Should your engagement letter contain an arbitration clause?

Since Monday 2 October 2006, the public (including the press, competitors and potential litigants) have been able to obtain copies of any pleadings filed at Court. This means that, for any litigation commenced after that date, documents such as claim forms, particulars of claim and statements of defence, which can all contain sensitive information, are open to public inspection. Witness statements and expert reports cannot be examined. This change has prompted many financial institutions to review the dispute resolution clauses in their engagement letters and consider whether disputes arising under them would be better determined by arbitration. In order to assist with this decision-making process, Gillian Eastwood and Oliver Kerridge of Freshfields set out below the ten key issues to be considered.

Gillian Eastwood (+44 (0) 20 7936 4000; gillian.eastwood@fresh-fields.com) is a partner in Freshfields Bruckhaus Deringer’s Financial Institutions Disputes Group. Oliver Kerridge (oliver.kerridge@freshfields.com) is an associate in that group.

Confidentiality

Confidentiality is one of the principal benefits of arbitration over litigation. It is generally the preferred dispute resolution process for matters involving commercially sensitive information or reputational issues for one or both parties. There is a common assumption that parties to an arbitration, as well as the tribunal, will keep the existence of the arbitration confidential. However, the confidentiality protection it offers is by no means absolute.