(1)Existing law provides a framework for the arbitration and conciliation of international commercial disputes. Existing law requires an arbitration agreement subject to this framework to be in writing, specifying that an agreement is in writing if it is contained in a document signed by the parties or in an exchange of letters, telex, telegrams, or other means of telecommunication that provide a record of the agreement, or in an exchange of statements of claim and defense in which the existence of an agreement is alleged by one party and not denied by another.

This bill would further specify that an agreement is in writing if it is contained in an exchange of electronic mail or in an electronic communication if the information contained therein is accessible so as to be usable for subsequent reference.

(2)Existing law provides that an arbitral tribunal may, at the request of a party, order a party to take an interim measure of protection with respect to the subject matter of the dispute, but does not explicitly define interim measure of protection. Existing law allows any party to an arbitration to request that the superior court enforce an award of an arbitral tribunal to take any interim measure of protection.

This bill would define interim measure of protection to mean any temporary measure by which, at any time prior to the issuance of the award by which the dispute is finally decided, an arbitral tribunal orders a party to: (1) maintain or restore the status quo pending determination of the dispute; (2) take action that would prevent, or refrain from taking action that is likely to cause, harm or prejudice to the arbitral process; (3) provide a means of preserving assets out of which a subsequent award may be satisfied; or (4) preserve evidence that may be relevant and material to the resolution of the dispute. The bill would require that in most instances, a party requesting an interim measure of protection must satisfy to the arbitral tribunal that it would be irreparably harmed if the measure is not granted, that the harm substantially outweighs the harm likely to result to the party against whom the measure is directed if the measure is granted, and that there is a reasonable possibility that the requesting party will succeed on the merits. The bill would allow a party to, without notice, request an interim measure of protection along with a preliminary order directing a party not to frustrate the purpose of the interim measure requested. The bill would also allow a party against whom a preliminary order is directed to object to the preliminary order before the arbitral tribunal. The bill would provide that a party requesting an interim measure or preliminary order is liable for any costs and damages caused by the measure or order to any party if the arbitral tribunal later determines that the measure or order should not have been granted.

This bill would provide that an interim measure issued by an arbitral tribunal must be recognized as final and binding, and may be enforced upon application to the superior court. The bill would provide that a superior court may refuse to recognize or enforce an interim measure only under specified circumstances.

(1)Existing law provides a framework for the arbitration and conciliation of international commercial disputes. Existing law requires an arbitration agreement subject to this framework to be in writing, specifying that an agreement is in writing if it is contained in a document signed by the parties or in an exchange of letters, telex, telegrams, or other means of telecommunication that provide a record of the agreement, or in an exchange of statements of claim and defense in which the existence of an agreement is alleged by one party and not denied by another.

This bill would further specify that an agreement is in writing if it is contained in an exchange of electronic mail or in an electronic communication if the information contained therein is accessible so as to be usable for subsequent reference.

(2)Existing law provides that an arbitral tribunal may, at the request of a party, order a party to take an interim measure of protection with respect to the subject matter of the dispute, but does not explicitly define interim measure of protection. Existing law allows any party to an arbitration to request that the superior court enforce an award of an arbitral tribunal to take any interim measure of protection.

This bill would define interim measure of protection to mean any temporary measure by which, at any time prior to the issuance of the award by which the dispute is finally decided, an arbitral tribunal orders a party to: (1) maintain or restore the status quo pending determination of the dispute; (2) take action that would prevent, or refrain from taking action that is likely to cause, harm or prejudice to the arbitral process; (3) provide a means of preserving assets out of which a subsequent award may be satisfied; or (4) preserve evidence that may be relevant and material to the resolution of the dispute. The bill would require that in most instances, a party requesting an interim measure of protection must satisfy to the arbitral tribunal that it would be irreparably harmed if the measure is not granted, that the harm substantially outweighs the harm likely to result to the party against whom the measure is directed if the measure is granted, and that there is a reasonable possibility that the requesting party will succeed on the merits. The bill would allow a party to, without notice, request an interim measure of protection along with a preliminary order directing a party not to frustrate the purpose of the interim measure requested. The bill would also allow a party against whom a preliminary order is directed to object to the preliminary order before the arbitral tribunal. The bill would provide that a party requesting an interim measure or preliminary order is liable for any costs and damages caused by the measure or order to any party if the arbitral tribunal later determines that the measure or order should not have been granted.

This bill would provide that an interim measure issued by an arbitral tribunal must be recognized as final and binding, and may be enforced upon application to the superior court. The bill would provide that a superior court may refuse to recognize or enforce an interim measure only under specified circumstances.

(1)Existing law provides a framework for the arbitration and conciliation of international commercial disputes. Existing law requires an arbitration agreement subject to this framework to be in writing, specifying that an agreement is in writing if it is contained in a document signed by the parties or in an exchange of letters, telex, telegrams, or other means of telecommunication that provide a record of the agreement, or in an exchange of statements of claim and defense in which the existence of an agreement is alleged by one party and not denied by another.

This bill would further specify that an agreement is in writing if it is contained in an exchange of electronic mail or in an electronic communication if the information contained therein is accessible so as to be usable for subsequent reference.

(2)Existing law provides that an arbitral tribunal may, at the request of a party, order a party to take an interim measure of protection with respect to the subject matter of the dispute, but does not explicitly define interim measure of protection. Existing law allows any party to an arbitration to request that the superior court enforce an award of an arbitral tribunal to take any interim measure of protection.

This bill would define interim measure of protection to mean any temporary measure by which, at any time prior to the issuance of the award by which the dispute is finally decided, an arbitral tribunal orders a party to: (1) maintain or restore the status quo pending determination of the dispute; (2) take action that would prevent, or refrain from taking action that is likely to cause, harm or prejudice to the arbitral process; (3) provide a means of preserving assets out of which a subsequent award may be satisified; or (4) preserve evidence that may be relevant and material to the resolution of the dispute. The bill would require that in most instances, a party requesting an interim measure of protection must satisfy to the arbitral tribunal that it would be irreparably harmed if the measure is not granted, that the harm substantially outweighs the harm likely to result to the party against whom the measure is directed if the measure is granted, and that there is a reasonable possibility that the requesting party will succeed on the merits. The bill would allow a party to, without notice, request an interim measure of protection along with a preliminary order directing a party not to frustrate the purpose of the interim measure requested. The bill would also allow a party against whom a preliminary order is directed to object to the preliminary order before the arbitral tribunal. The bill would provide that a party requesting an interim measure or preliminary order is liable for any costs and damages caused by the measure or order to any party if the arbitral tribunal later determines that the measure or order should not have been granted.

This bill would provide that an interim measure issued by an arbitral tribunal must be recognized as final and binding, and may be enforced upon application to the superior court. The bill would provide that a superior court may refuse to recognize or enforce an interim measure only under specified circumstances.

 CONSENT  

Bill No: AB 1903

Author: Maienschein (D)

Introduced: 1/23/24

Vote: 21

SENATE JUDICIARY COMMITTEE: 11-0, 6/4/24

AYES: Umberg, Wilk, Ashby, Caballero, Durazo, Laird, Niello, Roth, Stern, Wahab, Wiener

SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8

ASSEMBLY FLOOR: 70-0, 4/4/24 (Consent) - See last page for vote

SUBJECT: International commercial arbitration: procedure

SOURCE: The International Law and Immigration Section, California Lawyers Association

The Litigation Section, California Lawyers Association

DIGEST:

This bill specifies that an agreement is in writing for purposes of the statutory framework for the arbitration and conciliation of international commercial disputes if it is contained in an exchange of electronic mail or in an electronic communication if the information contained therein is accessible so as to be usable for subsequent reference. This bill also makes various changes to provisions governing an interim measure of protection that is authorized to be issued under the framework.

ANALYSIS:

Existing law:

1. 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) under Title 9.3 of the Code of Civil Procedure (“Title 9.3”). (Code Civ. Proc. § 1297.11 et seq.)^[1]
2. Existing law specifies the circumstances under which an arbitration or conciliation agreement is considered “international” under Title 9.3. (§ 1297.13.)
3. Requires an arbitration agreement under Title 9.3 to be in writing. (§ 1297.72.)
4. Provides that it is not incompatible with an arbitration agreement under Title 9.3 for a party to request from a superior court, before or during arbitral proceedings, an interim measure of protection, or for the court to grant such a measure. (§ 1297.91.)
5. Authorizes the arbitral tribunal, at the request of a party, to order a party to take an interim measure of protection as the arbitral tribunal may consider necessary in respect of the subject matter of the dispute, unless otherwise agreed by the parties. (§ 1297.171.) Authorizes the arbitral tribunal to require a party to provide appropriate security in connection with an interim measure of protection. (§ 1297.172.)

This bill:

1. Directs application of the title to include regard for its international origin and the need to promote uniformity in its application and the observance of good faith.
2. Clarifies that any questions concerning international commercial arbitration that are not expressly settled within Title 9.3 are to be settled in conformity with the general principles embodied in the title.
3. Defines an arbitration agreement to be in writing if its content is recorded in any form, including, but not limited to, in a document signed by the parties or in an exchange of letters, telex, telegrams, electronic mail, or other means of telecommunication accessible for subsequent reference that provides a record of the agreement. Further clarifies that an arbitration agreement is in writing if it is an electronic communication and the information contained therein is accessible so as to be usable for subsequent reference.
4. Defines as an agreement in writing, an agreement that is contained in an exchange of statements of claim and defense in which the existence of an agreement is alleged by one party and not denied by the other, and a reference in a contract to any document containing an arbitration clause if the reference is such as to make that clause part of the contract.
5. Grants a superior court the same power to issue an interim measure of protection in relation to arbitration proceedings, irrespective of whether the place of arbitration is in California, as it has in relation to proceedings filed in the first instance in the superior courts.
6. Clarifies that any party to the arbitration may request the superior court to enforce an interim measure of protection granted by an arbitral tribunal, and removes a requirement that the enforcement be granted pursuant to the law applicable to the granting of the type of interim relief requested.
7. Defines an interim measure of protection, or interim measure, as any temporary measure, whether in the form of an award or in another form, by which, at any time prior to the issuance of the award by which the dispute is finally decided, the arbitral tribunal orders a party to do any of the following:
   1. Maintain or restore the status quo pending determination of the dispute;
   2. Take action that would prevent, or refrain from taking action that is likely to cause, current or imminent harm or prejudice to the arbitral process itself;
   3. Provide a means of preserving assets out of which a subsequent award may be satisfied; or
   4. Preserve evidence that may be relevant and material to the resolution of the dispute.
8. Requires a party requesting an interim measure to satisfy the arbitral tribunal that both of the following conditions are met:
   1. Harm not adequately reparable by an award of damages is likely to result if the measure is not ordered, and such harm substantially outweighs the harm that is likely to result to the party against whom the measure is directed if the measure is granted; and
   2. There is a reasonable possibility that the requesting party will succeed on the merits of the claim. The determination of this possibility shall not affect the discretion of the arbitral tribunal in making any subsequent determination.
9. Permits a party, without notice to any other party, to make a request for an interim measure together with an application for a preliminary order directing a party not to frustrate the purpose of the interim measure requested, and would allow the arbitral tribunal to grant a preliminary order provided that it considers that prior disclosure of the request for the interim measure to the party against whom it is directed risks frustrating the purpose of the measure.
10. Requires the arbitral tribunal, immediately following their determination with respect to an application for a preliminary order, to give notice to all parties of the request for the interim measure, the application for the preliminary order, the preliminary order, if any, and all other communications, including the content of any oral communication, between any party and the arbitral tribunal in relation to the interim measure.
11. Requires the arbitral tribunal to provide an opportunity to any party against whom a preliminary order is directed to present its case at the earliest practicable time, and decide promptly on any objection to the preliminary order.
12. Establishes that a preliminary order shall expire after twenty days from the date on which it was issued by the arbitral tribunal, and allows the arbitral tribunal to issue an interim measure adopting or modifying the preliminary order after the party against whom the preliminary order is directed has been given notice and an opportunity to present its case.
13. Makes a preliminary order binding on the parties, but not subject to enforcement by a court, and clarifies that the preliminary order does not constitute an award.
14. Permits the arbitral tribunal to modify, suspend, or terminate an interim measure or a preliminary order it has granted, or in exceptional circumstances and upon prior notice to the parties, on the arbitral tribunal’s own initiative.
15. Permits the arbitral tribunal to require the party requesting an interim measure to provide appropriate security in connection with the measure, as well as require the party applying for a preliminary order to provide security in connection with the order when appropriate.
16. Permits the arbitral tribunal to require any party to promptly disclose any material change in the circumstances on the basis of which the measure was requested or granted.
17. Requires the party applying for a preliminary order to disclose to the arbitral tribunal all circumstances that are likely to be relevant to the arbitral tribunal’s determination whether to grant or maintain the order, and continues the obligation until the party against whom the order has been requested has had an opportunity to represent its case.
18. Makes the party requesting an interim measure or applying for a preliminary order liable for any costs and damages caused by the measure or the order to any party if the arbitral tribunal later determines that, in the circumstances, the measure or orders should not have been granted. Permits the arbitral tribunal to award such costs and damages at any point during the proceedings.
19. Makes an interim measure issued by an arbitral tribunal final and binding, and, unless otherwise provided by the arbitral tribunal, permits the interim measure to be enforced upon application to the superior court subject to other provisions of this bill.
    1. Requires the party who is seeking or has obtained recognition or enforcement of an interim measure to promptly inform the court of any termination, suspension, or modification of the interim measure.
    2. Provides the superior court where recognition or enforcement is sought may order the requesting party to provide appropriate security if the arbitral tribunal has not already made a determination with respect to security or where such a decision is necessary to protect the rights of third parties.
20. Specifies that recognition or enforcement of an interim measure can be refused only if the provisions of a) or b), below, are met.
    1. At the request of the party against whom it is invoked if the court is satisfied that certain conditions are met. Provides that any determination made by the court on any of these grounds is effective only for the purposes of the application to recognize and enforce the interim measure. The court in which recognition or enforcement is sought cannot, in making that determination, undertake a review of the substance of the interim measure.
    2. If the court finds that any of the following are met:
       1. The interim measure is incompatible with the powers conferred upon the court, unless the court decides to reformulate the interim measure to the extent necessary to adapt the interim measure to its own powers and procedures for the purposes of enforcing that interim measure and without modifying its substance;
       2. The subject matter of the dispute is not capable of settlement by arbitration under the law of the United States; or
       3. The recognition or enforcement of the interim measure would be contrary to the public policy of the United States.

Comment

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, Chapter 23, Statutes of 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 AB 2667, 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.” (NOTE: See Senate Judiciary Committee, analysis of AB 2667 (1987-1988 reg. sess.) p. 2.)

Located at Title 9.3 of the Code of Civil Procedure (“Title 9.3”), 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. In 2018, Title 9.3 was amended to authorize foreign and out-of-state attorneys who meet certain conditions to represent their clients in an international arbitration in this state. (SB 766 (Monning, Chapter 134, Statutes of 2018)). Other than SB 766, Title 9.3 has not been updated since it was enacted. In 2006, amendments were made to update the UNCITRAL Model Law in order to conform it to current practices and account for technological developments. These amendments addressed, among other things, the right to interim relief while the international arbitration proceeded, and modernized the law in light of technological developments, principally to clarify that an international arbitration agreement can be formed through an exchange of emails or other electronic communications.

According to the proponents of this bill, California’s outdated statute acts as a barrier to attracting international commercial arbitrations to the state. They argue this bill is entirely consistent with other legislative efforts that have been made to promote California as a venue for international commercial arbitration. They note that when these arbitrations are held in California, it benefits California businesses, which otherwise would have to litigate across the country or overseas, and supports the industries, including the hospitality industry, that benefit from business activity in this state.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

SUPPORT: (Verified 6/17/24)

International Law and Immigration Section, California Lawyer Association (co-source)

Litigation Section, California Lawyers Association (co-source)

California Arbitration, Inc.

California Dispute Resolution Council

College of Commercial Arbitrators

Silicon Valley Arbitration and Mediation Center, Inc.

OPPOSITION: (Verified 6/17/24)

None received

ARGUMENTS IN SUPPORT: The author writes:

California’s international commercial arbitration code is based on the 1985 UNCITRAL Model International Commercial Arbitration Law. This bill incorporates the amendments to the UNCITRAL Model Law that occurred in 2006, which updated the Model Law to conform to current practice and account for technological developments.

This legislation is entirely consistent with the other legislative efforts that have been made to promote California as a venue for international commercial arbitration – efforts that were made to encourage that such arbitrations be held in California and not elsewhere in, or outside, the United States to the detriment of California companies. When held in California, international arbitrations benefit California businesses, which otherwise would have to litigate across the country or overseas, and support the industries, including the hospitality industry, that benefit from business activity in this State.

The California Dispute Resolution Council writes in support stating:

AB 1903 is designed to bring the California International Arbitration and Conciliation Act (CIAC), codified as Code of Civil Procedure Section 1297.11 et. seq., into conformance with the current version of the Model Law on International Commercial Arbitration (the Model Act) that was adopted by the United Nations Commission on International Trade Law (UNCITRAL) in 1985. […]

AB1903 will have virtually no impact or burden on our state courts. We expect that most of the litigation arising from international arbitration agreements will quite likely be initially filed or removed to the federal courts because of the geographical diversity that is inherent in international arbitrations. AB 1903 will once again make California an attractive location for international arbitrations. It needs to be enacted.

ASSEMBLY FLOOR: 70-0, 4/4/24

AYES: Addis, Aguiar-Curry, Alanis, Alvarez, Arambula, Bains, Bauer-Kahan, Bennett, Berman, Boerner, Bonta, Bryan, Calderon, Juan Carrillo, Wendy Carrillo, Connolly, Davies, Essayli, Flora, Mike Fong, Friedman, Gabriel, Gallagher, Garcia, Gipson, Grayson, Haney, Hart, Holden, Irwin, Jackson, Jones-Sawyer, Kalra, Lackey, Low, Lowenthal, Maienschein, McKinnor, Muratsuchi, Ortega, Pacheco, Papan, Jim Patterson, Joe Patterson, Pellerin, Petrie-Norris, Quirk-Silva, Ramos, Rendon, Reyes, Luz Rivas, Rodriguez, Blanca Rubio, Sanchez, Santiago, Schiavo, Soria, Ta, Ting, Valencia, Villapudua, Waldron, Wallis, Ward, Weber, Wicks, Wilson, Wood, Zbur, Robert Rivas

NO VOTE RECORDED: Cervantes, Chen, Megan Dahle, Dixon, Vince Fong, Hoover, Lee, Mathis, McCarty, Stephanie Nguyen

Prepared by: Amanda Mattson / JUD. / (916) 651-4113

6/18/24 10:49:50

**** END ****

1. All further references are to the Code of Civil Procedure unless specified otherwise. ↑

SENATE JUDICIARY COMMITTEE

Senator Thomas Umberg, Chair

2023-2024 Regular Session

Bill No: AB 1903 (Author:Maienschein)

Version: January 23, 2024

Hearing Date: June 4, 2024

Fiscal: Yes

Urgency: No

Consultant: AM

SUBJECT

International commercial arbitration: procedure

DIGEST

This bill specifies that an agreement is in writing for purposes of the statutory framework for the arbitration and conciliation of international commercial disputes if it is contained in an exchange of electronic mail or in an electronic communication if the information contained therein is accessible so as to be usable for subsequent reference. The bill also makes various changes to provisions governing an interim measure of protection that is authorized to be issued under the framework.

EXECUTIVE SUMMARY

This bill is identical to AB 615 (Author:Maienschein, 2023), which passed this Committee but was ultimately held in the Senate Appropriations Committee. 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. In 2006, amendments were made to update the UNCITRAL model law in order to conform it to current practices and account for technological developments. This bill incorporates the amendments to the UNCITRAL Model Law that were made in 2006 into California law.

The bill is sponsored by the International Law and Immigration Section, and the

Litigation Section of the California Lawyers Association. The bill is supported by various organizations representing arbitrators. No timely opposition was received by the Committee.

PROPOSED CHANGES TO THE LAW

Existing law:

1. 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) under Title 9.3 of the Code of Civil Procedure (“Title 9.3”). (Code Civ. Proc. § 1297.11 et seq.)^[1]
2. Existing law specifies the circumstances under which an arbitration or conciliation agreement is considered “international” under Title 9.3. (§ 1297.13.)
3. Requires an arbitration agreement under Title 9.3 to be in writing.
   1. Provides that an agreement is in writing if it is contained in a document signed by the parties or in an exchange of letters, telex, telegrams, or other means of telecommunication which provide a record of this agreement, or in an exchange of statements of claim and defense in which the existence of an agreement is alleged by one party and not denied by another. (§ 1297.72.)
4. Provides that it is not incompatible with an arbitration agreement under Title 9.3 for a party to request from a superior court, before or during arbitral proceedings, an interim measure of protection, or for the court to grant such a measure. (§ 1297.91.)
5. Authorizes the arbitral tribunal, at the request of a party, to order a party to take an interim measure of protection as the arbitral tribunal may consider necessary in respect of the subject matter of the dispute, unless otherwise agreed by the parties. (§ 1297.171.)
6. Authorizes the arbitral tribunal to require a party to provide appropriate security in connection with an interim measure of protection. (§ 1297.172.)

This bill:

1. Directs application of the title to include regard for its international origin and the need to promote uniformity in its application and the observance of good faith.
2. Clarifies that any questions concerning international commercial arbitration that are not expressly settled within Title 9.3 are to be settled in conformity with the general principles embodied in the title.
3. Defines an arbitration agreement to be in writing if its content is recorded in any form, including, but not limited to, in a document signed by the parties or in an exchange of letters, telex, telegrams, electronic mail, or other means of telecommunication accessible for subsequent reference that provides a record of the agreement.
   1. Further clarifies that an arbitration agreement is in writing if it is an electronic communication and the information contained therein is accessible so as to be usable for subsequent reference.
   2. Defines the following for the purposes of the previous provisions:
      1. “Electronic communication” means any communication that the parties make by means of data messages.
      2. “Data message” means information generated, sent, received, or stored by electronic, magnetic, optical, or similar means, including, but not limited to, electronic data interchange (EDI), electronic mail, telegram, telex, or telecopy.
4. Defines as an agreement in writing, an agreement that is contained in an exchange of statements of claim and defense in which the existence of an agreement is alleged by one party and not denied by the other, and a reference in a contract to any document containing an arbitration clause if the reference is such as to make that clause part of the contract.
5. Grants a superior court the same power to issue an interim measure of protection in relation to arbitration proceedings, irrespective of whether the place of arbitration is in California, as it has in relation to proceedings filed in the first instance in the superior courts.
6. Clarifies that any party to the arbitration may request the superior court to enforce an interim measure of protection granted by an arbitral tribunal, and removes a requirement that the enforcement be granted pursuant to the law applicable to the granting of the type of interim relief requested.
7. Defines an interim measure of protection, or interim measure, as any temporary measure, whether in the form of an award or in another form, by which, at any time prior to the issuance of the award by which the dispute is finally decided, the arbitral tribunal orders a party to do any of the following:
   1. maintain or restore the status quo pending determination of the dispute;
   2. take action that would prevent, or refrain from taking action that is likely to cause, current or imminent harm or prejudice to the arbitral process itself;
   3. provide a means of preserving assets out of which a subsequent award may be satisfied; or
   4. preserve evidence that may be relevant and material to the resolution of the dispute.
8. Requires a party requesting an interim measure to satisfy the arbitral tribunal that both of the following conditions are met:
   1. harm not adequately reparable by an award of damages is likely to result if the measure is not ordered, and such harm substantially outweighs the harm that is likely to result to the party against whom the measure is directed if the measure is granted; and
   2. there is a reasonable possibility that the requesting party will succeed on the merits of the claim. The determination of this possibility shall not affect the discretion of the arbitral tribunal in making any subsequent determination.
9. Permits a party, without notice to any other party, to make a request for an interim measure together with an application for a preliminary order directing a party not to frustrate the purpose of the interim measure requested, and would allow the arbitral tribunal to grant a preliminary order provided that it considers that prior disclosure of the request for the interim measure to the party against whom it is directed risks frustrating the purpose of the measure.
10. Requires the arbitral tribunal, immediately following their determination with respect to an application for a preliminary order, to give notice to all parties of the request for the interim measure, the application for the preliminary order, the preliminary order, if any, and all other communications, including the content of any oral communication, between any party and the arbitral tribunal in relation to the interim measure.
11. Requires the arbitral tribunal to provide an opportunity to any party against whom a preliminary order is directed to present its case at the earliest practicable time, and decide promptly on any objection to the preliminary order.
12. Establishes that a preliminary order shall expire after twenty days from the date on which it was issued by the arbitral tribunal, and allows the arbitral tribunal to issue an interim measure adopting or modifying the preliminary order after the party against whom the preliminary order is directed has been given notice and an opportunity to present its case.
13. Makes a preliminary order binding on the parties, but not subject to enforcement by a court, and clarifies that the preliminary order does not constitute an award.
14. Permits the arbitral tribunal to modify, suspend, or terminate an interim measure or a preliminary order it has granted, or in exceptional circumstances and upon prior notice to the parties, on the arbitral tribunal’s own initiative.
15. Permits the arbitral tribunal to require the party requesting an interim measure to provide appropriate security in connection with the measure, as well as require the party applying for a preliminary order to provide security in connection with the order when appropriate.
16. Permits the arbitral tribunal to require any party to promptly disclose any material change in the circumstances on the basis of which the measure was requested or granted.
17. Requires the party applying for a preliminary order to disclose to the arbitral tribunal all circumstances that are likely to be relevant to the arbitral tribunal’s determination whether to grant or maintain the order, and continues the obligation until the party against whom the order has been requested has had an opportunity to represent its case.
18. Makes the party requesting an interim measure or applying for a preliminary order liable for any costs and damages caused by the measure or the order to any party if the arbitral tribunal later determines that, in the circumstances, the measure or orders should not have been granted. Permits the arbitral tribunal to award such costs and damages at any point during the proceedings.
19. Makes an interim measure issued by an arbitral tribunal final and binding, and, unless otherwise provided by the arbitral tribunal, permits the interim measure to be enforced upon application to the superior court subject to other provisions of this bill.
    1. Requires the party who is seeking or has obtained recognition or enforcement of an interim measure to promptly inform the court of any termination, suspension, or modification of the interim measure.
    2. Provides the superior court where recognition or enforcement is sought may order the requesting party to provide appropriate security if the arbitral tribunal has not already made a determination with respect to security or where such a decision is necessary to protect the rights of third parties.
20. Specifies that recognition or enforcement of an interim measure can be refused only if the provisions of a) or b), below, are met.
    1. At the request of the party against whom it is invoked if the court is satisfied that certain conditions are met. Provides that any determination made by the court on any of these grounds is effective only for the purposes of the application to recognize and enforce the interim measure. The court in which recognition or enforcement is sought cannot, in making that determination, undertake a review of the substance of the interim measure.
    2. If the court finds that any of the following are met:
       1. the interim measure is incompatible with the powers conferred upon the court, unless the court decides to reformulate the interim measure to the extent necessary to adapt the interim measure to its own powers and procedures for the purposes of enforcing that interim measure and without modifying its substance;
       2. the subject matter of the dispute is not capable of settlement by arbitration under the law of the United States; or
       3. the recognition or enforcement of the interim measure would be contrary to the public policy of the United States.
21. Makes various technical and clarifying amendments.

COMMENTS

1. Stated need for the bill

The author writes:

California’s international commercial arbitration code is based on the 1985 UNCITRAL Model International Commercial Arbitration Law. This bill incorporates the amendments to the UNCITRAL Model Law that occurred in 2006, which updated the Model Law to conform to current practice and account for technological developments.

This legislation is entirely consistent with the other legislative efforts that have been made to promote California as a venue for international commercial arbitration – efforts that were made to encourage that such arbitrations be held in California and not elsewhere in, or outside, the United States to the detriment of California companies. When held in California, international arbitrations benefit California businesses, which otherwise would have to litigate across the country or overseas, and support the industries, including the hospitality industry, that benefit from business activity in this State.

1. Bill is intended to bolster California as a venue for international commercial arbitration

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 AB 2667, 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 Com., analysis of AB 2667 (1987-1988 reg. sess.) p. 2.)

Located at Title 9.3 of the Code of Civil Procedure (“Title 9.3”), 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. In 2018, Title 9.3 was amended to authorize foreign and out-of-state attorneys who meet certain conditions to represent their clients in an international arbitration in this state. (SB 766 (Monning, Ch. 134, Stats. 2018).) Other than SB 766, Title 9.3 has not been updated since it was enacted.

In 2006, amendments were made to update the UNCITRAL Model Law in order to conform it to current practices and account for technological developments. These amendments addressed, among other things, the right to interim relief while the international arbitration proceeded, and modernized the law in light of technological developments, principally to clarify that an international arbitration agreement can be formed through an exchange of emails or other electronic communications.

According to the proponents of the bill, California’s outdated statute acts as a barrier to attracting international commercial arbitrations to the state. They argue this bill is entirely consistent with other legislative efforts that have been made to promote California as a venue for international commercial arbitration. They note that when these arbitrations are held in California, it benefits California businesses, which otherwise would have to litigate across the country or overseas, and supports the industries, including the hospitality industry, that benefit from business activity in this state.

1. Statements in support

The California Dispute Resolution Council writes in support stating:

AB 1903 is designed to bring the California International Arbitration and Conciliation Act (CIAC), codified as Code of Civil Procedure Section 1297.11 et. seq., into conformance with the current version of the Model Law on International Commercial Arbitration (the Model Act) that was adopted by the United Nations Commission on International Trade Law (UNCITRAL) in 1985. […]

AB1903 will have virtually no impact or burden on our state courts. We expect that most of the litigation arising from international arbitration agreements will quite likely be initially filed or removed to the federal courts because of the geographical diversity that is inherent in international arbitrations.

AB 1903 will once again make California an attractive location for international arbitrations. It needs to be enacted.

SUPPORT

International Law and Immigration Section, California Lawyer Association (sponsor)

Litigation Section, California Lawyers Association (sponsor)

California Dispute Resolution Council

Silicon Valley Arbitration and Mediation Center, Inc.

OPPOSITION

None received

RELATED LEGISLATION

Pending Legislation: None known.

Prior Legislation:

AB 615 (Maienschein, 2023) was identical to this bill. AB 615 was held in the Senate Appropriations Committee.

SB 766 (Monning, Ch. 134, Stats. 2018) authorized foreign and out-of-state attorneys who meet certain conditions to represent their clients in an international arbitration in this state.

AB 2667 (Killea, Ch. 23, Stats. 1988) enacted Title 9.3.

PRIOR VOTES

Assembly Floor (Ayes 70, Noes 0)

Assembly Appropriations Committee (Ayes 12, Noes 0)

Assembly Judiciary Committee (Ayes 10, Noes 0)

**************

1. All further references are to the Code of Civil Procedure unless specified otherwise. ↑

Date of Hearing: March 20, 2024

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Buffy Wicks, Chair

ABPCA Bill Id:AB 1903

Author:(Maienschein) – As Introduced Ver:January 23, 2024

Urgency: No State Mandated Local Program: No Reimbursable: No

SUMMARY:

This bill makes changes to state statutes on international commercial arbitration to align California law with the United Nations Commission on International Trade Law (UNCITRAL)’s model international commercial arbitration laws.

FISCAL EFFECT:

Minor cost pressures (Trial Court Trust Fund, General Fund) to the courts to the extent the bill increases court workload. In pertinent part, this bill grants a superior court authority to enforce interim protections issued by an arbitration tribunal. Costs to the courts will depend on the number of related petitions filed and the amount of court time needed to adjudicate petitions and enforce interim protections, and may be offset to some extent by filing fees. As discussed in more detail below, even a large increase in these petitions will likely have only a modest impact on court workload.

COMMENTS:

1. Purpose. According to the author:

This legislation is entirely consistent with the other legislative efforts that have been made to promote California as a venue for international commercial arbitration – efforts that were made to encourage that such arbitrations be held in California and not elsewhere in, or outside, the United States to the detriment of California companies. When held in California, international arbitrations benefit California businesses, which otherwise would have to litigate across the country or overseas, and support the industries, including the hospitality industry, that benefit from business activity in this State.

1. Background. International commercial arbitration is a form of alternative dispute resolution through which international companies settle disagreements using a mutually agreed upon process rather than through litigation in court. In 1985, UNCITRAL developed a set of model international commercial arbitration laws to help countries modernize their laws on arbitral procedure. California passed its own arbitration code a few years later, largely adopting the policies proposed by UNCITRAL. In 2006, UNCITRAL updated its model laws to account for advances in technology and other industry changes. However, California has not significantly updated its own international commercial arbitration statutes since the 1980s.

This bill would bring California law into alignment with the UNCITRAL model laws and reflect contemporary technology and arbitration practices. Some provisions of the bill govern the practices of non-governmental arbitral tribunals and parties that have agreed to enter into international commercial arbitration. Among other changes, the bill also allows a California superior court to issue interim protections during ongoing arbitration proceedings and enforce interim measures issued by an arbitral tribunal, resulting in a potential increase in workload for the superior courts.

According to the analysis of this bill by the Assembly Committee on Judiciary, these changes could make California a more attractive location for international commercial arbitration, which may also contribute to an increase in related petitions and workload to the courts. However, practitioners in this area indicate very few petitions seeking to enforce interim arbitration measures have been filed in the past. California Arbitration, Inc., a membership organization for legal practitioners of international arbitration alternative dispute resolution, reported to this committee that its members identified only three such petitions filed in the past decade. Accordingly, even if this bill doubled or tripled the number of petitions filed statewide, it would have only a minimal impact on court workload, if any.

1. Prior Legislation. AB 615 (Maienschein), of the current legislative session, was identical to this bill. It was held on the Senate Appropriations suspense file.

Analysis Prepared by: Annika Carlson / APPR. / (916) 319-2081

Date of Hearing: March 12, 2024

ASSEMBLY COMMITTEE ON JUDICIARY

Ash Kalra, Chair

ABPCA Bill Id:AB 1903

Author:(Maienschein) – As Introduced Ver:January 23, 2024

PROPOSED CONSENT

SUBJECT: International commercial arbitration: procedure

KEY ISSUE: SHOULD CALIFORNIA MODERNIZE ITS INTERNATIONAL COMMERCIAL ARBITRATION STATUTES TO REFLECT THE UNITED NATIONS COMMISSION ON INTERNATIONAL TRADE LAW’S MODEL LAW?

SYNOPSIS

Arbitration is one of the most commonly used methods of dispute resolution, particularly in international commercial contexts. International commercial arbitration, or foreign arbitration, is the process of resolving disputes arising between private parties across national boundaries. As our economy becomes increasingly global, the appeal of international commercial arbitration continues to grow. International commercial arbitration allows private entities that are otherwise governed by distinct legal frameworks and procedures to consent to a mutually agreeable decision maker, or arbiter, location for the arbitration, and governing law. In 1958, in recognition of the growth of international disputes, the United Nations hosted the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (also called the “New York Convention”). The goal of the New York Convention was to “provide common legislative standards for the recognition of arbitration agreements and court recognition and enforcement of foreign and non-domestic arbitral awards.” In 1988, California adopted UNCITRAL’s Model Law, but the statute has not been amended since. This bill modernizes California’s international arbitration code to reflect modern arbitration practices and technological advances. This bill is sponsored by the California Lawyer’s Association and is supported by the California Dispute Resolution Council.

SUMMARY: Modernizes California’s international commercial arbitration statutes and brings them in line with the United Nations Commission on International Trade Law (UNCITRAL)’s Model Law. Specifically, this bill:

1. Directs application of the title to include regard for its international origin and the need to promote uniformity in its application and the observance of good faith.
2. Clarifies that any questions concerning international commercial arbitration that are not expressly settled within the title are to be settled in conformity with the general principles embodied in the title.
3. Defines an arbitration agreement to be in writing if its content is recorded in any form, including, but not limited to, in a document signed by the parties or in an exchange of letters, telex, telegrams, electronic mail, or other means of telecommunication accessible for subsequent reference that provides a record of the agreement.
   1. Further clarifies that an arbitration agreement is in writing if it is an electronic communication and the information contained therein is accessible so as to be usable for subsequent reference.
   2. Defines the following for the purposes of the previous provisions:
      1. “Electronic communication” means any communication that the parties make by means of data messages.
      2. “Data message” means information generated, sent, received, or stored by electronic, magnetic, optical, or similar means, including, but not limited to, electronic data interchange (EDI), electronic mail, telegram, telex, or telecopy.
4. Defines as an agreement in writing, an agreement that is contained in an exchange of statements of claim and defense in which the existence of an agreement is alleged by one party and not denied by the other, and a reference in a contract to any document containing an arbitration clause if the reference is such as to make that clause part of the contract.
5. Grants a superior court the same power to issue an interim measure of protection in relation to arbitration proceedings, irrespective of whether the place of arbitration is in California, as it has in relation to proceedings filed in the first instance in the superior courts.
6. Clarifies that any party to the arbitration may request the superior court to enforce an interim measure of protection granted by an arbitral tribunal, and removes a requirement that the enforcement be granted pursuant to the law applicable to the granting of the type of interim relief requested.
7. Defines an interim measure of protection, or interim measure, as any temporary measure, whether in the form of an award or in another form, by which, at any time prior to the issuance of the award by which the dispute is finally decided, the arbitral tribunal orders a party to do any of the following:
   1. Maintain or restore the status quo pending determination of the dispute;
   2. Take action that would prevent, or refrain from taking action that is likely to cause, current or imminent harm or prejudice to the arbitral process itself;
   3. Provide a means of preserving assets out of which a subsequent award may be satisfied;
   4. Preserve evidence that may be relevant and material to the resolution of the dispute.
8. Requires a party requesting an interim measure to satisfy the arbitral tribunal that both of the following conditions are met:
   1. Harm not adequately reparable by an award of damages is likely to result if the measure is not ordered, and such harm substantially outweighs the harm that is likely to result to the party against whom the measure is directed if the measure is granted;
   2. There is a reasonable possibility that the requesting party will succeed on the merits of the claim. The determination of this possibility shall not affect the discretion of the arbitral tribunal in making any subsequent determination.
9. Permits a party, without notice to any other party, to make a request for an interim measure together with an application for a preliminary order directing a party not to frustrate the purpose of the interim measure requested, and would allow the arbitral tribunal to grant a preliminary order provided that it considers that prior disclosure of the request for the interim measure to the party against whom it is directed risks frustrating the purpose of the measure.
10. Requires the arbitral tribunal, immediately following their determination with respect to an application for a preliminary order, to give notice to all parties of the request for the interim measure, the application for the preliminary order, the preliminary order, if any, and all other communications, including the content of any oral communication, between any party and the arbitral tribunal in relation to the interim measure.
11. Requires the arbitral tribunal to provide an opportunity to any party against whom a preliminary order is directed to present its case at the earliest practicable time, and decide promptly on any objection to the preliminary order.
12. Establishes that a preliminary order shall expire after twenty days from the date on which it was issued by the arbitral tribunal, and allows the arbitral tribunal to issue an interim measure adopting or modifying the preliminary order after the party against whom the preliminary order is directed has been given notice and an opportunity to present its case.
13. Makes a preliminary order binding on the parties, but not subject to enforcement by a court, and clarifies that the preliminary order does not constitute an award.
14. Permits the arbitral tribunal to modify, suspend, or terminate an interim measure or a preliminary order it has granted, or in exceptional circumstances and upon prior notice to the parties, on the arbitral tribunal’s own initiative.
15. Permits the arbitral tribunal to require the party requesting an interim measure to provide appropriate security in connection with the measure, as well as require the party applying for a preliminary order to provide security in connection with the order when appropriate.
16. Permits the arbitral tribunal to require any party to promptly disclose any material change in the circumstances on the basis of which the measure was requested or granted.
17. Requires the party applying for a preliminary order to disclose to the arbitral tribunal all circumstances that are likely to be relevant to the arbitral tribunal’s determination whether to grant or maintain the order, and continues the obligation until the party against whom the order has been requested has had an opportunity to represent its case.
18. Makes the party requesting an interim measure or applying for a preliminary order liable for any costs and damages caused by the measure or the order to any party if the arbitral tribunal later determines that, in the circumstances, the measure or orders should not have been granted. Permits the arbitral tribunal to award such costs and damages at any point during the proceedings.
19. Makes an interim measure issued by an arbitral tribunal final and binding, and, unless otherwise provided by the arbitral tribunal, permits the interim measure to be enforced upon application to the superior court subject to other provisions of this bill.
    1. Requires the party who is seeking or has obtained recognition or enforcement of an interim measure to promptly inform the court of any termination, suspension, or modification of the interim measure.
    2. Authorizes the superior court where recognition or enforcement is sought to order the requesting party to provide appropriate security if the arbitral tribunal has not already made a determination with respect to security or where such a decision is necessary to protect the rights of third parties.
20. Restricts refusal of recognition or enforcement of an interim measure to the following situations:
    1. At the request of the party against whom it is invoked if the court is satisfied that certain conditions are met. Makes a determination made by the court on this ground effective only for the purposes of the application to recognize and enforce the interim measure, and prohibits the court in which the recognition or enforcement is sought from undertaking a review of the substance of the interim measure.
    2. At the court’s own determination if it finds that one of various conditions are met;
    3. If the court finds that any of the following are met:
       1. The interim measure is incompatible with the powers conferred upon the court, unless the court decides to reformulate the interim measure to the extent necessary to adapt the interim measure to its own powers and procedures for the purposes of enforcing that interim measure and without modifying its substance;
       2. The subject matter of the dispute is not capable of settlement by arbitration under the law of the United States;
       3. The recognition or enforcement of the interim measure would be contrary to the public policy of the United States.
21. Makes various technical and clarifying amendments.

EXISTING LAW:

1. Establishes Title 9.3: Arbitration and Conciliation of International Commercial Disputes. (Code of Civil Procedure Section 1297.11 et seq. All further references are to the Code of Civil Procedure unless otherwise noted.)
2. Provides that an arbitration or conciliation agreement is considered “international” if any of the following applies:
   1. The parties to an arbitration or conciliation agreement have, at the time of the conclusion of that agreement, their places of business in different states;
   2. If the place of arbitration or conciliation if determined in, or pursuant to, the arbitration or conciliation agreement, the place where a substantial part of the obligations of the commercial relationship is to be performed, or the place with which the subject matter of the dispute is most closely connected is situated outside the state in which the parties have their places of business;
   3. 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
   4. The subject matter of the arbitration or conciliation agreement is otherwise related to commercial interests in more than one state. (Section 1297.13.)
3. Defines an arbitration or conciliation to be commercial if it arises out of a relationship of a commercial nature, including, but not limited to, any of the following:
   1. A transaction for the supply or exchange of goods or services;
   2. A distribution agreement;
   3. A commercial representation or agency;
   4. An exploitation agreement or concession;
   5. A joint venture or other, related form of industrial or business cooperation;
   6. The carriage of goods or passengers by air, sea, rail, or road;
   7. Construction, insurance, licensing, factoring, leasing, consulting, engineering, financing, banking, professional services;
   8. The transfer of data or technology; or
   9. Intellectual or industrial property, including trademarks, patents, copyrights and software programs. (Section 1297.16.)
4. Permits parties to a dispute to authorize a third party to make a determination. (Section 1297.22.)
5. Requires an arbitration agreement to be in writing. (Section 1297.72.)
6. Defines an agreement to be in writing if it is contained in a document signed by the parties or in an exchange of letters, telex, telegrams, or other means of telecommunication which provide a record of the agreement, or in an exchange of statements of claim and defense in which the existence of an agreement is alleged by one party and not denied by another. Also specifies that the reference in a contract to a document containing an arbitration clause also constitutes an arbitration agreement provided that the contract is in writing and the reference is such as to make the clause part of that contract. (Section 1297.72.)
7. Authorizes a party to request an interim measure of protection, and authorizes a court to grant such a measure. (Section 1297.90.)
8. Authorizes a party to an international commercial arbitration to request the superior court to enforce an award from an arbitral tribunal to take an interim measure of protection granted by the arbitral tribunal. (Section 1297.92.)
9. Authorizes the arbitral tribunal, at the request of a party, to order a party to take an interim measure of protection as the arbitral tribunal may consider necessary in respect of the subject matter of the dispute, unless otherwise agreed by the parties. (Section 1297.171.)
10. Authorizes the arbitral tribunal to require a party to provide appropriate security in connection with an interim measure of protection. (Section 1297.172.)

FISCAL EFFECT: As currently in print this bill is keyed fiscal.

COMMENTS: International commercial arbitration, or foreign arbitration, is the process of resolving disputes arising between private parties across national boundaries. International commercial arbitration allows private entities that are otherwise governed by distinct legal frameworks and procedures to consent to a mutually agreeable decision maker, or arbiter, location for the arbitration, and governing law. For example, a company located in California which does business with a company in China may enter into an agreement to hash out any potential controversies or claims with a mutually agreeable impartial party through a proceeding hosted in France, applying California law. As our economy becomes increasingly global, the appeal of international commercial arbitration continues to grow, as the process permits entities with distinct linguistic and cultural backgrounds to identify a mutually agreeable procedure by which to settle disagreements and obtain an enforceable final decision.

In 1958, in recognition of the growth of international disputes, the United Nations hosted the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (also called the “New York Convention”). The goal of the New York Convention was to “provide common legislative standards for the recognition of arbitration agreements and court recognition and enforcement of foreign and non-domestic arbitral awards.” (Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 1958) (the “New York Convention”), United Nations Commission on International Trade Law, available at: https://uncitral.un.org/en/texts/arbitration/conventions/foreign_arbitral_awards.) Nearly 30 years later, in 1985, the United National Commission on International Trade Law (UNCITRAL) developed its first Model Law on International Commercial Arbitration, to provide a set of guiding principles to “assist States in reforming and modernizing their laws on arbitral procedure so as to take into account the particular features and needs of international commercial arbitration.” (UNCITRAL Model Law on International Commercial Arbitration (1985), with amendments as adopted in 2006, United Nations Commission on International Trade Law, available at: https://uncitral.un.org/en/texts/arbitration/modellaw/commercial_arbitration.) Following the adoption of the UCITRAL Model Law, California passed its own international arbitration code in 1987, largely embracing the Model Law. However, when the UNCITRAL Model Law was amended in 2006 to reflect technological developments, California’s law remained the same.

According to the author:

This legislation is entirely consistent with the other legislative efforts that have been made to promote California as a venue for international commercial arbitration – efforts that were made to encourage that such arbitrations be held in California and not elsewhere in, or outside, the United States to the detriment of California companies. When held in California, international arbitrations benefit California businesses, which otherwise would have to litigate across the country or overseas, and support the industries, including the hospitality industry, that benefit from business activity in this State.

This bill modernizes California’s international arbitration code to reflect modern arbitration practices and technological advances. Among other changes, this bill clarifies that an international arbitration agreement, which must be in writing to be valid, is considered to be written when it is formed via e-mail. The bill also makes various changes to conform to the 2006 UNCITRAL Model Law by delineating valid interim measures of relief – or a temporary measure available to either party before a final award is granted in order to provide a degree of protection to the requesting party.

By placing California’s international arbitration statute in line with UNCITRAL’s Model Law, this bill would arguably facilitate California-based companies’ participation in international trade by ensuring that California law recognizes agreements made via e-mail and explicitly authorizing interim measures of protection. Additionally, it would arguably draw increased international commercial arbitration to the state, thereby supporting the state’s businesses that already engage in international commercial activity. By providing an attractive location for international commercial arbitration, the bill may additionally encourage new or growing businesses to expand beyond California’s borders.

Last year AB 615 (Maienschein, 2023), which was identical to the current measure was held in Senate Appropriations.

ARGUMENTS IN SUPPORT: This bill is sponsored by the California Lawyers Association and supported by California Arbitration, Inc., the College of Commercial Arbitrators, and the Silicon Valley Arbitration and Mediation Center, Inc. In support of the measure the sponsors write:

AB 1903 will update and modernize California’s international commercial arbitration law, thereby encouraging commercial parties to an international commercial dispute to agree to hold their arbitration in California rather than other leading jurisdictions, such as Florida, New York, London, Paris, Geneva, Hong Kong, or Singapore.

[…]

Most of AB 1903 addresses arbitral procedure and the formation of arbitration agreements. The bill would not create new authority or expand the existing authority of the superior courts to issue or to enforce interim protections during an ongoing international commercial arbitration. To the contrary, AB 1903 should reduce the need for parties to resort to the superior court. The bill adds standards and conditions for an arbitral tribunal to grant an interim measure of protection. It also authorizes the arbitral tribunal to modify, suspend, or terminate an interim measure. Both of these updates should increase parties resorting to the arbitral tribunal rather than the courts. The bill also eliminates uncertainty over the standards for courts to use to enforce interim measures by specifying the grounds upon which a court can refuse to enforce an interim measure. The bill could result in a decrease in the number of requests filed with the superior courts (which are already minimal) by providing recourse to the arbitral tribunal to grant, modify, suspend, or terminate an interim measure of protection rather than having the matter litigated in court. (See new Code of Civil Procedure sections 1297.171-178.)

AB 1903 furthers previous legislative efforts to continue to promote California as a venue for international arbitration and to attract business to this State. Thus, for example, in 2018 the International Commercial Arbitration and Conciliation Act was amended to authorize foreign and out-of-state attorneys who meet certain conditions to represent their clients in an international arbitration in California (SB 766 (Monning), Stats. 2018, ch. 134). This bill will benefit California businesses, which otherwise would be conducting their international arbitrations across the country or overseas, and will support industries that benefit from business activity in this State.

REGISTERED SUPPORT / OPPOSITION:

Support

California Lawyers Association, Litigation Section and International Law and Immigration Section (sponsor)

California Arbitration, INC.
College of Commercial Arbitrators
Silicon Valley Arbitration and Mediation Center, INC.

Opposition

None on file

Analysis Prepared by: Manuela Boucher-de la Cadena / JUD. / (916) 319-2334