The State of Delaware is offering something new for parties that would rather arbitrate than litigate in a public courtroom - and its offering has global reach.
The Delaware Court of Chancery and the Delaware Supreme Court are renowned for their business law expertise and their speed for resolving business disputes. Complex business cases have been decided in the Court of Chancery − with discovery, motion practice, trial and a thorough written opinion − in as little as 30 days. When an appeal is taken to the Delaware Supreme Court, the appeal is adjudicated promptly. The speedy and expert resolution of business disputes is part of the Delaware brand. Delaware’s litigation process saves money and enables an enterprise to focus on business by cutting down on the time wasted on litigation.
Traditional forms of arbitration actually have taken longer than most Delaware court proceedings. Now, however, the new Delaware Rapid Arbitration Act (DRAA), 10 Del. C. Ch. 58, effective May 2, 2015, places a Delaware brand on the arbitration of complex business disputes that also will save businesses money and time. By expressly referencing the DRAA in an arbitration agreement, the parties are deemed to have consented to the provisions and benefits of the Act. This is a welcome addition to the panoply of benefits the State of Delaware provides to business entities formed under Delaware law.
How the DRAA works
The DRAA is straightforward. Business entities, at least one of which must be formed under Delaware law, may agree in writing to submit to arbitration under the DRAA any controversy existing at the time of the agreement or arising after its effective date. More than one million Delaware business entities qualify to use the DRAA, including more than 66 percent of Fortune 500 companies and more than half of all US public companies.
With unique provisions, the DRAA builds expedited case management into the Delaware arbitration process in several important ways. The Act requires all arbitrations to be completed within 120 days. Only by unanimous agreement of the parties may this deadline be extended, and then only to 180 days. If an Arbitrator does not comply with this mandate, there are financial penalties for the Arbitrator.
Time is also saved under the DRAA − and litigation is avoided − by giving the Arbitrator the sole authority to decide any issue on the scope of the arbitration. As to review, the parties may contract for (i) no review of the Arbitrator’s decision, (ii) review before an Appellate Arbitrator selected by the agreement with a process defined in the agreement, or (iii) an Appellate Arbitrator appointed by the Delaware Court of Chancery. If the parties do not limit the review in this way, the review is conducted by the Delaware Supreme Court in conformity with the Federal Arbitration Act, 9 U.S.C. § 1et seq., but only if a challenge is taken within 15 days of the final award.
Scope of the relief
Improvements to the arbitration process under the DRAA do not come with any sacrifice of the traditional benefits of arbitration as a form of private dispute resolution. Unless the parties limit the authority of the Arbitrator by agreement, the Arbitrator may grant legal or equitable relief, including damages, specific performance or injunction.
Still private and confidential
Significantly, and unlike trial proceedings, arbitral hearings are still private and confidential. The parties may select an Arbitrator with appropriate expertise for their dispute, and the seat of arbitration may be anywhere in the world under the DRAA. Costs are generally lower, and an award is more easily enforced under the New York Convention and the Panama Convention, than a court judgment. These international conventions require the enforcement by contracting states of arbitration agreements and arbitral awards.
Selection of an Arbitrator
The parties may identify the Arbitrator or a process for selecting one or more Arbitrators. If neither is done, the Delaware Court of Chancery may appoint one or more Arbitrators upon request. Arbitrators do not have to be from Delaware, but experienced Delaware practitioners are certainly available for consideration, especially if the Delaware Court of Chancery is making the selection.
Geographic reach of the DRAA
An arbitration proceeding under the DRAA can be held anywhere in the world and the ability to apply Delaware’s new brand of rapid arbitration anywhere the parties choose makes the DRAA especially attractive.