Ali Shipping Corpn v Shipyard Trogir

An arbitration agreement carries, as a matter of law, an implied obligation not to disclose or use outside the arbitration documents, submissions, evidence, transcripts or awards generated in the proceedings. The obligation is a necessary incident of arbitral privacy, rather than a fact-specific implication based on business efficacy.

Disclosure may nevertheless occur by consent, court order or leave, where reasonably necessary to protect a party’s legal rights, or where the interests of justice require it. Reasonable necessity is assessed flexibly and in the round. Mere convenience, usefulness or common corporate ownership is insufficient. Unless an exception is established, prejudice from disclosure is ordinarily presumed.

The appellant obtained an arbitral award against a shipyard under one shipbuilding contract. The shipyard then sought to deploy the award, written submissions and witness transcripts in separate arbitrations against three companies under common ownership and management with the appellant.

Longmore J granted an ex parte injunction restraining that use. Clarke J subsequently discharged the injunction and dismissed the claim. He considered that no term preventing disclosure should be implied on the particular commercial facts.

The appellant appealed. The central questions were whether arbitral confidentiality arose as a term implied by law, whether common ownership displaced it, and whether disclosure was reasonably necessary to protect the shipyard’s rights in the later arbitrations.

1. Appeal allowed unanimously. Potter LJ, with whom Brooke and Beldam LJJ agreed, held that the injunction should be made final, subject to a proviso permitting appropriate later use of witness transcripts.
2. The confidentiality obligation attaching to commercial arbitration is a term implied by law. It is a necessary incident of the parties’ agreement to submit their dispute to private arbitration. Its existence and scope do not depend upon applying the business-efficacy or officious-bystander test afresh to the circumstances of each contract.
3. The obligation covers awards and reasons, pleadings, written submissions, witness proofs, transcripts and notes of evidence. Recognised exceptions include express or implied consent, a court order, leave for disclosure reasonably necessary to protect an arbitrating party’s legal rights against a third party, and disclosure required in the interests of justice.
4. Reasonable necessity is a flexible standard. The court should consider the nature and purpose of the later proceedings, the tribunal’s powers and procedures, the issues to which the material is directed, and the practicality and expense of obtaining the information elsewhere. Material which is merely helpful, convenient or commercially persuasive does not satisfy the test.
5. Common beneficial ownership and management between the objecting party and the persons involved in the later arbitration creates no further exception. The later arbitrators are themselves third-party strangers to the earlier arbitration. Prejudice is ordinarily presumed unless a recognised exception is established.
6. The proposed issue-estoppel plea was unsustainable. The earlier arbitrator had treated the companies as separate legal entities, made only general findings about non-payment, and expressly stated that those findings could not bind the companies concerned. The award and supporting material were therefore not reasonably necessary to advance issue estoppel or to provide an evidential shortcut in the later arbitrations.
7. The position could change if an application to dismiss for want of prosecution were made or a witness gave materially inconsistent evidence. Disclosure of the earlier testimony might then be reasonably necessary to meet alleged evidential prejudice or required in the interests of justice. The injunction was therefore to contain an appropriate proviso addressing those circumstances.

• Court of Appeal: Allowed the appeal unanimously and directed that the injunction be made final, subject to an appropriate proviso concerning later use of witness transcripts.
• High Court (Clarke J): Discharged the ex parte injunction, dismissed the appellant’s claims and ordered it to pay the respondent’s costs.
• High Court (Longmore J): Initially granted an ex parte injunction restraining use of the arbitration materials.