15 March 2022
Expert determination is a dispute resolution process that does not involve court proceedings or the appointment of an arbitrator. Instead, an independent expert qualified in the subject matter of the dispute is appointed by the parties to resolve the dispute.
How it works
The expert’s decision is (unless otherwise agreed at the outset) legally binding on the parties and enforceable through the courts. The process therefore differs from mediation where a neutral mediator is appointed to assist in seeking a settlement but does not make any decisions. In common however with mediation and arbitration, the process is entirely private and confidential to the parties. Sensitive commercial information is therefore kept out of the public domain. There is no right of appeal and the decision of the expert is final, save in cases of fraud, collusion or manifest error (for example, where the expert departed in a material way from the parties’ instructions). The expert will bring their own knowledge to bear on the issues and is entitled to form a view and make a decision based entirely on their own expertise.
How it starts
The starting point is an agreement between the parties to submit a dispute or difference to an expert. Usually, the parties will have included a clause to this effect in their contract but even if there is no such provision (or no written contract), the parties can nevertheless agree to refer their dispute to an expert.
Why choose expert determination?
The process is suitable for disputes of a technical nature or involving a valuation of some kind. Common examples include technical issues in commodity, energy, construction and technology contracts, rent reviews, the valuation of businesses, land, property and shares in private companies and the interpretation of insurance contracts. A suitable expert is better placed to resolve such disputes than a judge or arbitrator, who would usually require expert evidence in order to reach a decision. The process is unlikely to be suitable if the dispute involves factual disputes which require consideration of witness evidence or a large amount of documentation.
Parameters for the process
It is important to ensure that the scope of the expert’s appointment is carefully considered and defined in order to avoid uncertainty about what exactly the expert is being asked to decide (and to remove the risk of any later challenge on this ground). An expert determination clause therefore needs careful drafting and will set out the issue(s) to be determined, the relevant qualification required and will recite the expert’s duty to act independently and as an expert not an arbitrator. The clause will often specify how the reference will be conducted, the process to be followed and how the decision will be issued. Decisions are usually required to be in writing typically with reasons and will record that the decision is final (save for manifest error or fraud). The clause will usually make provision for the expert’s fees (generally these are shared between the parties) and may make provision for the award of interest and if desired, for the parties’ own legal costs.
Because the parties have to agree to expert determination (whether in a written contract or subsequently) and define its scope and procedure, it is very flexible. They can agree the identity of the expert or provide for a particular professional body to nominate an expert in the relevant field (for example accountancy or valuation). They can specify whether the determination will be based purely on documents and written submissions, whether there should be an oral hearing and what timetable will be followed. A number of bodies publish model rules that can be adopted or modified to suit the particular case. Sometimes the appointed expert will hold a preliminary procedural meeting with the parties and their representatives to decide how best to proceed, and often to ensure that the parties agree as many of the background facts as possible in order to ensure that the relevant issues have been properly identified.
The process is simpler, less formal than litigation or arbitration, and is generally quicker and less expensive because there is no requirement for pleadings, disclosure of documents or cross examination of witnesses. Consequently, when drafting contracts, it is well worth considering the benefits of including an expert determination provision in appropriate cases, or seeking agreement to adopt expert determination as a dispute resolution mechanism where that is not already in place.
If you wish to discuss any of the issues outlined in this article, then please contact a member of the Litigation and Dispute Resolution Team.
The content of this article is for general information only. It is not, and should not be taken as, legal advice. If you require any further information in relation to this article please contact the author in the first instance. Law covered as at March 2022.