Why this decision matters

In the recent decision of SOS Marine Inc. v. M/V Gentle Seas (Ship), 2024 FC 1042, the Federal Court of Canada considered whether information disclosed in arbitration proceedings should be kept confidential in a court proceeding between the same or third parties (the “Action”).

Overview

The dispute arose between the Plaintiff, SOS Marine Inc. (“SOS Marine”), a Quebec-based maritime service company, and the Defendants, the ship M/V Gentle Seas (“Gentle Seas”) and its owners, acting through their agent Laden Maritime Inc. (“Laden”). This dispute stemmed from an agreement between SOS Marine and Stem Shipping Co. S.A. (through Laden) for the cleaning of the Gentle Seas’ cargo holds.

After experiencing delays due to reported issues with the ship’s crane, SOS Marine submitted a revised quote for additional work necessary to unload the remaining cargo and clean the holds. The Defendants declined to cover any costs beyond the original quote. The Plaintiff then arrested the vessel.

In response, the Defendants filed a motion to appeal a ruling by a Case Management Judge. This ruling mandated that the Defendants respond to questions and undertakings they had improperly objected to during their examination for discovery, and the production of the arbitration’s pleadings. The inquiries pertained to an unrelated arbitration involving the Defendants and the Gentle Seas’ charterer, who is not a party to the Action.

The Case Management Judge ordered that the requested information was relevant to the issues at hand and stated that any confidentiality concerns could be raised and handled in accordance with the applicable Federal Court Rules.

Key Issue and Considerations

The Court addressed a number of issues; however, for the purposes of this blog post, the focus is on the second issue: whether information disclosed in the arbitration proceeding was confidential and not capable of production in the court proceeding.

The Court’s Analysis and Decision

The only submission made by the Defendants was that arbitrations are private by nature and that disclosing information from the arbitration would encroach on the implied undertaking rule. The Defendants did not include in their materials any evidence attesting to the confidentiality of the arbitration proceedings. In response, the Plaintiff argued that the information sought was relevant and producible.

Ultimately, the Court concluded that the appeal should be dismissed. The Defendants did not cite any authority or reasoning to suggest that litigation privilege stemming from the deemed undertaking rule extends to private arbitration proceedings or the actual pleadings of those proceedings. Additionally, this argument was never made before the Case Management Judge; therefore, there could be no palpable or overriding error in the Order.

Furthermore, confidentiality is not the same as privilege, and if documents are relevant to subsequent litigation between the same or third parties, they should be disclosed in the interest of justice in court proceedings.

As a result, it was determined that the Case Management Judge did not commit a reviewable error in finding that the arbitration proceedings between the Defendant owners of the Gentle Seas and the charterers were relevant.

Final Thoughts

This decision underscores the significance of a carefully crafted arbitration agreement or the use of thoughtfully designed institutional rules that include confidentiality provisions. Although these arrangements remain subject to judicial override, parties who wish to maintain confidentiality must proactively implement measures—whether through institutional rules or their arbitration agreement—to ensure it is preserved.