The Delaware Rapid Arbitration Act (“DRAA”) became effective on May 4, 2015. This new statute permits parties to commercial transactions to opt-into an arbitration process that is designed to enable the resolution of business disputes in a timely, costeffective and confidential manner.
The DRAA only applies to disputes arising under an agreement that explicitly references the statute; thus, a company may not opt-in merely by including a provision in its bylaws or certificate of incorporation. Additionally, in order for the DRAA to apply, (i) at least one party to the agreement must be a business entity formed or organized under Delaware law or having its principal place of business in Delaware, (ii) no party to the agreement may be a consumer, and (iii) the agreement must contain a choice of law provision selecting Delaware law to govern the contract.
The DRAA includes several helpful provisions: parties to an agreement may specify who will serve as the arbitrator or set forth a process for selecting the arbitrator. To ensure speedy resolution of disputes, the DRAA requires the arbitrator to render a final decision within 120 days of being appointed (unless the parties agree otherwise). The arbitrator is penalized for failing to render a decision in a timely manner by a reduction in the arbitrator’s fees owed by the parties. Arbitration proceedings under the DRAA permit the parties to present relevant evidence and cross-examine witnesses, although even these rights can be altered or curtailed by mutual agreement. The arbitrator is empowered to compel the attendance of witnesses and the production of documents.
Other streamlining features of the DRAA are noteworthy: the arbitrator has the exclusive authority to decide issues of procedural and substantive arbitrability (thus preventing litigation about the scope of the arbitration agreement from being pursued in the courts). The Delaware Supreme Court has jurisdiction to consider only appeals of final awards issued by arbitrators pursuant to DRAA arbitration proceedings. Further, parties may agree to eliminate appellate review entirely, and may agree to use an alternative appeal procedure such as review of the final award by an arbitrator or a panel of arbitrators. Such an alternative may prove particularly useful in protecting sensitive information: although arbitration proceedings under the DRAA are generally confidential, involving the courts in the dispute resolution process may result in the disclosure of information that would otherwise remain private.
The DRAA presents businesses with opportunities for cost and time savings. However, given the potential of DRAA arbitration to severely limit procedural rights in the event of a dispute, parties should consult with counsel before including DRAA arbitration provisions in their commercial contracts.