BILL ANALYSIS �
SENATE JUDICIARY COMMITTEE
Senator Hannah-Beth Jackson, Chair
2013-2014 Regular Session
SB 907 (Monning)
As Amended March 24, 2014
Hearing Date: April 1, 2014
Fiscal: No
Urgency: No
RD
SUBJECT
International Commercial Disputes: Representation and Assistance
DESCRIPTION
This bill would provide that in any proceeding or procedure
conducted pursuant to the statutes governing the arbitration or
conciliation of international commercial disputes, the parties
may appear in person or be represented or assisted by any person
of their choice. This bill would specify that a person
representing or assisting a party need not be a member of the
legal profession or licensed to practice law in California.
This bill would make various findings and declarations, and
require the statutes be liberally construed in order to
effectuate its legislative intent, as specified.
BACKGROUND
In 1985, the United Nations Commission on International Trade
Law adopted a model law on International Commercial Arbitration
(UNCITRAL model law) to provide a framework for the resolution
of commercial disputes involving multiple nations from varying
legal traditions. Three years later, with the passage of AB
2667 (Killea, Ch. 23, Stats. 1988), California enacted specific
statutes governing the arbitration and conciliation of
international commercial disputes according to the standards of
that UNCITRAL model law. As described in this Committee's
analysis of that bill, the legislation sought "to permit the
arbitration [and conciliation] of international commercial
disputes in California according to accepted international
standards, thereby rendering foreign nationals more amenable to
negotiating their disputes in this State." (See Sen. Judiciary
(more)
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Com., analysis of AB 2667 (1987-1988 Reg. Session), p.2.)
Located at Title 9.3 of the Code of Civil Procedure, these
statutes specify the form of the arbitration agreement,
delineate judicial involvement in aid of arbitration, provide
for the composition and jurisdiction of arbitral tribunals,
establish the manner and conduct of arbitrations, govern the
making of awards and termination of proceedings, and specify the
conduct and effect of conciliation procedures. (Code Civ. Proc.
Sec. 1297.11 et seq.) Among these provisions, under the chapter
pertaining to conciliations, Section 1297.351 of the Code of
Civil Procedure provides that "the parties may appear in person
or be represented or assisted by any person of their choice. A
person assisting or representing a party need not be a member of
the legal profession or licensed to practice law in California."
This bill would revise and recast the above provision so as to
clearly authorize parties to any international arbitration or
conciliation to be represented or assisted by any person of
their choice, including non-attorneys and non-California
attorneys.
CHANGES TO EXISTING LAW
Existing law provides that no person shall practice law in
California unless an active member of the State Bar. (Bus. &
Prof. Code Sec. 6125.)
Existing law , Title 9 of the Code of Civil procedure governs
(domestic) arbitrations, including enforcement of arbitration
agreements and conduct of arbitration proceedings, among other
things. (Code Civ. Proc. Sec. 1280 et seq.)
Existing law provides that a party to an arbitration has the
right to be represented by an attorney at any arbitration
proceeding or hearing, as specified. (Code Civ. Proc. Sec.
1282.4(a).) Existing law authorizes an out-of-state attorney to
appear on behalf of a client in arbitration as long as the
out-of-state attorney files a certificate with specified
information, approved by the arbitrator, filed with the State
Bar of California, and served on all parties to the arbitration.
(Code Civ. Proc. Sec. 1282.4(b)-(e).) Existing rule of court
provides that, at the discretion of the court upon written
application, as specified, an out-of-state attorney may appear
before a court as counsel pro hac vice provided that an active
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member of the State Bar of California is associated as attorney
of record. (California Rules of Court, rule 9.40.)
Existing law provides that an out-of-state attorney
participating in an arbitration is subject to the disciplinary
jurisdiction of the State Bar of California. (Code Civ. Proc.
Sec. 1282.4(f).)
Existing law , Title 9.3 of the Code of Civil Procedure, governs
the arbitration and conciliation of international commercial
disputes, if the arbitration or conciliation is in California,
subject to any agreement which is in force between the United
States and any other state(s). (Code Civ. Proc. Sec. 1297.11 et
seq.) Existing law specifies the circumstances under which an
arbitration or conciliation agreement is "international." (Code
Civ. Proc. Sec. 1297.13.)
Existing law provides that the title governing the arbitration
and conciliation of international commercial disputes shall not
affect any other law in force in California by virtue of which
certain disputes may not be submitted to arbitration or may be
submitted to arbitration only in accordance with provisions
other than those of this title. Notwithstanding the foregoing,
this title supersedes Sections 1280 to 1284.2, inclusive, with
respect to international commercial arbitration and
conciliation. (Code Civ. Proc. Sec. 1297.17; Code Civ. Proc.
Secs. 1280-1284.2 generally govern the enforcement of
arbitration agreements and the conduct of arbitration
proceedings with respect to "domestic" arbitrations in
California, including provisions for out-of-state attorneys who
participate in an arbitration in California.)
Existing law provides that the parties may appear in person or
be represented or assisted by any person of their choice, and
that a person assisting or representing a party need not be a
member of the legal profession or licensed to practice law in
California. (Code Civ. Proc. Sec. 1297.351.)
This bill would repeal the above provision and instead provide
that, in any proceeding or procedure conducted pursuant to the
title governing the arbitration and conciliation of
international commercial disputes, the parties may appear in
person or be represented or assisted by any person of their
choice. This bill would provide that a person representing or
assisting a party need not be a member of the legal profession
or licensed to practice law in California.
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This bill would make various findings and declarations
including, among other things:
California's robust, internationally oriented economy and
concentration of large companies occupying positions of global
leadership make California an ideal venue for international
commercial arbitration.
It is the intent of the Legislature, therefore, that the
statutes governing arbitrations and conciliations of
international commercial disputes be broadly construed so as
to promote California's interest in becoming a major center
for international commercial arbitration.
This bill would require that this title be construed liberally
in order to effectuate its legislative intent. The purposes of
this title and all of its provisions with respect to powers
granted shall be broadly interpreted to effectuate that intent
and purposes and not as to any limitation of powers.
COMMENT
1. Stated need for the bill
According to the author:
In 1988, the California Legislature enacted [AB 2667 (Killea,
Ch. 23, Stats. 1988)], to recognize, support and promote the
benefits of international commercial arbitration and
conciliation. The Act is contained in Title 9.3 of the Code
of Civil Procedure. Code of Civil Procedure Section 1297.351
is part of the Act, and provides: "The parties may appear in
person or be represented or assisted by any person of their
choice. A person assisting or representing a party need not
be a member of the legal profession or licensed to practice
law in California." Although that language is not limited to
international conciliation on its face, it appears in Chapter
7 of Title 9.3, a Chapter within the Act dealing with
international conciliation. This has resulted in ambiguity,
leading some to conclude that this same language does not
apply to international commercial arbitration. [ . . . ]
[As a result of this ambiguity,] California has not been able
to become a center for international commercial arbitration,
which is one of the fastest growing areas of law practice . .
. .
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The lack of international arbitrations in California works to
the disadvantage of all California stakeholders, imposing
needless costs on California companies, depriving California's
legal, business and tourism industries of commercial
opportunities, and depriving the State of tax revenues.
California's robust, internationally oriented economy and
concentration of large companies occupying positions of global
leadership make California an ideal venue for international
commercial arbitration. The economic benefits of being a
center for international commercial arbitration are
substantial, broad-based, and distributed across both the
state and municipal levels. The advantages range from an
increase in business for California international lawyers (and
supporting experts, translators, stenographers, and other
professionals and staff) to an increase in business for
hotels, restaurants, and the business sector in general.
California should and could become a major center for
international commercial arbitration. California laws should
promote that policy, consistent with the original intent of
the Act. This bill would fix an ambiguity in the law that has
prevented that from happening. (Emphases in original.)
One individual, Daniel Kolkey, who worked on the original 1988
legislation writes that "[w]hile out-of-state lawyers can
register to appear in a domestic arbitration in California (Code
Civ. Proc., [Sec.] 1282.4), foreign lawyers may not, and even
this registration requirement is inapplicable to international
commercial arbitrations in California. (See Code Civ. Proc.,
[Sec.] 1297.17.) This means that a sophisticated commercial
party is limited to a California attorney to represent it in an
international arbitration in California. Since other leading
international commercial arbitration venues do no limit the
lawyers who may represent a party, nor require registration,
California's parochial rule simply results in the arbitrations
being held elsewhere." (Emphasis in original.) Mr. Kolkey adds
that this has the following consequences:
1. Where a California business cannot persuade its foreign
counterparts to arbitrate their commercial disputes in
California, the California business has had to arbitrate
its dispute in a more distant, less familiar venue.
2. California has lost economic benefits generated for the
local economy by international commercial arbitrations.
3. When the international arbitration is held outside
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California, California lawyers are not retained as local
counsel for the arbitration.
4. Given California's restrictions on a company's choice of
counsel, when an international arbitration is held in the
U.S., other U.S. jurisdictions, like New York, benefit from
the additional economic activity generated by the
international commercial arbitration.
2. This bill seeks to clarify a potential ambiguity in
existing law
This bill would authorize the parties to any proceeding or
procedure conducted by Title 9.3 of the Code of Civil Procedure
(relating to the arbitration and conciliation of international
commercial disputes), to appear in person or be represented or
assisted by any person of their choice, even if the person is
not a member of the legal profession or licensed to practice law
in California.
Similar language permitting representation by non-attorneys and
non-California attorneys already exists under the statutes
governing these international commercial disputes. Namely,
Section 1297.351 of the Code of Civil Procedure provides that
the parties may appear in the proceedings themselves or have
another person of their choice represent or assist them,
regardless of their standing as a member of the legal profession
or licensure to practice law in California. According to the
author, there appears to be some ambiguity as to whether this
language would apply only to conciliations of international
commercial disputes or if it would apply to arbitrations of such
disputes as well.
The author points to the case of Birbrower v. Superior Court
(1998) 17 Cal.4th 119, 130-131, in which the California Supreme
Court, in dicta, discusses exceptions to the general requirement
of Section 6125 of the Business and Professions Code that
persons practicing law in California be active members of the
California State Bar. Staff notes that while that case did not
involve an international commercial dispute and therefore would
not create any sort of binding precedent as to the scope of
Section 1297.351, the court's comments appear to have created
uncertainty on that issue for parties who might consider
California as a venue for resolution of their international
commercial disputes. Specifically, the court wrote that:
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The Legislature has recognized an exception to section 6125 in
international disputes resolved in California under the
state's rules for arbitration and conciliation of
international commercial disputes. (Code Civ. Proc. [Sec.]
1297.11 et seq.) This exception states that in a commercial
conciliation in California involving international commercial
disputes, "The parties may appear in person or be represented
by any person of their choice. A person assisting or
representing a party need not be a member of the legal
profession or licensed to practice law in California." (Code
Civ. Proc. [Sec.] 1297.351.) (Emphasis added.)
This statement therefore tends to suggest that even though the
actual statutory text of Section 1297.351 does not by its own
terms expressly limit the scope of this exception to commercial
conciliations, the courts could interpret it to be limited as
such because of its location under the conciliation chapter of
Title 9.3. At the same time, however, in contradiction to any
such conclusion, the Birbrower court later goes on suggest that
it reads Section 1297.351 to apply to both conciliations and
arbitrations of international commercial disputes, when it
states that "these rules specify that, in an international
commercial conciliation or arbitration proceeding, the person
representing a party to the conciliation or arbitration, is not
required to be a licensed member of the State Bar. (Code Civ.
Proc., [Sec.] 1297.351.)" (Id. at 133, emphasis added.)
As such, the author seeks to remove any ambiguity by revising
and recasting Section 1297.351 to form a new section that would
apply more generally to both intentional arbitrations and
conciliations. This would ensure the application of that
language to international arbitrations, which the proponents of
this bill hope will propel California into becoming one of the
major centers for such international commercial dispute
resolutions.
In support of the bill, Thomas Girardi of Girardi Keese Lawyers,
writes in support of this bill that "[international commercial
arbitration] is one of the fastest growing areas of the law, and
California should be a major pacific rim venue for those
matters. Unfortunately it is not, because of a technical flaw
in the existing California International Commercial Arbitration
and Conciliation Act. SB 907 corrects that flaw, and will allow
California to be competitive with New York and Miami, in the
United States, and Singapore, Hong Kong, and other venues on the
pacific rim."
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Staff notes that insofar as ambiguity exists under current law,
this bill poses the question of whether the existing
authorization of Section 1297.351 to use non-attorneys or
non-California attorneys should apply in international
arbitrations.
3. This bill will not impact domestic arbitrations
This bill would expressly authorize the use of non-attorneys or
non-California attorneys in arbitrations, as well as
conciliations, of international commercial disputes. Under
existing law, arbitrations and conciliation agreements are
considered "international" only under specified circumstances,
such as where: (1) the parties to the arbitration or
conciliation agreement have, at the time of the conclusion of
that agreement, their places of business in different states
(i.e. countries); (2) the parties have expressly agreed that the
subject matter of the arbitration or conciliation agreement
relates to commercial interests in more than one state; or (3)
the subject matter of the arbitration or conciliation agreement
is otherwise related to commercial interests in more than one
state. (See Code Civ. Proc. Sec. 1297.13.)
The author emphasizes that this bill only affects international
arbitrations, and not domestic arbitrations:
This bill takes the existing California provisions regarding
representation in International Conciliation and adopts them
also for International Arbitration, matching the International
Arbitration provisions in other competing jurisdictions, not
only London, Hong Kong, Singapore and other international
jurisdictions, but also New York, which is seeking to become
the same kind of center for international arbitration.
International commercial arbitration is a field that is
distinct from domestic arbitration. The parties to an
international contract ordinarily agree in advance on what
will happen if a dispute arises. Any nation's court will
necessarily be "foreign" to one or more of the parties.
International arbitration offers a neutral and impartial forum
for resolving international commercial disputes. It is
favored by many for its procedural flexibility, as well as the
enforceability of the resulting arbitral award in most
international jurisdictions, avoiding problems associated with
the enforceability of foreign judgments.
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Moreover, staff notes that existing law expressly states that
the statutes governing arbitrations and conciliations of
international commercial disputes "shall not affect any other
law in force in California by virtue of which certain disputes .
. . may be submitted to arbitration only in accordance with
provisions other than those of this title" and that these
statutes only "supersede[ ] Sections 1280 to 1284.2, inclusive,
with respect to international commercial arbitration and
conciliation." (Code Civ. Proc. Sec. 1297.17; Sections
1280-1284.2 of the Code of Civil Procedure govern arbitrations
in California generally, including the enforcement of
arbitration agreements and the conduct of arbitration
proceedings.) Accordingly, this bill would not impact existing
requirements that attorneys representing parties in domestic
arbitrations in California either be licensed to practice in
California in accordance with Section 6125 of the Business and
Professions Code, or otherwise be admitted to the bar of another
(U.S.) state in compliance with the requirements of the Out of
State Attorney Arbitration Counsel (OSAAC) Program. (See Code
Civ. Proc. Sec. 1282.4.) In other words, those protections
appear to be unaffected by this bill.
Furthermore, while the requirements of Section 6125 and of the
OSAAC program serve as important consumer protections, given the
nature of the international commercial disputes that would be
arbitrated, the parties involved in such disputes are arguably
sophisticated entities are able to select properly qualified
persons to represent their interests and to heavily negotiate
any agreement to arbitrate their disputes.
4. Author's amendment
The following amendment is offered by the author to remove the
codified intent language with respect to the interpretation of
the title on arbitrations and conciliations of international
commercial disputes.
Author's amendment :
On page 2, strike lines 30-34
Support : California Dispute Resolution Council; Conference of
California Bar Associations; two individuals
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Opposition : None Known
HISTORY
Source : Author
Related Pending Legislation : None Known
Prior Legislation :
AB 2667 (Killea, Ch. 23, Stats. 1988) See Background.
SB 624 (Steinberg, 2013) would have, among other things,
provided that a person representing or assisting a party in an
international commercial dispute proceeding need not be a member
of the legal profession or licensed to practice law in
California.
This bill died in the Senate Rules Committee.
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