An Independent Expert Or An Arbitrator?

The recent decision of Wilky Property Holdings Plc v London & Surrey Investments Ltd [2011] EWHC 2226 has served to illustrate certain of the factors which may prove relevant in distinguishing between arbitration and expert determination clauses.

In Wilky, the parties had entered into consultancy agreement in November 1996 relating to property development. The agreement contained a dispute resolution clause expressly providing for the appointment of an "independent expert" (clause 22). A dispute arose as what LSI was entitled to be paid under the agreement and, LSI sought to refer the issues for expert determination. Wilky disputed the referral on the grounds that it contended that certain of the matters fell outside the scope of clause 22 (and also that there was no dispute yet capable of a referral). Wilky issued Part 8 proceedings seeking declarations as to the construction of the agreement. Having made the referral, LSI then sought to argue that clause 22 provided for arbitration and applied to stay Wilky's Part 8 proceedings.

In short, if clause 22 provided for arbitration, a stay of Wilky's Part 8 proceedings would be mandatory under section 9(4) of the Arbitration Act 1996 and, in such a case, the court would be able to apply the guidance laid down by the Supreme Court in Fiona Trust (Premium Nafta Products Limited and Others v Fili Shipping Ltd and others [2007] UKHL 40) resulting in the court interpreting clause 22 widely so as to cover all disputes.

Richard Snowden QC, sitting as deputy judge of the High Court, held that clause 22 meant what it said and dismissed LSI's contention that clause 22 provided for arbitration. It was an expert determination clause and not an arbitration clause.

In addressing whether clause 22 was an arbitration agreement, the judge stated that the answer to the basic question of "What is an arbitration?" is not always straightforward. "In the absence of guidance, the question must in the end be answered intuitively".1 Intuition is to be guided by reference to a number of factors that have been seen as material to the question of whether a particular process qualifies as an arbitration. Those material factors include:

The agreement between the parties. In Wilky, the agreement made several references to "expert" and "determination" and there was no reference to arbitration or the 1996 act. In the ordinary and natural use of words, there is a clear difference between dispute resolution by arbitration and...