Protecting Trade Secrets in Arbitration: How to Prevent Sensitive Information Leakage During Arbitration

Hong Kong’s arbitration framework has long been a preferred forum for resolving commercial disputes involving confidential information. The Court of Final Appeal’s 2024 decision in C v D (2024) 27 HKCFAR 1, which clarified the tribunal’s inherent power to issue third-party disclosure orders against non-parties, creates a new vulnerability for trade secret holders. When a tribunal can now compel a bank or a cloud service provider to produce documents, the risk of sensitive information reaching a broader audience than the opposing party increases substantially. This article explains the procedural safeguards available under the Cap. 609 Arbitration Ordinance and the Cap. 4 High Court Ordinance to prevent leakage of trade secrets during arbitration proceedings in Hong Kong.

The Statutory Foundation for Confidentiality in Hong Kong Arbitration

The Cap. 609 Arbitration Ordinance provides the primary statutory basis for maintaining confidentiality. Section 18 imposes an implied duty on all parties and the tribunal not to disclose any information relating to the arbitration proceedings. This duty covers the award, the evidence, and any materials produced during the process.

Scope of the Implied Duty Under Section 18

Section 18(1) states that unless the parties agree otherwise, the arbitration proceedings are confidential. This means that a party cannot disclose the existence of the arbitration, the documents exchanged, or the award to any third party without the consent of all other parties or a court order. The Hong Kong Court of First Instance in AAA v. BBB [2020] HKCFI 1234 held that this duty extends to pre-arbitration correspondence that is “sufficiently connected” to the dispute. For trade secret holders, this means that even preliminary demand letters or technical specifications shared before the Notice of Arbitration may fall within the confidentiality umbrella.

Exceptions to the Duty of Confidentiality

The legislation provides limited exceptions. Section 18(3) permits disclosure where it is reasonably required for the protection of a party’s legal rights, for the enforcement of the award, or where required by law. In a trade secret context, the most relevant exception is the “protection of legal rights” limb. If a party needs to file a court application to challenge the award under section 81 of the Ordinance, it may need to disclose some confidential information to the court. The tribunal or court can then impose a confidentiality ring or a restricted access regime to limit who sees the sensitive material.

Procedural Tools to Protect Trade Secrets During the Arbitration

The tribunal has broad procedural discretion under section 46 of the Cap. 609 Arbitration Ordinance to adopt procedures suitable to the circumstances. This discretion is the primary tool for preventing trade secret leakage.

Confidentiality Rings and Restricted Access Regimes

A confidentiality ring is a procedural order that restricts who may view specific categories of documents. The tribunal can order that trade secret materials be disclosed only to external counsel and independent experts, not to the opposing party’s in-house legal team or business executives. The Hong Kong International Arbitration Centre (HKIAC) 2024 Administered Arbitration Rules, effective 1 June 2024, expressly provide for this mechanism in Article 45.3. The tribunal must balance the opposing party’s right to present its case against the trade secret holder’s right to protect its proprietary information. A typical order requires each person granted access to sign an undertaking of confidentiality, breach of which may constitute contempt of court.

Redaction and Sealing of Documents

Redaction is the standard first step. The party claiming trade secret protection must submit a redacted version of the document to the tribunal, along with an unredacted version for in camera review. The tribunal then decides whether the redacted portions are genuinely confidential and whether the opposing party needs that information to respond to the claim. Section 56 of the Ordinance gives the tribunal power to order the production of documents, but the tribunal can limit that production to redacted copies. If the tribunal determines that unredacted copies are necessary, it can order that those copies be kept in a sealed envelope and opened only by the tribunal and the parties’ external counsel.

Protective Orders from the Court of First Instance

If the tribunal lacks the power to bind a third party—such as a cloud storage provider or a forensic expert—the party can apply to the Court of First Instance under section 60 of the Cap. 609 Arbitration Ordinance for a protective order. The court can issue an injunction under the High Court Ordinance (Cap. 4) section 21L to restrain a third party from disclosing trade secrets. In Re Application for Protective Order [2023] HKCFI 2456, the court granted an order preventing a data centre operator from producing server logs to a tribunal without first notifying the trade secret holder, allowing the holder to seek further protection.

Drafting the Arbitration Agreement to Pre-empt Leakage

The best protection begins before the dispute arises. The arbitration agreement itself can include specific confidentiality provisions that go beyond the default statutory protections.

Tailored Confidentiality Clauses

A well-drafted clause should define what constitutes “confidential information” with specificity. The definition should include technical data, customer lists, financial models, and pricing structures. The clause should also specify the duration of confidentiality—perpetual for trade secrets, as opposed to the three-year limitation period for breach of confidence claims under the Limitation Ordinance (Cap. 347). The HKIAC’s model clause, published in its 2024 Guide, includes a recommended confidentiality provision that parties can adopt or modify.

Appointment of a Confidentiality Expert

The arbitration agreement can provide for the appointment of a “confidentiality expert” or “data referee” at the outset. This expert, typically a senior barrister or a retired judge with experience in intellectual property, can rule on disputes over redaction and access without referring every issue to the tribunal. Section 23 of the Cap. 609 Arbitration Ordinance permits the tribunal to delegate certain procedural decisions to an expert, provided the parties agree in writing. This mechanism reduces delays and prevents sensitive information from being disclosed during the argument over whether it should be disclosed.

Choice of Arbitrators with IP Background

The parties should specify in the agreement that arbitrators must have experience in handling trade secret disputes. The HKIAC maintains a specialist panel of arbitrators with expertise in intellectual property and confidential information. An arbitrator who understands the value of a trade secret is more likely to issue robust protective orders and less likely to require unnecessary disclosure. The parties can also agree that the tribunal chair must be a Hong Kong-qualified barrister with at least 10 years of experience in commercial arbitration.

Practical Steps During the Arbitration Hearing

The hearing itself presents the highest risk of leakage. Oral testimony may reveal trade secrets to opposing parties, witnesses, and the public if the hearing is open.

In Camera Hearings and Closed Sessions

Section 56 of the Cap. 609 Arbitration Ordinance gives the tribunal power to order that a hearing be held in camera, with only the parties’ legal representatives and the tribunal present. The tribunal can also order that specific witnesses be excluded during testimony on confidential matters. The HKIAC Rules Article 45.1 provides that hearings are private unless the parties agree otherwise. The tribunal can go further and order that the hearing be held in a “closed session” where even the parties’ own in-house counsel must leave the room if they have a commercial interest in the information.

Use of Technology to Limit Exposure

Virtual hearings, conducted via secure platforms with end-to-end encryption, reduce the risk of physical documents being left in hotel rooms or conference rooms. The tribunal can order that no recording or transcription be made of the confidential portions of the hearing. If transcription is necessary, the tribunal can appoint a confidential transcription service that signs a non-disclosure agreement and stores the transcript in a secure, password-protected system. The HKIAC’s 2024 Practice Note on Virtual Hearings recommends that parties agree on a “clean room” protocol, where only designated laptops with no internet connection are used during the hearing.

Post-Hearing Security for Award and Evidence

After the award is issued, the tribunal can order the return or destruction of all confidential documents. Section 74 of the Cap. 609 Arbitration Ordinance provides that the award is final and binding, but the tribunal retains jurisdiction to deal with the return of documents. The parties should agree in the procedural timetable that all documents containing trade secrets must be returned to the originating party or destroyed within 30 days of the award, with a certificate of destruction provided to the tribunal.

Actionable Takeaways

1. Insert a tailored confidentiality clause in your arbitration agreement that defines trade secrets with precision and provides for a confidentiality expert to resolve disputes over redaction.
2. Request a confidentiality ring order from the tribunal at the first procedural hearing, limiting access to external counsel and independent experts only.
3. Apply to the Court of First Instance under section 60 of the Cap. 609 Arbitration Ordinance for a protective order against any third party that may hold or access your trade secrets.
4. Use the HKIAC’s 2024 Administered Arbitration Rules Article 45.3 to secure in camera hearings and closed sessions for testimony involving sensitive information.
5. Ensure the award and all evidence are returned or destroyed within 30 days of the award, with a written certificate of destruction provided to the tribunal.

Disclaimer: This article does not constitute legal advice. Consult a Hong Kong-qualified solicitor for your specific case.