When Can Arbitration Statements Be Withheld? The Confidentiality Rule Explained

The confidentiality of arbitration proceedings is a cornerstone of alternative dispute resolution (ADR) in the Philippines. It encourages parties to speak openly and settle disputes without fear that their statements will be used against them elsewhere. But what happens when a party uses arbitration testimony to file a criminal complaint? The Supreme Court addressed this tension in Federal Express Corporation v. Airfreight 2100, Inc. (G.R. No. 216600, November 21, 2016), ruling that witness statements and testimony given during arbitration are confidential and cannot be used as evidence in other proceedings.

The Dispute Behind the Case

Federal Express Corporation (FedEx) and Airfreight 2100, Inc. (Air21) were engaged in a commercial dispute involving money remittance, taxes, and other charges. They agreed to settle their differences through arbitration before the Philippine Dispute Resolution Center. During the proceedings, FedEx's Managing Director, Rhicke Jennings, testified that two companies that had opposed FedEx's license application were allegedly proxies of Air21.

Air21's Chairman, Alberto Lina, felt these statements were defamatory. He filed a complaint for grave slander against Jennings before the city prosecutor, quoting portions of the arbitration testimony and witness statements. In response, FedEx and Jennings asked the Regional Trial Court for a confidentiality/protective order to prevent the disclosure of these arbitration documents. The trial court denied the petition, and the Court of Appeals affirmed, ruling that statements not related to the subject of the arbitration were not confidential.

The Issue Before the Supreme Court

The central question was whether Jennings' testimony during arbitration fell within the definition of "confidential information" under Republic Act No. 9285, the Alternative Dispute Resolution Act of 2004. If it did, the confidentiality rule would protect it from being used in the slander case.

The Ruling: Confidentiality Is the General Rule

The Supreme Court reversed the lower courts and granted the protective order. The Court held that the witness statements and oral testimony clearly fell under Section 3(h) of the ADR Act, which defines confidential information to include communications made in dispute resolution proceedings and witness statements filed in arbitration.

The Court rejected the argument that the statements were not "relative to the subject of arbitration." It explained that "relative" simply means "connected to," and parties in arbitration are encouraged to discuss openly the circumstances surrounding their conflict. The statements surfaced when FedEx's suspended license was discussed, and Jennings explained how the opposition to the license showed Air21's leverage over FedEx. Whether the arbitral tribunal gave weight to these statements was a separate matter for the arbitrators to decide.

The Court also emphasized that both parties had agreed to the Terms of Reference, which required the arbitration proceedings to be kept strictly confidential. The ADR Act and the arbitration rules repeatedly use the word "shall," which is mandatory. Thus, the general rule is that information disclosed in an ADR proceeding is privileged and confidential.

Why the Confidentiality Rule Matters

The Court stressed that the very purpose of arbitration would be defeated if it became a tool for evidence gathering. If a party could use arbitration testimony in another forum, participants would hesitate to speak freely, undermining the informal and amicable nature of ADR. The Court noted that if Lina believed Jennings committed slander, he should present evidence independent of the arbitration documents.

Practical Takeaways

• Arbitration testimony is generally confidential. Witness statements and oral testimony made during arbitration are protected under Section 3(h) of the ADR Act and cannot be used in other proceedings without the source's consent.
• Confidentiality is not absolute. The ADR Act allows disclosure with the parties' consent or for limited purposes, such as showing relevant documents to a court when resort to court is allowed.
• "Relative to the subject" is interpreted broadly. Statements need only be connected to the dispute, not strictly limited to the core legal issues, to be considered confidential.
• Parties should honor their confidentiality agreements. If parties agree to keep arbitration proceedings confidential, violating that commitment can justify a protective order.
• Criminal complaints cannot rely on arbitration evidence. A party who believes a crime was committed during arbitration must present evidence independent of the arbitration records.

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.