United States: The Delaware Rapid Arbitration Act: The Return Of Arbitration As A Quick And Cost-Effective Way For Businesses To Resolve Their Disputes Privately

Last Updated: October 1 2015
Article by Jonathan A. Weininger

Arbitration was originally created to provide parties with a speedy and less expensive forum for resolving disputes outside of the courts, but has eroded over the years to become equally, if not more, expensive and time consuming than litigation. To curb that trend, one state has enacted an innovative statutory scheme whose express purpose is to restore arbitration to its roots.

In May 2015, the State of Delaware adopted the Delaware Rapid Arbitration Act (the "DRAA"). The express purpose of the DRAA is to give Delaware business entities "a method by which they may resolve business disputes in a prompt, cost-effective, and efficient manner, through voluntary arbitration conducted by expert arbitrators, and to ensure rapid resolution of those business disputes." 10 Del.C. § 5802.

By its terms, the DRAA serves as another option for sophisticated entities to consider when negotiating agreements that include alternative dispute resolution ("ADR") provisions. The DRAA does not replace other more customary ADR methods available to parties, including arbitration provisions that afford lengthier procedures or more extensive discovery, as determined by the parties in their written agreements. Such options continue to be available.

To streamline arbitration, the DRAA sets forth a series of ground rules for handling arbitrations that the parties agree in writing to submit to the DRAA for resolution. These rules ensure that cases arbitrated under the DRAA are resolved quickly – not more than 180 days after the arbitrator accepts appointment – and with limited involvement of the courts. In a novel development for the legal industry, the DRAA actually enlists the arbitrator to ensure the prompt resolution of each matter. Specifically, the DRAA provides that an arbitrator who fails to issue the final award within a certain time period risks forfeiting some or all his or her arbitrator fees.

These and several other notable provisions of the DRAA are summarized below:

  • The DRAA applies to business disputes only. Consumer cases and disputes involving homeowners' associations are not subject to arbitration under its provisions.
  • The DRAA is available for both monetary and non-monetary disputes, regardless of the amount in controversy.
  • To invoke the DRAA, the parties must have a signed, written agreement that expressly identifies the DRAA by name. One of the parties to the arbitration must either have its principal offices in Delaware or be a Delaware-organized entity.
  • The agreement to arbitrate must be governed by Delaware law. However, the parties may select another jurisdiction's laws to govern their underlying contractual relationship. Thus, a Delaware-organized entity doing business in California could invoke the DRAA in its business contracts by having Delaware law govern the arbitration agreement while selecting California law to govern other aspects of its relationship. Moreover, the arbitration could be conducted in California, or elsewhere, even though Delaware law would control the administration of the proceeding.
  • The DRAA eliminates common pre-arbitration squabbles that often wind up in time-consuming and expensive court proceedings, such as disputes over the scope of arbitration. Under the DRAA the arbitrator, not the court, has sole jurisdiction to decide such questions.
  • The DRAA also eliminates post-arbitration confirmation proceedings entirely. Under the DRAA, the arbitrator's final award is automatically confirmed approximately 20 days after its issuance. This procedure not only expedites the time it takes to have the award entered as a judgment, but promotes another purpose of the DRAA: allowing business litigants to have their disputes resolved almost entirely outside the purview of the courts, which means they are more likely to be resolved privately.
  • The DRAA prohibits challenges to the arbitrator's interim rulings. It also allows the parties to waive any right to challenge the final award. If the parties wish to preserve the right to challenge the final award, the DRAA provides for direct review by the Delaware Supreme Court, and that challenge must be filed within 15 days after the final award is issued. Even then, the Delaware Supreme Court's review is limited – it may only "vacate, modify, or correct the final award in conformity with the Federal Arbitration Act." The DRAA does allow the parties to agree to a "private" appeal of their matter, but any such provision is purely contractual and, again, does not involve the courts.
  • The DRAA expects that arbitrators will be appointed promptly; thereby eliminating another common delay associated with traditional arbitration. The parties can name the arbitrator in their agreement, or provide a method for selecting the arbitrator. The DRAA also allows the parties to select an arbitrator not trained in the law, such as financial specialists, accountants or industry experts. Alternatively, if the parties are unable to agree or if the selected arbitrator is unavailable, the DRAA authorizes the Delaware Court of Chancery to appoint an arbitrator within 30 days after a petition is filed. There are some potential limits on who can serve as the arbitrator if the parties leave it up to the Court to decide.
  • Finally, the DRAA provides that all matters must be determined within 120 days of the arbitrator's acceptance of the appointment. This deadline can be extended up to 180 days, but not longer, by consent of all the parties and the arbitrator. If the arbitrator does not render a final award within the required time, the DRAA imposes a reduction in the arbitrator's fees, including the possibility that the arbitrator could forfeit his or her entire fee if the final award is more than 60 days late.

While the DRAA is not suitable for every type of dispute, it presents a new, business-friendly approach for entities desiring a quick and cost-effective method for resolving their business disputes privately.

What should you do?

Companies organized in Delaware should consult legal counsel to discuss the benefits of revising their contracts to include DRAA provisions. Non-Delaware entities who enter into disputes with Delaware corporations should also be aware of the options provided by DRAA.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
Moritt, Hock & Hamroff LLP
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Moritt, Hock & Hamroff LLP
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions