Untangling the Privacy Paradox in Arbitration

Abstract

Arbitration is private but not secret. This truism regarding arbitration seems contradictory and nonsensical. However, common understandings of privacy in arbitration often lull individuals into assuming personal information revealed in arbitration may not become public. They assume privacy and confidentiality are synonymous. The reality is that arbitration is private but not necessarily confidential, or secret. This is the privacy paradox: it defies common conceptions of arbitration's secrecy, but is nonetheless true. This paradox is problematic because it leads to shortsighted contracting and simplistic assumptions about arbitral justice. Moreover, it may foster injustice when repeat players unduly benefit from unpublished awards as well as pro-drafter confidentiality provisions.

This Article thus calls contracting parties to more carefully draft their arbitration contracts, and invites policymakers to craft transparency reforms that consider tensions created by the privacy paradox. It seeks to spark discussion of multi-perspective transparency reforms by proposing a two-prong approach toward transparency: (1) Require publication of arbitration awards in arbitrations involving statutory discrimination, consumer protection, corruption, and fraud; and (2) Establish default rules protecting personal and proprietary information from use or disclosure outside of arbitration hearings. The key is to balance all parties' interests in confidentiality and privacy with the public's legitimate interests in accessing information that may affect health, safety or wellbeing. Indeed, tempered and properly guided secrecy standards could enhance arbitration's value for disputing parties, as well as the public.

Keywords: arbitration, privacy, confidentiality, transparency

JEL Classification: K39, K00