Associated Electric v. European Re
This appeal concerned the question whether an award made in one arbitration could be referred to in a second arbitration between the same parties despite an express confidentiality agreement preventing disclosure of the award. The Privy Council held that it could.
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This case note is based on an Article in the March 2003 Edition of the ‘Bulletin’, published by the Marine and Insurance teams at the international firm of lawyers,DLA. DLA is an International Contributor to this website.
Two separate disputes over the obligation of European Re to indemnify Aegis were referred to arbitration. The first resulted in an award dated 19 January 2000. The second was referred to a different arbitration panel. European Re wanted to rely on the first award in the second arbitration, but Aegis claimed this would breach a confidentiality agreement and obtained an injunction to restrain European Re. The injunction was overturned by the Bermudian Court of Appeal and the matter was referred to the Privy Council.
The arbitration clause in the reinsurance agreement provided that disputes would be resolved "in accordance with current reinsurance practice rather than strictly according to the letter of the law". The correct interpretation of this clause was an important issue in the first arbitration and, according to European Re, the decision of those arbitrators on this point was relevant to, and even decisive of, the issue in the second arbitration. For Aegis to raise the same dispute in the second arbitration would amount to a failure by Aegis to recognise and perform the earlier award.
Aegis, however, relied upon the general principle of privacy in arbitration proceedings (Dolling-Baker v Merrett  1 WLR 1205) and also on the terms of a confidentiality agreement included in agreed procedural directions during the first arbitration. This agreement stated that the parties, their lawyers and the arbitration panel agreed "as a general principle to maintain the privacy and confidentiality of the arbitration" and that any documents, transcripts and the arbitration result would not be disclosed "to any individual or entity, in whole or in part, which is not a party to the arbitration between Aegis and European Re". A number of specific exceptions were set out, for instance, enabling European Re to report to its retrocessionaires or enabling parties to share information with auditors or regulatory authorities.
Opinion of the Privy Council
Aegis was a mutual insurance company issuing excess of loss and liability policies to members, mostly United States utility companies. European Re was reinsuring Aegis in respect of those risks. It was easy to see that documents exchanged or generated during arbitration would be likely to include material that might be of value to persons with interests adverse to Aegis or their members and European Re. This was the reason for the confidentiality agreement. But the otherwise legitimate use of an earlier award in a later, also private, arbitration between the same two parties was a different issue.
The essential purpose of arbitration is to determine the dispute between the parties. An award made by an arbitration tribunal pursuant to an arbitration agreement is final and binding, so that, if necessary, the parties can go to court to enforce it. This is not only the position under the UK Arbitration Act 1996, but also under the UNCITRAL Model Law on International Commercial Arbitrations of 1995 and the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958, both of which apply in Bermudian law.
But if the successful party is prevented from referring to an award, and that prohibition is given a wholly unrestricted construction, it would mean any award would become, effectively, unenforceable. This would be fundamentally inconsistent with the purpose of arbitration. European Re's right to refer to the earlier award (in order to plead that Aegis were estopped from raising the same issue in a later arbitration) was a form of enforcement of the earlier award.
The situation in this case was different from that in Ali Shipping Corporation v Shipyard Trogir  1 WLR 314 (where the Court of Appeal prevented material obtained in an earlier arbitration from being used in a later arbitration) because here the parties to both arbitrations were the same. Only the members of the arbitration panel had changed.
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