Expert determination is a private method of dispute resolution whereby disputing parties appoint an expert to determine their dispute. We take a purposeful look at the small print of this resolution method.
Expert determination is a private method of dispute resolution whereby disputing parties appoint an expert to determine their dispute. It is most used in the areas of valuation and assessment. In certain cases, it can have significant advantages over arbitration.
The Use of Expert Determination
Expert determination is a form of alternative dispute resolution whereby disputing parties ask an independent expert to give a binding decision on their dispute. It can be of particular value in the case of technical disputes where it allows the parties to have their dispute resolved by a specialist in the field. It might, for example, be chosen for the determination of a rent pursuant to the rent review provisions in a lease or the valuation of shares pursuant to the provisions of a share purchase agreement.
Expert determination is a private process. Accordingly, neither the dispute nor the expert’s determination are in the public domain.
Basis for Expert Determination
As with arbitration and most other forms of alternative dispute resolution, expert determination is entirely dependent on the agreement of the parties to adopt it.
It is most commonly found in the form of a dispute resolution clause in the contract entered into between the parties (e.g. lease, share purchase agreement) which will provide for any dispute arising between them in relation to all or certain specified matters in the contract to be referred to an expert for determination.
Difference between Expert and Expert Witness
An expert appointed to determine a dispute should be distinguished from an expert witness. An expert witness is a person with specialized knowledge or experience whose duty, even if engaged by a party, is to give to the court or tribunal in legal proceedings an impartial opinion on particular matters in dispute which are within the expert’s area of expertise. The expert witness, unlike the expert, has no role in the determination of the dispute.
Differences between Expert Determination and Arbitration
Expert determination and arbitration differ in a number of respects which include the following:-
- Expert determination is governed specifically by the terms of the parties’ agreement to refer the matter to the expert. Arbitration is governed not only by the parties’ agreement to refer the matter to an arbitrator but also by statute and judicial precedent.
- An expert is engaged specifically for his/her particular expertise and will be expected to apply that expertise in the determination of the dispute. An arbitrator is required to base his/her determination on the submissions of the parties and is not entitled to draw on other knowledge or experience without first making it clear to the parties that he/she is doing so and giving the parties adequate opportunity to respond.
- Subject to the terms of the agreement under which the expert is appointed, an expert may make his/her determination without receiving evidence or arguments from the parties provided that in general terms the proceedings are conducted fairly. In many cases the determination will be conducted on the basis of a single submission by each party without the involvement of lawyers or other experts and without the need for an oral hearing. Accordingly, the determination of a dispute by an expert may be obtained more quickly and more cheaply than that by an arbitrator.
- The Arbitration Act 2010 confers certain rights and obligations on the parties the effect of which is to give the parties a degree of statutory protection not granted to parties in an expert determination.
- Under the Arbitration Act 2010 arbitrators enjoy statutory immunity for their acts and omissions. An expert has no such immunity and can be open to claims in negligence or breach of contract. Accordingly, an expert will invariably only accept an instruction that has a limited scope and is within his/her particular expertise. Further, the expert, as part of the terms of his/ her engagement, may require the parties to agree to the expert having immunity.
- There are very limited grounds on which an arbitrator’s award can be challenged. These are specified in the Arbitration Act 2010. The grounds on which an expert’s determination can be challenged are also limited but the parties, in the terms of the agreement pursuant to which the expert is appointed, may provide otherwise.
- The decision of an expert, while binding, cannot be enforced in the same way as an arbitration award which has the benefit of the enforcement provisions pursuant to the Arbitration Act 2010 and the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.
Expert determination operates wholly on a contractual basis. Accordingly, as the extent of the expert’s authority is entirely based on contract, there are no rules of procedure or statutory provisions to fall back on which makes it essential for the dispute resolution clause pursuant to which the expert is appointed to be very carefully drafted in order to ensure that it makes full and proper provision for all the parties’ requirements and the procedural rules which are to apply.
This is the fourth article in our alternative dispute resolution series. The first one, Mediation Explained, can be viewed here. The second one, Arbitration Explained, can be viewed here. The third one, Adjudication Explained, can be viewed here.