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SEPTEMBER 2014


g) there are no witnesses of fact or expert witnesses as there will often be in arbitration, there are generally just written submissions by each party;


h) the decision maker is an expert in the disputed subject matter, so there should be no need to educate them, as there can be with tribunals, particularly in technical matters, such as accounting; and


i) it is only in unusual circumstances (manifest error) that the decision can be appealed.


Expert determinations differ from other forms of ADR in that they provide a final and binding determination. Some other forms of ADR, like mediation, are not binding until the parties agree it is (usually only when they have agreed the settlement).


What are the benefits of expert determination?


The key benefits of expert determination over other forms of ADR are that:


a) it is a transparent process that can be flexed to the particular circumstances of the dispute;


b) it is cheaper, quicker and more confidential than arbitration or litigation;


c) the decision is final and binding on the parties apart from in unusual circumstances;


d) the decision maker is an expert in the disputed subject matter, which should lead to good quality decisions.


What are the pitfalls of expert determination? How are these challenges overcome?


a) If the contract containing an expert determination clause is not clearly drafted, the expert may have just as many problems as the parties in determining the correct outcome of the disputed matter. To minimise the scope for subsequent disputes, we would advise clients to use people familiar with the expert determination process and the subject matter, when drafting such contracts (eg accountants when drafting clauses around the preparation of completion accounts), so that the right expertise is incorporated therein.


b) If an expert is inexperienced in the subject matter (not a true “expert”) or unfamiliar with the process, there is more risk that the decision will be controversial. To minimise this risk, we advise choosing a proven and recommended expert; someone who is expert in the subject matter, independent and familiar with being both a determinating expert and with legal disputes generally.


There is a risk that, even with an experienced expert, the result is unexpected and the basis for the decision cannot be understood. This can be helped by agreeing that the expert will provide a reasoned decision. Whilst this can increase the risk of further dispute (as well as cost), it gives parties a better understanding of the expert’s rationale.


c) This risk could also be mitigated by asking the expert for a draft decision, to give the parties


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one last chance to comment before the final determination is made.


d) Once the expert determination process has been triggered, and the Disputed Matter(s) identified, there is generally no scope to add further issues to the dispute if they become apparent at a later stage. There is no way to adequately deal with this problem in a typical expert determination, as the whole basis of the process is that it is final and to open the issues would go against this. We would therefore recommend that contracts also include provisions for other dispute resolution mechanisms in case this situation arises.


Is there anything else that you would like to add?


a) It is important to consider whether you want a reasoned or a non-reasoned determinations (a reasoned decision may cost more and take longer, but will provide the rationale for the decision).


b) It is useful to set out key features of the expert determination process in the contract, otherwise if the parties try to do this once a dispute has arisen, it will be much harder to reach agreement. The expert can then advise on the rest of the process him/herself as appropriate and should have the opportunity to ask parties to do more work or present more evidence if required.


c) It is worth giving thought to whether the expert can or should carry out his or her own investigations into the issues rather than just relying on party submissions and questions to the parties. Also, whether the expert can or should seek legal advice if there are matters of contract interpretation.


d) The key to having a successful expert determination is choosing the right expert. The right expert is usually someone experienced in the dispute process generally and expert determinations specifically and who is an expert in the subject matter of the dispute. LM


Contact:


Legal Focus


45


Frank Ilett


T: +44 20 7392 7450 M: +44 7801 843692


E: fi@habermanpartnership.com


Liz Perks


T: +44 20 7392 7442 M: +44 7979 690298


E: lp@habermanpartnership.com


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