Expert Determination

AUSTRALIA BELGIUM CHINA FRANCE GERMANY HONG KONG SAR INDONESIA (ASSOCIATED OFFICE) ITALY JAPAN PAPUA NEW GUINEA
SAUDI ARABIA SINGAPORE SPAIN SWEDEN UNITED ARAB EMIRATES UNITED KINGDOM UNITED STATES OF AMERICA

Expert Determination
This guide covers:

What expert determination is

When expert determination is used

The key characteristics of expert

determination

Considerations to be borne in mind when

drafting an expert determination clause

A specimen clause and details of appointing

authorities are also provided.

This publication is not intended to be a comprehensive review of all

developments in the law and practice, or to cover all aspects of
those referred to. Readers should take legal advice before applying
the information contained in this publication to specific issues or
transactions. For more information please contact us at Ashurst
LLP, Broadwalk House, 5 Appold Street, London EC2A 2HA
T: +44 (0)20 7859 3888 F: +44 (0)20 7859 3880
www.ashurst.com
Ashurst LLP and its affiliates operate under the name Ashurst.
Ashurst LLP is a limited liability partnership registered in England
and Wales under number OC330252. It is a law firm authorised and
regulated by the Solicitors Regulation Authority of England and
Wales under number 468653. The term "partner" is used to refer to
a member of Ashurst LLP or to an employee or consultant with
equivalent standing and qualifications or to an individual with
equivalent status in one of Ashurst LLP's affiliates. Further details
about Ashurst can be found at www.ashurst.com.
Ashurst LLP 2016 Ref: 9094674 May 2016

Expert Determination

Expert Determination
Expert determination is a form of alternative dispute resolution whereby the parties to a contract ask an
independent expert to give a binding decision on a dispute. If the clause is drafted properly and it is used in the
right circumstances expert determination can provide you with a quicker, cheaper and effective means of settling
a dispute.

1.

When is it used?

The main advantage of expert determination is that it allows parties to a technical dispute to go "straight to the
horse's mouth": why involve judges or arbitrators if they are going to turn to an expert for the answer? In
practice, therefore, the types of dispute that are referred to expert determination involve single issues and
technical rather than legal questions. Classic examples include:

in a long-term contract where experts are required to give an opinion on technical issues likely to arise,
such as assessing whether industrial plant machinery has met the acceptance criteria laid down by the
parties, or measuring whether goods supplied meet the contractual specifications;

where the contract provides for the value of the assets to be determined at some later date, such as a
share purchase agreement where there are completion accounts, in the case of a rent review under a
lease or in the case of a pension transfer.

2.

Key characteristics

"Creature of contract"
Expert determination clauses operate wholly on a contractual basis. The parties can choose who they want to
deal with the relevant issue which can be a significant advantage where the dispute requires knowledge of
complicated technical issues. The exact confines of the expert's authority can be delineated by agreement
between the parties without interference from the courts.

No legislative background
In contrast to arbitration expert determination is not backed up by statute. Whilst this may make the process
quicker and more efficient, the downside is that, as the expert's remit is entirely dependent on the contract
granting him authority, he has no residual powers beyond those expressly granted by the contracting parties. So,
for example, an expert cannot summon a third party witness even if that witness has information crucial to
settling the dispute at hand.

Privacy
Whereas proceedings before a court take place in the public domain, parties to an expert determination can
maintain the privacy of their contractual relationship. Settling a dispute privately may increase the viability of an
ongoing commercial relationship between the disputing parties.

Finality
If the parties agree to be bound by the expert's decision it is very difficult to challenge it; there is no appeal
route as in the court system and fewer grounds of appeal than in arbitration. This greater certainty in the finality
of the outcome, and the advantages in terms of cost and speed, is one of the most attractive features of expert

Page 1

Expert Determination

determination. Paradoxically, it is also one of the greatest pitfalls: if the expert gets it wrong, the parties may be
stuck with the decision.1
However, although generally a mistake is not a ground for challenging a decision it may be challenged if the
expert has materially departed from his instructions i.e. not performed the task his contract required him to
perform. One such example would be where the expert was asked to value one property but in fact valued
another. Other grounds for challenge include fraud and partiality2.

Enforceability
An expert's decision becomes, in effect, another term of the contract and the winning party can only enforce it by
commencing fresh proceedings for breach of the contractual agreement to be bound by the decision. In contrast,
court judgments and arbitral awards are enforceable as of right.

Procedure
Because an expert's remit is entirely dependent on contractual provisions there are no rules of procedure and
process to fall back on. The clause, or as is more common, the terms of reference, will need to make provision
for the procedural rules that are to apply. Usually the parties will make their own submissions to the expert by
way of documents only. As the expert is acting as expert he is normally given powers to act inquisitorially.

No statutory immunity
Unlike a judge or arbitrator an expert has no statutory immunity. If the expert has been negligent in coming to
that decision the disappointed party may have an action against him for breach of contract. Consequently, no
expert will agree to a wide-ranging instruction, but only to an instruction that has a limited scope and is within
their expertise.

3.

A note of caution

Expert determination is a useful method of dispute resolution if used in the right circumstances. Think carefully
before you refer some or all of your disputes to the decision of an expert and ensure that it is the correct forum
for those disputes. Once the parties have agreed to refer a particular dispute to expert determination the
relevant courts may hold you to your agreement and refuse jurisdiction to hear that dispute. In addition,
depending on the relevant jurisdiction, damages may be awarded for a loss incurred by a failure to comply with
the terms of an expert determination clause. The courts of England and Wales have previously held parties to
their agreement to refer disputes to an expert and have awarded damages comprising of costs wasted in the
proceedings brought in breach of the relevant clause.3

4.

Drafting considerations

Many of the pitfalls associated with expert determination can be avoided by careful, bespoke drafting. Of all
dispute resolution clauses an expert determination clause requires the most care and tailoring to the specific
circumstances.

Act as expert
Where an expert determination clause is used it is important that the clause expressly states that the expert is to
act as expert in order to avoid confusion with other methods of dispute resolution such as arbitration.

1
2

Owen Pell Limited -v- Bindi (London) Limited (2008) QBD (TCC).
This is where the expert fails to treat the parties fairly by, for example, granting one party more time than the other to complete a procedural
stage such as the delivery of written submissions (Hickman -v- Roberts [1913] AC 229). The test for partiality requires actual bias, or a real
danger of injustice resulting from the alleged bias and not just conflicts of interest or apparent lack of independence (Macro -v- Thompson (No.3)
[1997] 2 B.C.L.C. 36; Bernhard Schulte -v- Nile Holdings [2004] Lloyds's Rep 352).
Douglas Harper -v- Interchange Group Ltd [2007] EWHC 1834 (Comm); Union Discount -v- Zoller [2002] 1 WLR 1517.

Page 2

Expert Determination

Appointment of the expert

An expert, unlike a judge, should possess expertise and technical knowledge relevant to the dispute. It is not
advisable to name a specific individual to be the expert as that depends on the individual being willing, available
and able to give a decision at the time a dispute arises. Typically, the clause will (i) specify the field of expertise
from which the expert is to be chosen, (ii) provide that the parties will try to agree on the identity of the expert
at the time the dispute arises and (iii) failing such agreement, provide for appointment by an appropriate
professional institution. Ensure that the institution exists and is willing to appoint an expert. If not, the courts are
not able to assist in appointing one. A table of appointing authorities is provided at the end of this guide.

Finality and grounds for challenge

It is important to expressly state that the expert's decision is to be final but you should also consider on what
grounds you want to be able to challenge a decision of the expert. As mentioned above, unless the contract
expressly provides otherwise, the expert's decision can generally only be challenged on an allegation of fraud,
partiality or material departure from instructions. The mere fact that the expert has made a mistake is not a
ground for challenging his or her decision. As such, it is common practice for parties to agree that an expert's
decision is binding except in the case of "manifest error". Such an error would occur where the expert has
made a plain and obvious error or an obvious oversight or mistake.

Procedure
Unlike litigation or arbitration, where the procedures are governed by rules of court, institutional rules or statute,
the procedure for expert determination will be entirely dependent on the parties' agreement. If there is no
procedure set out in the clause one will need to be established at the time the dispute arises. This is dangerous
as, once there is a dispute, agreement between the parties is more difficult to achieve. Consequently, if one
party is obstructive, the process can become relatively slow and expensive. The experts powers of compulsion
are limited. Providing for the procedure in the clause or in the expert's terms of reference attached to the
contract will avoid this. The other alternative is to agree that the expert can set the procedure but that leaves
the parties with no control over the timetable.
It is important to set out clearly and exactly what the expert is required to do and the powers that he has in
order to accomplish that task. It may be preferable to set this out in the expert's terms of reference. Important
points to be addressed include a definition of the matters to be determined by the expert, a requirement that the
expert makes his decision based on all the evidence before him, and whether or not the expert has authority to
decide issues of construction. Procedural issues that should be addressed include the nature of any submissions
to be made to the expert, whether there should be an oral hearing and whether to permit oral testimony at that
hearing, and the form in which the expert will deliver his decision, including whether or not it will be
accompanied by reasons.
In some circumstances you may wish to include a timetable for the making of submissions. Typically, clauses
provide for written submissions to be made within 28 days, comments on the other party's submissions to be
made within a further 14 days and the expert's decision to be made within 90 days. Oral submissions may also
be provided for. It is important that the timetable prescribed for the expert determination is a realistic one and
not so optimistic that you suffer substantial disadvantage procedurally through having agreed an extremely tight
timetable, the result of which prejudices your ability to ensure that your case is fully put to the expert.

Costs
Unless provided for in the clause or the expert's terms of reference the expert will have no power to make costs
awards. Consider therefore whether you wish to give the expert a power to award costs against the losing party
and to refer costs matters to an independent costs draftsman. Alternatively, the parties could agree to bear their
own costs in the expert determination process (which will include the costs of the expert's time).

Page 3

Expert Determination

Confidentiality
You may also want to include in the expert determination clause a provision relating to confidentiality. It should
be borne in mind however that such a provision may be displaced by statutory or regulatory requirements.
Alternatively, you may in fact wish to set precedent in the course of resolving the dispute in such a scenario
litigation will be preferable to expert determination.

5.

Specimen clause

This clause is provided by way of example only: expert determination clauses will always need to be tailored to
suit the particular circumstances. The clause below is based on the specimen clause provided by Practical Law
Company.
Definition
"Expert" means a person appointed in accordance with clause [ ] to resolve [A MATTER UNDER THE
AGREEMENT].
1. EXPERT
1.1 An Expert is a person appointed in accordance with this clause to resolve [A MATTER UNDER THE
AGREEMENT].
1.2 The parties shall agree on the appointment of an independent Expert and shall agree with the Expert
the terms of his appointment.
1.3 If the parties are unable to agree on an Expert within seven days of either party serving details of a
suggested expert on the other, either party shall then be entitled to request [NAME OF BODY ENTITLED
TO MAKE NOMINATION] to appoint an Expert [PROFESSIONAL QUALIFICATION] of repute with
international experience in [TYPE OF MATTER] and for the [NAME OF BODY ENTITLED TO MAKE
NOMINATION] to agree with the Expert the terms of his appointment.
1.4 The Expert is required to prepare a written decision and give notice (including a copy) of the decision
to the parties within a maximum of three months of the matter being referred to the Expert.
1.5 If the Expert dies or becomes unwilling or incapable of acting, or does not deliver the decision within
the time required by this clause then:
(a) either party may apply to [NAME OF BODY ENTITLED TO MAKE NOMINATION] to discharge the Expert
and to appoint a replacement Expert with the required expertise; and
(b) this clause applies in relation to the new Expert as if he were the first Expert appointed.
1.6 All matters under this clause must be conducted, and the Experts decision shall be written, in the
English language.
1.7 The parties are entitled to make submissions to the Expert [including oral submissions] and will
provide (or procure that others provide) the Expert with such assistance and documents as the Expert
reasonably requires for the purpose of reaching a decision.
1.8 To the extent not provided for by this clause, the Expert may in his reasonable discretion determine
such other procedures to assist with the conduct of the determination as he considers just or appropriate
[, including (to the extent he considers necessary) instructing professional advisers to assist him in
reaching his determination].

Page 4

Expert Determination

1.9 Each party shall with reasonable promptness supply each other with all information and give each
other access to all documentation and personnel as the other party reasonably requires to make a
submission under this clause.
1.10 The Expert shall act as an expert and not as an arbitrator. The Expert shall determine [THE MATTER
UNDER THE AGREEMENT] [which may include any issue involving the interpretation of any provision of
this Agreement, his jurisdiction to determine the matters and issues referred to him or his terms of
reference]. The Experts written decision on the matters referred to him shall be final and binding on the
parties in the absence of manifest error or fraud.
1.11 Each party shall bear its own costs in relation to the reference to the Expert. The Expert's fees and
any costs properly incurred by him in arriving at his determination (including any fees and costs of any
advisers appointed by the Expert) shall be borne by the parties [equally or in such other proportions as
the Expert shall direct].

Page 5

Expert Determination

Appointing authorities
The following is a list of appointing authorities which may be contacted to provide either general advice or to
appoint an expert in the event that the parties are unable to agree on the choice of expert.
ICC International Centre for Expertise
38 cours Albert 1er
75008 Paris
France
T: + 33 1 49 53 30 53
F: + 33 1 49 53 30 49
http://www.iccwbo.org/court/expertise/id4595/index.html

LCIA
70 Fleet Street
London EC4Y 1EU
United Kingdom
T: 44 (0)20 7936 6200
F: +44 (0)20 7936 6211
http://www.lcia.org/

The Centre for Effective Dispute Resolution CEDR

International Dispute Resolution Centre
70 Fleet Street
London EC4Y 1EU
T: +44 (0)20 7536 6000
F: +44 (0)20 7536 6001
www.cedr.co.uk

The General Council of the Bar of England and

Wales
289-293 High Holborn
London WC1V 7HZ
T: +44 (0)20 7242 0082
F: +44 (0)20 7831 9217
www.barcouncil.org.uk

The Academy of Experts

3 Gray's Inn Square
London WC1R 5HP
T: +44 (0)20 7430 0333
F: +44 (0)20 7430 0666
www.academy-experts.org

The Law Society of England and Wales

The Law Society's Hall
113 Chancery Lane
London WC2A 1PL
T: +44 (0)20 7242 1222
F: +44 (0)20 7831 0344
www.lawsociety.org.uk

Page 6

Ashurst Quickguides
Ashurst's Quickguides are a regularly updated
mini-library of short legal summaries on a
range of key issues relevant to businesses.
For a full list of current titles and the most
up-to-date versions, please visit the
publications section of our website
(www.ashurst.com).
If you would like further information on this
guide, please speak to your usual contact at
Ashurst or one of our contacts listed below.
James Comber
Partner, Hong Kong
T: +852 2846 8963
E: james.comber@ashurst.com

Ben Giaretta
Partner, Singapore
T: +65 6416 3353
E: ben.giaretta@ashurst.com
Gareth Hughes
Partner, Hong Kong
T: +852 2846 8963
E: gareth.hughes@ashurst.com
Ronnie King
Partner, Singapore
T: +65 6416 9507
E: ronnie.king@ashurst.com
Rob Palmer
Partner, Singapore
T: +65 6416 2204
E: rob.palmer@ashurst.com