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44
Legal Focus
SEPTEMBER 2014
Expert Determination
This month we take a look at Expert Determination and the legal pitfalls surrounding it, by speaking to Frank Ilett and Liz Perks from The Haberman Partnership.
What are the key cases you have dealt with recently regarding expert determination?
Liz is leading the team acting for the purchaser in a $100 million completion accounts dispute being resolved through expert determination, following our client’s acquisition of a group of companies in the music industry. There are more than 100 disputed accounting matters to be determined.
Frank was involved recently in a post-acquisition dispute worth hundreds of millions of dollars following the sale of a raw materials business in Ukraine. The expert determination revolved around the interpretation and English translation of an accounting clause that had no clearly defined meaning under Ukrainian GAAP.
Frank recently gave expert evidence in a post transaction dispute in South Africa dating back 16 years. The dispute arose out of an expert determination that was given in 2000, but due to the unclear wording of it, the parties have been in dispute ever since.
Why do you think that expert determination is becoming such a popular method of solving disputes?
First, it has actually been around for a long time (more than 20 years) in completion accounts disputes, but in the past did not have the visibility that it has today; Secondly, its popularity has grown because:
a) it has proven to be a reliable way to obtain a final and binding decision;
b) expert determinations are hard to appeal so, as a resolution method of last resort, they work well;
c) the process for expert determination is extremely flexible, allowing the parties and the expert to agree whatever process works best for their particular circumstances;
d) they can be used at any stage in a contract to provide quick determinations of specific issues as they arise. In other words you can have a number of expert determinations arising under one contract if required;
e) they are particularly useful where the issues involved are very technical, like accounting, or in
issues where experts such as accounting or IT experts are best qualified to determine the dispute;
f) the process for providing evidence and the timetable is transparent, so there are few surprises;
g) they are usually quick and cost effective;
h) solicitors have become more involved in them over the last 10 years, which has helped raise the profile of expert determination and, therefore, its usage;
i) generally there are more experienced experts available now, which means expert determination occurs across many more disciplines than before; and
j) given that it is a confidential process, it is better suited to confidential or sensitive commercial matters than court or even arbitration.
How does expert determination differ from ADR?
Expert determination is a form of ADR; it is perhaps just less well known than arbitration, mediation, conciliation, early neutral evaluation and other similar forms of ADR.
It differs from arbitration because:
a) it does not have the clearly defined rules and processes associated with most arbitrations, so can be flexible to fit the circumstances;
b) there is usually only one expert, as opposed to a typical arbitral panel of three;
c) the expert is selected because he or she is a specialist in the subject matter in dispute, rather than a lawyer (whilst not all arbitrations are decided by lawyers, most are);
d) it is generally quicker and cheaper and usually dealt with in a few months;
e) the expert acts as an expert and not an arbitrator, which means that he or she is free to use his or her expertise to find the right answer, rather than deciding which of the opposing views of the parties is correct;
f) submissions to the expert are usually only made in writing and it is rare for the process to include oral testimony;