Confidentiality in Arbitration: Supreme Court Shields Arbitration Statements From Slander Claims

The Supreme Court has ruled that statements made during arbitration proceedings are confidential and cannot be used as evidence in a separate criminal case for slander. In Federal Express Corporation v. Airfreight 2100, Inc. (G.R. No. 216600, November 21, 2016), the Court protected a witness's arbitration testimony from being used against him in a defamation complaint, reinforcing the confidentiality guarantees at the heart of alternative dispute resolution.

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 financial issues arising from a service agreement. To settle their differences, both companies agreed to submit the matter to arbitration before the Philippine Dispute Resolution Center.

During the arbitration, a FedEx witness, Rhicke S. Jennings, testified about the relationship between Air21 and two freight forwarding companies that had previously opposed FedEx's license application. Jennings suggested these companies were connected to Air21 or its chairman, Alberto Lina.

Lina felt aggrieved by these statements and filed a complaint for grave slander against Jennings before the city prosecutor's office. Lina used portions of the arbitration transcripts and witness statements to support his complaint. In response, FedEx and Jennings sought a confidentiality or protective order from the Regional Trial Court to prevent the use of these arbitration materials.

The Issue Before the Court

The central question was whether Jennings's testimony during the arbitration proceedings fell within the definition of "confidential information" under the Alternative Dispute Resolution Act of 2004 (R.A. No. 9285) and could therefore be protected from disclosure.

The RTC and the Court of Appeals both denied the petition, reasoning that the statements were not related to the subject of arbitration—which involved monetary claims—and that confidentiality rules should not shield criminal conduct.

The Supreme Court's Ruling

The Supreme Court reversed the lower courts and granted the confidentiality order. The Court held that Jennings's written witness statement and his oral testimony during the April 25, 2013 arbitration hearing clearly fell under Section 3(h) of the ADR Act, which defines confidential information to include:

• Communications, oral or written, made in a dispute resolution proceeding
• Witness statements and reports filed or submitted in an arbitration

The Court emphasized that the phrase "relative to the subject of mediation or arbitration" should not be strictly confined to the core issues of the dispute. The term "relative" simply means "connected to," and arbitration proceedings are designed to encourage parties to openly discuss their grievances and explore circumstances that might relate to the source of the conflict.

The Importance of Good Faith in Arbitration

The Court stressed that arbitration is a non-litigious process where parties rely on confidentiality to speak candidly. If statements made during arbitration could be used in other forums, the very purpose of alternative dispute resolution would be defeated.

The Court noted that both parties had agreed to the Terms of Reference, which required the arbitration proceedings to be kept strictly confidential under Section 23 of the ADR Act. Section 23 provides that arbitration proceedings, records, evidence, and the arbitral award shall be considered confidential and shall not be published except with the consent of the parties or for limited court disclosure purposes.

Significantly, the Court stated that if Lina believed Jennings committed slanderous remarks, he should have presented evidence independent of the arbitration documents. Using arbitration materials as an "entrapment mechanism" to gather evidence for other cases would render arbitration proceedings useless.

Practical Takeaways

• Confidentiality is broad: Information disclosed during arbitration is presumed confidential, even if it touches on matters beyond the strict legal issues in dispute.
• Protective orders are available: Parties who believe confidential arbitration information has been improperly disclosed may seek a protective order under Rule 10.5 of the Special ADR Rules.
• Criminal complaints require independent evidence: A party who suspects criminal conduct during arbitration must rely on evidence gathered outside the arbitration process.
• Arbitration is not evidence-gathering: The proceedings should not be used as a tool to collect information for use in other cases.
• Review the arbitration agreement: Parties should ensure their arbitration agreement and terms of reference clearly address confidentiality obligations.

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