Delaware Rapid Arbitration Act - Expedited Arbitration With An Arbitral Award Within 120 Days

27.08.2015
The state of Delaware has recently enacted the Delaware Rapid Arbitration Act (“DRAA”) which became effective on 2 May 2015. Although this is not the first offer of “fast-track” arbitration proceedings, the DRAA seems to be particularly innovative by offering a final award within only 120 days from the date of the arbitrators’ acceptance of appointment. While this 120 day deadline can be extended to 180 days by unanimous consent of the parties, the DRAA imposes a penalty on the arbitrators who do not meet this deadline. The penalty for failure to resolve the dispute within the time frame is partial reduction or full forfeiture of the arbitrators’ fees based on the length of delay in issuing the final award.

Prerequisites: B2B disputes with connection to Delaware

The expedited arbitration process is available for parties who select Delaware law as governing law of their agreement. Furthermore, at least one of the parties to the arbitration agreement must be either incorporated in Delaware or have Delaware as its principal place of business.

The DRAA is available for B2B disputes. There is no minimum or maximum monetary threshold and consequently, parties may seek either non-monetary relief or arbitrate large disputes. The DRAA is not applicable to consumer or home owner association disputes.

To utilize the DRAA, the arbitration agreement must be signed and have an express reference to the DRAA by name. The parties have wide flexibility to appoint one or more arbitrators and select a method of appointment. To achieve maximum efficiency, the Delaware Court of Chancery is allowed to appoint a senior member of the Delaware bar within 30 days should the parties fail to appoint arbitrators.

Flexibility of the Parties

The DRAA offers parties the benefit of the speed of the final award while at the same time allowing flexibility and the freedom to preserve optionality. The parties are free to decide and amend their arbitration agreement regarding the selection of arbitrators, the rules that will govern the arbitration, whether any hearing should take place, the location of the hearing, the scope of discovery, whether the arbitrator may issue subpoenas or authorize depositions, how the presentation of evidence should take place and the nature of the challenge or appeal (if at all) - under one condition. The parties must agree to these details before the arbitrator accepts the appointment.

This distinguishes the DRAA from many other expedited arbitration rules which often provide for some restrictions such as a reduction of the number of hearings, of the filing schedule or exclusion of expert testimony.

Generous Powers of the Arbitrators

The DRAA achieves the ability to offer a prompt award by removing the parties ability to apply to the national court for certain disputes and therefore removing time consuming detours to a speedy arbitral award. The arbitrators are vested with the sole authority to resolve questions regarding which issues are properly subject to arbitration both procedurally and substantively. When choosing to use the DRAA, the parties agree to waive challenges to personal and subject matter jurisdiction for the arbitration eliminating another detour to a speedy final award. Other options to apply to the national court are also forfeited such as their right to enjoin the arbitration because the dispute is not covered by the arbitration clause or attempts at removal to federal court. Parties agree that they may not appeal interim rulings and orders, or challenge whether the arbitration was properly held. By granting the arbitrators with sole authority to handle these matters and removing the parties ability to apply to a national court, the DRAA is able to achieve a shorter timeline to a final award.

Also in this regard, the DRAA is remarkable in that it clearly puts the timely resolution above potentially relevant scrutiny of the award. It will be interesting to see how parties respond to the DRAA knowing that they may not have the regular recourse to state courts for reviewing certain particularly crucial elements of the arbitration process.

Confirmation of Award

Under the DRAA, and unlike other regimes of arbitration, the DRAA does not allow for a proceeding to confirm the final award of the arbitrators but rather provides for a procedure for an automatically deemed confirmation of a final award. The parties have 15 days to challenge the award directly to the Supreme Court of Delaware with no intermediate review required before the lower courts. According to §5809 of the DRAA, the court may only “vacate, modify or correct the final award in conformity with the Federal Arbitration Act”. Hence, the grounds for setting aside the award are limited. If the award is not challenged the award is deemed confirmed five days after the 15 day deadline to challenge the award has passed.

Difference to Other Expedited Proceedings

As compared to other expedited arbitral proceedings, the DRAA offers parties the elimination of diversions along the way to an enforceable award. The penalty on the arbitrators for a delayed award, lack of a minimum amount in controversy and the unique method to quickly confirm the award show that Delaware has taken expedited procedures a step further. Especially where parties have continuing relationships where quick resolution of disputes is desired, the DRAA is another option for parties, provided there is a connection to Delaware.

Further details regarding the DRAA may be located at Chapter 58 of Title 10 of the Delaware Code. If you would like to discuss the details of the DRAA or require an arbitrator for a DRAA arbitration, please contact either Anke Meier or Meribeth Banaschik.

Any questions?  Please contact: Dr. Anke Meier or Meribeth Banaschik
Practice Group:  Litigation, Arbitration & ADR