Delaware Rapid Arbitration Act Rules Now Effective

The Delaware Rapid Arbitration Act (DRAA) now has rules. Enacted earlier this year, the intent of the DRAA is to serve as an alternative, confidential, and cost-effective forum for binding arbitrations involving Delaware corporations, LLCs, and other business entities. 10 Del. C. § 5801. Key provisions include limited discovery, default confidentiality rules, a 90-day time frame for a hearing, and, perhaps most notably, docking of the arbitrator’s fee if a decision is not rendered within 120 days of appointment. (There is a provision allowing for a single 60-day extension if all parties agree, however).

For businesses to take advantage of the DRAA program for commercial (not consumer) disputes, at least one of the parties to the arbitration agreement must be organized under Delaware law. In addition, the arbitration agreement enabling the arbitration of disputes must specifically reference the DRAA. The arbitration agreement must also provide that the arbitrator has the power to issue subpoenas and/or award commissions for depositions; otherwise, no third-party discovery will be conducted. Arbitrators have authority to determine questions of substantive and procedural arbitrability as well as to grant either legal or equitable relief (including interim relief). The arbitration may take place anywhere and using a wide variety of methods (in-person, videoconference, or telephone).

The parties may agree to modify the rules, but they may not agree to extend any of the time frames set forth under the DRAA. The parties may choose an arbitrator or may petition the court of chancery for one. The DRAA’s deadlines commence at the service on all parties of written notice that the arbitrator has accepted his or her appointment. The rules contemplate a preliminary telephonic conference, a preliminary telephonic hearing, a scheduling order, and a one-day arbitration hearing. Respondents in DRAA arbitrations should not expect that failing to respond to the claimants’ notice of arbitration will delay the proceeding.

Although the DRAA program may not be appropriate for all kinds of commercial disputes, the benefits it offers—efficiency, confidentiality, speed, and arbitrators with knowledge of Delaware commercial law—will be of great interest to many businesses incorporated or formed in Delaware.

_{Elizabeth S. Fenton is a partner with Saul Ewing in Wilmington, Delaware.}

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