Judges do not always agree to seal settlements or limit public access to court proceedings. Publicity of a court case can have devastating results on the organization’s bottom line in the following ways:
- Additional law suits.
- Drop in stock value or stock price.
- Loss of investors.
- Damage to the company’s reputation, resulting in loss of customers and ability to attract quality personnel.
- Exposure of proprietary product, R&D or marketing information to competitors.
For example, trade secrets may be involved or the parties want the arbitration to be conducted on an entirely confidential basis, so that neither the existence of the arbitration nor any of the disclosures therein are to be made public. Where trade secrets, patent information and other sensitive subjects are in dispute, such discretion may be essential not only to preserve the proprietary character of the rights in question, but also to avoid lawsuits by other parties. Confidentiality also serves to prevent damages to the reputation of the product or manufacturer involved, thus saving «commercial face.
Although confidentiality has long been considered one of the advantages of arbitration many of the institutional rules, until recently, did not expressly provide for confidentiality. Therefore, parties involved in ADR should include provisions in their arbitration clause to ensure confidentiality. According to the World Intellectual Property Organization, the rules should:
- Address the range of information that may be subject to a requirement of confidentiality
- Provide provisions dealing with the maintenance of confidentiality in relation to the existence of the arbitration, the disclosures made within the arbitration and the award itself.
- Specify confidentiality obligations on the part of the parties (and their witnesses), the arbitrators and the mediation center
- Indicate limitations on the confidentiality requirements, such as when disclosure is required by law or by a competent regulatory body.
A party may wish to invoke the confidentiality of a special class of information it wishes to submit. For example, they may make protective orders in respect of trade secrets and other confidential information that one party wishes to have specially protected. To assist its determination whether the information may be disclosed, sometimes a confidentiality advisor is assigned. The advisor may also be appointed as an expert briefing the mediator, on specific relevant issues, without disclosing the confidential information to the other party.
While confidentiality in ADR can be a benefit to organizations, it can also be a detriment. For example, in an EEO or sexual harassment dispute, it may be to the company’s advantage to use ADR to continually “hide” repeated violations. This is using ADR to contain rather than to expose and remedy widespread conflict. This will ultimately hurt employee morale and allow the company to continue unethical practices rather than face the laws concerning these issues and be forced to comply.
Barrier, Michael. The Mediation Disconnect. HR Magazine, May 2003.
Costantino, Cathy A. and Merchant, Christina Sickles. 1996.
Designing Conflict Management Systems, Jossey-Bass Publishers, San Francisco, CA. Internet: http://www.wipo.int/