The Delaware Rapid Arbitration Act: 5 Considerations for a Practitioner

In response to the request by Delaware’s corporate citizenry for a modern and useful arbitration statute, in April 2015, Delaware Governor Jack Markell signed into law a new and modern approach to the arbitration process: the Delaware Rapid Arbitration Act (the “DRAA”).[1] The DRAA returns arbitration to its long-lost roots: speedy, efficient and binding resolution of disputes, stripping away the various mechanics of delay that have built up over the last 50 years of practice. The DRAA is the product of the collaboration of arbitration practitioners from Delaware, New York, Washington and abroad, led by Delaware’s Chief Justice, Leo E. Strine, Jr., Delaware’s Chancellor, Andre G. Bouchard and Delaware’s Secretary of State, Jeffrey Bullock.

The DRAA makes the process of starting an arbitration quick and inexpensive, accelerates the arbitration itself to ensure a swift resolution, and does away with confirmation proceedings altogether. It also provides for either private, contractual appeals or challenges directly to the Delaware Supreme Court. The DRAA attempts to strike a balance between the contractual decisions of the parties while innovating to make commencing an arbitration a speedy and inexpensive process.

In short, Delaware opted for a regime that is responsive to concerns expressed by arbitration constituencies in an effort to revitalize arbitration as an efficient, speedy and meaningfully different dispute resolution choice.

The DRAA is not designed to preempt more “traditional” arbitration proceedings. Rather, it is a response to the expressed need for a modern and useful arbitration statute, specially designed for disputes where the parties need no-nonsense and swift resolution, such as in the case of ongoing business relationships that would suffer from drawn-out litigation.

Every day lawyers guide their clients through all manner of business disputes. The consequences of the decisions that are made in such disputes often have long-term financial and business implications for the client — for months, and sometimes, years. The advice an attorney provides to a client in connection with the analysis of a dispute resolution procedure often is the most critical decision that one can make when advising a client involved in, for example, a dispute among partners of an on-going business operation. Thus, where clients are engaged in an ongoing business relationship, such as a joint venture or supply agreement, they may determine that dispute resolution in litigation is too costly, drawn out and potentially destructive to their ongoing relationship. The DRAA was designed with just such “relationship disputes” in mind. Among the DRAA’s many highlights, the practitioner needs to understand the following the top 5 considerations:

  1. An arbitration under the DRAA is a speedy, specialized proceeding for prompt and confidential business dispute resolution. While it is possible to contract for a longer arbitration in advance, barring such contractual provision, the arbitration will in no event take longer than 180 days once it is commenced. Arbitrators who fail to meet the statutory deadline suffer a reduction of their compensation.
  2. The DRAA arbitrator, whether selected by the parties or appointed by Delaware’s Court of Chancery, will have broad powers to rule on the scope of the arbitration itself as well as on his or her own authority. Now common pre-arbitration jousting about the scope of the arbitration is eliminated: all such issues are vested solely in the arbitrator.
  3. The DRAA allows the parties to an arbitration agreement to select a specialized arbitrator, including one not trained in law to resolve their dispute. Thus, financial specialists, accountants or industry experts may be selected and appointed as arbitrators. Practically this means that an earn out dispute arising from an asset acquisition may be resolved solely by an accounting trained arbitrator and an intellectual property licensing dispute may be resolved by an arbitrator trained in licensing.
  4. Proceedings to confirm arbitral awards are abolished, and such awards are “deemed” to be confirmed by the simple passage of time. This unique feature of the Act eliminates post-hearing challenges in the trial court and once again shrinks the time to final resolution of the parties’ dispute.
  5. The default “challenge” to the final award is directly to the Delaware Supreme Court, bypassing altogether the traditional first layer of review by the trial court. Any such review is limited to the standards of the FAA. Alternatively, the parties may, by contract, waive any challenge, thus assuring that the “Final Award” of the arbitrator is in fact “final” or, where desirable, provide for a private review before one or more appellate arbitrators. In such case, the scope of review is as broad as the agreement to arbitrate provides.

The DRAA directly addresses and resolves the major issues identified by the statute’s constituencies as problems or issues arising in more traditional arbitration proceedings. In short, Delaware opted for a regime that is responsive to concerns expressed by arbitration constituencies in an effort to revitalize arbitration as an efficient, speedy and meaningfully different dispute resolution choice. Accordingly, those who determine to proceed under the DRAA do so with the understanding that they are asking for prompt and efficient resolution of their disputes, and that they will get such resolution with only minimal review of the arbitrator’s decisions.

Sample forms for use in connection with DRAA arbitration are available for download (in Microsoft Word) at www.rlf.com/DRAA, as is an electronic version of a handbook for practice under the statute.

One last note: unlike AAA or other arbitration, in which the parties pay an administrative fee often in the thousands of dollars to commence an arbitration[2] the DRAA, because it does not involve the professional “administration” of an arbitration, does not involve any “administrative” fee whatsoever.

Copyright ©2015. Richards, Layton & Finger, P.A. All Rights Reserved


[1] 10 Del. C. §§5801, et seq.

[2] See Commercial Arbitration Rules and Mediation Procedures; Administrative Fee Schedules, www.adr.org/aaa/ShowPDF?doc=ADRSTAGE025290 (last visited April 29, 2015), providing for minimum administrative fees in commercial disputes of $1,550 and up to $65,000 for the largest disputes.