"See You In Court...I Mean...Arbitration!" Part 2 (Confidentiality)
Is confidentiality an advantage of arbitration over litigation?
In deciding whether you want your business disputes decided through arbitration rather than litigation, it helps to understand what arbitration is and how it compares to litigation. I covered some of that in Part 1 of this The Candid Counsel series on arbitration. It also helps to understand the general advantages and disadvantages of arbitration compared to litigation and to appreciate that not all of the supposed advantages are real. One of the supposed advantages is Confidentiality. That is the topic of today’s post.
An often-cited advantage to arbitration over litigation is that arbitrations are usually confidential. But whether that advantage applies for your business depends. Here are two key points to consider on confidentiality, ideally with the assistance of counsel who knows your business and has had experience litigating and arbitrating disputes on behalf of clients.
First, arbitration is generally better than litigation if keeping your business dispute from the public view is a primary concern. It may not be. In fact, depending on the nature of the dispute, you may want publicity. For example, you may want to send a message to competitors that your business is dead serious about protecting its copyrights. Filing (and better yet, winning) a lawsuit against a copyright infringer sends a powerful message. On the flip side, as news proliferates of widespread sexual misconduct in corporate America, we have learned that confining those disputes to private arbitration also served – at least in the short term – to protect corporate reputations.
Second, as I described in Part 1 of this series, by agreement, most arbitrations are private and confidential. Note that your business and its potential adversary need to agree that the arbitration will be private and confidential. The Rules that govern the arbitrations do not guarantee confidentiality. The American Arbitration Association (AAA) says in its Statement of Ethical Principles, for example, that “[a]n arbitration proceeding is a private process,” however, “[t]he parties always have a right to disclose details of the proceeding, unless they have a separate confidentiality agreement.” Thus, if you decide that arbitration is right for your business and confidentiality is important, then your contracts should provide not only that disputes will be resolved by arbitration but that arbitration proceedings will be confidential.