The Delaware Rapid Arbitration Act (DRAA), 10 Del. C. §§5801-581, which became effective this month, provides a new, speedy, and relatively low-cost arbitration process for commercial disputes through the Delaware Court of Chancery. The DRAA builds on the state’s commitment to alternative dispute resolution (ADR) for parties with sophisticated commercial litigation claims. For the last few years, the Chancery Court has offered confidential mediations in which sitting judges act as neutrals and assist parties in negotiating consensual settlement agreements.

Under the DRAA, parties ask the Chancery Court to appoint a panel from lists submitted by the parties. The panel, which renders a binding decision, would not include sitting judges – a limitation enabling the process to remain confidential. The parties must agree to arbitrate their disputes – usually in the agreement governing the transaction giving rise to the dispute. The program is available for commercial (non-consumer) disputes arising under agreements with a Delaware choice of law provision, and where at least one party either is a Delaware corporation or has its principal place of business in the state. The DRAA can only be invoked through an agreement between the parties, as corporations are prohibited from requiring DRAA arbitration in their certificates of incorporation and bylaws.

The program vests arbitrators with extensive powers. DRAA arbitrators resolve all issues of substantive and procedural arbitrability. They may also make interim rulings and orders determining what evidence and witnesses can be presented, and can grant legal and equitable relief, including money damages, specific performance, and injunctions.

The parties can agree that the arbitration award does not have to be certified by a judge to be effective. The arbitrator’s interim decisions are not subject to appellate review or challenge.  The final award can be appealed to the Delaware Supreme Court, which is restricted to affirming or denying the award, and correcting mathematical errors. The parties can agree to eliminate appellate review entirely, or replace it with an alternative review process by one or more arbitrators.

The DRAA is intended to enhance the attractiveness of private arbitrations, which offer a fast and less costly alternative to traditional litigation. Unless the parties agree otherwise, arbitrators must decide within 120 days of accepting the appointment, with a one-time extension of 60 days.  Unlike most commercial arbitration rules, arbitrators who fail to meet the deadlines are subject to a reduction of their fees.

The links below provide sample contract provisions setting out mandatory mediation and arbitration requirements.

Sample Mediation Agreement

Sample Arbitration Provision

Ballard Spahr attorneys represent corporations and other business entities, as well as their officers and directors, in all phases of corporate governance and every type of securities and corporate governance claim. This includes: advice on corporate law; structuring, negotiating, and documenting potential transactions; avoiding, evaluating, and litigating procedural and substantive challenges; and conducting internal corporate investigations. The firm’s Securities Enforcement and Litigation Group advises on compliance and represents clients in investigations, regulatory proceedings, and litigation involving the Securities and Exchange Commission, state attorneys general, and state securities regulators. For more information, please contact M. Norman Goldberger at 215.864.8850 or goldbergerm@ballardspahr.com, David J. Margules at 302.252.4431 or margulesd@ballardspahr.com, or Irene R. Lax at 215.864.8386 or laxi@ballardspahr.com.


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