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14/12/20

ADR: Independent expert determination

ADR: Independent expert determination

Alternative dispute resolution (ADR) comes in a variety of forms and fundamentally means a process of resolving a dispute other than through litigation.

With specific regard to the engineering and construction industry, it commonly means a process alternative not only to litigation but also to arbitration.

Typical forms of ADR include conciliation, mediation, adjudication, and expert determination. This article addresses expert determination, what it is, why it is seemingly becoming more popular, especially in the Middle East, and how in the right circumstances it can operate to the advantage of the parties to a dispute.


Author: Peter Banathy, Regional Director, Driver Trett Middle East and Africa


What is it?

In its simplest form, it is the parties to a dispute appointing an independent third party, “the expert”, to exercise their professional expertise, experience and knowledge to decide upon issues that are the basis of the dispute.

The resulting determination can be binding or nonbinding and can arise either from a process provided for in the contractual agreement between the parties, or from a separate agreement that the parties choose to enter into outside of the contract provisions (commonly described as an ad-hoc arrangement).

Expert determination is bound by the contractual framework surrounding it and is not subject to any specific legislation. As a consequence, it can be a very flexible process and the details of it are often open to the parties to negotiate and agree.

For example, the parties may agree that the process should be concluded on a “documents only” basis with a set timeline for exchanges of submissions. For large and/or complex issues, expert determination may provide for multiple rounds of document submissions, together with a hearing or hearings.

The selection of the expert needs to be carefully considered such that the person appointed has the necessary skills and experience to understand and address the key issues of the dispute. As a dispute can often relate to a number of technical and legal matters, it is always worth considering allowing for the involvement of specialist support to the expert (for example on specific technical or legal matters).

Experts can be appointed by a nominating body, such as the RICS or the Chartered Institute of Arbitrators (CIArb) and nomination via such bodies is often prescribed where contracts contain provision for expert determination.

In other instances, especially under an ad hoc arrangement between the parties, it may simply be by agreement between the parties as to the relevant expert to appoint. As well as ensuring that the expert has the relevant skills and experience to address the matters in dispute, there are various other considerations for the parties for the appointment and process to be effective. 

For example, the expert should:

  •  Be free from any conflicts of interest;
  •  Act with impartiality and fairness;
  • Have appropriate availability aligned with the timetable set out for the process;
  • Agree procedure or terms of reference to allow the expert to make their own enquiries and where necessary use their experience to draw conclusions from the evidence they have been presented with;
  • Manage the overall process within the framework of the agreed process.

The conclusion of the process is typically reached when the expert furnishes the determination to the parties.

This should articulate the decisions of the expert clearly and provide reasoning so as to enable the parties to understand the full basis of the determination.


Why is expert determination increasing in popularity in the Middle East?

Across the Middle East, expert determination has become increasingly more common over the last eighteen months or so. In particular, I have seen a marked increase in the number of ad-hoc agreements entered into by parties in dispute.

So why is this the case?
Expert determination as described above can, subject to agreement between the parties, be a very flexible process tailored to suit the nature, size and complexity of the dispute(s). Typically, the process is shorter in duration and much more cost effective than litigation or arbitration. In addition, the parties usually have an opportunity to influence the choice of the expert undertaking the determination, thus ensuring that the matters are reviewed and determined by an individual (possibly with relevant support) who is appropriately qualified and experienced in the relevant subject matter. This can be very effective where the dispute centres around complex technical issues for example.

Furthermore, for disputes which could still be the subject of litigation or arbitration, engaging a prior process of expert determination may promote a settlement of the dispute. In my experience, this is the main reason that parties enter into an ad-hoc and non-binding process.

This has added benefits in that it allows commercial relationships to continue without the normal fractures that often appear when parties are engaged in formal dispute proceedings with each other.

How can expert determination benefit the parties to a dispute(s)?

As already mentioned, expert determination is typically quicker and more cost effective than litigation or arbitration, which, in the very challenging economic climate the world is currently in, may be a particular attraction to parties to a dispute.

Also, when using an ad-hoc non-binding process in particular, it may facilitate a commercial settlement of a dispute, thus avoiding the costs associated with more formal proceedings.

In my experience, clients often question the usefulness of expert determination when it is non-binding. My typical answer to them is that it provides a basis for re-setting a party’s expectations and thereafter can prompt settlement discussions which in turn can help the parties to avoid lengthy and costly proceedings. The rationale of a neutral third party with relevant expertise in the matters underpinning the dispute can allow the parties to sense check their own opinions on the matters against their original position.

Another benefit I have seen is that where a party or parties to a dispute are an entity with rigid accounting and financial reporting requirements (including shareholder or stakeholder considerations) expert determination can provide a clear measure for such accounting and reporting purposes relatively quickly.

Similarly, where circumstances allow and expert determination is used whilst a project is still ongoing, a dispute that is determined relatively quickly can allow the parties to focus on the completion of the project rather than becoming embroiled in a more lengthy and acrimonious dispute resolution process.

In conclusion, whilst expert determination may not always be the ideal or ultimate mechanism for resolving disputes in our industry, for the reasons described above, it clearly has some very real attractions, and therefore, a place in the market.

A word of warning; those seeking to include a clause within a contract citing expert determination as a form of dispute resolution must draft a clause that reflects the parties precise wants and needs. A recent case heard in the Technology and Construction Court found that such a clause was not clear and that the expert lacked jurisdiction; the determination/decision of the expert was rendered null and void and therefore not binding upon the parties.13

The Royal Institution of Chartered Surveyors (RICS) publishes a very comprehensive and useful guidance note on the subject of expert determination14 for instances where surveyors may be asked to act in this role. Such guidance may be useful for any other professional who is acting in or considering taking that role. The guidance note also makes for useful reading for anyone considering submitting a dispute it is party to or maybe involved with, to expert determination.

A further sign perhaps that expert determination is set to increase in popularity in the Middle East and elsewhere is that the RICS recently delivered its first expert determination training programme. In anticipation of this increase I was a happy participant on the programme and have enhanced my skills to allow me to continue to deliver effective expert determinations across the region. 


This article was originally written for issue 20 of the Driver Trett Digest.
To view the publication, please visit: www.driver-group.com/digest-issue-20 

For insight on the dispute resolution services offered by Driver Trett, please CLICK HERE. 


 

Articles  /  Digest  /  Global  /  Middle East

Articles  /  Digest  /  Global  /  Middle East

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