Is Arbitration Private and Confidential in Canada?

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The limits on privacy and confidentiality of arbitration is often hard to unravel. They are really two separate questions. And the answer to both seems to be: “It depends.”

Is Arbitration Private?

It is generally assumed that arbitration is private – in contrast to the courts, which are generally open to the public, with some exceptions. But where does that assumption arise?

Provincial arbitration statutes generally do not provide that arbitration is private. (See for example the Uniform Arbitration Act and the BC, Alberta, and Ontario Acts.)

Nor does the UNCITRAL Model Law on International Commercial Arbitration, which has been adopted in provincial laws governing international commercial arbitration.

However, many institutional arbitration rules do have express privacy terms.

For example, the ADR Institute of Canada (ADRIC) Arbitration Rules state that arbitration proceedings must take place in private, unless the parties agree otherwise. (4.18.1)

The Agreement for Arbitration of the Canadian Motor Vehicle Arbitration Plan (CAMVAP) expressly provides that “the Arbitrator will hear your claim in private.”

The ICDR Canada Canadian Arbitration Rules provide that “hearings are private unless the parties agree otherwise or the law provides to the contrary.” (Article 23.6 )

The JAMS Comprehensive Arbitration Rules frame privacy a bit differently. Under Rule 26 says anyone having a direct interest in the arbitration is entitled to attend the hearing, subject to the discretion of the arbitrator or agreement of the parties. However, the arbitrator may exclude any non-party from any part of the hearing.

Rules such as these give an arbitrator the authority to exclude the public from arbitration hearings. For example, if a party wants to have a member of the public or media attend the hearing, the arbitrator can exclude them either at their own discretion or the request of the opposing other party.

The private nature of arbitration may also influence whether the evidence, arguments and findings of fact in an arbitration are admissible in court.

A recent decision of the Alberta Court of Appeal illustrates some of the limits on the privacy of arbitration, if the case ultimately ends up in court in a dispute about the validity or enforcement of the award.

In Flock Estate v Flock, 2019 ABCA 194, the court had to decide whether any of the evidence, legal arguments or findings from an earlier arbitration between the parties was admissible as evidence in court. The case involved a dispute over matrimonial property which was fought out in arbitration and multiple court proceedings for more than 20 years, and even survived one of the spouses.

The arbitration award had been set aside 10 years earlier, so the court was not willing to rely on any of the arbitrator’s findings.

“It is highly unlikely that anything in the decision would be admissible as evidence. The arbitrator’s opinion and ineffectual ruling about what should happen to the [disputed] property is not evidence of anything other than his personal, and ultimately ineffective opinion.” {25, citations omitted]

Similarly, the court said the pleadings and legal arguments made in the arbitration were also irrelevant and inadmissible. It ordered all of the materials in the current proceedings referring to the earlier arbitration award, and counsel’s submissions in the arbitration to be struck.

However, the court did find that “sworn testimony given by either of [the parties] during the arbitration proceedings might be admissible. That evidence, however, is different in quality from the bare submissions of counsel, or the ultimately ineffectual opinions of the arbitrator.” [31] Recognizing that this bitter fight wasn’t over, the Court of Appeal, left it up to the trial court to make a final determination about the admissibility of contested evidence.

Is Arbitration Confidential?

This question usually relates to the confidential nature of the information and evidence disclosed in the arbitration. The fact of the arbitration itself may also be confidential.

Arbitration statutes are generally silent these questions as well. However, arbitrators do have broad discretion to make procedural orders, including orders requiring parties to keep information and evidence disclosed in the arbitration confidential.

Many of the institutional rules go further.

The ADRIC Rules provide that the parties and anyone attending the proceedings must keep all Confidential Information confidential. “Confidential Information” includes the existence of an arbitration and the meetings, communications, documents (including electronic data), evidence, awards, rulings, orders, and decisions of the Tribunal in respect of the arbitration. Exceptions can be made only for disclosure required by a court, necessary in connection with a judicial challenge or to enforce, or required by law. (4.18.2)

Jams Rule 26, on the other hand, requires only that JAMS and the Arbitrator to maintain the confidential nature of the arbitration proceedings, the hearing and final award. It doesn’t require the parties themselves to keep it confidential, but the arbitrator may issue orders to protect the confidentiality of “proprietary information, trade secrets or other information”.

The ICDR Rules on confidentiality are somewhat broader than JAMS. Neither ICDR or the arbitrator may divulge confidential information disclosed by the parties or any witnesses. And the tribunal “may make orders concerning the confidentiality of the arbitration or any matters in connection with the arbitration and may take measures for protecting trade secrets and confidential information.” (Article 37)

So many of the things that would automatically be protected as Confidential Information under the ADRIC Rules may not be covered by the more limited confidentiality protection of the JAMS Rules. The ICDR Rules seem to fall somewhere in between.

In 2249492 Ontario Inc. v. Donato, 2017 ONSC 4974 (CanLII), the Ontario Court considered an appeal of an arbitrator’s confidentiality order and upheld the arbitrator’s decision to grant a permanent injunction against the applicant and its counsel from publishing the award or other details of the arbitration.

The arbitration was conducted under the rules of the ADR Chambers, which state that any arbitration is private and confidential — with some specific exceptions such as for the conduct of the arbitration itself, or to set aside, recognize or enforce an award, or where disclosure is required by law or a court. Even when one of those exceptions applies, disclosure is limited by the rules. (Rules 16.1, 16.2, 16.3)

When the arbitration was commenced, one of the parties proposed specific confidentiality terms in a draft arbitration agreement. Those terms were removed by the opposing party, so they were left with the default ADR Chambers rules.

The Court concluded that the arbitrator was correct in deciding that those rules applied, despite the negotiations over the wording of the agreement. The absence of an express confidentiality clause in the arbitration agreement was not enough to permit the parties or their counsel to make public statements about the arbitration or the award, the court said.

 [46] “…the removal of language providing for confidentiality in … the draft arbitration agreement does not assist in the interpretation of the Arbitration Agreement. The confidentiality language … was unnecessary, given the incorporation by reference of the ADR Rules which include confidentiality language in Rule 16. For this reason, it was not unreasonable for the Arbitrator to interpret the Arbitration Agreement as he did without regard to the extrinsic evidence [of the removal of the confidentiality clause].”

What Can Parties Do To Protect Privacy and Confidentiality?

First it’s critical to understand the default rules under the statutes or institutional rules governing a potential arbitration. Do they provide the kind of protection you want or need?

If not, the default statutory and institutional rules generally give way to the agreement of the parties in most cases, so the obvious solution is to include express privacy and confidentiality clauses in the arbitration agreement.

However, it’s important to take care and give some thought to those terms. As the cases clearly show, there are some situations where a party to a dispute may not want it to be private, or may not want all of the information disclosed to be confidential.

This can be tricky. If one party tries to negotiate the privacy and confidentiality terms, it may raise a red flag for the other party. It’s hard to argue that the arbitration should not be private or confidential, given that these are often seen to be reasons for choosing arbitration over litigation.

And, in the end, as the Donato decision illustrates, the arbitrator or a court court may ignore the parties’ negotiated agreement and decide for themselves what is private and confidential.

http://www.slaw.ca/2019/07/31/is-arbitration-private-and-confidential-in-canada/