Confidentiality and privacy are often mentioned as advantages of mediation and arbitration over litigation in commercial disputes.
In some cases, of course, the threat of publicity can be a tactical advantage for one party. But, going into an agreement at least, both parties usually have an interest in protecting trade secrets and business goodwill. Even after a dispute arises, private and public-sector organizations may be reluctant to air their disputes in public, for a variety of reasons. So they want any agreed dispute resolution process to be private and confidential.
Recent cases in Canada and elsewhere illustrate the care parties must take to ensure that this intention is realized – especially, in situations where one of them later decides that they would gain an advantage if they are able to make some details public.
Supreme Court of Canada’s unanimous decision earlier this year in Union Carbide Inc. v. Bombardier Inc., 2014 SCC 35, recognizes a broad public policy in favour of maintaining the confidentiality of settlement discussions, including mediation. But there are limits.
The case involved efforts to enforce the terms of a settlement agreement reached following mediation. The parties disagreed whether the settlement applied globally or just to Canadian litigation. When Bombardier brought a motion to enforce payment of the settlement amount, supported by documents it said proved the narrower scope of the settlement, Union Carbide brought a motion to strike on the basis that it referred to documents exchanged and discussions that had taken place in the course of mediation.
A standard mediation agreement signed by the parties contained the following confidentiality clause: “Nothing which transpires in the Mediation will be alleged, referred to or sought to be put into evidence in any proceeding.”
In light of the clause, the motions judge found that the mediation process was confidential and could not be referred to in enforcement proceedings. The Quebec Court of Appeal disagreed. When mediation results in a settlement agreement, communications made in the course of the mediation cease to be privileged, the court said. Settlement privilege does not prevent a party from producing evidence of confidential communications to prove the existence of a disputed settlement agreement arising from mediation or to assist in the interpretation or enforcement of the settlement.
The Supreme Court of Canada agreed with the result, but for different reasons. The court recognized that the parties may agree, in their mediation agreement, to expand or limit the scope of the default rules relating to confidentiality (whether under the Civil Code in Quebec or common law elsewhere). But they must do so in a very clear and explicit way. A standard boilerplate confidentiality clause is not enough to show an intention to change the rules that normally apply to the confidentiality of all settlement discussions.
The same logic would apply in other circumstances where a party may seek to avoid the confidentiality of mediation or arbitration.
Internationally, some jurisdictions recognize obligations of confidentiality in arbitration, but there little or no consistency about the scope of those obligations or even who they apply to: the parties, witnesses, counsel, or even the tribunal itself.
In the UK, courts have said arbitration is inherently meant to be private, and the confidentiality obligations apply to all concerned. But in other countries, including Canada and the United States, courts have said there is no default confidentiality obligation. They must be expressly stated in the governing law, the procedural rules or the agreement of the parties.
And of course, arbitration awards and proceedings become public to some extent every time a party seeks enforcement in the courts or – unhappy with the process or the result – seeks to have an arbitration award set aside.
Journalist Jan Wong learned a very expensive lesson on the risk of disclosing the confidential terms of a settlement, achieved as a result of mediation during the arbitration of her wrongful dismissal claim against the Globe and Mail. In November 2014, the Ontario Divisional Court, 2014 ONSC 6372 , dismissed her application for judicial review of the arbitrator’s award that she repay $209,912 that she had been paid by the newspaper. Despite a confidentiality clause in the settlement agreement, she wrote a book entitled “Out Of The Blue” about her legal dispute with the Globe in which she said, among other things, she had been “paid a pile of money to go away” and that she received “a big, fat check.”
The Ontario court found no fault in the arbitrator’s decision to enforce the terms of settlement agreement and require repayment of the settlement amount. To add insult to injury, the court also awarded costs against Ms. Wong in favour not only of the newspaper but also her union, which she alleged had acted “reprehensibly” in not properly representing her at the arbitration.
What is perhaps most interesting in the arbitration award, is the areas in which the arbitrator found that Wong did not breach the terms of her settlement agreement.
The arbitrator looked carefully at the chapter that dealt with the settlement and observed that:
…the style, structure and language used convey to the reader that [Wong] had negotiated very favourable terms which included a substantial payment…and that the Employer “had caved.” (page 235) The tone and tenor of many portions of the book about which the Employer complains suggest the terms of the…settlement were a vindication of [Wong] positions …
The book reveals how the arbitration and mediation unfolded and talks about many details that were not part of the final settlement.
[Wong’s] public disclosure of matters discussed and considered during the mediation which led to the [settlement agreement] is inappropriate. (Correspondence from her own lawyer…, as well as [Wong’s] notes of the mediation…, indicate she was aware that discussions held during mediation were confidential). However, such disclosure, although inappropriate, does not disclose “the terms of the settlement”.
The lesson, in all of this, is that parties must give very careful thought to whether they want their dispute to be resolved privately, and whether they want it to remain confidential, come what may. The must think about whether there may be situations, like those in Union Carbide, where they may need to disclose some information about the mediation or arbitration in order to enforce a settlement or an award, or to seek some other remedy.
They must also think about the scope of the confidentiality provisions in their settlement agreement.
As the Supreme Court of Canada said in Union Carbide: “There is indeed a delicate balance to be struck.”