibits posed a risk of their being used "out of context" by the respondent, to which the claimants would have no equal means of defence.
The tribunal viewed as excessive the respondent's stated intention to use of the exhibits to impeach the claimants' experts in the present case.
Comment
Despite the fact that the issues concerning confidentiality and risks posed by alleged breaches of confidentiality were different in the present case, the tribunal were assisted by the approach of the tribunal in Biwater. In particular, the tribunal adopted the argument that "transparency considerations shall not justify actions that exacerbate the dispute or otherwise compromise the integrity of the arbitration proceedings".
The order as a whole turned, not only on principles of confidentiality, but also other important considerations including the principle of equality and the requirements of the applicable Italian and EU laws.
The case is a good illustration of the flexibility of procedure in ICSID arbitration, and shows that the tribunal can tailor obligations of confidentiality to suit the justice of the particular case. The tribunal indicated that it shared the view that transparency should:
"be encouraged as a means to promote good governance of States, the development of a well-grounded and coherent body of case law...[and] confidence in the system of investment arbitration."
However, such considerations did not outweigh other factors, including in particular, the privacy laws applicable in the claimants' jurisdictions or the principle of equal treatment.