Following the Branch’s AGM, John Kendall gave us an excellent lecture on expert determination, usefully starting by first of all defining what an expert determination is and what it is not. An expert determination is a binding dispute resolution process and is not expert appraisal, early neutral evaluation or mediation. It is a species of commercial dispute resolution where it is agreed to go to a third party who is an expert, but who then becomes the tribunal and is not acting as an expert witness. The legal distinction between arbitration and expert determination is not as significant in the US compared to the UK.
When John first got involved in expert determination 10 years ago, he found that although it was being widely applied, there was hardly anything written and, prompted by colleagues, therefore produced the first book on Expert Determination to promote the understanding of the process so the appropriate dispute method can be selected and used effectively.
His second edition published in 1996 is likely to be replaced by the third edition in 18 months time, which will have the benefit of his long experience and current role as consultant to CEDR.
He considers that clients need to be given a choice of commercial dispute resolution and to have a binding process without the formality of arbitration. It has to be fair overall but, unlike arbitration, it can include private conversations between the parties and the expert. Unlike arbitration, the expert is more inquisitorial and can investigate before giving a decision. The process of an expert determination can be determined by the expert appointed and there is no need (some might consider better avoided!) for a hearing and neither is the expert obliged to refer results of investigations to the parties before decision.
Expert determination is useful as an adjunct to other systems, as decisions by experts can be made on specific issues, for example in the valuation of a business. It can be useful in mediation too as a help in taking a decision on a difficult issue, before the mediation is continued. There are broad applications suitable for the use of expert determination which include share-valuations and takeovers. The Table shows a comparison of a range of dispute resolution procedures on whether the result is binding and whether there is due process.
The origins of expert determination are founded in land issues and rent reviews and it is now also widely used in the construction, computing and oil and gas industries. As it is simpler and cheaper than arbitration, it is useful as a general dispute resolution procedure and is often used to arrive at interim decisions. The Channel Tunnel project is an example where a contract included a dispute clause which referred problems to a panel. If the decision was unanimous, it stood unless referred to arbitration and so was in essence the forerunner of statutory adjudication.
Advice was given to the meeting to keep the clause in the contracts simple and straightforward. It is necessary to give powers so the expert gives a binding decision and also has the power to award interest. Under common law, there is no power to award interest unless it is specifically given in the contract. Including an appointing authority in the contract is essential eg CEDR, CIArb, IChemE, RIBA and RICS, but beware including in the list organisations which do not appoint. Parties can separately agree on an expert, but cannot go to the courts as they have powers to appoint arbitrators but not experts.
Expert determination can be stronger than arbitration, as the Arbitration Act does not apply and it can go ahead even if parties do not co-operate.
Challenges to the expert could arise before the decision, on the decision or after the decision. Challenges after the decision will generally only be upheld if there is manifest error and cases were cited to show that the courts take a very strong line on upholding an expert’s determination. An individual acting as an expert does not have statutory immunity and therefore can be sued, although courts have found in favour of experts so far. It is therefore advisable for experts to ask for immunity or even indemnity. Enforcement of the decision is a contractual issue.
|
Binding? |
DueProcess? |
|
|
Litigation |
Yes |
Yes |
|
Arbitration |
Yes |
Yes |
|
Expert determination |
Yes |
No |
|
Statutory adjudication |
Yes |
No |
|
Expert appraisal |
No |
No |
|
Early neutral evaluation |
No |
No |
|
Mediation |
No |
No |
In the free flowing discussion that ensued, many issues were raised with the first point being about the extent and frequency of the use of expert determination. A useful feature of the process to the parties concerned is its privacy, which means that it is difficult to assess the full use of expert determination. It was agreed that insurance company decisions were difficult to predict.
The point was made that expert determination (unlike arbitration) had no statutory basis and thus no procedure for payment of fees of the expert. It was prudent therefore to agree a fee structure first with the parties which could include interim fees, joint and several liability and a lien on the decision.
Under the JCT procedure, the adjudicator is not acting as an expert although acting under a contractual system rather than statute law. It was considered that it would be useful to have a Court of Appeal decision about adjudication and it would be interesting to see to what extent the law on experts could be applied to adjudicators.
The difference between rent reviews and arbitration was raised, emphasising the benefits of arbitration for the parties and that it does not have to be slow and expensive. In response, mediation was suggested as an alternative if satisfied customers were needed.
It was emphasised that a badly drafted clause in the contract on expert determination could lead to very undesirable consequences and thus the advice of the Dispute Resolution Department should be sought to help with drafting clauses for a contract.
Although the procedures for dispute resolution were debated in the House of Lords and are therefore in the public domain, the use of the procedures during the contract were covered by the rules of privacy and have not been written up.
In summary, John Kendall gave us a most useful introduction to expert determination and indicated clearly where it could be used with advantage compared to other procedures for dispute resolution.
Jean Venables