Arbitration of International Commercial Disputes
In general, companies that enter into economic relations with foreign companies may include provisions in the contract that outline how they plan to resolve legal disputes in the future. In the United States, federal laws strongly favor arbitration as a means of resolving international commerce disputes. The courts will exercise deference towards such arbitration agreements because they permit the involved parties to resolve disputes in their preferred forum and under their preferred legal procedure. In fact, certain state law provisions show a preference for international commercial arbitration. Indeed, the California International Arbitration and Conciliation Act ("CIACA"), codified under Code of Civil Procedure section 1297.11 et seq. operates to encourage parties with international business relationships to contractually agree to resolve their disputes in California. However, before entering into international commercial arbitration agreements, or while in the process of arbitrating an international commercial dispute, contact the Law Offices of Salar Atrizadeh to speak with a knowledgeable and experienced attorney regarding your arbitration agreement.
Usually, an arbitration or conciliation is considered international if the: (i) parties have their places of business in different countries; (ii) subject matter of their dispute is closely connected with a third country, or a substantial part of their agreement is to be performed in such third country; (iii) parties have designated California as the place of arbitration; or (iv) subject matter of the arbitration or conciliation is otherwise related to commercial interests in more than one country. In the alternative, the parties may simply agree that their agreement relates to commercial interests in more than one country, and thereby invoke the CIACA.
The parties that contractually agree to international arbitration for contractual relations will generally agree that the rules of the United Nations Commission on International Trade Law will govern the arbitration proceedings. Otherwise, the traditional structure of arbitration applies in the international arena. For instance, the parties come together to agree on an arbitrator and governing procedural standards. If they are unable to decide the framework and parameters of the arbitration, CIACA provides, among other default rules, methods for selecting the place of arbitration, the language used during the arbitration, and expert discovery rules. However, the arbitrator is bound to follow the rules of law that the parties selected and agreed to upon forming the arbitration agreement.
In general, the parties have discretion to either appear in person, be represented, or assisted by any person of their choice. Nonetheless, the arbitrator must make a ruling on the “arbitrability” of the dispute. This will include a finding, by the arbitrator, that the arbitration agreement is in fact valid and binding, and that the arbitrator has jurisdiction to hear the underlying dispute. Indeed, corporate entities which do not want to resolve the dispute by the terms of the arbitration agreement may bring a case to contest whether the agreement is in fact binding. In the event that the arbitrator finds the arbitration agreement is actually not binding, the corporate entities may move to resolve the dispute through more traditional means such as state or federal courts. Alternatively, if a corporate party ignores the binding arbitration agreement and first files a complaint with a court, under California Code of Civil Procedure section 1297.81 the other party maintains the right to file a motion to stay litigation and motion to compel arbitration.
In consideration of the unique nature of arbitration, especially involving international commercial disputes, our clients stand to gain knowledge and guidance by seeking the assistance of attorneys with experience to guide them towards a resolution of their legal disputes.