Secret Arbitration in Business Disputes is Unconstitutional – Federal Judge

According to a ruling passed by the federal judge Mary McLaughlin a few days back, it is now against the constitution to go for a secret arbitration in business disputes. The 26-page decision stated that the Chancery court, which is the main body presiding over business disputes involving high profile people and some of the largest corporations of the world, is officially not allowed to hold secret arbitration for any kind of dispute settlement. This ruling was the result of a lawsuit filed by the Coalition of Delaware for open government, with the main line of argument as the fact that secret meeting and decisions infringe the basic rights of the citizens.

McLaughlin observed that the secret arbitration involved only one judge who sits and listens to the facts and evidences and then passes a decision which is enforceable by law. This method of a one man show is something that the constitution of the country does not allow and therefore the proceeding of the Delaware case which functions as a non jury, secret trial before the Chancery court judge should be made public. McLaughlin stated that because the trial is public in nature, every member of the civil society should have a right to access the proceedings as per his or her desire.

The open government collation which was presented by David Finger said while giving his opinion after the decision that this kind of ruling is a reminder for all about the significance of transparency in all government departments. Similarly, Lawrence Hamermesh who is a professor of law in Delaware and assisted in preparing the case for the government remarked that secret arbitration are a way of earning money for the state of Delaware which is the corporate hub for thousands of United States companies. At the same time, these procedures also present a cost effective solution to the corporation involved, thus creating a win-win situation for all.

Normally the procedure has been that all the lawsuits involving claims of monetary damages of above $ 1 million are brought directly to the secret arbitration. On one side, the attorney of the government was of the opinion that procedures like secret arbitration make the courts more efficient; this is because most of the secret arbitration cases have been solved in a single day hearing. But at the same time, it should also be noted that the total hearings generated a revenue of dollars 60,000 only in the last one year. This money was generated from the fees of $ 12,000 charged on every arbitrary petition submitted along with $ 6,000 per day after the first hearing (this fee is because of engaging the judge among others, in your lawsuit).

The proceedings of the secret arbitration were kept so private that they were not even placed on the court docket and therefore the general public or the press had no way of knowing that a certain proceeding between corporations is going on. The original petition for making secret arbitration unconstitutional was submitted after two companies disclosed to the Security and Exchange Commission that they were trying to seek arbitration for a failed merger. Without the filing with the SEC, the general public would never have found out about the arbitration at all.

A number of media companies and press organizations later submitted supporting briefs to show that they are in favor of the secret arbitration that is to be made public. These organizations include the Washington Post, New York Times, Associated Press, Delaware State Bar Association (the corporation law division), New York Stock Exchange, NASDAQ and Reporters Committee for freedom of press. The full implication of this constitutional change will be revealed in the coming months as companies re-evaluate their legal priorities.

Author Bio:
John Anderson enjoys writing, blogging, business and the law. He has experience working with private lawyers who practice in criminal law, and also with attorneys specializing in defending drug and alcohol related charges in schools.

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