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The Delaware Arbitration Experiment: Not Just a “Secret Court” | Author: Jessica Tyndall

The Delaware Arbitration Experiment: Not Just a “Secret Court” | Author: Jessica Tyndall

Delaware has long been at the “cutting-edge” in resolving commercial disputes and providing contemporary statutory corporate governance principles. The Corporate Council, an arm of the Delaware State Bar Association, meets annually to update the Delaware corporation law as needed, in order to provide its chartered corporations with significant advantages over corporations chartered elsewhere. Accordingly, 51% of the publicly traded companies in the United States, and 61% of the Fortune 500 companies are chartered in Delaware.

In April 2009, in order to preserve Delaware’s pre-eminence in offering cost- effective dispute resolution, the Corporate Council set forth an initiative, which the Delaware State Legislature adopted into statute, that amended the rules governing the Court of Chancery to permit the court to arbitrate disputes upon consent of the parties. The genesis of the initiative was the presumption that the arbitration program was one that was “needed and desired by the business community” as an alternative to otherwise expensive litigation. The arbitration program, in addition, was believed to provide a suitable forum for international disputants because it would guarantee participants that disputes would be arbitrated by widely recognized and competent business court judges, who are familiar with the laws that govern business agreements and, additionally, it would provide an award enforceable in other nations.

The arbitration program has not, however, been without critics. The cornerstone of the arbitration program, as with all arbitration, is confidentiality. Because the arbitration program is confidential, critics have argued that it creates a “secret court” and violates the First Amendment right of access to court proceedings.

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