Foreign investors increasingly complain that US arbitration is morphing in to a process closer to full-blown litigation. I’ve always found it interesting that ‘full-blown’ is used to describe ‘all-in’ litigation and ‘all-in’ infectious disease. But I digress. The fact remains that many of the advantages of arbitration—speedier resolutions at a lower cost—are being lost to a variety of interim challenges, enforcement questions and other processes that defer prompt resolution of disputes. The good news for Irish and Northern Irish companies is that Delaware offers a way to make arbitration ‘work’ again.
The Delaware legislature enacted the Delaware Rapid Arbitration Act (DRAA) in April 2015. The statute, according to my partner Henry Chalmers, streamlines the process for initiating an arbitration, sets tight deadlines for concluding it, automatically confirms the arbitration award, and provides speedy resolution of any challenge directly to the Delaware Supreme Court. The DRAA’s stick? It imposes financial penalties on the arbitrator if a final decision is not issued within 120 days of commencement.
The DRAA is available for most disputes (it can’t be used for consumer, homeowner or shareholder disputes) involving at least one business organized under Delaware law. So, when you create your lightning rod, you might consider Delaware as the jurisdiction of organization. The DRAA, in my view, makes Delaware an even more attractive jurisdiction of formation for foreign businesses expanding to the US.
Henry writes that parties must agree in writing that their arbitration will be governed by the DRAA. The arbitrator has exclusive power to determine the scope of the arbitration, and courts are divested of jurisdiction to enjoin the process or entertain interim challenges. Parties also are relieved of the obligation to initiate legal proceedings to confirm their arbitration awards, as they are automatically confirmed within twenty days. Also, any challenges to an award are limited either to a private, arbitral appellate body or to a narrow and final appeal directly to the Delaware Supreme Court.
Within this tight framework, however, the parties are given great freedom to structure the arbitration as they see fit. Irish and Northern Irish companies should consider invoking the DRAA (through their Delaware affiliate) with the proper language in, for example, a distribution agreement.
If you have any questions, feel free to contact me or Henry Chalmers.