International Commercial Arbitration

CLA successfully advocated in support of the enactment of legislation that authorized out-of-state attorneys and attorneys from foreign jurisdictions to represent parties in international commercial arbitrations in California. 

Senate Bill 766 (Monning) – Support

February 28, 2018

Hon. Bill Monning
Member of the Senate
State Capitol, Room 313
Sacramento, CA 95814

Dear Senator Monning:

The California Lawyers Association (“CLA) is pleased to support SB 766, which would authorize out-of-state attorneys and attorneys from foreign jurisdictions to represent parties in international commercial arbitrations and related proceedings in California.

By way of background, CLA launched on January 1, 2018 as a nonprofit, voluntary organization, and the new home of what were the Sections of the State Bar of California and the California Young Lawyers Association. The mission of CLA is promoting excellence, diversity and inclusion in the legal profession and fairness in the administration of justice and the rule of law. CLA represents the vast diversity of California’s legal community and the various areas of law practiced throughout the state. As part of its consideration of this bill, the CLA Board of Representatives consulted with the subject matter experts on CLA’s International Law Section, who practice in the area of international commercial arbitration. The International Law Section’s Executive Committee voted unanimously to support this bill in its entirety, including its public protections provisions. We have also reviewed the Report and Recommendations of the California Supreme Court International Commercial Arbitration Working Group, which studied this issue and made the recommendation upon which this bill is based. We believe SB 766 transcends any particular practice area and strikes at the core of CLA’s mission by (1) governing who is permitted to practice law in California; and (2) ensuring that appropriate safeguards are in place to oversee the practice of law in California and protect clients.

California is currently missing out on a valuable opportunity. Nineteen United States jurisdictions and fifty-three of fifty-five surveyed foreign countries currently permit lawyers from foreign jurisdictions to provide legal services to parties in international arbitrations in their jurisdictions. Some states, like New York and Florida, actively work to attract international commercial arbitration business. In California, in contrast, out-of-state attorneys and attorneys from foreign jurisdictions are not authorized to provide legal services in these arbitrations. This deters foreign parties from selecting California as a venue for arbitrating international commercial disputes, resulting in an adverse impact on California’s legal business, the related economy, and California parties.

California is ideally situated to become a center of international commercial arbitration, with its robust concentration of businesses engaged in international commerce. By opening California as a venue for international arbitrations, SB 766 would increase business for California attorneys. Although some California attorneys currently represent clients in international commercial arbitrations, the attorneys are most often required to go to other states or countries to pursue these arbitrations. SB 766 would bring these arbitrations to California, providing new opportunities for California attorneys to act as lead counsel or as local counsel, often retained in the jurisdiction in which an international arbitration is held to assist the foreign or out-of-state attorneys and parties.

The economic benefits of SB 766 would not be limited to attorneys. In addition to increasing business for those who directly support the legal proceedings (including paralegals, other professional staff, experts, court reporters, and translators) the bill would benefit the local economy (including hotels, restaurants, tourist attractions, and retail businesses).

SB 766 will also benefit California parties. The fact that California deters foreign parties from selecting California as a venue for international commercial arbitrations results in a disadvantage to California parties who would prefer the convenience and benefits of having the arbitration in California. Given the barrier to choosing California as a venue for an international arbitration, California parties are often forced to go to the considerable expense of arbitrating their disputes in a foreign jurisdiction. In addition, if the parties have selected California law as the governing law, California residents are currently less protected because the dispute and the application of California law will likely be decided by non-California arbitrators in a foreign jurisdiction. Under SB 766, if the arbitration were held in California, the California party would have a greater likelihood of a California arbitrator being appointed, would have access to the California courts with respect to judicial review of any arbitration award, and would have the convenience of a local forum for its witnesses and attorneys.

SB 766 is based on the American Bar Association Recommendation for a Model Rule of Temporary Practice by Foreign Lawyers and includes important public protection provisions, all of which the CLA Board supports. Disputes subject to international commercial arbitration are generally business disputes between sophisticated parties who are able to select properly qualified attorneys to represent their interests. This bill provides, as specified, that it does not apply to individual consumer, health insurance, healthcare, or employment disputes. The bill would require that the out-of-state or foreign attorney be subject to effective regulation and discipline by a duly constituted professional body or public authority of the attorney’s out-of-state or foreign jurisdiction and be in good standing in every jurisdiction in which he or she is admitted or otherwise authorized to practice law. The bill would further (1) require that an attorney rendering legal services pursuant to its provisions be subject to the jurisdiction of the courts and disciplinary authority of California with respect to the California Rules of Professional Conduct and the laws governing the conduct of attorneys to the same extent as a member of the State Bar of California; (2) specifically authorize the State Bar to report complaints and evidence of disciplinary violations to the appropriate disciplinary authority of any jurisdiction in which the attorney is admitted or otherwise authorized to practice law (but also recognize that there is nothing in existing law that would prevent such reports); and (3) require the State Bar to submit an annual report to the Supreme Court that specifies the number and nature of any complaints that it has received against attorneys who provide legal services pursuant to the bill’s provisions, and any actions it has taken in response to those complaints. We believe these are all necessary and proper protections that would be in place to oversee the provision of legal services in California.

California should seize this opportunity and join the other jurisdictions that authorize foreign and out-of-state attorneys to represent parties in international commercial arbitrations. Enactment of SB 766 will remove barriers that prevent foreign parties from selecting California as a venue for international commercial arbitrations, thereby increasing California’s legal business and strengthening the related economy, while also protecting California parties who are currently compelled to arbitrate outside California in a different state or country.

If you have any questions, please feel free to contact me at (619) 239-8131 or HRosing@Klinedinstlaw.com.

Sincerely,

Heather Linn Rosing, President
California Lawyers Association