Speed and Strategy: Understanding the Delaware Rapid Arbitration Act
In the world of business, time is often just as valuable as capital. When disputes arise, the traditional legal route can sometimes feel like a marathon when you need a sprint. For companies operating under Delaware law, there is a specialized tool designed specifically to keep business moving: the Delaware Rapid Arbitration Act (DRAA).
Launched in 2015, the DRAA was developed by a team of experts—including Delaware’s Chief Justice and Secretary of State—to address a growing problem: traditional arbitration was becoming nearly as slow and expensive as court litigation. The DRAA offers a streamlined, confidential, and highly predictable path to resolving complex business issues.
The Speed Standard: 120 Days
The most defining feature of the DRAA is its strict, statutory timeline. Unlike typical litigation that can drag on for years, the DRAA mandates that a final decision be reached within 120 days of the arbitrator accepting the case.
While parties can unanimously agree to a one-time extension of up to 60 days, the clock is legally binding. To ensure this speed is maintained, the Act includes a unique financial incentive: if an arbitrator misses the deadline, their fees are reduced or, if more than 60 days late, forfeited entirely.
Built for Business
The DRAA is an "enabling statute" designed for business-to-business disputes. It cannot be used for consumer matters, ensuring it remains a sophisticated tool for commercial entities. It is particularly ideal for:
- M&A Disputes: Such as post-closing working capital adjustments or earn-out disagreements.
- Corporate Governance: Including advancement and indemnification requests for directors and officers.
- Technical Valuations: Where a quick, expert decision is needed to move a project forward.
Freedom and Flexibility
Delaware is famous for its "contractarian" approach—the idea that businesses should have the freedom to decide their own rules. The DRAA leans heavily into this principle by allowing parties to:
- Choose Their Expert: You aren't limited to choosing a lawyer or judge. If your dispute is over complex accounting, you can appoint a CPA or financial expert as your arbitrator.
- Tailor Discovery: Parties can choose to have "Discovery Lite" or forgo time-consuming depositions and document requests entirely to save costs.
- Maintain Privacy: Arbitration under the DRAA is private, allowing sensitive business disagreements to be resolved away from the public eye.
How to Opt-In
The DRAA is strictly "opt-in." To use it, your contract must specifically refer to the Delaware Rapid Arbitration Act by name and be governed by Delaware law. Additionally, at least one party must be a Delaware business entity or have its principal place of business in the state.
By including a DRAA clause in your agreements, you aren’t just choosing a forum; you are choosing a faster, more predictable way to protect your business interests and get back to work.
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