Through a glass darkly: The transparency paradox in arbitration

India has positioned itself as a growing hub for arbitration under the Arbitration and Conciliation Act, 1996 (amended in 2015 and 2019). However, a fundamental challenge persists - the secrecy vs. accountability paradox. While confidentiality ensures efficiency, it often shields bribery-tainted contracts and corrupt settlements from public scrutiny.

The UNCITRAL Rules on Transparency (2014) and the United Nations Convention Against Corruption (UNCAC, 2003) promote greater disclosure, particularly in investor-state disputes and public-interest cases. Yet, Section 42A of India’s Arbitration Act enforces strict confidentiality, even in cases where corruption is suspected. This clashes with global anti-bribery standards, including the OECD Anti-Bribery Convention, the UK Bribery Act (2010), and the US Foreign Corrupt Practices Act (FCPA, 1977), weakening enforcement and investor confidence.

Moreover, India's Digital Personal Data Protection Act, 2023 (DPDA) has introduced stringent privacy regulations, which, while strengthening data protection, could further complicate transparency in arbitration. The intersection between arbitration confidentiality, corruption allegations and data privacy laws raises concerns about whether information crucial to public interest should be disclosed or remain protected under privacy provisions.

1. Opaque enforcement mechanisms

   • Section 34 of the Arbitration Act allows courts to set aside arbitral awards on public policy grounds, but its inconsistent application to corruption claims creates legal uncertainty.

   • This ambiguity enables bribery-tainted agreements to remain unchallenged.

2. Lack of arbitrator accountability

   • Unlike the IBA Guidelines on Conflicts of Interest in International Arbitration, India lacks a framework requiring arbitrators to report or reject disputes involving bribery.

   • Without clear reporting obligations, corrupt contracts risk being enforced through arbitration.

3. Transparency vs. privacy in arbitral proceedings

   • The DPDA, 2023, along with global privacy frameworks like the European Union’s General Data Protection Regulation (GDPR), raises critical questions on data confidentiality in arbitration.

   • While these laws aim to protect sensitive personal and corporate data, they may also limit access to crucial case information in disputes involving corruption.

   • Striking a balance between data protection and legal transparency is crucial to prevent arbitration from becoming a safe haven for financial misconduct.

International courts have increasingly refused to uphold arbitration awards linked to corruption.

• World Duty Free v. Kenya (ICSID, 2006) – The tribunal ruled that a bribery-tainted contract was unenforceable, reinforcing that corruption cannot be legitimized through arbitration.

• Metal-Tech Ltd. v. Uzbekistan (ICSID, 2013) – The tribunal dismissed the investor’s claim due to evidence of corrupt payments, emphasising that arbitration cannot be used to enforce contracts tainted by bribery, thereby reinforcing transparency in investor-state disputes.

To align with international best practices, India must:

1. Amend Section 42A to permit redacted disclosure of arbitral rulings in corruption-related cases.

2. Introduce mandatory arbitrator disclosures under the Arbitration Council of India (ACI).

3. Strengthen public policy exceptions in enforcement, ensuring compliance with UNCITRAL, ICSID and OECD anti-corruption frameworks.

4. Clarify DPDA provisions on arbitration-related disclosures, ensuring they do not unintentionally obstruct transparency in corruption-linked disputes.

India’s arbitration framework must evolve to combat corruption while preserving efficiency. While confidentiality is crucial for protecting commercial interests, it must not become a shield for unethical agreements.

Furthermore, data protection laws must be carefully aligned with arbitration policies to prevent them from hindering transparency in corruption cases. By integrating targeted transparency measures, India can reinforce investor trust, judicial oversight and its credibility as a global arbitration hub.

The challenge is not whether to embrace transparency, but how to implement it while balancing privacy concerns and arbitration efficiency.

Nidhi Malhotra is a Legal Manager in Governance, Risk, and Compliance services at Cyterico.