Expert Determination – Interaction with the Arbitral Tribunal and the Conflict of Competences Between Both: An International Perspective

Abstract

The majority of disputes arising out of the post-closing phase relate to determination or adjustment of the purchase price, which is done through an expert determination (ED) procedure. ED is recognized by various jurisdictions and is a well-known and frequently exploited legal feature in the commercial reality. The gist of the ED procedure consists of allowing a third party, usually an independent accountancy firm, to determine the level of the price adjustment or the final price itself. If any dispute between the parties pertaining to the outcome of the ED should arise, the same expert is involved in resolving such dispute by providing their own determination. Such determination is designed to be fact specific, based on financial documents only, fast and efficient. The parties agree that once the expert’s procedure is completed, the ED’s decision shall be final and binding. At the same time, it is not uncommon for the same M&A contract to include an arbitration agreement which stipulates that ‘any dispute’ arising out of said contract shall be solved by an arbitral tribunal. This duality often leads to these two proceedings overlapping which creates conflicts of competences between the arbitral tribunal and ED.
This chapter aims to focus on analysing what the interrelation between ED and arbitration is, what the possible conflicts of competences between both institutions are, and how such conflicts are and should be tackled from the international arbitration practice perspective.