(Reuters) - A U.S. federal judge ruled on Thursday that Delaware's Court of Chancery cannot hold arbitration hearings before a sitting judge that are closed to the public, according to court documents.

The court's five judges were sued by the Delaware Coalition for Open Government, a group that promotes government transparency, for holding what the group said amounted to "secret" hearings to settle large business disputes.

The federal judge hearing the case, Mary McLaughlin of the Eastern District of Pennsylvania, ruled that the arbitration cases cannot be closed to the public.

"The court concludes that the Delaware proceeding functions essentially as a non-jury trial before a Chancery Court judge," wrote "Because it is a civil trial there is a qualified right of access and this proceeding must be open to the public."

(Reporting By Tom Hals in Wilmington, Del.; Editing by Steve Orlofsky)