Expert Determination Explained

Introduction

This explanatory overview is for business people contractually drawn into a required expert determination procedure for commercial disputes but who are unfamiliar with the process. Caveats apply (see below).

What is expert determination?

In outline, and in BTG Advisory’s work in this area, expert determination is a private binding dispute resolution procedure that parties contractually agree: 

1. Applies to specified disputes

Examples of its scope include:

• Disputes about the valuation of shares in a buyout under a shareholders’ agreement.
• Accounting issues in connection with completion accounts arising from a share purchase agreement (SPA) and including deferred consideration (purchase price adjustment).
• Accounting and/or valuation issues arising from partnership and joint venture agreements.

2. Requires an independent dispute resolver with specific expertise 

• The remit of the neutral appointee is to determine the dispute before them as an expert, not as an arbitrator or adjudicator. The appointee may be referred to as the “expert” or “independent accountant” or “valuer”.

3. The expert has procedural authority over the process

• At the outset, we agree our procedural powers with the parties and design the process in consultation with them. This takes account of their requirements and the needs of the case. 
• In summary, the expert gathers the information considered needed for the purposes of their remit. Subject to the expert’s entitlement to make enquiries, it is usual for parties to have the opportunity to make written submissions to the expert in respect of their respective positions and to address those made by their opponent. Parties may obtain assistance from their legal advisers in preparation of submissions and from their own separately engaged experts on the issues in question. 
• The process is ordinarily conducted on a documents-only basis. There may be procedural meetings or informal meetings to further enquiries if the expert considers this necessary.

4. The decision (or determination) of the expert is final and binding upon the parties

• The decision is delivered in writing (the expert determination). 
• The expert may (or may not) be required to also consider and determine the allocation of the expert’s costs. The parties otherwise bear their own costs. 

Starting an expert determination

The requirements for starting an expert determination, including the appointment of an expert, may be set out in a written underlying contractual agreement between the parties, or a separate agreement between them after the dispute has arisen or may be found within a court order. 

Selection of appointee

Under the terms of their agreement, the parties may agree on their selection of identified appointee and approach them accordingly to invite them to take up the appointment. We accept expert determination appointments directly from the parties in a dispute subject to the agreement of terms and conditions of engagement and completion of our conflict and KYC checks. 

In the event that the parties are unable to agree on the appointee, they may agree to instruct a selected professional institution to make the appointment on their behalf from their panel of expert determiners drawn from their membership. An appointment fee is likely and may run to thousands of pounds.

Settlement

During the process, the parties are free to engage in or continue settlement negotiations between themselves. 

Caveats

Given the legal nature of the procedure, parties are advised to obtain professional legal advice as to its suitability for their needs and in its conduct. This article is intended to represent general guidance only in this regard. It is non-exhaustive, is not a recommendation of any procedure, is not legal advice and should not be relied on as such. 

Contact 

The BTG Commercial Arbitration Forum [BTG Commercial Arbitration Forum (btgadvisory.com)] is led by Daniel Djanogly, a Partner at BTG Advisory. He is an experienced and qualified Chartered Arbitrator, Expert Determiner and Forensic Accountant Expert Witness.

If you would like to appoint an arbitrator or expert determiner or require further information on services, please contact Daniel Djanogly.

Please note, in view of the neutrality of the role of arbitrator or expert determiner, all correspondence will be on a disclosable basis.