Australia: Expert determination clauses in contracts - are they worth it?
Expert determination is a type of alternative dispute resolution (ADR) where an independent third party is appointed to decide the dispute. The advantage of expert determination is that it can be short, sharp, and relatively cost-effective. Disadvantages are that there is no procedural code and it can be weakened if the expert decision is not "binding", thus allowing further dispute.
A "CEO clause" provision requires each party's nominated senior management to agree to meet within a relatively short period of time after the dispute has arisen to confer prior to referral to expert determination or other step. If the dispute is not resolved within the required time frame, it can be referred to independent expert determination.
If this happens, the parties should agree on the expert. The expert will decide the procedure if the ADR clause does not provide for it. Where parties have agreed to appoint an expert, it should be accepted that the expert will impose appointment terms. Even if the ADR clause sets out the terms, an expert is entitled to impose a reasonable term to protect against possible court proceedings arising out of the determination
Expert determinations are binding unless the contract clause states otherwise or it can be established that the determination is not in accordance with the contract requirements. An ADR clause may, however, provide otherwise or for "appeal" steps.
By Faith Laube and Toby Blyth
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