Delaware recently enacted the Delaware Rapid Arbitration Act (the "DRAA"), a potentially cost-saving alternative form of dispute resolution for Delaware business entities. The DRAA contains several noteworthy features that: (i) generally require arbitration to be completed in no longer than 180 days; (ii) eliminate the need for judicial confirmation of arbitration awards; and (iii) limit court challenges to a single appeal to Delaware's highest court or, if the parties have so provided, to an arbitrator.
In particular, the DRAA, which will become effective on May 4, 2015, contains the following important provisions:
Applicability. For the DRAA to apply, (i) one party must be a business entity formed in Delaware or with its principal place of business in Delaware; (ii) both parties must be business entities; and (iii) the arbitration agreement must select both Delaware law and the DRAA.
Arbitrator Selection. If the parties have not done so, the Delaware Court of Chancery will appoint the arbitrator.
Exclusive Jurisdiction Over Arbitrability Issues. Arbitrators have exclusive power to decide substantive and procedural arbitrability. This should eliminate much collateral pre-arbitration litigation.
Sanction Power. The arbitrator may impose sanctions to resolve an arbitration in a timely, efficient, and orderly manner.
Speed of Resolution. Unless parties select a different time in their arbitration agreements, DRAA arbitrations must be completed within 120 days of the arbitrator's acceptance of the appointment. By unanimous agreement, the parties can extend the default 120-day deadline or the deadline agreed to by the parties by no more than 60 days. The DRAA imposes financial penalties on arbitrators who do not meet the timing requirements of the DRAA.
Limited Judicial Review. The winning party is not required to seek judicial confirmation of an award. That is deemed to occur automatically. If an award includes remedies other than for damages, it may be reduced to judgment in Chancery Court. Judgment for an exclusively damages award must be issued by Delaware Superior Court. A losing party's challenge to an award is restricted to an appeal directly to the Delaware Supreme Court or, if the arbitration agreement so provides, to one or more arbitrators.
The DRAA's most striking features are its various limits on collateral court litigation, including its requirement that only arbitrators determine arbitrability issues, its elimination of judicial confirmation of awards, and its restriction of award challenges to a single appeal to Delaware's highest court or, if the arbitration agreement so provides, an arbitration panel. This likely renders Delaware the most arbitration-friendly jurisdiction in the nation.