Monthly Archives: May 2017

Until recently, Delaware’s dominance in the competition to sell corporation charters was considered so great as to be irreversible. Scholars assumed that if another state were to discover a method to compete effectively, Delaware could simply copy it. But the current threat to Delaware’s dominance comes not from another state, but from arbitration bylaws. Delaware cannot solve the problem by copying because the U.S. Constitution prohibits states from offering secret arbitration.

For Delaware, loss of its cases to arbitration would a crippling blow. Delaware dominates the charter competition by leveraging its unique Chancery Court. Unlike the courts of other states, the Chancery Court is significantly specialized in corporate law, publishes its opinions, has a large body of precedent, tries cases without juries, and has the resources and motivation to provide quick hearings. Other states cannot copy Delaware because they do not incorporate sufficient numbers of companies to generate sufficient litigation to support a court specialized in corporate law, because their governments are not dependent upon, and so not fully supportive of, their efforts to compete for charter sales, and because their constitutions guarantee the right to trial by jury.
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