THE NEED TO UPDATE CALIFORNIA’S INTERNATIONAL ARBITRATION CODE

Written by Daniel M. Kolkey^*

If California is going to attract more international commercial arbitrations, its international commercial arbitration code, enacted 35 years ago, needs an update. Fortunately, there is a bill that has passed out of the California Assembly and is before the California Senate – Assembly Bill No. 615 – that would do precisely that. But before we address the impact and importance of this legislation, a little background is warranted.

Despite its strategic position on the Pacific Rim, California has struggled to persuade parties to hold their international commercial arbitrations in California. Instead, such arbitrations have more often gone to New York, London, Paris, Geneva, Singapore, Hong Kong — and even Florida.

This has not only been disappointing to the California bar, but also to the California hospitality industry and California businesses, which would benefit from holding the arbitration of their commercial disputes nearby. A business can always choose to litigate an international commercial dispute in its own courts. But an international arbitral award is more enforceable overseas than a federal judgment because international treaties provide for the enforcement of foreign arbitral awards in over 170 jurisdictions. By contrast, there is no international treaty that provides for enforcement of U.S. judgments in other countries. And finally, international arbitration allows the contracting parties to agree on the procedures, the selection of arbitrator(s), and governing law for their potential disputes before a dispute arises.