Arbitration and the Future of Delaware's Corporate Law Franchise

Abstract

In response to perceived threats to its position as a venue for adjudication of corporate litigation, in 2010 Delaware added a unique arbitration procedure to its menu of options for parties seeking to resolve their corporate disputes in Delaware. This new procedure relies on sitting judges to act as arbitrators in confidential proceedings. In this paper, I argue that not only is such a procedure in violation of the First Amendment policy to access to the courts, by virtue of the fact that sitting judges, rather than retired judges or professional arbitrators hear the cases, but that it is also bad policy from the perspective of the corporate law. If successful, the procedure threatens to put Delaware's corporate law franchise at risk over the long term.

Keywords: corporate, arbitration, shareholder litigation

JEL Classification: K00, K22, J52