Expert Determination Clauses in Contracts Providing for International Arbitration: What Happens when the Expert 's Decision is Not Final and Binding?

Abstract

Expert determination clauses are used in a variety of international contracts, typically as a means of resolving specific issues or disputes, with international arbitration being chosen as the general dispute resolution mechanism. Such ad hoc expert determination clauses often provide that the expert 's decision shall be final and binding, except in the event of specified circumstances such as fraud or manifest error. Typically, however, these clauses do not provide for a mechanism to apply when a party considers that an exception to the final and binding nature of the expert's decision is present or for some other reason fails to comply with the expert's decision. This absence is surprising, because the chance that one of the parties will be dissatisfied with the expert's decision and will attempt to avoid compliance with it is realistic. This article (i) provides some background with respect to ad hoc expert clauses in international contracts, (ii) explores some of the issues that may arise as a result of the lack of a specified mechanism to deal with challenges to the expert's decision or a party's failure to comply with it and attempts to provide some answers, (iii) considers language included in certain standard or institutional international expert clauses to avoid these issues, and (iv) recommends language to be included in international contracts providing for expert determination of certain issues and international arbitration as the general dispute resolution mechanism to avoid issues that might otherwise arise.