English Commercial Court refuses to grant injunction based on breach of arbitral confidentiality

In A Corporation v (1) Firm B and (2) Mr W [2025] EWHC 1092, the English Commercial Court refused to grant an injunction preventing a law firm from acting in an arbitration on the basis that there was a risk of misuse of confidential material subject to arbitral confidentiality.

This case contains a helpful summary of the legal principles relating to the obligation of confidentiality in arbitral proceedings and the relevant exceptions. Specifically, it examines the confidentiality concerns that may arise where one law firm is instructed to act for separate clients who have claims against a common counterparty. The court comments that an exception to confidentiality might apply where practitioners and parties seek to adduce evidence from a third party who has conducted an arbitration against a common counterparty.  On the facts of this case, however, the judge was not persuaded that there had been breaches of confidentiality or that it would be just and equitable to restrain the law firm in question from continuing to act in future, as there was no realistic possibility that further confidential information would be disclosed.

Background

This case concerned an application made by the Claimant, A Corporation, for various categories of interim injunctive relief relating to the alleged misuse of material which was subject to a duty of arbitral confidentiality. Given the confidentiality concerns in the case, the judgment is anonymised and provides limited factual details.

However, the judgment conveys that the underlying dispute related to two separate arbitrations involving two different vessels (the Vessel 1 and the Vessel 2 References respectively, the Vessel 1 Reference having settled). The Vessel 1 Reference was between A Corporation and B Corporation, and the Vessel 2 Reference was between C Corporation and D Corporation. A Corporation and D Corporation had the same ultimate ownership. Mr Z from Firm A had acted for A Corporation in the Vessel 1 Reference, and had continued to act for D Corporation in the Vessel 2 Reference.

Crucially, Mr W from Firm B's London office had acted for B Corporation in the Vessel 1 Reference, and now Mr Y from Firm B's Asia office was acting for C Corporation in the Vessel 2 Reference, raising the issue that lawyers from the same firm were acting in both arbitrations. This raised complex questions about the confidentiality obligations to which Firm B, and in particular, Mr W and his team, were subject.  

The judgment also discloses that: (i) through Mr W, C Corporation was asked to co-operate with and provide evidence to B Corporation in relation to the Vessel 1 Reference, and (ii) Mr W had passed on confidential information to Mr Y about the Vessel 1 Reference, including the terms of A Corporation's settlement offers.  Firm B and Mr W did not challenge the conclusion that this involved a breach of confidence.

The principal injunction sought by A Corporation was to restrain Firm B from acting for C Corporation in the Vessel 2 Reference, in addition to other associated applications aimed at preventing Firm B from providing confidential information relating to the Vessel 1 Reference to C Corporation.

Analysis

It was common ground that the injunction application would be determined in accordance with the American Cyanamid test.

The court accepted that solicitors who are instructed by parties to an arbitration owe a similar duty of confidentiality to both parties, and that a solicitor can be restrained in appropriate cases from deploying material which is subject to arbitral confidentiality for a non-permitted purpose.

As a matter of English law, the default rule is that the parties to an arbitration agreement will be taken to have impliedly agreed to an obligation of confidentiality. There were several additional potential sources of an obligation of confidentiality arising from confidentiality provisions in the various agreements. However, the court considered the application based on the general duty of arbitral confidentiality, as this was the only legal source of the obligation addressed in A Corporation's skeleton argument.

The court summarised the legal principles relating to the obligation of arbitral confidentiality. It noted that the fact that a dispute leads to the commencement of an arbitration does not, of itself, make the existence of the dispute and the events which gave rise to it confidential (even if the documents deployed in the arbitration, such as witness statements about the underlying dispute, are confidential). Given the circumstances of this case, the court also looked at the distinction between information protected by the obligation of arbitral confidentiality and the experience that lawyers inevitably acquire from conducting arbitrations, noting in particular that the implied undertaking made by lawyers only to use disclosed documents for the purposes of the proceedings in which they were disclosed is an element of the duty of arbitral confidentiality.

The court then focused on the exceptions to arbitral confidentiality developed in case law. The relevant exception here was "where it is reasonably necessary for the protection of the legitimate interests of an arbitrating party". This has been held to extend to, for example, supporting an issue estoppel founded on an award against the arbitrating party. In relation to this exception,

the judge was satisfied that it was "very strongly arguable" that it must be permissible to use at least some of the material falling within the scope of arbitral confidentiality for the purpose of seeking to elicit similar fact evidence from a third party who is believed to have similar complaints against the opposing party. As the court explained, this is a recognised category of admissible evidence in English civil proceedings. He commented that it would be surprising if confidential material could be deployed to attack the credibility of a witness, for example, but not for the purpose of adducing evidence positively and directly probative of an arbitrating party's case.

A further issue here was whether "without prejudice" privilege can be disseminated to someone other than the original parties without breaching the attendant obligation of confidentiality. Although the court noted that this was not discussed in the authorities, ultimately it was not necessary to decide the issue in this case, as Firm B did not challenge the conclusion that the disclosure of settlement offers involved a breach of confidence.

Decision

Although it was arguable that Firm B had breached certain obligations of confidentiality, the judge considered that Firm B and Mr W had the better of the argument that there had been no breach, because either the information was not subject to arbitral confidentiality, or if it was confidential, that it was subject to an exception.

Ultimately, the court was not persuaded that it would be just and equitable to restrain Firm B from acting for C Corporation in the Vessel 2 Reference, being satisfied that there was no realistic possibility of the lawyers who worked on the Vessel 1 Reference providing confidential information to C Corporation going forward. This was based on, amongst others, Firm B's confirmation that no lawyer who had acted in the Vessel 1 Reference would act in the Vessel 2 Reference (save for some agreed "Excepted Personnel" who performed firmwide roles) and Firm B had given an undertaking to the court to this effect. Mr W and his team had deleted all emails relating to the Vessel 1 Reference which had been in the Vessel 2 file and were also willing to be locked out of the Vessel 2 file. Given the measures that had been taken, A Corporation had not persuaded the judge that there was a real risk of confidential information crossing from Firm B's London offices to Firm B's Asia office.

The court also balanced the risk of the confidentiality breach against the prejudice that C Corporation would suffer if it was deprived of its choice of lawyer. The court also noted when conducting this balancing exercise that the lawyers acting for D Corporation knew a great deal more about the Vessel 1 reference than the Firm B lawyers acting for C Corporation. It also noted that the two references were seen as being significantly different, including the quantum claimed.

Overall, the court was satisfied that granting an injunction would occasion significant prejudice to Firm B (given its pre-existing client relationship with C Corporation) and to C Corporation, whereas not granting the injunction would not occasion any prejudice to A Corporation, and very limited prejudice to D Corporation.

Comment

This case illustrates the complex confidentiality issues that can arise for parties and practitioners where the same counsel acts for parties pursuing separate arbitrations against a common counterparty or counterparties. It contains an interesting analysis of what constitutes confidential information, the various ways in which confidential information can be disclosed, and the steps that can be taken to protect it. It is also a good reminder that information does not become confidential just because it is deployed in an arbitration.

The court's finding that it is "strongly arguable" that the sharing of information for the purpose of establishing similar facts against a common counterparty falls within one of the exceptions to arbitral confidentiality will be of particular interest, and perhaps some concern, to parties and practitioners. In practical terms, extending the exceptions in this way may have a potentially significant effect, given the differing scope for interpretation as to what is appropriate in terms of obtaining and adducing evidence probative of a party's case in the arbitration. However, although this case suggests that this may be a valid exception to confidentiality, this will be heavily context-dependant, and a thorough analysis will need to be undertaken on a case-by-case basis.