The Delaware Rapid Arbitration Act (DRAA)—which provides a streamlined arbitration process that will allow for prompt, cost-effective resolution of business disputes—was passed by the Delaware House of Representatives on March 19, 2015, and the Delaware Senate on March 31, 2015, and was signed by Governor Jack Markell on April 3, 2015. The DRAA will become effective on May 4, 2015, and will be codified as new Chapter 58 of Title 10 of the Delaware Code. As summarized in more detail below, the DRAA offers a real alternative to the litigation process, providing companies with the chance to engage in a fast, relatively low-cost dispute resolution process without the burden of extensive discovery. The DRAA may be particularly beneficial to companies that are in commercial relationships with each other and that seek to avoid a lengthy, extensive, and public litigation process.

What Is the DRAA and Who Can Use It

The DRAA is designed to provide parties with what the proponents of arbitration originally anticipated from an alternative dispute resolution method: an opportunity for sophisticated parties to resolve business disputes faster and at far less cost than other forms of dispute resolution. The process is completely voluntary. All parties must explicitly agree to arbitration under the DRAA and select Delaware law to govern the agreement—either in the agreement that forms the basis for the dispute or in a separate agreement in which they consent to arbitration under the DRAA. Further, at least one of the parties to the agreement must be a business entity formed in Delaware or with its principal place of business in Delaware.

The DRAA, like much of Delaware’s corporate law, is “enabling” in the sense that it does not limit parties’ access to other forms of dispute resolution, such as other arbitration procedures and litigation (although greater limitations may be imposed in the contract pursuant to which the parties agree to have potential disputes resolved under the DRAA). Also, the DRAA is limited to disputes between business entities; as a result, the DRAA will not be available to resolve consumer disputes.

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