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Federal judge strikes down Delaware 'secret' arbitration rule

A judge for the US District Court for the District of Delaware on Thursday struck down the Delaware Chancery Court [official websites] procedure allowing for closed-door arbitrations for large business disputes. In a 26-page decision [memorandum, PDF] Judge Mary McLaughlin held that the Chancery Court's rule allowing parties to opt for confidential, expedited arbitration [Bloomberg report], with one of the five Chancery judges sitting as arbitrator, amounted to secret non-jury trials that give rise to a qualified right of public access under the First Amendment [Cornell LII materials]. The ruling comes from a 2011 lawsuit [complaint, PDF] filed by the Delaware Coalition for Open Government (DCOG) [advocacy website] after the Delaware General Assembly adopted a dispute resolution amendment [HB 49, PDF] in 2009 to promote Delaware as a state in which to resolve business disputes: "The Court of Chancery shall have the power to arbitrate business disputes when the parties request a member of the Court of Chancery, or such other person as may be authorized under rules of the Court, to arbitrate a dispute ... Arbitration proceedings shall be considered confidential and not of public record until such time, if any, as the proceedings are the subject of an appeal." McLaughlin agreed with the DCOG argument that the law violates the legal concept that "[p]ursuant to the First Amendment ... the public has a presumptive right of access to judicial proceedings and records, civil and criminal. This right of access is considered to be a right of contemporaneous access, meaning that the public has the right to attend judicial proceedings (as opposed to merely reviewing a transcript at a later time) and to review documents as they are filed with the Court or introduced into evidence." Delaware has expressed its intent to appeal the decision.

Arbitration is becoming an increasingly popular form of dispute resolution around the world. Earlier this month Shafiq Jamoos, co-owner of the Jamoos Law Office, reviewed the costs and benefits of international arbitration [JURIST comment] compared to traditional litigation, writing that there is no definitive answer as to which is an inherently "better" process. Last month Russia's Federal Arbitration Court ordered British Petroleum (BP) to pay 100 billion rubles (US$3.1 billion) in damages [JURIST report] to TNK-BP, BP's 50-50 joint venture with Alfa Access Renova (AAR) [corporate websites], a consortium representing four Russian billionaire tycoons. In April Dmytro Vorobey, an LL.M. Candidate at the University of Pittsburgh School of Law [official website] and intern at the district prosecutor's office and the district court in Novomoskovk, Ukraine, provided a critique of Ukraine's progress towards implementing consistent international arbitration practices [JURIST comment].

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