Expert Determination Clause
Expert Determination is a private process whereby parties’ consent to refer their dispute to an impartial technical expert who renders a binding decision. It is well suited for disputes requiring special skill and knowledge for proper evaluation of the subject matter. Eliminating the requirement of any legal representation, it ensures efficient and speedy disposal of disputes. It also guarantees flexibility in the procedure by allowing the parties to decide the same.
Being a creature of a contract, it is neither a judicial process nor does it follow an adversarial system of adjudication. Thus, the inherent informal nature of this mechanism furnishes an expeditious and cost-effective approach to dispute resolution. It is therefore conducive to maintaining a relationship and continuing the performance of contractual obligations despite the ongoing expert determination procedures. However, it provides limited provision for appeal; courts are reluctant to interfere in matters where parties have chosen to relinquish their rights to resort to legal process. Apart from fraud, collusion, actual bias and non-compliance of stipulated procedures, there is hardly any way to redress the grievance arising out of an adverse decision.
Although aimed to provide a neutral and flexible platform for the disposal of disputes, parties may find themselves in a precarious condition due to poorly drafted expert determination clause. Parties often suffer irreparable loss due to lack of specificity and ambiguity regarding the nature of dispute, the procedure to be followed and the consequences. Expert determination is confused with arbitration despite being fundamentally distinct. It is more informal and aims to address highly technical issues. Ambivalence causes confusion as to whether the parties intent to remit a dispute to expert determination or arbitration especially when a contact contains both the clauses. For eg: A clause states: ‘In the absence of an agreement on the fair market value of the goods, parties may refer the issue to an Auditor.’ Thus, a confusion arises as to whether the appointed auditor is required to arbitrate, following the essential elements of arbitration, or function informally, as an expert. Due to ambiguity in the words, the intention of the parties remains uncertain. Therefore, the disputes which are aimed to be referred to expert determination should be categorically mentioned in the contract.
A well drafted Expert determination clause should effectively address all the essential elements of this mechanism.
For Example: Consider an Expert Determination clause which states: [Party X] and [Party Y], being parties to a contract entered into, on or about [Date dd/Month/Year], have agreed that all matters in dispute between them shall be referred to Expert Determination in accordance with the rules and procedures as agreed upon by the parties.
- The procedure has not been carved out. An expert does not generally owe the same duty of formality as a judge of a court or an arbitrator. Therefore, postponing the consent on rules or procedures leaves a provision for the expert to depart from the general rules of professional fairness.
- The nature and scope of expert determination which can be employed to a particular dispute has not been highlighted. Such construction proves detrimental especially in cases involving multifarious issues or those which require the consent of a third party.
- It neither provides the procedure of appointment of an expert nor convey the consent of the parties regarding the identity of the same.
This Article Does Not Intend To Hurt The Sentiments Of Any Individual Community, Sect, Or Religion Etcetera. This Article Is Based Purely On The Authors Personal Views And Opinions In The Exercise Of The Fundamental Right Guaranteed Under Article 19(1)(A) And Other Related Laws Being Force In India, For The Time Being.