An Introduction to Resolving A Dispute Through an Expert Determination Process

Firstly, what is meant by an expert determination?

It is the process where the parties agree that a third party (the “Expert”) is appointed to answer particular questions / determine particular disputed items identified by the parties. It generally works best when there is a narrow set of clearly defined technical questions.

An expert determination is not the same as providing expert testimony to a court or a tribunal. Under English law, it is a process under contract that is intended to give the parties finality, save for fraud or manifest error, on disputed issues that are capable of being addressed by an expert.

It is not a process whereby the Expert becomes part of the dispute between the parties, even if one or both parties are disappointed in the outcome of the determination. It is important to remember that the Expert engaged is not an arbitrator, adjudicator, or an expert witness. He or she is not giving opinion evidence under court or tribunal processes.

What do the parties get from the expert determination?

• A confidential, binding decision.
• It allows the parties to appoint an expert who is familiar with the technical issues.
• It generally results in a quicker decision when compared to the court / arbitration route. Note that even if the parties went to court, they may still need to engage an Expert, but in the capacity of an expert witness.
• It can be flexible with the initial timetable agreed between the parties and the Expert.
• It is a transparent process as both parties see all the information / correspondence provided to the Expert.
• It can be less adversarial and may help the parties maintain a business relationship post dispute.
• The Expert arrives at his / her decision, based upon his / her own knowledge, expertise and experience, taking into account the submissions made by the parties. This can be a great advantage, particularly when the issue is a technical one and the Expert has been carefully chosen due to their particular area of expertise.
• Only in limited circumstances can the expert determination be challenged (e.g. fraud or manifest error).

Step 1: Identifying the Expert

The identification of the Expert may already be set down in the commercial agreement between the parties that contains the expert determination clause, but if this is not the case, there are a number of options for selecting an appropriate Expert.

The first option open to the parties may be to simply agree between them who might be suitably qualified. If the dispute is financial in nature, it may be that the company’s auditor can make the determination. In this situation, no further research is required on finding an appropriate expert. This may not, however, be acceptable to the parties if, for example, they are concerned about independence, in which case they will need to research an alternative expert.

Organisations exist that can provide recognised experts; e.g. if the parties wish to appoint an expert accountant they can approach the Institute of Chartered Accountants in England and Wales (“ICAEW”) President’s Appointment Scheme to nominate one for them.

Be mindful, though, that if the parties allow an external body to nominate the Expert, such as the President’s Appointment Scheme, they lose control over the choice of Expert.

Alternatively, the parties can independently research and agree upon a person to act as the Expert, thereby retaining control over the selection process. There are organisations which maintain lists of experts who have had to go through an accreditation process. In the case of Experts in the accounting field these include:

• The Academy of Experts;
• The Expert Witness Institute; or
• The ICAEW’s Register of Accredited Accountant Expert Witnesses.

In selecting an Expert from one of these or similar sources it will be important for the parties to understand the following:

• Whether the external body nominates experts, as in the case of the ICAEW’s President’s Appointment Scheme; and
• The selection process under which these experts become members of these organisations.

Once the parties have clarification on these issues, they can then consider whether a particular external body’s list contains a broad selection of highly qualified experts from which a suitable candidate may be selected.

It is also important to establish that the Expert does not have any vested interest in the outcome of the dispute, and is not in any way biased towards or against either party.

Step 2: Terms of Appointment

Once the Expert has been identified, the next step is to set the terms of the appointment. The main considerations specific to an expert determination are:

• There should be a set of clear instructions, setting out the questions to be answered / disputed items to be determined.
• Will the Expert provide an unreasoned or reasoned expert determination? The advantage of the former is that it will be quicker and cost less. The disadvantage is that the parties will not be privy to the reasons as to why the Expert arrived at his / her determination.
• How the Expert’s fees will be split between the parties. Typically the Expert’s fees are shared equally between the parties.
• Agreeing the timetable as part of the engagement terms, although there may also be provision for both parties to make requests to the Expert for the timetable to be altered subsequently.

The terms of engagement will make it clear that the Expert is required to make the decision / determination on the basis of material provided to him / her by the parties.

Step 3: The Process

There are no set rules, but the Academy of Experts has, for example, produced its “Rules for Expert Determination”, and these include guidelines on the timetable and process.

In all cases the agreed instructions should be followed. This has been the subject of a recent England & Wales Court of Appeal decision in Begum –v- Hossain [2015] EWCA Civ 717.

All correspondence with the Expert should be in writing. The process will normally be that each party submits their evidence in writing to the Expert by a prescribed date and the Expert then arranges for the evidence from one party to be exchanged with the other party.

The initial set of documentation is provided within an agreed number of days (as set out in the engagement terms) after the Expert’s engagement letter is signed. This initial documentation should summarise the nature of the dispute, the issues involved, the parties’ submissions in relation to those issues and, in financial disputes, the effect on the quantum of the amount or amounts claimed, together with appropriate supporting documentation.

The parties are then given an agreed number of days to provide a written response to the other’s submissions, indicating whether or not they agree with the other party, and if not in agreement, why this is the case.

In addition to the above, the Expert will have discretion to request written clarification or ask further questions of the parties on any matters contained in the written material received from them. Further queries are sent in writing to both parties simultaneously. It may also be the case that issues outside the Expert’s area of expertise get raised; for example, legal issues. In such instances, the Expert’s terms will normally allow him to seek advice from appropriately qualified third parties, the cost of which is generally borne by the parties.

Step 4: The Determination

Once the Expert has considered the submissions made by the parties and applied his / her expertise and experience, the determination is given. This is either with or without reasons.

Conclusion

In summary, if you consider that an expert determination is right for you, here are some tips for ensuring the process runs smoothly:

• Choose the Expert carefully;
• Ensure the instructions are clear;
• Decide whether it is to be an unreasoned or reasoned determination; and finally
• Ensure you comply with all the agreed procedures; remember the Expert makes a decision based upon his / her knowledge, expertise and experience, taking into account the submissions made by the parties.

Expert determination clauses are often written into agreements between parties where there may be scope for disagreement over technical issues. Under English law, exercising such clauses presents a pathway to achieve finality by way of a private process under contract, rather than have the disagreement examined in the public arena of the courts. It can also be a useful way to resolve disputes where the parties either choose or need to maintain an ongoing relationship once the dispute resolution process is over.