Conference on Mediation

March 29, 1996, Geneva, Switzerland

 

Confidentiality in Mediation
by Francis Gurry
Director, WIPO Arbitration and Mediation Center
(Geneva, Switzerland)


As a dispute-resolution procedure, mediation is, because of its wholly consensual nature, largely free of legalities. Both the parties’ continuing participation in the process and any outcome are determined by the parties’ will, rather than a governing law.

One area where the law does assume importance, however, is confidentiality, since one of the distinctive features of information is that, once communicated, its substance (as opposed to the materials in which it is expressed) cannot be taken back, but can only be subjected to restrictions on use or further disclosure. Before entering into the process of communicating information within a mediation, therefore, the parties will want to know exactly what their respective rights and obligations in relation to that information are.

The importance of legal rights with respect to confidentiality is particularly pronounced also because confidentiality is a fundamental expectation of parties in agreeing to a mediation. In any list of the advantages that mediation offers as a dispute-settlement procedure, confidentiality generally features prominently. In intellectual property disputes, in particular, parties are often especially sensitive to the need for confidentiality, either because the intellectual property rights subject to the dispute have a high profile in the market, or because the rights themselves consist of trade secrets.

The law is not, however, the only way in which the parties’ expectation of confidentiality is satisfied. The expectation also has a deontological foundation. Like most professional relations of confidence, such as the relation between doctor and patient or attorney and client, it is widely recognized that the nature of the mediator’s position is one of trust in which he or she owes an ethical obligation to respect the confidentiality of disclosures made in the course of a mediation (1). The legal obligations of confidentiality are, however, broader in scope. They extend beyond the mediator to the parties and others involved in a mediation, the extension being achieved either contractually, through the adoption of a set of rules governing the mediation procedure or through separate confidentiality agreements, or by implication, where the law so provides, from the nature of the mediation process (2).

Because of the highly porous nature of information, as a further assurance to the parties’ that their expectation of confidentiality will be respected, usually certain practical measures, such as the return of briefs or written documents exchanged in a mediation, are required under sets of mediation rules or adopted as part of the ground rules applicable to the procedure.

In dealing with the legal obligations of confidentiality, naturally it is important to remember that different legal systems will approach the question in different ways. While it is unlikely that any legal system would fail to respect the contractual obligations of confidentiality established by the rules governing a mediation, the scope of the obligations and, in particular, the description of any exceptions to them are likely to differ according to the mandatory law requirements of the legal system in which it is sought to give effect to the obligation. It is estimated, for example, that there are more than 200 State and federal statutes and numerous reported decisions relating to mediation confidentiality in the United States of America alone (3). The present paper will, therefore, seek only to identify the main issues raised by confidentiality in a mediation and to describe some of the possible approaches to those issues, rather than to describe in detail the positive law of any particular jurisdiction.

 

THE FUNCTIONS OF CONFIDENTIALITY

Confidentiality serves two principal functions in a mediation.

In the first place, it is intended to facilitate disclosure in a non-binding procedure where no coercive means of requiring disclosure exist. Unlike in litigation or an arbitration, a party to a mediation is free to withdraw at any time and cannot be forced to reveal information while it does continue to participate in the procedure. An environment conducive to disclosure is thus required. Confidentiality, by promising that disclosures will have no consequence beyond the non-binding mediation procedure, provides that environment.

Secondly, confidentiality is designed to stake out safe ground on which the parties can explore options that may exist for the resolution of their dispute. By protecting views expressed, or suggestions, admissions or proposals made, from disclosure outside the mediation, confidentiality is intended to provide a safe haven to which the parties can resort to investigate options for settlement without those investigations prejudicing or having any consequences on the legal positions that the parties might otherwise maintain in relation to the dispute in question.

 

THE GEOMETRY OF CONFIDENTIALITY

Confidentiality is always relational in nature. An obligation to respect confidentiality can arise only if one person, the confidant, receives information that has been communicated in confidence by another, and it is similarly breached only if the confidant uses or discloses the information so communicated outside the relation in which it was communicated.

In examining the geometry of relations in respect of confidentiality in a mediation, two separate sets of relations arise for consideration. The first is the set of relations between the participants within the mediation process itself, considered as a sphere set apart from the rest of the world. The issue here is the flow of information between the participants in the mediation process, and whether one of those participants, the mediator, is under an obligation not to disclose to one party information received from the other. The second set of relations concerns the participants in the mediation process as against the outside world and whether, and, if so, under what circumstances, any of the participants in the mediation may reveal information received in the course of the mediation to an outside party or in a context outside the mediation.

 

Confidentiality within the Mediation Process

In an arbitration or litigation, a fundamental right of a party, as part of due process, is to know what case it has to answer and to have access to all the information submitted to the tribunal or court by the other party. Private meetings or communications between one party and the arbitral tribunal or court on matters of substance are generally prohibited (4). The universe of mediation is, of course, entirely different. The parties to a mediation do not transfer decision-making to an outside party or body. Since the mediator is not a decision-maker, there is no need for each party to have access to all the information possessed by the mediator.

Within this conception of the parties retaining responsibility for resolving their own dispute, the mediator’s role is to endeavor to facilitate communication between the parties for the purpose of assisting them in reaching their own resolution of the dispute. Since the parties are involved in a dispute, however, it is unlikely that the relations between them are such as to be conducive to this communication. The device commonly used to break the initial impasse of communication between the parties is separate meetings, or caucuses, between the mediator and each party. In such separate meetings, the mediator may become the special confidant of information from one of the parties that is not in the possession of the other party. What is the mediator’s responsibility in relation to such confidences?

The approach adopted in the WIPO Mediation Rules to such separate meetings is set out in Article 11 (5). Article 11 first of all recognizes the legitimacy of separate meetings between the mediator and each party. Similar recognition of the practice of caucuses is contained in the American Arbitration Association Commercial Mediation Rules (6)("the AAA Commercial Mediation Rules"), the Model Procedure for the Mediation of Business Disputes of the CPR Institute for Dispute Resolution (7) ("the CPR Model Procedure"), the Rules of Conciliation of the Beijing Conciliation Center (8) ("the BCC Rules of Conciliation") and the UNCITRAL Conciliation Rules (9).

Article 11 then imposes the rule that information given to the mediator at a caucus or in a separate communication with one party may not be disclosed by the mediator to the other party except with the express authorization of the confiding party. The entirely confidential nature of such information is thus established as the general rule and the burden is placed on the mediator to obtain authorization if he or she feels that it would be useful for an exception to be created to the rule and for any information so given to be passed to the other side. A similar approach is to be found in the CPR Model Procedure (10). In contrast, the UNCITRAL Conciliation Rules (11) and the BCC Rules of Conciliation (12) start from the general rule that information received by the mediator at separate meetings may be passed to the other party. It is for the communicating party to create an exception by specifically requesting that the information or part of it be kept confidential. Provided that the mediator follows the standard practice of ensuring that the parties understand and agree to the ground rules of the procedure, the differences of approaches in these rules are unlikely to be significant in practice.

The mediator’s position as a special confidant of each the parties and his or her obligation with respect to such confidences also provides the basis for the rule that the mediator may not act in any other capacity in other proceedings relating to the subject matter of the dispute. Article 20 of the WIPO Mediation Rules contains the following provision in this regard:

"Unless required by a court of law or authorized in writing by the parties, the mediator shall not act in any capacity whatsoever, otherwise than as a mediator, in any pending or future proceedings, whether judicial, arbitral or otherwise, relating to the subject matter of the dispute."

Equivalent rules are to be found in the CPR Model Procedure (13), the ICC Rules of Optional Conciliation (14) and the UNCITRAL Conciliation Rules (15).

In a recent case in the United States of America, Poly Software International, Inc. v. Su (16) , the principle contained in Article 20 was applied by the court to prevent a mediator from acting as attorney in later factually related litigation. In that case, a copyright dispute over computer software between a company and two of its former employees was submitted to mediation. After several mediation sessions, including private caucuses, the dispute was settled. Each of the parties remained in the software business, operating through various different entities. A new dispute broke out between the parties concerning the allegedly illicit use by one of the former employees of copyrighted computer code in developing products for the new entity that he controlled. Some of the code that it was alleged in the new dispute had been misused had also been the subject of the mediation. Litigation was commenced in this new dispute and the mediator was engaged as counsel by one of the former employees.

A motion was brought to disqualify the mediator from acting as counsel. The court, noting the issue as one of first impression, granted the motion. In so doing, it stated that "although mediators function in some ways as neutral coordinators of dispute resolution, they also assume the role of a confidant." (17) In the instant case, the court found that the mediator had undoubtedly received a great deal of confidential information. On this basis, the court held that (18):

"Where a mediator has received confidential information in the course of mediation, that mediator should not thereafter represent anyone in connection with the same or a substantially factually related matter unless all parties to the mediation proceeding consent after disclosure."

A mediator acting later as attorney for one party in a related matter (without the consent of all parties) seems clearly inappropriate. But can the mediator act as arbitrator in arbitration proceedings concerning the same or a related dispute? Here, considerable differences in practice are to be found that owe their origin to the different psychology of dispute resolution prevailing in different cultures.

On the other hand, there is a school of thought that an arbitrator may be transformed into a mediator but, once having assumed the role of mediator, cannot be born again as an arbitrator in the same or a related matter. This is the rule expressed in Article 20 of the WIPO Mediation Rules and its analogues in the CPR Model Procedure, the ICC Rules of Optional Conciliation and the UNCITRAL Conciliation Rules, mentioned above. Naturally, the operation of the rule is subject to party autonomy, so that the mediator may later act as arbitrator if the parties so agree. Failing such agreement, however, the view is that the mediator’s position as confidant is incompatible with the requirements that the arbitrator be independent and impartial.

A contrary starting point is to be found in Article 20 of the BCC Conciliation Rules, which provides that, if a conciliation fails, the conciliator may be appointed as arbitrator in subsequent arbitration proceedings, except where such appointment is opposed by the parties. Similarly, the Arbitration Rules of the China International Economic and Trade Arbitration Commission (CIETAC) (19), the Rules of Arbitration of the China Maritime Arbitration Commission (20) and the Rules of Maritime Arbitration of The Japan Shipping Exchange, Inc. (21) all envisage that an arbitral tribunal may play an active role in mediating a dispute, while resuming the arbitral function should the mediation fail.

This difference in approach, prevalent in Asian countries, would seem to arise from a cultural disposition that views a negotiated settlement agreed by the parties to a dispute as a better result for all concerned than a decision imposed by an outside tribunal. Consequently, measures designed to bring the parties to such a negotiated settlement are to be actively promoted by any outside tribunal ultimately responsible for rendering a decision in the absence of an agreed settlement. Thus, one finds provisions designed to bring the parties to mediation not only in the arbitration rules mentioned in the preceding paragraph, but also in the Chinese Code of Civil Procedure (22) and the Japanese Code of Civil Procedure (23).

These fundamental differences in the psychology of dispute resolution may be able to be explained, but in what position do they leave parties in a context in which disputes are increasingly international in character and in which dispute resolution seeks to serve the needs of users throughout the world? Here, two suggestions seem apposite in bringing about some reconciliation between the approaches. First, the principle of party autonomy should prevail so that the parties’ expectations can be respected. Concretely, this means that any role-changing on the part of mediator and arbitrator should be undertaken only with the informed consent of the parties. This seems entirely consonant with the approach envisaged in Article 20 of the BCC Conciliation Rules, which allows a party to object to the mediator being appointed arbitrator. Secondly, if a mediation does take place within the context of an arbitration in which the mediator is an arbitrator, the discussions, views and admissions occurring within the mediation should be insulated from exposure in the subsequent arbitration. This is, in fact, envisaged in the CIETAC Arbitration Rules, Article 51 of which provides:

"Should conciliation fail, any statement, opinion, view or proposal which has been made, raised, put forward, acknowledged, accepted or rejected by either party or by the arbitration tribunal in the process of conciliation shall not be invoked as grounds for any claim, defense and/or counterclaim in the subsequent arbitration proceedings, judicial proceedings or any other proceedings."

This rule corresponds to a standard provision in mediation rules, discussed below, which is directed at disclosures in subsequent arbitrations or litigation in which the mediator is not involved.

 

The Confidentiality of the Mediation Process as Against the Outside World

In considering the extent to which information concerning a mediation can be protected from disclosure outside the mediation, three principal questions arise:

  1. what information relating to the mediation is covered by the blanket of confidentiality;
  2. which persons are bound to respect the confidentiality of that information; and
  3. what exceptions, if any, are there to the prohibition of disclosure outside the mediation?

 

(1) What Information is Subject to Confidentiality?

Depending on the rules adopted to govern the mediation, and on any other contractual arrangements made with respect to the mediation process, all information relating to a mediation is, in principle, susceptible of being subject to the obligation of confidentiality. This means, in particular, that the existence of the mediation process between the parties, the disclosures and communications made within the mediation process and the outcome of the mediation can all fall within the scope of the obligation.

The operative provision in the WIPO Mediation Rules, Article 15 (24), is drafted broadly enough to cover potentially all such information. It requires each person involved in the mediation to respect "the confidentiality of the mediation and...any information concerning, or obtained in the course of, the mediation." The corresponding provisions in the AAA Commercial Mediation Rules (25), the CPR Model Procedure (26), the ICC Rules for Optional Conciliation (27) and the UNCITRAL Conciliation Rules (28) are similarly drafted broadly enough to cover potentially all such information.

The broad scope of such information may be a cause of alarm to some potential users of mediation, who may fear that their freedom to effectively prosecute a claim in the event that the mediation does not result in a settlement is excessively restricted. Any such fears that confidentiality operates to freeze all information introduced in the course of a mediation from any subsequent use can be allayed if three principles are borne in mind.

First, mediation confidentiality cannot operate so as to withdraw from the public domain information that is already there. In order for the provisions of the rules cited above to be operative in cloaking information with confidentiality, the information must not otherwise be publicly available. Thus, if the fact that two parties were involved in a mediation was generally known, there could be no obligation of confidentiality with respect to that fact.

Secondly, the introduction of information in a mediation by a party cannot prevent that party from using that information elsewhere, but it can prevent the party from associating the information with the mediation. To take an obvious example, if a party claims a breach of contract in a mediation, confidentiality cannot operate to prevent that party from asserting breach of contract outside the mediation. It could, however, assuming other conditions to be satisfied, prevent the party from disclosing that the breach of contract had been the subject of the mediation.

Thirdly, confidentiality cannot prevent a party from using information acquired in the course of a mediation which it already knows or subsequently discovers by wholly independent means. Thus, if one party discloses certain factual information in a mediation, the other party is not thereby precluded from using that information subsequently if it can show that it already knew the information or that it is later communicated to it by an independent third party or, even, by the first party outside the context of the mediation.

These principles mean that the potentially wide ambit of confidentiality in respect of information in a mediation must always be very closely examined in the context of the actual circumstances. What confidentiality proscribes is the use of confidential information acquired only through the mediation or the confidential association of information, which might otherwise be known, with the mediation.

 

(2) Which Persons are Bound to Respect Confidentiality?

Another of the distinctive features of information is its mobility. Once out, it can no longer be contained. In order to ensure that confidentiality is preserved in relation to the mediation, therefore, it is necessary that all persons involved in the mediation be bound to respect the confidentiality of the mediation.

Article 15 of the WIPO Mediation Rules seeks to achieve this coverage of those involved in the mediation. It makes it clear that the obligation of confidentiality attaches to "[e]ach person involved in the mediation, including, in particular, the mediator, the parties and their representatives and advisers, any independent experts and any other persons present during the meetings of the parties with the mediator..." The rules governing a mediation, however, bind only those party to the contract in which the rules were adopted. In so far as independent experts and other such third parties are concerned, therefore, a statement in the rules seeking to bind them to confidentiality is insufficient. For this reason, the last sentence of Article 15 of the WIPO Mediation Rules provides for each of the persons involved in the mediation to sign an appropriate confidentiality undertaking prior to taking part in the mediation.

In the case of other institutional rules, because of the problem of privity to the contract constituted by the rules, some adopt the approach of making the obligation of confidentiality explicit only for the mediator and the parties (29). Full coverage is, however, the objective of Article 6 of the ICC Rules of Optional Conciliation, which seeks to attach the obligation of confidentiality to "every person who is involved in [the conciliation process] in whatever capacity." The limited contractual effect of the rules would, however, require the adoption of the practice of having independent parties sign confidentiality agreements in order to give this rule full legal effect in jurisdictions where one cannot confidently expect an obligation of confidentiality on the part of such parties to be implied.

 

(3) Exceptions to the Prohibition of Disclosure Outside the Mediation

There are four circumstances in which the obligation of confidentiality established in relation to a mediation may be overridden.

The first circumstance is the obvious one where the parties themselves agree to give publicity to the mediation and to depart from any contrary contractual understanding that they may have reached concerning confidentiality (30).

The second circumstance arises if it becomes necessary to enforce a settlement agreement. In such circumstances, the enforcement proceedings would place at least the fact of the mediation and the content of the settlement agreement on the public record. Article 14 of the UNCITRAL Conciliation Rules contains an explicit derogation from confidentiality to this effect (31). Other institutional rules do not contain such an express derogation, but it would seem clear that it could not be argued that confidentiality was breached by seeking enforcement of a settlement agreement. The purpose of confidentiality is, as mentioned above, to facilitate disclosure in a non-binding procedure that is directed at giving the parties an opportunity to investigate the possibility of reaching their own settlement of the dispute. Having reached such a settlement, it could in no way advance the function to be served by confidentiality by raising confidentiality as a reason for preventing effect being given to the settlement.

The first two exceptions outlined above represent interpretations of the legal obligations of confidentiality that are inherent in the contractual nature of those obligations. The two remaining exceptions, however, are of a conceptually different nature. They arise as a result of the collision of the contractual obligations of confidentiality with aspects of the mandatory law of the jurisdiction in which it is sought to enforce confidentiality.

The first of those other exceptions (the third area of exception to confidentiality) concerns the somewhat ill-defined notion of public policy. In England, for example, a general exception to the enforcement of confidences in law has developed on the basis of the dictum that "there is no confidence as to the disclosure of iniquity." (32) In many other countries, it is likely that a somewhat similar exception exists on the basis of the widely accepted principle that contracts against public policy or l’ordre public will not be enforced. The difficulty is not so much the existence of the exception, but the definition of its operation, public policy being a notoriously nebulous notion. In intellectual property disputes, a possible area in which the exception might assume importance is anti-competitive practices. If a settlement agreement constituted a collusive practice proscribed by antitrust laws, it would be difficult to rely on confidentiality to suppress the disclosure of information concerning the settlement. An aspect of the role of counsel for the parties and of the mediator, however, should be to advise the parties of any potentially illicit feature of their proposed settlement.

The scope of an exception based on public policy should not be exaggerated. In the ordinary case, there should not be any reason to fear that the cover of confidentiality risks being lifted because the disclosure of information is required or excused for reasons of public policy.

The final area of exception is perhaps the most difficult--the disclosure of information concerning the mediation in subsequent litigation. Most institutional rules (33) contain a provision similar to Article 17 of the WIPO Mediation Rules, which is in the following terms:

"Unless otherwise agreed by the parties, the mediator and the parties shall not introduce as evidence or in any manner whatsoever in any judicial or arbitration proceeding:

  1. any views expressed or suggestions made by a party with respect to a possible settlement of the dispute;
  2. any admissions made by a party in the course of the mediation;
  3. any proposals made or views expressed by the mediator;
  4. the fact that a party had or had not indicated willingness to accept any proposal for settlement made by the mediator or by the other party."

A provision of this nature is essential to assure the parties that they can, in fact, investigate all possible settlement options without prejudicing their rights in a subsequent arbitration or litigation should they fail to reach agreement on one of those options. It goes to the heart of the function of confidentiality in a mediation.

If litigation does ensue, however, then there is potential for conflict between the rule contained in Article 17 and its analogues and the principle that all pertinent evidence should be produced in the litigation. How are these two principles reconciled? This question can only be answered on the basis of general principles in the present paper, since the answer in any particular case will depend upon the law of evidence in the jurisdiction in which the litigation is brought, and considerable divergences in approach exist in this area, particularly between adversary systems and civil-law systems. In addition, in some jurisdictions, such as a number of States in the United States of America, the situation is specifically regulated by statute.

The approach that is emerging to the potential conflict of the two principles is based on the use of two analogies. According to the first, the position of the mediator is assimilated to that of a legal advisor. On this basis, the mediator would be accorded, in common-law systems, a privilege against disclosure of information communicated to him or her in the mediation in a similar manner to the legal professional privilege (or attorney-client privilege) enjoyed by a legal advisor, while, in civil-law systems, the mediator would be bound by an obligation of professional secrecy from which he or she could not derogate even in subsequent litigation.

A moot issue is the determination of the holder of the privilege--whether it should be the joint privilege of the parties or an independent privilege of the mediator. The former approach has some support in England (34), so that the privilege could be waived by the parties, whereas the latter approach has been favored within the context of labor mediation in the United States of America (35). The approach of vesting the right to waive the privilege in the parties seems to be more consistent with the notion of mediation as a process entirely controlled by the parties and as one in which the mediator performs a facilitative role at the behest of the parties. It is also more consistent with the analogy with attorney-client or legal professional privilege. Outside the area of commercial disputes, in family or labor mediation, for example, the protection of interests beyond those of the parties themselves may provide a basis for according an independent privilege to the mediator in those other areas.

The first analogy covers only the position of the mediator and does not deal with the position of the parties. In so far as the parties are concerned, a second analogy can be used in order to equate the discussions and communications occurring within a mediation to pre-trial settlement negotiations conducted on a "without prejudice" (sous les réserves d’usage) basis, thereby conferring immunity on the discussions and communications from production in subsequent litigation (36).

The significance of the analogies is that the immunity from disclosure in litigation accorded both to privileged communications with a legal advisor and to pre-trial settlement negotiations is considered a derogation from full disclosure in litigation which is necessary in order for the administration of justice to function effectively. In so far as legal professional privilege is concerned, full disclosure between a client and its legal advisor is a pre-condition to full disclosure in litigation, and it is unlikely that clients would be as forthcoming in disclosing all the relevant evidence concerning their case to their professional advisor without the protection of legal professional privilege. In so far as pre-settlement negotiations are concerned, the disposal of civil litigation to the satisfaction of the parties concerned obviously promotes the administration of justice and avoids economically wasteful litigation. Again, without a form of protection from subsequent disclosure in litigation for discussions occurring in pre-trial settlement negotiations, it is unlikely that such negotiations could take place in the atmosphere of frankness and candour that is required to enable the parties concerned to take informed decisions on their rights and interests.

The protection of communications within a mediation from disclosure in litigation, as sought by Article 17 of the WIPO Mediation Rules and its equivalent in other rules, can thus be viewed, in the ordinary case, as advancing the same fundamental public interest as the rule normally requiring full disclosure of evidence in litigation, namely, the efficient functioning of the system of administration of justice. In the usual case, therefore, it may be expected that there will be no conflict of the interests that the two principles are designed to promote.

There may yet be, however, in an exceptional case, a further aspect of the public interest that may require a reconsideration of this convergence of underlying interests of mediation confidentiality and the full disclosure of evidence. In the area of intellectual property, one such other possible aspect of the public interest is the fact that many intellectual property titles (patents, trademarks, industrial designs, plant variety rights and rights in the layout-designs or topographies of integrated circuits) are registered on a public register, so that their scope is known to all members of the public who might potentially be affected by them. It might be argued that a position adopted by the owner of an intellectual property title in a mediation with respect to the validity or scope of the title ought to be known in any subsequent litigation concerning the title between the same or other parties, that is, that the intellectual property owner should be estopped from asserting a different position from the one that it has adopted in a mediation.

Such an argument was advanced before the United States Court of Appeals for the Federal Circuit in Hayworth Inc. v Steelcase Inc. (37) The case involved, in its origin, two actions for patent infringement. The first action was brought in 1985 by Hayworth against Steelcase for the infringement of certain of Hayworth’s patents. In 1989, Steelcase sued Hayworth for the infringement of certain of Steelcase’s patents. A decision on liability was given in the first action, it being held that Hayworth’s patents were valid, enforceable and infringed. The remaining issue of quantum, together with the outstanding issues in the second action, were then consolidated and the parties agreed to refer all such issues to a Special Master for resolution by settlement or mini-trial. It was agreed, as part of this reference, that the ADR proceeding would be secret and, specifically, that all transcripts, documents, testimony and other information produced in or in connection with the ADR proceeding would be kept confidential.

In 1992, Hayworth sued a third party, HMI, for infringement of the same patents that it had asserted against Steelcase. HMI subpoenaed Steelcase in that third action to produce all documents relating to the litigation between Hayworth and Steelcase, including the ADR proceedings. When Steelcase objected to the subpoena, HMI moved to intervene in the litigation between Hayworth and Steelcase to obtain the documents. Those documents, and any determination of the Special Master, it was argued, could be expected to show reasonable royalty evaluations, Hayworth’s policy with respect to licensing, the value of the invention to Hayworth in procuring sales of non-patented items, the profitability and commercial success of the patented product, advantages of the patented product over older products and customary or acceptable profits in the industry for analogous inventions.

The Court of Appeals for the Federal Circuit upheld the decision of the lower courts to deny HMI’s motion to intervene. In so doing, it disposed of two main arguments that had been advanced by HMI in favour of the intervention and of lifting the cloak of confidentiality.

The first such argument was that intervention was warranted on the basis of the efficiency of not duplicating discovery in the HMI infringement action. In particular, it was argued that the court below had given undue weight to the confidentiality agreement and had ignored the countervailing public policy interest of maintaining open access to court records. The Court of Appeals for the Federal Circuit held that there had been no neglect of the public policy interest of maintaining such open access, but that the court below had properly held that that interest should not override the ADR confidentiality agreement, "which also fosters strong public policies in favour of judicial economy and private resolution of disputes." (38) On the contrary, the intervention would jeopardize the settlement of two lawsuits which could resolve infringement disputes involving six patents.

The second argument advanced by HMI was that the public policy of judicial economy was best served by according issue-preclusive effect to the Special Master’s determinations. In rejecting this argument, the court stated that "the ethic of ADR is often different than that of litigation. There is an emphasis on compromise, of each side softening their positions in order to meet in the middle. Each concession must be understood in the context of those of the other parties. The series of positions each party takes and the decisions of the Special Master must be looked at as an integrated whole. Therefore, the rationale which drives issue-by-issue collateral estoppel is not wholly applicable in this situation." (39)

In other words, the nature of a mediation is such that the probative value of concessions made is wholly dissimilar to a concession in the course of litigation or testimony, and should not be able to be relied on for estoppel purposes. The very nature of a mediation as a settlement negotiated by reference to interests that extend beyond the strict legal rights of the parties, commends the result that collateral estoppel should not be able to be invoked to lift the cloak of confidentiality with respect to communications within a mediation or to the outcome of the mediation.

 

PRACTICAL MEASURES TO ENSURE CONFIDENTIALITY

As mentioned above, the rules governing a mediation often provide for certain practical measures to secure confidentiality. The purpose of these measures is to reinforce the legal obligations of confidentiality and to minimize the adverse effects on confidentiality of any court order requiring disclosure. Three such measures can be mentioned briefly.

The first is the requirement, to be found in Article 14 of the WIPO Mediation Rules (40), that no recording of any kind may be made of any meetings of the parties with the mediator. The implementation of this measure ensures that there is no transcript available for subsequent discovery.

The second measure, as exemplified by Article 16 of the WIPO Mediation Rules (41), directs each party involved in a mediation to return, on the termination of the mediation, any brief, document or other materials supplied by a party, without retaining any copy thereof.

A further measure, again to be found in Article 16 of the WIPO Mediation Rules, directs that any notes taken by a person concerning the meetings of the parties with the mediator shall be destroyed on the termination of the mediation (42). Again, the purpose of the measure is to minimize the documentation available for subsequent intrusions into the confidentiality of the mediation.


Notes

1. See, for example, American Arbitration Association, American Bar Association & Society of Professionals in Dispute Resolution, Model Standards of Conduct for Mediators (1995):
"V. Confidentiality: A Mediator shall maintain the reasonable expectations of the parties with regard to confidentiality."

2. This would, for example, be likely to be the conclusion reached by courts in England in the absence of express contractual stipulations: see Francis Gurry, Breach of Confidence 143-158, OUP, Clarendon, Oxford (1984).

3. Stephen B. Goldberg, Frank E.A. Sander & Nancy H. Rogers, Dispute Resolution: Negotiation, Mediation and Other Processes (Little, Brown and Company, 2nd ed., 1992) 179.

4. See, for example, Article 45, WIPO Arbitration Rules, and the rules requiring communications by one party to the tribunal to be sent to the other party in Article 4.3, LCIA Rules, and Article 15(3), UNCITRAL Arbitration Rules.

5. "Article 11
The mediator shall be free to meet and to communicate separately with a party on the clear understanding that information given at such meetings and in such communications shall not be disclosed to the other party without the express authorization of the party giving the information."

See, also, Article 12(c), which is directed at the submission by one party to the mediator of specific written materials which that party considers to be confidential.

6. Article 10.

7. Rule C-4(a).

8. Article 16.

9. Article 9(1). The ICC Rules of Optional Conciliation are silent on the question.

10. Rule C-7.

11. Article 10.

12. Article 17.

13. Rules C-10 and C-11.

14. Article 10.

15. Article 19.

16. 880 F.Supp. 1487 (D. Utah 1995), reported also in (1995) 6 World Arbitration and Mediation Report 107-108. See, also, Jennifer Donghee Cho v. The Superior Court of Los Angeles County 95 C.D.O.S. 8237 (Oct. 19, 1995), noted in (1996) 14 Alternatives 43-44, in which the California Court of Appeal held that a law firm could not act as trial counsel representing a party where a former judge, now of counsel to the firm, had presided over a settlement conference as a judge earlier in the litigation.

17. (1995) 6 World Arbitration and Mediation Report 107, at 108.

18. Ibid

19. See Articles 46 to 51.

20. "The Arbitration Commission and the arbitration tribunal may conciliate cases under their cognizance." (Article 37).

21. "(1) The parties do not lose their respective rights to settle the dispute amicably even after the application for arbitration has been filed.
(2) The Board may, at any stage of the arbitration proceedings, mediate between the parties for the whole or a part of the dispute." (Section 21).

22. Article 6 of the Chinese Code of Civil Procedure provides:
"In trying cases, the People’s courts should stress mediation; when mediation efforts are not effective, the court should issue its decision in a timely manner."
The translation comes from Kenji Tashiro, "Conciliation and Mediation during the Arbitral Process" (1995) 30 Bulletin of the Japan Shipping Exchange, Inc. 17-32, 22.

23. Article 136 of the Japanese Code of Civil Procedure provides:

"[1] The court may, whatever stage the suit may be in, attempt to carry out compromise or have a commissioned judge or an entrusted judge try the same.
(2) The court, a commissioned judge or an entrusted judge may for compromise order the principal party or his legal representative to appear before court."
The translation comes from Kenji Tashiro, loc. cit.

24. "Article 15
Each person involved in the mediation, including, in particular, the mediator, the parties and their representatives and advisors, any independent experts and any other persons present during the meetings of the parties with the mediator, shall respect the confidentiality of the mediation and may not, unless otherwise agreed by the parties and the mediator, use or disclose to any outside party any information concerning, or obtained in the course of, the mediation. Each such person shall sign an appropriate confidentiality undertaking prior to taking part in the mediation."

25. See Article 12, which speaks of "the confidentiality of the mediation."

26. See Rule C-8, which states that "[t]he entire process is confidential."

27. See Article 6, which states that the "confidential nature of the conciliation process shall be respected..."

28. See Article 14, which speaks of "all matters relating to the conciliation proceedings."

29. See Article 12 of the AAA Commercial Mediation Rules, which is directed at the mediator and the parties only; Rules C-8 of the CPR Model Procedure, which refers to the parties and the mediator only; and Article 14 of the UNCITRAL Conciliation Rules, which confines the obligation to the conciliator and the parties.

30. Thus, Articles 15, 16 and 17 of the WIPO Mediation Rules are expressed as applying "unless otherwise agreed by the parties."

31. "Confidentiality extends also to the settlement agreement, except where its disclosure is necessary for purposes of implementation and enforcement."

32. Gartside v Outram (1857) 26 LJ Ch. (NS) 113,114 per Wood V.-C. See, generally, Gurry op.cit., Ch, XV.

33. See AAA Commercial Mediation Rules, Article 12; BCC Rules of Conciliation, Article 19; CPR Model Procedure Rule C-10; ICC Rules of Optional Conciliation, Article 11; and the UNCITRAL Conciliation Rules, Article 20.

34. See Law Reform Committee (England), Sixteenth Report (Privilege in Civl Proceedings), Cmnd. 3472 para. 15 (1967) and, generally, Henry Brown and Arthur Marriott, ADR Principles and Practice (London, Sweet & Maxwell, 1993) 354-371, and Note, "Protecting Confidentiality in Mediation" (1984) 98 Harvard Law Review 441, 454-457.

35. See NLRB v. Joseph Macaluso, Inc. 618 F.3d 51 (9th Cir. 1980).

36. This was the approach adopted in a non-commercial context by the Court of Appeal in England in Mole v. Mole [1950] 2 All ER 328; see Brown and Marriott, op.cit. 362-366.

37. 12 F.3d 1090 (1993).

38. Ibid. at 1093.

39. Ibid. at 1094.

40. See, to similar effect, Article 13 of the AAA Commercial Mediation Rules and Rule C-4 of the CPR Model Procedure. There is no counterpart in the BCC Rules of Conciliation, ICC Rules for Optional Conciliation, or the UNCITRAL Conciliation Rules.

41. There is no counterpart for this provision in any of the other rules considered in this paper.

42. Ibid.

 

Discussion

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