Arbitration is a private, contractual substitute for litigation in which a tribunal (typically one or three arbitrators) renders a binding decision (an award) after considering legal arguments, evidence, and submissions from the parties.
Expert determination is a contractual mechanism whereby an independent expert is appointed to decide a specific issue, which is often technical, financial, or valuation-based, using their own expertise. The process is usually inquisitorial rather than adversarial.
Understanding the differences between the procedures informs the drafting of dispute resolution clauses in contracts, and helps parties to select a dispute resolution pathway after a disagreement has crystallised.
Similarities between arbitration and expert determination
The two procedures share several similarities.
First, they are both carried out in private, so if confidentiality is a concern, either arbitration or expert determination will be suitable.
Both procedures result in a binding decision. Unlike mediation, neither is a facilitative process, which seeks to find settlement. The decision of the expert or the arbitrator is final.
In terms of costs, the parties must pay for the time of the expert or the arbitrator(s). In litigation, parties do not pay for the judge’s time.
Both procedures offer a level of flexibility. The parties agree the timetable between them.
Differences between an expert and an arbitrator
Experts are chosen for their knowledge in a particular field. They are often accountants, actuaries, or engineers. They are not necessarily legally trained.
Arbitrators tend to be legally trained. Usually they are barristers, or ex-barristers. Parties may choose a particular arbitrator for their knowledge of the subject matter, such as in shipping, construction, or pension disputes. However, the arbitrator is usually a legal expert, rather than an expert in the technical nuances of the case.
Enforcement of a decision by an expert
A decision by an expert in an expert determination becomes part of the contract between the parties.
That means however, that enforcement can be more challenging than the enforcement of an arbitration award. If a party fails to comply with the decision, a further court judgment or arbitral award is likely to be required.
In England and Wales, an expert’s determination can be enforced through the courts by adopting the summary judgment procedure under CPR 24. This should be a fairly quick and straightforward procedure, especially if both parties are based in the UK. However, there will be costs to making the application.
Where one or more of the parties is located abroad, enforcement can be more difficult. If the losing party does not comply with the decision, the successful party will need to bring a breach of contract claim in the foreign court. This usually involves instructing local counsel, who will advise on the process in their jurisdiction.
Why choose expert determination rather than arbitration?
Expert determination is a quicker and cheaper process than arbitration. There is limited or no disclosure, and no formal hearing usually. Instead, the expert relies on their own knowledge and inquiries.
It is also a more informal procedure, which can help to preserve business relationships better than the adversarial forum of arbitration.
Disputes suited to expert determination
Expert determination is generally more suited to disagreements over technical points, rather than complex disputes and intricate points of law.
For example, parties often opt for expert determination where a form of valuation is required. Parties may ask an accountant to act as an expert to value shares during a dispute in the sale and purchase of shares in a business. Similarly, an accountant may be needed to determine the completion accounts, or the value of an asset.
Experts may also be chosen for their professional opinion on an issue. Engineers may determine the engineering performance of a particular assets, or asked to determine quality metrics in dispute.
Why choose arbitration over expert determination?
Expert determination is less suited to matters which require review of extensive documentary evidence, or factual witness evidence. For disputes with a complex factual matrix and multiple legal issues, arbitration is more appropriate.
Enforcement
Practically, one of the benefits of arbitration over expert determination is that the arbitrator’s award is more straightforward to enforce. The New York Convention requires all signatories to recognise and enforce international arbitration awards in their jurisdiction. So enforcement is automatic in the 172 contracting states.
Expert determinations cannot be enforced abroad without the commencement of a new action.
For disputes between international parties, arbitration is likely to be preferred as a dispute resolution procedure over expert determination.
Domestic parties can enforce a decision by expert determination through breach of contract proceedings, which can be truncated into a summary judgment application in the courts of England and Wales.
Structured and familiar procedure
Arbitration in the UK is underpinned by the Arbitration Act 1996, and the institutional rules that the parties have chosen. This means that there is a structured process, and the arbitrators have various powers. For example, arbitrators can order the disclosure of documents, or compel a witness to give evidence. No such powers exist automatically in an expert determination.
Possibility of costs recovery
Arbitrators have the power to award costs in favour of the successful party. In an expert determination, parties usually bear their own costs.
Bear in mind however, that this cuts both ways. Be prepared to pay the costs of the other side if you are unsuccessful.
Choosing between expert determination and arbitration
The choice is not necessarily binary. Sophisticated contracts may define which issues will be submitted to expert determination, and which disputes will be resolved through arbitration.
For example, parties may define that expert determination will be used for discrete technical or valuation issues, and arbitration will be used for broader disputes or matters of legal interpretation.
In any event, if the dispute resolution clause specifies arbitration, the parties can agree to resolve an issue through expert determination. If a dispute arises, parties can voluntarily enter into an agreement (often called an ad hoc submission) to refer a specific issue to an expert.
Conclusion
Arbitration and expert determination are not interchangeable. They serve distinct purposes and operate under different legal and procedural frameworks.
Arbitration offers procedural rigour, legal certainty, and global enforceability. Expert determination offers speed, efficiency, and technical precision.
