EXPERT DETERMINATION – AN ALTERNATIVE APPROACH TO DISPUTE RESOLUTION
A recent edition of Corporate Disputes looked at the rising costs of arbitration, and noted that the advantages once perceived over litigation, notably lower costs, are fast being eroded. So what further dispute resolution alternatives are there to arbitration and litigation? Mediation springs to mind, and is very valuable. However, it does not result in a defined resolution of the dispute, simply assisting the parties to an agreement. Mediation may, of course, not result in agreement being reached. In situations where both parties desire a clear result for a dispute, expert determination has become a process of choice in resolving many commercial disputes, including those that are very substantial, and particularly those that are technically complex. Expert determination is especially useful in multi-party disputes. The process is also often set out in Sale & Purchase Agreements as a mechanism to resolve aspects of the transaction, such as completion accounts on which the final consideration is based.
In essence, expert determination results in an individual expert in the matter of the dispute in question, determining or deciding the dispute on a binding basis that is not subject to appeal (in some cases an expert is appointed, say, to assess the value of an asset or business, whereby the expert’s valuation is binding but the parties are not compelled to transact if the price set by the expert is not acceptable to one of them). The nature of the process lends itself to situations where the critical issues are of a specific technical nature, perhaps accounting or valuation matters, a rent review or a construction or manufacturing process dispute. The role is quasi-judicial in nature. The important element is finding the right expert.
Expert determinations are typically more cost efficient than either litigation or arbitration. The procedures used are highly flexible, but once agreed between the parties and the expert will provide a final and definitive resolution to the dispute. The expert determination process can be as quick, or as extensive, as the parties decide. Once established, the process is in the hands of the expert, so it is critical that the person selected has the experience, knowledge and authority to drive the process forward.
Jul-Sep 2014 issue
FTI Consulting LLP