SACRAMENTO - California opening up to international arbitration will benefit businesses, the economy generally, and the legal profession, according to a renowNed mediator and former president of the state bar.
In July, legislators passed, and Gov. Jerry Brown signed, a bill that will allow lawyers from across the United States and from foreign jurisdictions to travel to California for arbitration talks and resolution.
It makes sense, said Howard Miller, a mediator and arbitrator with JAMS, the largest alternative dispute resolution (ADR) provider in the world, because California is one of the largest economies in the world.
"(The act) means the opportunity to increase international arbitration in California, (and) make it a major center for international arbitration," Miller told the Northern California Record, adding that the Economist magazine estimated the business is worth $1 billion a year to New York, which benefits not just the legal profession but associated travel and hospitality sectors.
Miller explained that California is already a leader in the field of "alternative dispute platforms," but believes "sheer inertia" kept the state from opening the field up internationally.
He added that the entire legal profession had to be supportive, and it needed to be explained to legislators that international arbitration between commercial companies has nothing to do with the more controversial issue of consumer, or employment, arbitration.
California companies will now have more leverage when negotiating contracts with foreign firms, he said. They will be able to insert into those contracts provisions that state any arbitration should happen in California, or use the potential for such a provision as leverage in negotiations.
Miller explained that there are two different types of international arbitration, one that is purely commercial between companies with headquarters in different countries and which, he said, "everyone considers advantageous."
Investor-state dispute settlement (ISDS), attract more controversy particularly with claims that international bodies such as the World Bank, accused of siding with multi-nationals against the interests of countries.
The recently enacted legislation only relates to commercial arbitration between companies, Miller said.
SB 766 allows individuals not admitted to practice law in California but are "good standing" either in the U.S. or abroad will be allowed "to provide legal services in an international commercial arbitration or related proceeding."
They will be under the jurisdiction of the state bar for disciplinary purposes, which will report annually to the California Supreme Court the number of complaints received and actions taken against attorneys.
Miller further explained that courts in California may get involved if there is a need for confirmation of an agreement or a dispute cannot be resolved via arbitration. Under that scenario, attorneys admitted to the California bar will take over.
One of the advantages California businesses will now have is at the initial stage of negotiating contracts as they will be able to add leverage to discussions by insisting that any later arbitration will happen in their home state, Miller said.
The ban on non-California bar attorneys from involvement in arbitration disputes dates to a state Supreme Court ruling in 1998.
The Birbower ruling held that that lawyers from foreign nations,and indeed other states, could not appear for international arbitration discussions in California, even risking criminal penalties if they did so.
Miller described international arbitration as one of the "fastest growing" legal practices, that the new law has the potential to pull in substantial fees for lawyers but also help the wider economy while allowing businesses to settle disputes without having to travel.
In a post jointly authored by Greenberg Taurig attorneys, Thomas Allen, Robert Herrington, and Jeff Scott, it was argued that California could be an excellent forum for international arbitration and disputes.
"It has strong national and state laws that favor the recognition and enforcement of arbitral awards and agreements to arbitrate," they wrote.
"California has sophisticated state and federal courts that don’t have a reputation for regional bias and California has many world-class cities and transportation centers that can offer suitable access, facilities and resources to host international disputes."
FedArb, a provider of international mediation services which employs more than 50 former federal judges and other "neutrals," welcomed the passing of the bill.
It removes "an artificial barrier that resulted in many California-based companies having to travel to places like Singapore, London and Hong Kong to arbitrate their disputes, the company said.
"Allowing international practitioners to represent their client's interests in California arbitrations will help Silicon Valley companies arbitrate their rights in California," Kennen Hagen, FebArb's president and chief executive, said in a statement.