Amendments to RCW by addition of New 7.04 B
International Commercial Arbitration Act

By request of the ADR Section from Representative Roger Goodman, the Legislative Committee conducted a review of the Washington Arbitration Statute (RCW 7.04 A).  The committee has determined that there is no reason that the current statute should be changed or amended.  However, Washington does not provide for international commercial arbitration as have many states through the adoption of the model international commercial arbitration act by the United Nations Commission on International Trade Law (UNCITRAL).  We recommend the adoption of the model trade act.

A summary and facts about the proposed act follow and the text of the new act draft by the Office of the Code Reviser can be accessed here:  ICAA H-2750 1 and an annontated version of that Act drafted by our legislative committee.

Purpose: To make the State of Washington a more hospitable venue for international commercial arbitration by limiting RCW 7.04A to domestic arbitration and enacting new RCW 7.04B – based on the UNCITRAL Model Law on International Commercial Arbitration – to govern international arbitration.

Rationale: (1) Washington’s Current Law (RCW 7.04A) Is Inadequate for International Arbitration

• RCW 7.04A is designed for domestic arbitration
  • Allows more court supervision of the arbitral process than the Model Law
  • Court supervision is more appropriate to protect individuals / residents than sophisticated business entities / foreign parties
• International arbitration differs significantly from domestic arbitration
  • Typically involves parties from different legal traditions
  • Almost always involves disputes between companies, not individuals
  • Typically involves relatively large amounts in dispute (millions of dollars)
  • Always involves only commercial – not labor, employment, or consumer – relationships
• International arbitration’s differences warrant separate treatment under the law
  • Companies have settled expectations regarding international arbitration
  • Foreign companies avoid jurisdictions that allow local courts to intervene

Rationale: (2) Washington Would Benefit From Adopting the UNCITRAL Model Law

• The Model Law is time-tested and internationally trusted
  • 66 nations and 8 U.S. states have enacted legislation based on the Model Law
  • The Model Law is the product of extensive collaboration among governments and interested stakeholders to establish a harmonized legal framework for resolving international commercial disputes
• Washington’s Pacific coast neighbors have enacted legislation based on the Model Law
  • California (1988)
    • Oregon (1991)
  • British Columbia (1986)
    • Mexico (1993)
• International arbitrations are economically beneficial to the cities and states that host them
  • Toronto study (2012): Estimated average economic impact of a case—C$1.7 million
  • UK estimate (1979): Estimated impact of international arbitration—£500 million
• Seattle is well-situated to host cases between Canadian, Mexican, Asian, and U.S. companies
  • Convenient for air travel; cost-effective facilities; hub of sophisticated global businesses; multicultural hospitality with a rich variety of dining and entertainment options.

Rationale: (3) Enacting Separate Legislation to Govern International Commercial Arbitration Has No Discernable Cost