I INTRODUCTORY REMARKS

Independence and impartiality are a concern in all situations where a third party is invited to express an opinion or to take a decision regarding a relationship - contractual or not — between two parties. The situation of experts in expert determination proceedings is no exception. The decision of the parties to rely on the expert opinion or decision is taken in consideration of his or her own independence

With the intention of provoking the reader, this chapter will explore the questions one may wish to reflect upon when talking about independence and impartiality in the context of expert determination. It is not the intention of the author to provide absolute answers to such questions. This chapter will show that, in fact, an analysis on a case-by-case basis is inevitable.

The question to start with is: Is there an independence and impartiality obligation of the experts in expert determination proceedings? If so, what is the source of such obligation? To whom do the experts’ independence and impartiality need to be reflected in expert determination proceedings? What are the consequences of the experts not complying with the obligation of independence and impartiality?

In answering to these questions, there are a number of issues to be addressed upon the various types of expert proceedings, and to be differentiated upon a number of criteria.

From the perspective of the way in which the expert determination is subject or not to specific statutory provisions, one can note that, while in the majority of the countries the expert determination is agreed by the parties under the general provisions of contract law, there are other countries such as the Netherlands and Belgium where, as previous speakers in of the panel explained, although the contractual element is still present, the expert determination is subject to special statutory provisions.

If one considers the criteria of the purpose of the expert determination, a first category of expert determination is that used by parties for the purpose of determining certain elements of the contract, to enable the finalisation of the formation of the contractual provisions. An example may be the situation in which the parties agreed that the price is defined by a specific formula where the market price at a specific later date is to be included, and then the role of the expert is to identify the market price and apply the formula. It may also be that the parties agree on a hardship clause, where parties use the same mechanism of a formula that include an element that the expert will determine. In such cases, parties jointly delegate to the expert the power to finalise or amend the terms of the contract and therefore the expert determination is in fact part of the formation of the consent on some specific elements of the contract. The binding decision of the expert determination will then become an element of the contract itself. A second category of expert determination is used by the parties for the purpose of solving a dispute or a potential dispute. In such cases, the expert determination is agreed by the parties as type of alternative dispute resolution mechanism (ADR) where parties delegate to the expert a part of the formation of the consent to a settlement agreement. The binding expert determination is therefore similar in nature with a settlement agreement concerning the contract, but separate of it. In such case, expert determination may resemble with the proceedings of a dispute adjudication or a dispute resolution board (depending of the value parties decide to give to the expert’s determination).

If one takes the perspective of the qualifications of the experts that are appointed in the expert determination proceedings, two situations may be identified. In first case, the experts belong to a profession where there is a body of norms addressing the ethical obligations of such experts (it is the case under certain laws of the auditors, the certifying engineers etc.). In this case, there are usually proceedings to enable a system of sanctions for the violation of such ethical obligations, and there is a role of the professional organisation in relation to these sanctions. In the second case, experts are simply persons that enjoy the professional expertise necessary to be entrusted by the parties with this role and there is no specific profession they belong to. In such case, there is no specific professional body to impose certain ethical standards to their activity.

The different categories of types of expert determination and situations of the status of the experts may have an influence on the assessment of the duties of independence and impartiality of experts and the consequences of the experts’ failure to comply with these duties.

II THE OBLIGATION OF INDEPENDENCE AND IMPARTIALITY

When searching for the source of an obligation, one would naturally look for the applicable law and/or the agreement of the parties. It is the same for expert determination, except that there are two contractual relationships: firstly, the main contract between the parties and secondly, the agreement of these parties with the expert (be it in the form of a tri-partite agreement, of a letter of engagement or other). In most cases, there is a correlation between the content of the main contract on one hand and the agreement with the expert, on the other hand. However, in spite of such a natural approach, many practical situations show that this is not necessarily the situation in all cases, and then problems may occur when parties consider that the main contract would give rise to obligations for the expert, while the expert is looking only at the tri-partite agreement (or letter of engagement). This is situation has some similarities with the dispute adjudication boards, but one should keep in mind that the procedure for dispute adjudication boards is much more elaborated in practice and, in some countries, one can identify legal provisions expressly referring to such procedure (see for example in Peru). Beyond this issue of delimitation of the different contractual sources of the obligations of the experts, further analysis becomes quite complex, particularly in the case of international relations, and a number of dilemmas may appear. In particular, one may wish to think of the choice between the law applicable to the expert determination (as a procedure agreed by the parties) and the law applicable to the experts’ professional activity, which are not necessarily the same, Moreover, the analysis does not stop at this question, and some comments are still to be made, on each of such laws.

Once that parties have agreed to an expert determination procedure administrated under certain rules, the position of such rules on the independence and impartiality of the experts will of course become relevant.

Also, in the identification of the obligations of independence and impartiality of the expert determination, application of certain instruments of soft law may be also considered, as well as the role — if any — of analogy with other situations regulated by statutory provisions or the applicability of general principle of law.

1. The applicable law on the obligation of independence and impartiality in expert determination procedures

In the pursuit of identifying the relevant law for the independence and impartiality of experts, the first dilemma is whether to apply the law that governs the expert determination procedure or the law governing the professional activity of the experts, if such experts are members of a profession imposing certain ethical standards?

This dilemma is known to practitioners in arbitration from the situation of counsel in arbitration and unfortunately remained to date without a clear answer in the international context. The general approach as far as counsel in arbitration are concerned was generally that counsel has to comply with two different requirements (i) with the procedural requirements under the norms and rules applicable to the arbitration proceedings, for the purpose of the due process and with an impact on this level and (ii) with the requirements originated in his/her affiliation to a bar association, for the purpose of observing the professional conduct of the counsel, with impact to be assessed under the relevant sanctions a professional body may apply. The need for some degree of harmonisation in the case of counsel in arbitration, due to the inequality of arms and potential due process issues that might originate from the different ethical requirements finally lead the international legal community to try to agree on some common expectations (see the IBA Guidelines for Party Representation in International Arbitration, 2013).

In this context, if the situation of experts in expert determination proceedings were to be approached in the same manner, the conclusion would be that parties should expect that experts comply with both the requirements for independence and impartiality originated from the law applicable to the expert determination procedure as well as from the law and rules that governs the profession experts are registered to practice.

However, there is a possibility for the issue to be approached differently, and this would be the case when the expert determination activity does not fall under those activities regulated by the profession to which the expert belongs to or, even more simple, the expert’s activity does not fall under any statutory regulations.

A second problematic issue regards the identification of the law applicable to the expert determination procedure. For this purpose, the first relevant step is to define the nature of the expert determination.

If the expert determination is to be considered as part of the formation of the consent on the clauses of the contract, the substantive law applicable to the contract would be also the law applicable to the expert determination.

If the expert determination is to be considered as part of the dispute resolution mechanism, one may wish to analyse whether the expert determination is to be considered as falling under the applicability of the procedural law applicable for the dispute resolution or would be still to be considered as governed by the substantive law applicable to the contract between the parties. Arguments may be formulated for both options:

On one hand, the application of the procedural law applicable to the dispute resolution (either the procedural rules of the courts of law or the lex arbitri, in case of an arbitration agreement) may be supported by the argument that national procedural laws may include provisions about mandatory pre-litigation procedures (such as mediation or conciliation) and then the contractually agreed pre-litigation or pre-arbitration procedures should be equally governed by the procedural law.

On the other hand, the application of the law governing the contract would be supported by the argument that, as opposed to arbitration, expert determination is not replacing a court decision but simply the parties’ agreement and therefore there is no possible jurisdictional role of the experts.

This dilemma has been addressed already by the arbitral tribunals the case of dispute adjudication boards (where the law is silent as to the qualification of their activity, which is the most frequent situation), and apparently — as other panellists discussed at this year’s meeting of the Institute — the case law is divided. Some arbitral tribunals have considered that the dispute adjudication board procedure is governed by the lex arbitri, in view of the fact that such a procedure is part of a multi-tier dispute resolution mechanism and it is a mandatory pre-arbitration step. Other arbitral tribunals were of the view that only the arbitration proceedings are governed by the lex arbitri, while the dispute adjudication boards would be governed by the law applicable to the contract. This view was supported mainly by the fact that, in many contracts, absent a certain procedure — such as the notice of dissatisfaction or initiation of a dispute — the effects of the dispute adjudication boards is on contractual level — modification of the contractual relationship between the parties as per the decision of the dispute adjudication board.

If expert determination were to follow the logic of the law applicable to dispute boards adjudication, then the main type of choices in analysing the possible applicable law to the expert determination would remain the same.

Still, if expert determination is not reflected in any effect in the parties’ relationship, but is merely a way for the parties to identify in the view of the expert a possible way to settle their dispute, namely whenever the expert determination effects are not binding upon the parties, there is no similarity with the dispute adjudication boards anymore.

In fact, in this author’s opinion, the identification of applicable law may follow two different paths, upon the type of the expert determination:

If the impact of the expert determination is on the formation of the contract, then its effects will be governed by lex contractus.

However, if the expert determination effect is impacting a potential pending litigation or arbitration between the parties (to suspend or terminate it) or when the effect of the expert determination would be part of the settlement between the parties and therefore there is a possibility to be included into a court decision or an arbitral award by consent, such effects are to be analysed from the perspective of the procedural law. In this case, its nature will be a mixed one, similarly with the situation of a settlement agreement between the parties. It shall be therefore governed both by the contract law and procedural law: its formation is governed by contract law, while its effects are to be dealt by differently, mainly by the procedural law.

Unfortunately, the list of dilemmas will not end once the conclusion that procedural law would apply. That is because, in the absence of an express agreement of the parties of applicable procedural law for the expert determination, there is still to determine which procedural law would apply. . For practical reasons, the easiest assumption would be that whatever procedural law would apply to the litigation or arbitration, would apply also to the pre-litigation or pre-arbitration procedures, including expert determination. Nevertheless, this is not necessarily the only option to be considered. The answer may differ based on the wording of the contract and the position of the expert determination in relation with the dispute resolution clause (as part of it or rather a distinct contractual mechanism for avoiding the dispute). In case the choice would not be automatically leading to the same procedural law as the one applicable for the litigation or arbitration, what criteria could be applied? May one consider such a notion as "place of expert determination" to be distinguished by or superimposed on the notion of "place of arbitration" or " choice of jurisdiction"? The place of expert determination be different than the place of the performance of the contract and the place of arbitration or place of jurisdiction. This situation cannot but show the importance of clarity in drafting the parties’ agreement to rely on the expert determination procedure, as room for interpretation may remain open in absence of specific provisions of international private law dealing with expert determination procedures.

The third important issue is whether the law governing the professional activity of the expert applies or not to the specific activity of expert determination. Experts may be engineers, accountants, economists or other. Such professions may or not be regulated in their home jurisdictions and therefore this would be a first task of the parties aiming to identify the legal professional obligations of these experts.

One should also consider that the law in the home jurisdiction may or may not apply for their activities outside that jurisdiction, i.e. when the expert determination would take place in another country. Discussions about the place of expert determination may once again rise and require interpretation.

A more complex situation appears when experts are members of a specific professional body in their respective jurisdictions, but the law does not impose ethical standards for the overall activity of those experts, but only for some specific activities. For example, it may be that a real estate evaluator is registered under the law regulating such activity, but at the same time enjoy the necessary expertise to evaluate art objects, which is an activity not subject to specific regulation in that jurisdiction. Would then the ethical standards for real estate evaluators be extended to all professional duties of that person, even if would concern evaluation of art objects? Various approaches might be considered, based in either an extensive or a restrictive interpretation of obligations prescribed by a law for a certain activity. The answer will have to be given in consideration of the specific legislations, on case by case basis.

2. Institutional rules for expert determination procedure

Parties may agree to refer their expert determination to the rules provided by an ADR services provider. Such rules are to be expected to include provisions regarding the obligation of independence and impartiality of experts.

For example, ICC Centre for ADR provides for such services and has adopted rules regarding the expert determination. ICC Rules for the Administration of Expertise Proceedings, in force as from 1 February 2015, provide the obligation of independence and impartiality, as well as for the obligation for disclosure at the time of the appointment in Article 3 — Selection of the expert:

i. The parties may jointly nominate an expert for confirmation by the Centre.

ii. In the absence of a joint nomination of an expert by the parties, the Centre shall appoint an expert.

iii. Before appointment or confirmation, a prospective expert shall sign a statement of acceptance, availability, impartiality and independence. The prospective expert shall disclose in writing to the Centre any facts or circumstances which might be of such a nature as to call into question the expert’s independence in the eyes of the parties, as well as any circumstances that could give rise to reasonable doubts as to the expert’s impartiality. The Centre shall provide such information to the parties in writing and shall fix a time limit for any comments from them.

and for the remaining duration of the proceedings in Article 4 — Continued Impartiality and Independence of the Expert — Replacement of the Expert", para (1) and (2):

(1) Every expert must be and remain impartial and independent of the parties involved in the expert proceedings, unless otherwise agreed in writing by such parties.

(2) An expert shall immediately disclose in writing to the Centre and to the parties any facts or circumstances of a similar nature to those referred to in Article 3(3) concerning the expert’s impartiality or independence which may arise during the expert proceedings Proce dural remedies for the lack of independence and impartiality of the expert in the form of replacement are provided in Article 4 paras (4) – (6).

3. Is application of other rules or principles possible, by analogy?

An analogy using the abstract logic of solving dilemmas in various other situation, as a method of reasoning, will be of course always be possible.

An analogy with legal provisions (analogia legis) is however a different situation. The extent to which that analogy may produce the outcome of a source of obligation will be always a matter of interpretation under the applicable law. For this reason, the situation will again turn to the need to identify the applicable law as per the above-mentioned analysis.

If the analogy were to produce effects, outcome of the analogous situation will lead to different assessment of independence and impartiality obligation, as well as their consequences. Therefore, there will always be questions as to where to find the appropriate analogy.

One could argue that the most appropriate analogy to be made is within the arbitration arena. If so, similarities may be found between the experts in expert determination with (i) either the arbitrators, as they indeed share the characteristic of being third parties appointed following an agreement of the parties to enter into such procedure, or (ii) with the arbitral-tribunal appointed experts, if the perspective would be that the experts are third parties appointed to assist in absence of a unilateral relationship with be parties, but in consideration of a neutral way of appointment or an agreement of all parties as to their appointment, or (iii) with the party-appointed experts, if the perspective would give prevalence to the fact that parties agree to the appointment of the experts and enter into a direct contract with them.

Others would look for analogies in the arena of courts of law, particularly when the expert determination procedure is not included in a dispute resolution clause referring disputes to arbitration. If so, similarities may be found (i) with the judges, but to a very limited extent, and, in this author’s view, only if the applicable procedural law would extend the application of the provisions regarding independence and impartiality of the judges to the experts, as well (and this is, indeed, the case in some legislations, for example Romania); (ii) with the court-appointed experts or (iii) with the party-appointed experts.

In all cases mentioned above, the main problem that makes analogies difficult is that both arbitration and courts of laws have jurisdiction over disputes while expert determination does not. If expert determination is included in the parties’ agreement as a mechanism for solving a dispute, it may be easier to understand such an analogy as the purpose is aiming in the same direction, even if the means are different. However, the situation becomes much more difficult when the expert determination is basically part of the formation of the consent of the parties. In these situations, it is this author’s suggestion that the interpretation might rather look at the obligations of a jointly appointed agent, the rules governing a mandate, and therefore rely only on the perspective of substantial law. Analogies drawn from the context of procedural law might be better avoided.

Finally, an analogy with the general principles of law (analogia juris) is also to be considered. Independence and impartiality if seen from a moral perspective cannot possibly be ignored in the general context of a legal system with strong ethical foundations. For this reason concepts as natural justice or fairness or good faith might be used when assessing the duties of the experts in expert determination proceedings, both in the situation when such proceedings would have a role in formation of the contract or it would aim to contribute to solving a dispute between the parties. As mentioned by previous speakers in this panel, case law in England, do refer to the natural fairness in such context.

4. Soft law on independence and impartiality of experts in expert determination

While the independence and impartiality of party-appointed experts in arbitration has been included in a number of ethical guidelines, no such instruments were developed with respect of expert determination procedures. Whether analogies may be made, as previously shown, is a matter of interpretation.

This cannot but underline, once again, the need for the parties who wish to rely on an expert determination procedure to carefully draft their agreement and particularly the tri-partite agreement with the expert.

III EFFECTS OF THE VIOLATION OF THE OBLIGATION OF INDEPENDENCE AND IMPARTIALITY

Once that the experts’ obligation to act independent and impartial is established, consequences for violating such obligation will enter into place based on the same source as the obligation itself.

If the expert determination is to be considered as part of the formation of the contract, then the remedy may be only at contractual level. Absent parties’ agreement on this issue, there will be few options left during the determination. Still, upon finalisation of the determination, an annulment of the determination as well as a claim for liability against the expert will still be possible, based on the legislation applicable to the contract between the parties as and/or the tri-partite agreement.

If the expert determination is to be considered as part of the dispute resolution, then the procedure to be applied may include procedural remedies such as challenge and/or replacement, while the proceedings are still pending. For example, article 4 paras (4) – (6) of the Rules for the Administration of Expertise Proceedings, in force as from 1 February 2015, under the title "Continued Impartiality and Independence of the Expert — Replacement of the Expert," provides that:

(4) An expert confirmed or appointed by the Centre shall be replaced upon acceptance by the Centre of a written request of all of the parties.

(5) If any party files a written objection with the Centre asserting that the expert does not have the necessary attributes, is not fulfilling the expert’s functions in accordance with the Rules or in a timely fashion, or is not independent or impartial, the Centre may replace the expert after having considered the observations of the expert and the other party or parties.

(6) When an expert is to be replaced, the Centre has discretion to decide whether or not to follow the original appointing process.

Absent such procedural remedies, either in the provisions of the main contract between the parties or in the tri-partite agreement signed by the expert with the parties, or in any procedural rules agreed by the parties, the remedies will to be found in either annulment of the determination or liability of the expert, or possibly both.

Moreover, in case the experts belong to a profession where there are legal or statutory norms addressing the ethical obligations that include independence and impartiality, parties may also have the option to complain with the relevant professional bodies for specific sanctions to be applied.

IV CONCLUSIONS

While apparently, the issue of independence and impartiality of experts in expert determination proceedings may be considered simple by those familiarised with the use of these notions in arbitration, in fact there is a quite complex number of specific factors to be considered in the case of expert determination.

The analysis to be made on a case-by-case basis may sometimes lead to conclusions that are not necessarily meeting the parties’ expectations, as educated by their familiarity with the independence and impartiality of arbitrators. For this reason, it is this author’s recommendation for the parties to consider a number of specific contractual provisions regarding the independence and impartiality of experts, whenever they consider including an expert determination procedure in their contractual relationship.

In their main contract, parties may wish to include: (i) a specific reference to the duty of independence and impartiality of the expert and a clear reference to the content of such obligation and the effects of failure of the expert to observe it; (ii) the effects of lack of independence and impartiality, mainly the termination of the mandate of the expert and the procedure of replacement. Of course, should the expert determination procedure is referred to rules elaborated by an ADR service provider (such as the ICC Centre for ADR), these issues are incorporated by reference.

In the tri-partite agreement entered with the expert (be it in the form of an engagement letter or other) parties may also include specific clauses such as (i) clauses regarding the requirements of independence and impartiality and the liability of the experts; ( ii) a specific choice of law as to the relationship between the parties and the expert; (iii) provisions describing the effects of the lack of independence and impartiality of the experts in expert determination procedure, mainly the possibility for termination of the mandate and possibly also their liability; (iv) a specific choice of jurisdiction for disputes between the parties and the experts.