What is Expert Determination? It is a procedure whereby an independent expert resolves a dispute rather than a judge or arbitrator. Expert determination is an excellent process for resolving disputes, usually of a technical nature.
The expert hears from all parties and the expert’s decision is final and binding unless otherwise agreed upon by the parties.
For more information on expert determination, here are the slides which Chris presented recently for International Mediation Awareness Week:
Think of it as a simplified version of arbitration. Both parties to a dispute appoint a suitably qualified expert to settle that dispute between them. Both parties can make oral and written submissions to the expert.
Yes and no. Pure forms of ADR are when the parties are in charge throughout. With ED, the parties choose the decision-maker and are involved in agreeing to the rules under which he should act, but thereafter the appointed expert is in charge of the process and gives the binding decision.
This question is discussed in Chris’ article which appears on the ICAEW website.
Appeals against an expert’s decision are very rare, and that is what the parties seek: finality to their dispute. As the Expert Determination is based on an agreed contract, there is very little that courts can then do if a determination is challenged. The court will tend to side with the decision of the expert unless there has been fraud, collusion, partiality, a material departure from instructions, or a failure to state reasons.
The wording of the expert determination clause in the contract may provide grounds to challenge a decision through the courts in the event of a manifest error by the expert determiner.
Expert determination is a good choice for settling disputes, especially disputes of valuation or of a technical nature, and those which might wreck working relationships if pursued through the courts. It is totally confidential, and usually quick and at modest cost. On all these it compares very favourably with arbitration and formal court proceedings.
Expert determination is used typically on single-issue and technical questions, though they can include legal questions. Using experts to answer such questions avoids the need for judges and arbitrators.
The sale of a business and the shares in a private company, or completion accounts on the sale of a company are just two examples of when expert determination is used.
Expert determination tends not to be used when:
In one of two ways:
In contracts, there is very often a Dispute Resolution Clause (DRC) which obliges the parties to follow Expert Determination in cases of dispute. For example, in the sale and purchase of a company, the parties have to agree the Completion Accounts and/or the Earn-Out. If they can’t agree, it is usual for the contract then to say that the President of ICAEW shall appoint the expert. But the President now discourages this, and will appoint only under a court order or by payment of a handling fee of £10,000. But parties can make their own choice of expert from the list (for nothing!).
It is also possible, and easy, for an appointment to be made at any time by agreement between the parties. If negotiations have failed and a court hearing looms, the parties may simply agree to have the matter determined by an expert. That takes the matter out of the hands of the court, at significant savings in legal costs and management time.
The remit of the expert in an expert determination is dependent on the contractual clause. The most common procedure sees parties submit written documentation and responses to any questions from the expert. See the pro forma rules described below at “What are the Expert’s Powers?”
Very. Except in very limited circumstances, for example where it is necessary to establish a precedent, virtually any dispute may be settled by ED. Chartered surveyors are often appointed to settle rent or valuation disputes, and chartered accountants such as Chris are often appointed to settle company sale/purchase disputes.
But it goes far wider. For example, Chris has settled these disputes:
Unlike a judge who does not profess such knowledge, the expert should have expertise and technical knowledge relevant to the dispute. The parties will try to agree on which fields of expertise the expert must have and which expert is chosen. And the experts do choose the expert; at court the judge is imposed.
In the event that the parties can’t agree on an expert, an appropriate professional institution can be called upon to appoint, or The Academy of Experts can make a choice – see the Academy of Experts for more information . The Academy is the only professional body in the world with a scheme for training and accrediting expert determiners, of many professions.
Expert determination is a private dispute resolution process between a number of interested parties and an independent expert.
The parties appoint the expert by contract, and the experienced expert determiner can provide the wording. It is between three parties: the two in dispute and the expert. The parties are obliged to cooperate with the expert and to accept his binding decision, and the expert is obliged to make the decision – see Campbell -v- Edwards, discussed in one of my blog posts.
So, since it is a valid contract, the “winning” party can sue on it, and the court will (almost) inevitably grant judgment to the winner. Expert determination is binding.
These are as defined by the rules which the parties and the expert agree at the start of the process. A pro forma set of rules may be found on the ICAEW website. These were devised by The Academy of Experts and settled by counsel, and Chris was involved in their adoption by ICAEW when he served on the ICAEW Forensic Committee.
Chris is now the chief examiner in expert determination at The Academy of Experts.
Chris always agrees his pricing structure before the assignment gets under way. All fees are payable equally between the parties. More information can be found in the expert determination section on the fees page.
It varies. Each party must have the right to make representations to the expert, and for the other side to respond (each way).
One of Chris’s Expert Determinations took seven years, but only because it was necessary to await an important decision from the tax tribunal. By contrast, he completed one in no more than five working days. That was exceptional; the parties wanted a quick decision and had all their representations ready in advance.
In normal circumstances, one can expect the process to take a few weeks, which puts it in a better light than a High Court hearing which can take many months even without appeals.
So Expert Determinations suits those parties who want a confidential process, a relatively inexpensive one, a prompt result, and a decision which cannot be appealed. The watchword is finality.