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North Carolina Journal of International Law and Commercial Regulation

Response to Professor Christoph Henkel

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For the panel discussion “Disputes Arising from Arbitration Agreements,” Professor Christoph Henkel addressed the problem of confidentiality in international commercial arbitration, gave illustrations of how international jurisdictions approach confidentiality differently, and offered a solution for the international community’s uncertainty towards confidentiality.[1] Henkel’s recommendations did not, however, address the practical limitations of relying solely on protective drafting. This solution inevitably results in increased transactional costs, and creates further uncertainty. Furthermore, drafting for confidentiality itself could hinder potential litigation.

Henkel stated that there is no uniform, international consensus on confidentiality in international commercial arbitration.[2] Rather, confidentiality is treated in a variety of disjointed ways. For example, at the most liberal level, absent an explicit confidentiality clause or “arbitration rules that expressly provide for [confidentiality],”[3] there is no “implied duty of confidentiality” in the United States.[4] Other countries, like the United Kingdom, uphold an implied duty of confidentiality, but also provide for exceptions where disclosure of arbitration is necessary to ensure justice.[5] At the most stringent level, New Zealand has “codified a duty of arbitral confidentiality”[6] that protects against disclosure of arbitration. Due to these differing treatments of confidentiality, Henkel recommends that parties to a contract protect themselves by drafting arbitration agreements that carefully defines what each party expects of confidentiality, and to explicitly contract for an arbitration site.[7] In drafting these protective provisions, Henkel further recommends that each party factor in the following: an arbitrator’s bias, and how a country’s public policy influences its approach towards disclosure and confidentiality.[8]

In spite of these reasonable and logical solutions, Henkel did not address the practical implications of his proposed solution. For example, resolving the confidentiality problem through drafting increases the transactional costs because lawyers must not only draft a protective document that describes and resolves any future contingencies, but must also understand the complex treatment of confidentiality globally.[9] Furthermore, because disputes often arise many years after the initial contract, it is difficult to predict where each party’s interest in confidentiality lies.[10] Finally, Henkel’s solution does not address what happens when a dispute moves past arbitration into litigation.[11] While resolving some issues in arbitration, confidentiality agreements are themselves problems in litigation. Confidentiality agreements are difficult to enforce because of the imprecise nature of how to calculate damages for a breach of confidentiality, and may impede a court’s fact-finding.

[1] Christoph Henkel, Address at the University of North Carolina Journal of International Law & Commercial Regulation’s Annual Symposium (Jan. 27, 2012).

[2] Id.

[3] Jeffrey W. Sarles, Solving the Arbitral Confidentiality Conundrum in International Arbitration, 4,

[4] Id.

[5] Id. at 5.

[6] Id. at 7.

[7] Christoph Henkel, Address at the University of North Carolina Journal of International Law & Commercial Regulation’s Annual Symposium (Jan. 27, 2012).

[8] For example, some countries require certain subject matter be disclosed to shareholders as matter of public policy.

[9] Sarles, supra note 1, at 12.

[10] Id.

[11] Christoph Henkel, Address at the University of North Carolina Journal of International Law & Commercial Regulation’s Annual Symposium (Jan. 27, 2012).

Posted by Rebecca Y. Yang on Sun. February 26, 2012 12:00 PM
Categories: Disputes from Arbitration Agreements

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