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The California Court of Appeals held that an Italian film distributor waived the protections of California’s Arbitration and Conciliation of International Commercial Disputes Act (the Act) because the distributor never informed the Arbitrator that the Act places special restrictions on an arbitrator’s decisionmaking.
In Mediafiction S.p.A. v. Miramax Film Corp., No. B185953, 2006 WL 3307068 (Cal. Ct. App. Nov. 15, 2006), Miramax filed arbitration claims against Mediafiction and several other Italian film distributors (the Distributors), alleging that they violated their distribution agreements with Miramax. The arbitrator entered an award in favor of Miramax.
The Distributors filed a motion to vacate the award, arguing that the Act prohibited the arbitrator from making a decision ex aequo et bono (according to what is right and good). This restriction does not apply in a “traditional arbitration” where the arbitrator is free to base his award on principles of equity and good conscience – unless, of course, the parties have dispensed with tradition and agreed that the arbitrator must follow the law, see, e.g., Rule 20D of the National Arbitration Forum Code of Procedure.
In ruling on the Distributors’ motion to vacate, the Court agreed that the arbitration was an international arbitration subject to the Act. As the Court noted, the Act does restrict an arbitrator’s decisionmaking by, for example, disallowing awards that are made ex aequo et bono. However, the Act also contains a waiver provision whereby a party waives any right to object to noncompliance with the Act unless the party objected during the arbitration.
The Court found that the waiver provision precluded the Distributors from raising any objection to noncompliance with the Act because prior to filing their motion to vacate, the Distributors never cited the Act’s restrictions on an arbitrator’s decision making. Accordingly, the Court affirmed the trial court order confirming the award.
The Act was patterned after the model arbitration law promulgated by the United Nations Commission on International Trade Law. It was meant to encourage foreign companies to choose California as a venue for arbitration. The waiver provision was included to protect the finality of arbitration awards and prevent parties from exploiting the Act for a second bite at the apple.
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