California Now Open for Business in International Arbitration
| Publication year | 2018 |
| Author | Howard B. Miller* |
Howard B. Miller*
The most important change in international legal affairs in 2018 for California lawyers and their clients was the legislature unanimously passing and Governor Brown signing Senate Bill 766 (SB 766), sponsored by Senator Bill Monning (D. Monterey). SB 766, signed by Governor Brown on July 18, 2018, effective as of January 1, 2019, permits a non-California lawyer qualified as a lawyer in another state or country to represent parties in international arbitrations in California. As international contracts, whether for financing, trade, joint ventures or suppliers, ordinarily include an international arbitration clause, SB 766 will have widespread effect.
It will not only bring more international arbitrations to California. It quite separately will provide additional leverage to California companies negotiating all international contracts.
Despite being the fifth largest economy in the world, California has for decades been a backwater for international commercial arbitration. The problem began when the California Supreme Court decided Birbrower, Montalbano, Condon & Frank v. Superior Court, 7 Cal. 4th 119 (1998), which effectively held representing parties in international arbitration in California was considered unauthorized practice of law, and a non-California lawyer could not practice or collect fees for work on international arbitration in California. Since California Business and Professions Code section 6126 states penalties for unauthorized practice of law in California may include a fine of up to one thousand dollars and one year in county jail, lawyers around the world were told if they went to California to handle an international arbitration, under a technical reading of the California statutes, they could go to jail. Non-U.S. lawyers negotiating with California businesses with respect to contracts that contained international arbitration clauses were simply unwilling to agree to California as a venue for arbitration, since they would not be able to appear and represent their clients in the arbitration and could be subject to severe penalties.
Before SB 766, if counsel for a California company during negotiations of an international contract suggested seating an international arbitration in California, the non-California counterpart could quickly say: "How do you expect me to agree to a procedure in California in which I...
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