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,
DRAAarbitrations 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.
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