Key Differences Between Arbitration and Expert Determination for Your Commercial Dispute

If your business falls into a commercial dispute, one of the first things you need to consider is how you will try to resolve it. It is, therefore, essential that you understand different methods for resolving commercial disputes. This can help you decide which to use either when developing a dispute resolution clause in your business contracts or during the disagreement itself. Two alternative dispute resolution (ADR) methods are arbitration and expert determination. This article will explain the key differences between arbitration and expert determination for your commercial dispute.

What is Arbitration?

Arbitration is an alternative dispute resolution (ADR) method for resolving commercial disputes. This means it occurs outside of the courts. Nonetheless, it is still a reasonably formal ADR process, so there are specific rules and procedures. Where parties use arbitration proceedings to resolve their commercial dispute, they will likely have an arbitral clause in the contract outlining this.

Arbitration involves the parties appointing an expert arbitrator or panel of arbitrators, depending on the complexity of the dispute. You and the other party will then present evidence for your side of the dispute to the arbitrator, who ultimately makes a binding decision. This is often called an arbitral award. 

What is Expert Determination?

Expert determination and ADR method where you and the other party appoint an expert for the issues you disagree on. They make a binding decision on the dispute. However, it is up to you and the other party to determine the exact way the expert determination process will work.

Expert determination is a beneficial ADR method for a commercial dispute concerning a technical issue. Therefore, when parties appoint an independent expert to decide on the dispute, they choose one with expertise in that area. However, where your dispute is a legal issue, such as legal interpretation or a factual issue, expert determination unlikely to be as helpful. 

What Are the Key Differences Between Arbitration and  Expert Determination?

Although arbitration and expert determination are both alternative dispute resolution (ADR) processes, they do have some important differences. It is important to understand what makes each method unique so that you can pick one most relevant to the nature of your dispute.  Below, we look at the key difference between these two ADR methods.

Dispute Resolution Costs

A clear difference between expert dispute resolution and arbitration is the cost difference. Arbitration can be costly, but expert determination is cheaper and a cost-effective alternative dispute resolution (ADR) process. One reason is that it is less formal than arbitration and is often carried out faster. In addition, expert determination is less adversarial than arbitration. This can be beneficial if you wish to maintain a good working relationship with the other party to the dispute. 

Alternative Dispute Resolution (ADR) Rules

Furthermore, arbitration often requires you to follow formal rules for arbitration, but this is not the case for the expert determination process. Arbitration has clear procedural rules depending on the arbitral body you use, such as the United Nations Commission on International Trade Law (UNCITRAL). It is also governed by the Arbitration Act 1996 for businesses in England and Wales. However, there are no similar legal rules for expert determination, meaning it is up to the parties to define them. These will often, therefore, be present in the commercial contract as terms of reference or be decided at the point of dispute.

Related Litigation

As a result of the lack of any legal rules for expert determination, a lack of legal clarity may arise. Therefore, litigation may occur and result in a disagreement about how the expert determination proceeds. This can be problematic, as litigation is a time-intensive and costly process. In particular, the expert determination may go from a cost-effective to an expensive process because of this related litigation. There is also less developed case law for expert determination, making it a more unfamiliar process.

Type of Decision Maker

A key difference between expert determination and arbitration is the type of decision-maker involved. Whilst both may be experts in the matter the parties disagree on, their areas of expertise and degrees vary. With expert determination, the dispute at hand is usually a technical one. Therefore, parties to the conflict will choose a decision maker who possesses specific knowledge in that area. However, an arbitrator tends to be a legal expert. This means that although they are specialists in legal issues, they may have limited in-depth knowledge of the disputed subject matter.

In addition, experts will gather their information and may ignore evidence the parties produce. However, an arbitrator will usually ask parties to the dispute before they collect their information on the dispute. 

Guide to Resolving UK Business Disputes

This guide outlines how to resolve commercial disputes.

Download Now

Key Takeaways

Arbitration and expert determination are two helpful but unique alternative dispute resolution (ADR) processes you may be considering for your commercial dispute. Arbitration is a formal process where an arbitrator or panel listens to the issues in dispute. They will then make a legally binding decision called an arbitral award. Expert determination is a less formal method and is usually used for technical matters. Like arbitration, the independent expert will usually make a binding decision. When evaluating which method is best for your dispute, you should consider their key differences regarding:

• dispute resolution costs;
• relevant procedures and rules;
• related litigation; and
• the type of decision maker. 

If you require assistance choosing between arbitration and expert determination for your commercial dispute, LegalVision’s experienced disputes lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.