Wednesday, January 27, 2010
The Chancery Court in Delaware has proposed arbitration rules that go into effect on February 1, 2010 (here). The proposed rules would permit its members to arbitrate "all business disputes" as long as the dispute is valued at more than $1,000,000 for money claims, involves at least one Delaware entity and the parties agree to the arbitration process. The proposed process is speedy - potentially huge cost saver - and so there might be a strong incentive for potential litigants to go the arbitration route. Especially so since the arbitrators will be the same court personnel who would hear the case if it ended going the normal route. The proposed arbitration rules also guarantee parties confidentiality. Individual litigants may find the confidentiality aspect appealing as well. After all, who wants the world the know that their directors stink?
Here's hoping that Delaware's arbitration process doesn't become too successful. Why? Well, much of Delaware's value derives from the positive externalities that come from its corporate law jurisprudence. If parties increasingly take disputes "private" via the Delaware courts, increased reliance on the confidentiality of the arbitration process might have the effect of degrading the continued development of the Delaware common law. That's actually something worth paying attention, but difficult to track.