What is Expert Determination?
Extract from Philip Loots and Donald Charrett, Practical Guide to Engineering and Construction Contracts (2009) 304-306 (citations omitted)
Expert determination is a method of dispute resolution in which an independent impartial Expert is engaged by the disputing parties to determine those disputed questions of fact and/or law in the reference defined by the parties. The Expert makes a determination on an assessment of party submissions and relevant evidence provided to him/her. An expert determination usually does not require that the parties be afforded procedural fairness. Accordingly a hearing at which witnesses give evidence and are available to be cross-examined may not be implemented.
An expert determination in which the reference is to determine the legal rights of the parties in respect of an entire, defined dispute may be indistinguishable from contractual adjudication (see ¶25.8.3). However an expert determination may be more narrowly confined to factual/technical issues, the answers to which may assist the parties to negotiate the resolution of a broader dispute. The skills required of an Expert in such a narrowly defined determination may be mainly or entirely technical in a particular specialty field, whereas an Adjudicator of a dispute will generally need to have significant legal skills in respect of the relevant contractual/statutory issues in dispute.
Binding and non-binding determinations
There are two distinct types of expert determination. In a non-binding expert determination, the parties appoint an Expert to provide an advisory opinion on the merits of the factual/legal issues included in the reference. Ideally, the parties have agreed on the identity of the Expert, and therefore have confidence in her/his skills and expertise to provide a relevant and useful opinion. Dependent on the skill of the Expert, and the persuasiveness of his/her reasons, the determination may be sufficiently persuasive that both parties accept it and settle their dispute accordingly. As a minimum, even if both parties do not accept it in its entirety, the determination is likely to assist the parties in their further negotiations, by virtue of the fact that it consists of an independent impartial view of the issues, and reasons for the conclusions reached.
The other type of expert determination is binding expert determination, in which the parties agree prior to the reference that they will accept the Expert’s opinion as a binding, conclusive determination of the issues in the reference. Whilst in general the parties have freedom of contract to agree that the determination will be binding and conclusive, care must be taken to ensure that such an agreement cannot be construed to oust the jurisdiction of the courts. This is discussed further in ¶25.2.2.
The Institute of Arbitrators and Mediators Australia has published Expert Determination Rules which can be used as appropriate Procedural Rules for the conduct of either binding or non-binding expert determination. The ICC has published two sets of Procedural Rules applicable to expert determination. The ICC Rules for Expertise are appropriate for non-binding expert determination under the supervision of the ICC. The Rules for a Pre-Arbitral Referee Procedure are appropriate for binding expert determination under the supervision of the ICC, and enable contracting parties to have rapid recourse to a Referee (Expert) who is empowered to make an order designed to meet an urgent problem.
The Conciliation Agreement published by IAMA could, with some appropriate changes, form the basis of a Third Party Agreement for either form of expert determination.
Advantages and disadvantages
The advantages of expert determination stem from the independence and skills of the Expert. A non-binding determination provides the parties with a “reality check” on their case and may dissuade them from proceeding to expensive litigation or arbitration. A binding determination resolves the defined issues in contention by means of an assessment of the relevant facts/law by an independent third-party neutral. The Expert can rely on her/his personal expertise on the issues in dispute (which can be an important factor in selection of the Expert), and is not confined to the evidence submitted by the parties. The time and cost of an expert determination are usually substantially less than for the more formal procedures of arbitration or litigation.
The major disadvantage of non-binding expert determination is that it may not conclude the dispute between the parties if they are unable to subsequently negotiate a settlement. In that situation, substantial costs are likely to be thrown away, and the time taken to reach ultimate resolution increased. Binding expert determination suffers from the disadvantage that there may be no avenue to appeal a determination that is plainly wrong because it is based on errors of fact (a disadvantage it shares with arbitration). As an Expert normally acts inquisitorially and does not hear evidence, the determination may not be based on all the available evidence.
Expert determination is particularly suitable in disputes in which:
- there are complex technical issues;
- the questions of law are straightforward; and
- both parties have confidence in the Expert’s skill and ability to determine the issues fairly and justly.