Expert Determination

Question 1

What are the three main situations where ED is used?

Answer 1

• Where the parties contractually bind themselves in advance to use ED
• Where a case raises issues of a very technical nature
• During the course of mediation, and once ED is complete they mediate the remaining issues

Question 2

How must the agreement to use ED be drafted?

Answer 2

• The clauses in a pre-existing contract must be unambiguously drafted
• They must make it clear which issues are to be referred to the determiner, and his area of expertise and qualifications

Question 3

What is the contractual effect of ED clauses?

Answer 3

• If clear and unambiguous, they will be upheld by the courts, and will generally prevent the parties having recourse to the courts to resolve the dispute
• If one party refuses to comply with this clause, the other party will be entitled to damages for breach of contract if it has to issue proceedings

Question 4

What will the court consider when a stay is applied for to enforce ED?

Answer 4

There can be no stay if the issues in the dispute do not come within the ED clause

• The court considers the following factors:
  
  • The extent to which the parties have complied with any pre-action protocol
  • Whether the dispute is suitable for ED
  • The costs of ED compared to the costs of litigation
  • Whether the dispute could be resolved more quickly by proceedings than ED
  • the overriding objective
  • the extent to which there would have to be parallel proceedings for the matters not within the ambit of the clause

Question 5

What are the advantages of ED?

Answer 5

• cost effective
• speedy resolution compared to litigation or arbitration
• removes decision making from the parties into the hands of an independent party
• relatively informal (strict rules of evidence and procedure don’t apply)
• the parties can agree the procedure the determiner will follow
• can be kept confidential and private
• can gives a final determination with no right of appeal (where parties agree)

Question 6

What are the differences between ED an negotiation, mediation and ENE?

Answer 6

• ED is less flexible
• Outcome is not within the parties’ control in ED
• Determination is decided on correct application of law and facts (not creatively)
• Decision in ED is usually binding

Question 7

What are the similarities with other forms of ADR?

Answer 7

• Selection of the process and expert is within the parties’ control
• More timely and cost-effective than litigation
• Parties generally control the amount of information before the determiner (although if required, the determiner can carry out an independent investigative role)
• Remains confidential

Question 8

How is the determiner selected?

Answer 8

• Can be carried out by an expert, neutral third party or even a panel of several + a lawyer
• Parties may agree between themselves, and may approach him directly
• May enlist the help of ED bodies (some ADR providers also advise on this)
• When appointing an expert, parties should consider:
  
  • Nature of expertise required
  • Procedure of appointment
  • Issues to be referred to expert
  • Procedure the expert should employ (the expert may be told to determine his own)
  • Information that should be provided
  • Whether it is confidential
  • Whether it is final and binding
  • Whether he is to give reasons
  • Circumstances of challenge
  • Time scale for the determination
  • Dates for payment of expert fees and any monetary sum decided to be paid

Question 9

How is the process determined?

Answer 9

• Relationship between the parties, scope, obligations, binding nature of the decision, whether reasons need to be provided, circumstances of challenge, are all primarily governed by the contract between the parties.
• If already provided for, the procedure should be followed
• It is more usually to agree in advance simply to refer disputes to ED, and then the parties and the determiner will agree on procedure

Question 10

Will the court intervene at all?

Answer 10

• If agreed procedure has broken down, the court can provide its own
• However, the court won’t intervene to order that a particular party should be entitled to make representations to the expert, or that particular documents should be provided, if the ED clause does not provide for these matters – they are procedural, for the expert to decide
• In the absence of agreement about the procedure, an ED cannot be set aside on the basis that the expert failed to follow a fair procedure in accordance with natural justice

Question 11

What is the typical procedure to kick off ED?

Answer 11

For the parties to send the expert:

• Written submissions
• Copies of all relevant documents (if one party refuses, having agreed to do so, the court may order him to do so)
• In some cases, the parties may agree that the parties or their lawyers should make submissions at a meeting/hearing, or that live evidence should be called, or that the expert conducts his own independent enquiries.
• Parties can tailor the process - statements of case, disclosure, formal hearing, oral submissions etc
• If proceedings have not been issued, ED can be informal, with only written submissions and the expert providing his decision in writing

Question 12

What is the implied duty in ED?

Answer 12

• There is an implied duty for the parties to co-operate with each other and the expert
• Where the expert’s proposed terms are reasonable and consistent with the rights and obligations in the parties’ agreement, the implied duty is likely to require the parties to accept the expert’s appointment on those terms

Question 13

What if confidential information has been shared?

Answer 13

• If information is given confidentially, and the expert must give reasons for his decision, he must summarise any information that is not known to the other party, so both parties can ascertain what he took into account in his decision.
• Important if the decision can be challenged on grounds of manifest error
• To avoid suggestions of bias, openness is preferable with documents and hearings

Question 14

What is the nature of the decision?

Answer 14

• Parties usually agree the decision is binding (the court will then uphold it)
• Can be either finally binding or temporarily binding
• Does not take the form of an award or order
• The agreement may specify a time limit for challenging it
• The parties may agree on having no right to challenge it

Question 15

Reasons for the decision

Answer 15

• The parties can agree whether reasons should be provided
• If the expert must do so and fails, the court will order him to do so, simply by enforcing the contractual provisions
• Reasons should be intelligible and adequate
• Reasons may be brief, but must explain the basis for the expert’s conclusions
• If the decision will not be binding, and there are no reasons, it is very difficult for the parties to show manifest error or departure from instructions

Question 16

Who decides whether the expert has jurisdiction?

Answer 16

• Regardless of whether the underlying contract between the parties has specified that the expert is to have exclusive jurisdiction to determine the extent of his own jurisdiction
• If a dispute arises in this regard, it may be in the interest of justice and convenience for the court to determine jurisdiction before an ED is made
  
  • Because the ED would then not be final and could be challenged
  • It would otherwise be a waste of time and costs
  • However, it is not always wasteful to first lay down an ED. Because the court has to determine whether it is faced with a real dispute, not a hypothetical one

Question 17

What are the grounds for challenging a final decision in court?

Answer 17

• The contract is given primary consideration
• If the parties agree that the decision is final and binding, then provided the expert has done exactly what he was instructed to do, and made the ED honestly and in good faith, it can generally not be challenged
• If there are no contractual grounds for challenge, what three grounds for challenge exist in law?

1. Material departure from instructions
2. Fraud
3. Impartiality

Question 18

Material departure from instructions

Answer 18

• Any departure is said to be material unless it can be said to be trivial or de minimis
• Once a departure is material, it is not necessary to show it actually affected the result

Question 19

Fraud and impartiality

Answer 19

• The court is likely to order reasons to be given, rather than set the decision aside
• If the expert is guilty of fraud or collusion with one of the parties
• With partiality, it must be shown that the expert actually was biased

Question 20

No reasons for decision

Answer 20

• The court is likely to order reasons to be given, rather than set the decision aside

Question 21

Manifest error

Answer 21

• The parties may contract that the decision will only be binding absent manifest error
• Manifest error may enable the decision to be set aside
• However, in the absence of any contractual term to this effect, the decision will be binding
• ‘Manifest error’ is an error so obvious as to be beyond reasonable contradiction
• The court can look at other material that was available to the expert, and any reasons given by way of clarification

Question 22

Error of law

Answer 22

Error of law will set aside the decision if:

• he did not perform the task assigned
• where an issue of law divides the parties, and this is what the expert needs to resolve, and he acted upon the wrong meaning (gone outside his decision-making authority)
• If he answered the right question in the wrong way, it will still be binding
• It seems unusual to prevent the parties to go to court, when the Arbitration Act 1996 gives a right to the parties to refer points of law to the court

Question 23

Failure to act lawfully or fairly

Answer 23

May be challenged if the procedure is set out in the contract, ad the expert fails to follow it

Question 24

Is the decision intended to be final on matters of construction?

Answer 24

• His role and his jurisdiction are a matter of construction
• If the agreement confers exclusive remit to determine the matter, the court has no jurisdiction to determine it because the parties have agreed to be bound
• However, if it can be said that the terms were not intended to oust the court’s jurisdiction in the interpretation of the terms, the court can intervene if the interpretation is incorrect
• The court will not readily accept that the parties intended an expert’s decision to be final and conclusive in respect of the construction
• In exceptional cases, the court may construe a term before a decision is made

Question 25

What is the procedure for challenging a decision?

Answer 25

• Usually made by issuing Part 8 proceedings
• If the decision is set aside, the court may make the determination itself or direct a new expert to be instructed

Question 26

How can a decision be enforced?

Answer 26

• Failure to honour the decision is a breach of contract
• Proceedings can be issued in relation to the breach. The court can order in favour of the decision.
• The order can then be enforced the same way as any other judgment

Question 27

Can an expert be sued?

Answer 27

• An expert can be liable in negligence or breach of contract
• Many experts seek immunity by inserting clauses in the agreement saying that the parties will not hold him liable in respect of the determination or call him as a witness
• These clauses may be unenforceable if they are unreasonable under the UCTA 1977

Question 28

How does ED differ from arbitration?

Answer 28

• Determiner has no power to make an order or award
• The determination does not take place under the AA
• There is no right of appeal
• The strict rules of evidence and natural justice does not apply (unless the contract provides)
• ED is not subject to the supervision of the court
• The parties retain a great deal of control over the timing and procedure
• The parties retain a reasonable degree of control over the evidence
• If it is an international dispute, it is not enforceable under the NYC
• An expert an be sued and has no judicial immunity
• An expert does not act in a judicial capacity, so can use his own expertise in the decision

Question 29

Dispute review panels

Answer 29

• Can be a hybrid form of determination
• May or may not involve an expert
• Usually each party appoints an independent party to the panel, who will then choose a chairman (all of these may or may not be experts)
• Decisions made by the panel will be binding unless they agree that they will refer the decision to arbitration within a specified time limit