ITN | March 10, 2010

ICSID tribunal applies ad hoc approach to confidentiality in arbitral proceeding

By Ugo Ukpabi*

March 11, 2010

In Giovanna A Beccara and Others v. The Argentine Republic a tribunal composed of Pierre Tercier, Georges Abi – Saab, and Albert Jan Van den Berg has decided that questions of confidentiality and transparency in ICSID arbitrations should be determined on a case by case basis.

The dispute – one of many arising out of Argentina’s response to response to its financial crisis – concerns debt security issued by Argentina and held by numerous non-Argentine and Argentine creditors, including the claimants. In late 2001, Argentina was unable to meet its financial obligations and failed to pay amounts owed under those bond instruments. As an alternative to meeting its obligations under the bond issue, the Argentine Republic launched an Exchange Offer (the “Exchange Offer”). Under the terms of the Exchange Offer, the previous bondholders could exchange their bonds (on which Argentina had already suspended payment) for new debt instruments to be issued at a later date.

The claimants refused to participate in that Exchange Offer. Rather, they argued that the respondent’s action amounted to a violation of its obligations under the applicable Argentina – Italy Bilateral Investment Treaty (the BIT). As a result, in the fall of 2006, the claimants commenced arbitral proceedings against Argentina seeking compensatory damages.

The procedural questions raised in this case centered around the disputing claims by the parties on questions of confidentiality. In that regard, the crux of the dispute centered on the appropriate disclosure and use of personal information relating to individual claimants in the case.

Disagreements between the parties began in March of 2008 when Argentina requested production of certain electronic information regarding different claimants in the arbitration. Argentina’s request was grounded in arguments that the format of the information previously provided to it by the claimants was not “in a format easily accessible” and therefore impeded its defence rights.

In response, the claimants stressed that they had already provided the respondent information in a computer-readable and searchable format. However, the claimants indicated that they were willing to provide Argentina with the data requested as long as it agreed to sign a confidentiality agreement. The parties were unable, however, to agree on the proper scope of the claimants’ proposed confidential agreement.

As the stalemate between the parties continued, preparations for arbitral proceedings continued. The claimants and the respondent continued to exchange documents and in the spring of 2009 both parties submitted their designation of witnesses, experts and documents for the jurisdictional phase of the proceedings. At this time, new concerns about confidentiality were raised by the claimants when Argentina submitted documents relating to its examination of witnesses and experts designated by the claimants for the jurisdictional hearing that contained expert opinions and transcripts from other arbitral proceedings.

Specifically, the claimants argued that the exhibits sought to be relied on by the respondent ignored confidentiality protections in the other arbitral proceedings. The claimants also contended that Argentina’s submission of those exhibits violated the principle of equality of the parties because the claimants did not have access to those proceedings, a reality that could lead Argentina to use such evidence selectively and out of context.

In response, Argentina argued that: (i) it had not submitted any document filed in sealed proceedings, (ii) there was no general rule of confidentiality governing ICSID arbitrations, and (iii) it had never been deprived of using such documents in any ICSID proceeding.

With the parties’ continued expression of divergent views on issues of confidentiality in investment arbitration, the tribunal announced in the fall of 2009 that it would make a decision on the matter.

In its ruling, the tribunal started by noting that it had powers to determine the conduct of proceedings brought before it by virtue of Rule 19 of the ICSID Arbitration Rules. As a result, the tribunal reasoned that it had the power to make orders concerning confidentiality.

Having confirmed its jurisdiction, the tribunal went on to discuss the issue of confidentiality in ICSID arbitrations generally. In that regard, the tribunal noted that while various provisions of the ICSID Convention, Administrative and Financial Regulations and Arbitration Rules deal with specific confidentiality duties of tribunals and ICSID, they do not expressly address the actions of parties themselves. Given such silence in ICSID’s legal framework, the tribunal determined that:

…unless there [is] an agreement of the [p]arties on the issue of confidentiality/transparency, the Tribunal shall decide on the matter [questions of confidentiality and transparency] on a case by case basis and, instead of tending towards imposing a general rule in favour or against confidentiality, try to achieve a solution that balances the general interest for transparency with specific interests for confidentiality of certain information and/or documents.

Having refrained from articulating a general principle of law concerning confidentiality questions in ICSID arbitrations, the tribunal went on to categorize the competing claims surrounding confidentiality in the following manner: (a) confidentiality as to the record of the proceedings; (b) confidentiality as to the protection of the claimants’ information; and (c) the admissibility, in the present proceedings, of certain confidential information arising in another arbitration proceeding.

(a) Confidentiality as to the record of the proceeding

With respect to this issue the tribunal noted that in their latest request for a confidentiality order, the claimants had asked that the entire proceedings be covered by a general duty of confidentiality. Specifically, the claimants attempted to limit any disclosure about the case by the parties to “general updates on the status of the case.” Not surprisingly, Argentina resisted the claimants’ request and reiterated its position that there is no general rule of confidentiality governing ICSID arbitrations.

For its part, the tribunal sought to chart a middle course approach different from the polar opposite positions adopted by the claimants and the respondent. In the Tribunal’s view, it was important to take into consideration, the nature of the information at stake because different considerations of confidentiality and transparency may apply, resulting in a differentiated treatment of that information. The tribunal also noted that the stage of the proceedings was another important factor when considering confidentiality issues. In this regard, the tribunal noted that greater caution should be taken while arbitration proceedings are on-going – especially given considerations such as ensuring the orderly conduct of the arbitration, respect for the parties’ equality of rights and avoiding the exacerbation of the dispute.

With the above considerations in mind, the tribunal went on to both allow and restrict disclosure of information related to various aspects of the arbitration. For example, with respect to a general discussion of the case, the tribunal determined that the parties could engage in such discussions publicly, provided that any such public discussion is restricted to what is necessary, and is not used to frustrate resolution of the dispute.**

(b) Confidentiality as to the protection of the claimants’ information

Going back to the events that kick-started the confidentiality dispute between the parties (i.e. Argentina’s request for certain electronic information about the claimants), the tribunal noted that it was important to pay heed to the applicable legislation (e.g. Italian Code and EC provisions) protecting the claimants’ privacy. As such, while it was willing to grant the respondent complete access to the requested information, it imposed limitations on its use. Specifically, the tribunal determined that: (i) disclosure of the requested information be for the sole purpose of conducting the arbitration, (ii) only persons connected with the arbitration be allowed access to the information, (iii) alterations to the information be disallowed, and (iv) disclosure to unauthorized third parties occur only with the claimants’ consent.

Finally, as to the attempt by Argentina to introduce certain exhibits (i.e. expert reports or transcripts of examinations of those experts) from other arbitral proceedings, the tribunal observed that the exhibits were issued in arbitrations different from the present case. In particular the tribunal noted that the arbitrations involved different claimants, circumstances, BITs and alleged substantive violations of those BITs. As a result, the tribunal concluded that exhibits from those proceedings could not easily be “transposed one to one to the present case” and refused to admit those exhibits as evidence in the present proceedings.

* Ugo Ukpabi obtained his PhD from (Osgoode Hall) York University, Toronto. He is a member of the Bars of Nigeria and the Province of Alberta, Canada. Ugo Ukpabi is a sole legal practitioner based in Calgary, Alberta.

** The tribunal also made determinations regarding the parties’ disclosure of : awards, decisions, orders and directions of the tribunal (other than awards), the minutes and records of the hearing, pleadings, written memorials, other written submissions, documents and exhibits related to pleadings, written memorials or other written submissions, and correspondence between the parties and/or the tribunal exchanged in respect of the arbitration.

Sources:

Procedural Order No. 3 (Confidentiality Order) in Re Giovanna is available here:
http://ita.law.uvic.ca/documents/BeccaraConfidentialityOrder.pdf