CONFIDENTIALITY - A DISTINCTIVE ADVANTAGE OF ARBITRAL PROCEEDINGS

In commercial activities, disputes may affect not only the rights and legitimate interests of the parties but also their reputation, business relationships, trade secrets, and competitive position. Accordingly, in addition to procedural flexibility, efficiency, and the finality of arbitral awards, confidentiality is widely regarded as one of the principal reasons why parties choose commercial arbitration as their preferred dispute resolution mechanism.

1. Legal Basis

Article 4.4 of the Law on Commercial Arbitration 2010 ("LCA 2010") establishes confidentiality as one of the fundamental principles governing arbitral proceedings, providing that: "Arbitral proceedings shall be conducted in private, unless otherwise agreed by the parties."

Furthermore, Articles 21.3 and 21.5 of the LCA 2010 recognize both the arbitrator's right to refuse the disclosure of information relating to the dispute and the obligation to maintain the confidentiality of the proceedings, except where disclosure is required by law or requested by a competent state authority in accordance with applicable legal provisions.

At MCAC, the Rules of Arbitration provide that hearings and arbitral proceedings shall be conducted in private. In addition, the MCAC Code of Ethics for Arbitrators requires arbitrators to preserve the confidentiality of all information relating to the dispute and prohibits them from using such information for their own benefit, for the benefit of others, or in any manner detrimental to any party or other relevant person.

This confidentiality regime distinguishes arbitration from court litigation. Under Article 15.2 of the Civil Procedure Code 2015, court hearings are generally conducted publicly, with closed hearings permitted only in exceptional circumstances involving the protection of state secrets, national customs and traditions, minors, or the legitimate need to safeguard professional secrets, trade secrets, personal privacy, or family privacy at the justified request of the parties.

2. The Significance of Confidentiality for Businesses

Protection of Trade Secrets

During the resolution of a dispute, businesses may be required to disclose contracts, customer databases, financial statements, pricing policies, operational procedures, proprietary technologies, or commercial strategies.

The private nature of arbitral proceedings significantly reduces the risk that such commercially sensitive information will be disclosed to the public or become accessible to competitors.

Mitigating Reputational Risks

The existence of a dispute involving customers, investors, suppliers, or strategic business partners may give rise to adverse market speculation and negatively affect a company's commercial reputation.

By resolving disputes through confidential arbitration, parties are able to manage disagreements within a controlled environment, thereby minimizing potential harm to their brand value, business operations, and commercial relationships.

Preserving Long-Term Commercial Relationships

Where disputes are resolved away from public scrutiny, parties are generally better positioned to communicate openly, negotiate constructively, and pursue amicable settlement.

This advantage is particularly valuable in the context of long-term commercial contracts, investment projects, construction agreements, distribution arrangements, joint ventures, and other continuing business relationships in which the parties intend to maintain future cooperation after the dispute has been resolved.

Protection of Third-Party Information

Documents submitted during arbitral proceedings may contain information relating to employees, customers, suppliers, financial institutions, experts, or other third parties.

Restricting access to such materials and controlling their use contributes to safeguarding the legitimate interests and confidential information of those third parties.

3. Conclusion

Confidentiality remains one of the defining advantages of commercial arbitration. By ensuring that proceedings are conducted in private, arbitration enables businesses to protect trade secrets, minimize reputational risks, and preserve valuable commercial relationships.

At MCAC, arbitral proceedings are conducted on a confidential basis in accordance with the MCAC Rules of Arbitration. Arbitrators are under a continuing duty to preserve the confidentiality of all information relating to the dispute, thereby safeguarding the parties' lawful rights and interests as well as their commercially sensitive information.
 

The article above has analyzed in detail is "CONFIDENTIALITY – A DISTINCTIVE ADVANTAGE OF ARBITRAL PROCEEDINGS". For more detailed information or legal assistance, please contact the MCAC Secretariat:

• Hotline: 0935 925 068 - 0236 3656799
• Email: contact@mcac.vn
• Read more: A PROPER UNDERSTANDING OF THE LIMITATION PERIOD FOR COMMENCING ARBITRATION PROCEEDINGS IN COMMERCIAL DISPUTES