Since Delaware Gov. Jack Markell signed the Delaware Rapid Arbitration Act (DRAA) into law last year, we continue to receive questions about what it means for our clients and how rapid arbitration can benefit businesses registered in Delaware. If you have any more questions about how it can be used in your business, please reach out to Stephen or myself at any time.
What does the Delaware Rapid Arbitration Act (DRAA) do?
The DRAA is designed to provide for the quick, binding, confidential and efficient resolution of everyday business disputes by an arbitrator selected by the parties or by the Chancery Court. It grants the arbitrator wide authority to decide a case with a full array of available remedies, and requires resolution within 180 days.
What are the key advantages of rapid arbitration?
The key advantages are speed, convenience and cost savings for all parties involved:
- Speed: Under the DRAA, arbitrations should be completed within 120 days of the appointment of the arbitrator. While the parties may consent to extend the time to complete the arbitration for an additional 60 days, the process must be completed in no more than 180 days. This is significantly less time than traditional arbitration and is certainly less time consuming than litigation, which can drag on for years. In addition, any decision that is challenged is only granted a minimal standard of review. By way of example, one client filed an action regarding an essential business issue almost two years in Federal court and has not yet reached discovery, let alone resolution.
- Convenience: With rapid arbitration, arbitration hearings under Delaware law can take place anywhere in the world, allowing parties to take advantage of Delaware’s expedited legal processes without ever leaving their home states or countries.
- Cost: The time and expense necessary to resolve disputes can be a burden on privately held businesses. With the time limitations imposed by the DRAA, and the potential elimination of incidental travel costs, businesses can look forward to a swift resolution to disputes at a lower cost.
When would you not want to use DRAA in a contract?
The speed that DRAA arbitrations occur may not be an advantage in every circumstance. Litigation and traditional arbitration include a number of steps that are absent from arbitration under the DRAA, including specific time periods for discovery. For parties who need the added leverage of time, the DRAA is not a good option.
Where does the DRAA not apply?
There are no minimum monetary thresholds, but the DRAA cannot be invoked to resolve a consumer dispute or a dispute involving a homeowners’ association.
What companies can take advantage of rapid arbitration?
In order to qualify for arbitration under the DRAA, at least one of the parties to a dispute must be a Delaware entity, though is not required to conduct its business in the State of Delaware. The agreement which is the subject of the dispute (signed by both parties) must specifically state that disputes are subject to arbitration under the DRAA, and that such arbitration provisions are governed by Delaware law.
For existing agreements, parties can have attorneys draft amendments in order to take advantage of the DRAA. For newly drafted agreements, parties should consult their attorneys to make sure agreement provisions are sufficient to fall under the requirements of the DRAA.