In the early part of 2017, a new law was passed by the New Jersey State Legislature without much fanfare and virtually none of the political wrangling that often accompanies actions in Trenton. In fact, it had broad bipartisan support and passed by a vote of 33−0 in the New Jersey Senate. Titled the New Jersey International Arbitration, Mediation and Conciliation Act, N.J.S.A. 2A:23E-1 et seq., it became effective on May 7.
The act provides for establishment of alternative dispute resolution centers to administer various modalities of settlement, with the aim of converting a mediated settlement into a consent arbitral award enforceable either in a U.S. court or abroad in one of the more than 150 signatory countries to the New York Convention, which has been the primary vehicle for enforcement of international arbitration awards. Arbitration, however, has come into increasing disfavor as it has grown more costly and time-consuming.
According to data amassed by the Global Pound Conference of the International Mediation Institute (IMI), the international business and commerce community has been promoting the use of mediation and related hybrid processes because of the greater economy, flexibility and control afforded to the parties. The problem is that mediation agreements are treated the same as other contracts and require litigation abroad for enforcement, absent a mechanism similar to what the New York Convention achieves for international arbitration. The new legislative action creates a consistency in the parties’ expectations to assure their deal will be carried out.
History of the Act
A body of the United Nations has been investigating means to enforce mediated settlements of international disputes. Efforts continue to be undertaken by Working Group II of the United Nations Commission on International Trade (UNCITRAL), which have been promoted by the U.S. Chamber of Commerce. Realistically, however, these efforts are viewed as being years from fruition. In a parallel development, organizations such as the College of Commercial Arbitrators (CCA), IMI and Pepperdine Law School established a task force on “mixed mode” (using hybrid methods) dispute resolution. New Jersey’s response is a legislative one.
Professor David S. Weiss, founder and director of the Institute for Dispute Resolution at New Jersey City University in Jersey City, who was the moving force behind the legislation, expects it to have an “enormous international impact on the legal and business sectors of our state, and bring significant economic benefits, as well.” Laura A. Kaster, immediate past president of the Justice Marie L. Garibaldi Inn of Court, who testified in support of the legislation, observes that the statute gives New Jersey a “leg up” in attracting increased international business, trade and commerce. This should boost the already significant role that international trade plays in the state’s economy. U.S. Department of Commerce data indicates that New Jersey exported more than $32 billion worth of merchandise in recent years, most of it going to Canada and Mexico.
Provisions of the Act
The statute, N.J.S.A. 2A: 23E-4, applies only to cross-border disputes defined as being between:
a. (1) two or more persons, at least one of whom is a nonresident of the United States or (2) two or more persons, all of whom are residents of the United States, if the dispute (a) involves property located outside the United States or (b) relates to a contract that envisages enforcement or performance in whole or in part outside the United States or (c) bears some relation to one or more foreign countries.
b. Notwithstanding subsection a. of this section, this act shall not apply to the arbitration of (1) any dispute pertaining to the ownership, use, development, or possession of, or a lien of record upon, real property located in this State, unless the parties expressly submit the resolution of the dispute to this act, or (2) any dispute involving family or domestic relations law.
Practically speaking, the statute creates a hybrid process in which the parties agree to appoint a neutral having the dual role of arbitrator and mediator. The parties engage in mediation and if they reach a settlement, the neutral (wearing his/her arbitrator “hat”) enters a consent award that is enforceable pursuant to section 8 of the Act, consistent with the Federal Arbitration Act (9 U.S.C. 1 et seq.) and the New York Convention, both of which are incorporated by reference.
Section 6 of the act provides for the establishment of nonprofit “centers” to facilitate the resolution of disputes by arbitration, mediation, conciliation and other means, as determined by the needs of the parties. At the present time, it is anticipated that one such center, the Global Mediation Exchange Center, will be operational in Jersey City in fall 2017. The center will provide services including physical space for mediations, panels of IMI-certified mediators specifically trained to address cross-border business disputes and continuing education concerning these functions. The plan is for other mediation centers to be established and collaborate internationally, forming what essentially will be a worldwide dispute-resolution network. It is envisioned that the network will offer heightened and efficient resolution capabilities.
Impact of the Act on NJ’s Legal and Business Sectors
While at first blush it might appear that the statute was designed with large corporations in mind, those who were intimately involved in its content and passage say otherwise. Robert E. Margulies of Jersey City’s Margulies Wind law firm, an arbitrator and mediator who testified in support of the statute and helped draft its language, was quoted in Law360 as saying that it also is geared toward small to medium-sized businesses seeking to expand their markets. According to Professor Weiss, the statute will address the needs of family-run and closely held businesses that may have previously shied away from cross-border commerce because of the cost and hassle involved. In addition, the statute also potentially creates new opportunities for dispute resolution professionals.
Advances in computer technology and the permeation of the internet into virtually all facets of everyday life have made it safe to say that nothing is truly “local” anymore. Any person who makes a sale or an order over the internet is theoretically within the ambit of the new statute. The notion that a business can avail itself of a convenient and economically feasible means of resolving a payment dispute, for example, may make New Jersey an attractive environment for companies. The state’s geographic location, having three major international airports in the region in addition to Port Newark and nearby ports in sister states, serves to make New Jersey a hub for international dispute resolution with the advent of the statute.
This, in turn, should translate into increased business opportunities for New Jersey lawyers. All business entities, ranging from sole proprietorships and mom-and-pop shops to multinational corporations who are involved in cross-border commerce, stand to benefit from the act’s scheme. Attorneys with clients on this spectrum will want to familiarize themselves with the new statute and make clients aware of the opportunities to do business globally and cost-effectively in this increasingly connected world.•