So what exactly is expert determination and how does it differ from other methods?
This is one of a number of private dispute resolution methods collectively referred to as alternative dispute resolution (ADR). Other ADR methods include arbitration and mediation.
In expert determination an independent expert is asked by the disputing parties to decide one or more issues between them. The experts are required to use their knowledge and experience to reach a decision based on their own investigation of the issues. The experts must act fairly and the parties must agree to be bound by the decision.
In England and Wales arbitration is supported and controlled by the Arbitration Act 1996, which supports the enforceability of arbitration awards locally and internationally. There is no similar statutory involvement in expert determination.
In arbitration, ‘fairness’ is formalised by the Arbitration Act. The arbitrator can only undertake an investigation if permitted by the parties and must share the results with the parties. Unlike the arbitrator, the expert is not immune from actions for negligence. In mediation, the mediator helps the parties arrive at their own settlement.
Are there particular types of dispute that suit expert determination?
Expert determinations tend to be applied to technical disputes. The expert is usually chosen for their expertise. The types of dispute for an accountant acting as expert include: share/business valuation disputes; disputes in relation to completion accounts; deferred consideration disputes following a sale of a business; profit share disputes in partnerships and joint venture agreements; and disputes about the loss of profits from breach of contract.
There can be numerous subsidiary disputes in connection with facts and the
interpretation of words, which may be outside the expertise of the expert.
Together with other procedural considerations, the expert may need to agree
arrangements to enable these matters to be dealt with in a way that does not
lead to the validity of his award in respect of the substantive issue(s) being
undermined.
How are appointments as expert made and what happens if no agreement can be reached?
A dispute resolution clause may be included in a contract, for example in a sale and purchase agreement for a company, which requires that an expert is appointed to resolve the dispute by expert determination.
If the parties to the agreement have not named the expert, or they are unable to agree on an expert, the contract may provide that the appointment is made by the president of a particular professional body from among its members.
Alternatively, there may be no pre-existing contractual provision for the appointment of an expert to determine the dispute. The parties may decide to use expert determination to solve the dispute.
How does the whole process work and what can the parties expect in terms of fees?
The initial stage of an expert determination assignment involves completion of the engagement formalities and agreement of the expert’s powers. The expert will check whether these are sufficient and, if not, seek to agree those necessary to fulfil their mandate.
The expert will usually issue directions in relation to disclosure of documentation and exchange of submissions including content, sequence and timing.
It is not unusual for further procedural issues to emerge as the matter proceeds.
These may include: defining the issue(s) for determination; dealing with delay on the part of a party; and dealing with abuse of the established process generally.
The written decision of the expert may be by letter to the parties, or in some other form of notice. In arbitration, accompanying reasons for the decision are a requirement, subject to the parties choosing otherwise. In contrast, in expert determination, unless it is agreed that they are required, the expert need not give reasons.
In arbitration, unless the parties agree otherwise, the arbitrator is required to deal with their costs and is empowered to award interest. In contrast, in expert determination these matters may not be within the agreed brief. In any event, it may only be the allocation of the expert’s fees which are in issue as far as the expert is concerned. Alternatively, the parties may have agreed to share these costs.
How much does the whole process cost and how does it compare with other methods?
In expert determination there may be no hearing, reduced disclosure (being disclosure necessary to meet the expert’s requirements), relatively little legal representation required if any, and no reasons given with the award. As a consequence expert determination is likely to be significantly cheaper than litigation. Due to the less formal structure of expert determination, subject to the agreed arbitration process, it can similarly be cheaper than arbitration.
Daniel Djanogly is a partner at Kingston Smith LLP
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