Out-Law Guide | 05 Aug 2011 | 3:53 pm | 3 min. read
Expert determination is a confidential and binding process that can offer an effective means of settling a technical issue or dispute. It is an impartial and flexible process.
The expert is required to act fairly and give each party a reasonable opportunity to be heard and respond to the other party. The determination of the dispute will be by an independent person with expertise relevant to the dispute.
When a fast solution is needed, expert determination is often the quickest and most inexpensive way of resolving disputes – particularly where the facts are agreed.
It is carried out in private, and therefore can be guaranteed to protect confidences and commercial sensitivity.
Expert determination is appropriate for technical or valuation issues. For example, an IT specialist may be appointed in an IT supply and installation contract to determine compliance with specifications or an accountant may be appointed as an expert in a business valuation dispute.
Expert determination has the following advantages as compared to other methods of dispute resolution, in particular arbitration and litigation:
The expert's decision is normally final and binding because, unless the parties provide otherwise, the decision can only be challenged on limited grounds such as fraud or lack of impartiality.
In England and Wales, an expert's determination can be enforced in court proceedings. However, as an expert's determination may not be readily enforceable by courts in other jurisdictions, disputes that arise out of some international contracts may be better resolved by another method.
A person agreed by the parties to be an expert qualifies as one. It could also be a person appointed for the purpose by the head of the appropriate professional body.
The identity of the independent expert may be agreed before any dispute arises - for example, a company's articles of association may specify that on a transfer of shares a 'fair value' is to be determined by the company's auditors.
The procedure is normally dictated by the terms of the original agreement made between the parties, incorporating the expert's terms of reference. These terms of reference set out the expert's powers and duties in detail. Some experts may suggest additional terms, in particular a waiver of any liability from the parties.
The following points should be covered:
The terms of reference should also cover the procedure to be followed, for example:
Parties will have to pay for the cost of the expert, and parties will normally bear their own costs. There is no power for the expert to award costs in favour of the successful party, unless that power is specified in the expert determination clause or the terms of reference or if the expert is specifically authorised to award and assess costs.