UNCLE OSWALD’S Q&A FORUM – OCTOBER 2021
IS AN APPOINTED ARBITRATOR ENTITLED TO UNILATERALLY DETERMINE A REFERRED DISPUTE AS AN EXPERT?
Dear Uncle Oswald
You might recall having advised me on the operation of section 6 (1) of the Arbitration Act 42 of 1965 in the April 2021 edition of Arbitrarily Speaking! Thank you, everything turned out well. As you predicted, the High Court granted my application for a stay of the litigation instituted by the Department and ordered that the dispute be referred to arbitration.
But as they say, be careful what you wish for. You may recall that the dispute concerns repudiation and the validity of termination of a bridge construction contract. The contract dictates that all disputes between the parties shall be determined by an arbitrator in terms of the 2018 edition of the Standard Procedure Rules for the Conduct of Arbitrations published by the Association of Arbitrators (Southern Africa). The arbitrator appointed by agreement between me and the Department is an individual with a construction background.
The arbitrator has made it clear to us that he is not interested in any evidence tendered by the witnesses or in legal arguments concerning the law of contract, repudiation and termination submitted by the counsel acting for me, or by the Department’s counsel. The arbitrator expressly advised us in writing that he intends to determine our dispute as an expert.
I am very concerned about this unusual development.
My question to you is twofold. First, is our arbitrator entitled to decide unilaterally to determine our dispute as an expert; and, second, what are the differences between arbitration and expert determination?
Kind regards,
Sam Shabangu
Dear Sam,
I am delighted to hear that the High Court granted your stay application and referred the dispute to arbitration.
The answer to your first question is a definite no. Your arbitrator is not entitled to decide unilaterally to determine your dispute as an expert. The reasons will appear from my summary of the essential differences between arbitration and expert determination.
In short, you and the Department contractually agreed that your dispute will be determined by an arbitrator in terms of the Association’s 2018 Standard Procedure Rules for the Conduct of Arbitrations. There is no contractual agreement between you and the Department for the referral of disputes to expert determination. The arbitrator was appointed as an arbitrator, not as an expert. The High Court referred the matter to arbitration, not to expert determination.
Alternative dispute resolution takes many different forms. Well known examples include arbitration and adjudication. However, all forms of alternative dispute resolution share one common attribute: They are dispute resolution mechanisms agreed upon between parties to a contract. Some of them such as arbitration, adjudication and mediation are, in different parts of the world, regulated by statute.
The procedural rules that govern a particular arbitration are normally, as is the case in your matter, identified in the underlying contract. Such procedural rules, for example, set out the requirements of a request for arbitration, how the arbitrator is to be appointed, the procedure for adducing evidence and conducting a hearing, and the delivery of an award. In other words, arbitration is a form of alternative dispute resolution that is regulated and governed in detail by statute and the applicable procedural rules. The arbitrator’s powers/rights and obligations are likewise expressly prescribed by statute and the applicable procedural rules.
My last encounter with expert determination was when I had a dispute with Oom Schalk Lourens in Groot Marico. Oom Schalk insisted that the mampoer he had sold me was distilled from pure peach. I detected a distinct hint of apricot. Our mutual friend Paul Kruger (before he became the president of the ZAR) was mandated to determine our dispute as an expert. After having consumed half my consignment, he determined that the outcome was undetermined. But I am getting sidetracked.
Differences between arbitration and expert determination
You have asked me about the difference between arbitration and expert determination.
Like arbitration, expert determination is a recognised form of alternative dispute resolution. However, they differ materially. Standard procedural rules do not exist for expert determination. The scope of the expert’s mandate will normally appear from the underlying contract, supplemented by agreement between the parties. In the absence of contractual or consensual procedures, an expert is free to determine the dispute in any manner they deem appropriate. Consequently, in the absence of contractually imposed or consensually agreed procedures, an expert would be free to issue a binding determination without providing reasons, without following evidentiary rules and without regard to legal precedent.
There are some other major differences between arbitration and expert determination:
- Arbitrators perform a quasi-judicial function, while experts apply their own skill and judgment.
- Arbitrators follow an adversarial process, while experts on the contrary adopt an inquisitorial process.
- Arbitrators are obliged to have regard to and evaluate evidence presented by the parties, but an expert is not.
- An arbitrator requires permission from the parties to conduct an own investigation and the parties are entitled to make submissions on the outcome of the investigation, but none of this applies to an expert.
- An arbitrator’s award is by statute subject to judicial review, but not an expert’s determination.
By definition, experts are chosen for their particular knowledge and expertise, and they are required to exercise their own skill and judgment. Experts, because they conduct an inquisitorial process, are responsible for gathering the information necessary to make a determination. Experts are not bound to have regard to submissions made by or on behalf of the parties. Expert determinations normally do not include evidence hearings. Experts have no jurisdiction to compel document production. Parties to an arbitration have a statutory right to have an award made an order of court and to have it enforced as such. However, an expert’s determination can only be enforced by way of contractual litigation based on specific performance or breach and, in this regard, international enforcement is likely to present challenges. Arbitration is ideally suited for the determination of factual disputes by means of a formal adversarial process. Expert determination lends itself to disputes reliant on the opinion of an expert in an informal process.
In conclusion
One could elaborate on each of these differences and add many more, but I think the point has been made. Your arbitrator conflated two different forms of alternative dispute resolution and, in the process, regrettably usurped powers that you and the Department certainly did not confer on him contractually. Like any person presiding over any form of alternative dispute resolution, an expert is a creature of contract and, as such, not entitled to decide unilaterally to determine an arbitral dispute as an expert.
Best regards,
Uncle Oswald