The Inherent Confidentiality Duty in the Role of the Mediator
According to both the European Code of Conduct for Mediators and the Spanish Mediation in Civil and Commercial Matters Act (LM), a mediator must respect the confidentiality of information and documents obtained during a mediation proceeding. The European Code of Conduct extends this confidentiality duty to the very existence of the mediation (point 4). This confidentiality is of such importance that the LM expressly establishes how violation of this confidentiality duty is the mediator’s responsibility.
Additionally, the LM sets an inherent obligation in all types of mediation proceedings, independent of the method applied to the proceeding (Harvard, transformation, circular-narrative, etc.) or the nature of the conflict in question (civil, commercial, labour, family, etc.)
Issues arising from the bankruptcy proceeding
Based on the above, the role of the bankruptcy mediator in a possible Extrajudicial Payment Agreement (AEP) is also affected by confidentiality duty.
The bankruptcy mediation is subject to various specialities which, especially for the outlined confidentiality duty, emphasize the duty of the bankruptcy mediator to urge the debtor’s judicial declaration of insolvency in the event of a breach of an EPA. This converts the bankruptcy mediator into the bankruptcy administrator in the subsequent bankruptcy proceedings (Articles 241 and 242 of the Bankruptcy Act).
It is possible that in the process of fulfilling his or her obligations as bankruptcy administrator, the administrator evaluated and highlighted information and documents which he or she gained knowledge of in a previous mediation proceeding. For example, those circumstances relevant to the preparation of the report must be prepared for the possible qualification of the bankruptcy as guilty (Article 196.1 of the Bankruptcy Act).
Essential Clarifications to the Confidentiality Duty in Bankruptcy Mediation
The concept of confidentiality as an absolute obligation may lead to unacceptable conduct on the part of a business. For example, as part of the negotiation of the EPA, a business may provide the bankruptcy mediator with sensitive information and documents that directly affect the entrepreneur’s insolvency liability, knowing that in any consecutive proceedings, the mediator-administrator cannot use the information/documents when preparing the qualification report.
Since the obligation cannot constitute an obstacle to legitimate and required actions that the bankruptcy mediator-administrator must assume in a consecutive proceeding, it is necessary to clarify the Article 9.1 LM obligation in the field of bankruptcy mediation.
In this regard, the European Code of Conduct for Mediators expressly recognizes that the mediator must adhere to the confidentiality duty unless there are legal or public policy reasons to the contrary. Therefore, the obligations of the bankruptcy administrator derived from the bankruptcy procedure create one of the legal reasons that support the confidentiality duty.
The Uniform Mediation Act (UMA) — enacted in the United States of America and regulating the issue of confidentiality in mediation — sets the signing of an agreement regulating the circumstances in which the duty does not apply as an exception to the conditionality duty. The extensive experience of the Anglo-Saxon world in the field of mediation (including bankruptcy mediation) recommends that, aside from the legal reasons alluded to above, at the start of the proceeding all the participants should sign an agreement or protocol that makes apparent until when the information and documents provided in the proceeding may be protected by the confidentiality duty (especially pressing information and documents provided by the debtor in a bankruptcy mediation, given that in practice the signing of a protocol or agreement on the part of the creditors can create major difficulties). This, at least in so far as there are no specific rules to regulate and develop the issue, we understand will be inevitable in Spain.
Conclusions
The previous assessment fully coincides with the conclusions of the recent meeting of the commercial judges of Madrid regarding the application criteria of the reform to the Law on support to entrepreneurs (that introduces bankruptcy mediation into our legislative system) in the following way: (…) For the performance of the bankruptcy mediator, the legal regime holds that the bankruptcy mediation brings together a series of specialities from the general characteristics of the common mediation in a way that distinguishes its function and implementation relative to a consecutive proceeding. It is possible to derive an implied legal waiver of the confidentiality duty in these cases, but only specifically with respect to the subsequent action as bankruptcy administrator and not in other areas (in line with art. 7.2 (b) of the Directive 2008/52/UE, of the European Parliament and Council, of May 21, 2008, on Certain Aspects of Mediation in Civil and Commercial Matters). However, it may be good practice for a mediator to obtain the expressed waiver in writing at the beginning of the mediation, for any subsequent proceeding.
For more information on Extrajudicial Payment Agreements in Spain,
