You are reviewing a commercial contract and there it is, tucked into the dispute resolution section: a short clause saying that certain disputes may be referred to an independent expert for determination. It may be a clause the other side asked for, or one you asked your lawyer to include. Either way, those few lines will decide how a future dispute is resolved, who decides it, and whether the answer can ever be revisited. The drafting choices are small in appearance and large in consequence.
An expert determination clause commits the parties to have a defined class of disputes decided by an independent person with relevant expertise instead of by a court. The expert is not an arbitrator, and the clause is not arbitration. Arbitration is governed by a statutory regime that applies once there is a written arbitration agreement within the meaning of s 7 of the Commercial Arbitration Act 2010 (NSW). Expert determination has no equivalent statute. Its binding force comes entirely from the contract the parties signed, which means the quality of the drafting is the whole game.
The clauses that make an expert determination clause work
A complete expert determination clause answers seven questions: what it covers, who the expert is, how the process runs, what the expert must decide, whether the determination binds the parties, who pays, and when it must be delivered. Each is dealt with below, followed by the interaction with the rest of the contract, which is where the drafting most often comes unstuck.
What the clause covers
The most important drafting decision is scope: which disputes does the clause catch? The clause should say that either party may refer a dispute by written notice, list the categories of dispute covered, and state whether the expert can decide whether a dispute is within scope at all.
A vague scope clause does not simply create uncertainty. It creates a threshold fight. In Campbelltown City Council v WSN Environmental Solutions Pty Ltd [2015] NSWSC 155, the contract contained two self-contained dispute resolution regimes: a general dispute resolution clause and a separate expert determination clause that applied to disputes about whether the contractor should be compensated for increased costs. When a dispute arose, the parties disagreed about which regime applied. One party referred the dispute to an expert; the other issued a notice of dispute under the general clause and asked the Supreme Court for a declaration that the expert had no role. Sackar J held that the expert determination regime applied, including to the threshold question of whether the dispute was in scope at all. The parties had spent months arguing about process before anyone looked at the substance of the dispute.
The drafting comes down to three choices:
- Trigger: whether either party can start the process unilaterally, or only after a notice and negotiation step.
- Categories: describe the disputes in terms a court can apply, such as disputes about how a price is calculated or whether an event qualifies as a variation.
- Threshold power: say whether the expert decides if a dispute falls within the clause, which prevents a second fight about the first fight.
Who the expert is and how they are appointed
The clause can name the expert, or describe the expertise required, or both. Naming a person gives certainty but creates problems if that person retires, moves, or loses independence before a dispute arises. Describing the expertise, such as a chartered accountant or an engineer with experience in a particular industry, keeps the appointment flexible but leaves the identity to be agreed later.
The trap is silence about what happens when the parties cannot agree on an appointment. In the Campbelltown contract, if the parties could not agree on an expert within 14 days of a request, the expert was to be the person nominated by the president of the NSW chapter of the Institute of Mediators and Arbitrators Australia. A default appointment mechanism of that kind keeps the process moving and stops one party from stalling.
The clause can structure the appointment in three ways:
- Named expert: certain, but can go stale as circumstances change.
- Agreed at the time: flexible, but invites an appointment dispute at the worst possible moment.
- Default appointment: the fallback that matters most, and the element most often missing.
How the expert runs the process
The clause should state how the expert will work. Will the determination happen on the papers only, or with a hearing? The Campbelltown contract adopted the published rules for expert determination of the Institute of Mediators and Arbitrators Australia. The contract in Firedam Civil Engineering Pty Ltd v Shoalhaven City Council [2009] NSWSC 802 instead set out the procedure in a schedule to the contract. Either approach works. Silence does not, because the parties will then argue about procedure while a dispute is live.
Two further choices belong in this clause: whether the expert can seek legal or technical advice, and whether the expert must give reasons. A determination that must state reasons gives the parties something they can understand and rely on, although the courts will not review the merits of those reasons.
Three further drafting points need to be settled:
- On the papers: cheaper and faster, and suited to parties in different states.
- With a hearing: worth including where findings of fact or the credibility of witnesses are involved.
- Reasons: state whether reasons are required, and what happens if the expert decides without giving them.
The questions the expert must answer
The clause should define the questions the expert must answer. In the Firedam contract, the schedule listed the questions the expert had to determine for each issue, including whether an event gave a party a right to compensation, whether that right was extinguished by any provision of the contract, and what compensation was payable. The schedule also said the expert must act as an expert and not as an arbitrator, must make the determination on the basis of the parties' submissions and the expert's own expertise, and must issue a certificate stating the determination and giving reasons.
Precise questions matter because the one ground of challenge the courts do entertain is the expert answering the wrong question. An expert who carries out the task the contract actually set will not have the determination reopened on its merits, but an expert who addresses a different issue has not made the determination the contract required.
Whether the determination is final and binding
Most expert determination clauses say the determination is final and binding, and the courts give those words real work to do. In Firedam, Tamberlin AJ explained that the circumstances in which a party may challenge an expert's determination are very restricted, and that there has been a trend against setting aside expert determinations except in limited circumstances, a hardening of the courts' attitude noted by the New South Wales Court of Appeal in Holt v Cox (1997) 23 ACSR 590. The purpose of the clause is to achieve certainty and finality and to avoid the time, expense and uncertainty of litigation.
A party cannot re-litigate the merits of a determination, even where the expert has made an error. Challenge is confined to narrow grounds: fraud or collusion, a failure to follow the procedure the contract stipulated, or the expert misconstruing the task and answering the wrong question. The principles are collected and applied in Australian Vintage Ltd v Belvino Investments No 2 Pty Ltd [2015] NSWSC 168, where a lessee sought to reopen a determination on the basis that the expert had misconstrued the clause he was appointed to apply.
Three formulations are available:
- Unconditional finality: the usual choice, and the one that gives the clause its point.
- Threshold carve-out: in the Firedam contract, determinations below $500,000 were to be treated as final and binding, while a determination at or above that amount left the parties free to proceed to litigation.
- Qualified language: wording that leaves the outcome open to review usually defeats the purpose of the clause, because it invites exactly the litigation the clause was meant to avoid.
Who pays for the expert
Decide the costs question up front. Common drafting is that the parties share the expert's fees equally, or that the expert directs how the fees are borne, and that each party otherwise bears its own costs. The clause can also require the referring party to pay a deposit or provide security for the expert's fees before the process starts. Leaving costs unaddressed turns a technical dispute into a second argument about who funds the process.
When the determination must be delivered
A deadline forces the process to move. The Firedam contract required the expert to issue a certificate within 16 weeks of engagement, unless the parties agreed otherwise. Consider what happens if the expert misses the deadline: whether the appointment lapses, whether a replacement is appointed, and whether a late determination is still binding. A clause without a deadline leaves the pace of the process in the expert's hands, which is rarely in either party's interest.
How the clause fits with the rest of the contract
This is the interaction point, and the place where the Campbelltown case bites. If the contract also has a general dispute resolution clause, an arbitration clause, or a mediation step, the expert determination clause must say which applies to which disputes, and whether expert determination is a condition precedent to litigation or arbitration. In Campbelltown, each regime was held to be self-contained, but only after the parties had litigated that very question at some expense. The wording that prevents the fight is an express statement of precedence.
One related drafting point deserves emphasis. The clause should state that the expert acts as an expert and not as an arbitrator, as both the Campbelltown and Firedam contracts did. A clause that reads like an arbitration agreement can be pulled into the statutory regime of the Commercial Arbitration Act 2010 (NSW), bringing with it a different set of rights, including statutory grounds to challenge or appeal an award. The "not an arbitrator" statement marks the clause as what it is: a contractual arrangement, not an arbitration.
Optional clauses worth adding
Beyond the core machinery, a handful of optional provisions are worth adding:
- Escalation step: a requirement that the parties give notice and attempt to resolve the dispute before either can refer it to an expert; worth including where the relationship is ongoing and most disputes should settle informally.
- Confidentiality: a provision keeping the determination, the submissions and the process out of public view; worth including where the dispute involves pricing, trade secrets or commercially sensitive information.
- Expert immunity: a release of the expert from liability for acts done in good faith in carrying out the determination, as in the Campbelltown contract; worth including because it makes skilled experts willing to accept the role.
- Ongoing determinations: a provision that a determination on a continuing issue applies until the parties otherwise agree, rather than once only; worth including for disputes about ongoing payment obligations.
- Indexation or adjustment: a provision that a determined amount is adjusted over time, such as by CPI, before it is paid; worth including where a determination feeds into later calculations under the contract.
How an Artificer Legal lawyer can help with your expert determination clause
A lawyer reviewing or negotiating an expert determination clause would work through the clauses in a deliberate order, because some decisions drive the others. Scope comes first: what the clause catches, and how it interacts with the rest of the contract's dispute machinery. The appointment mechanism comes second, because a deadlock default that does not work can stop the process before it starts. Then the process details, the questions the expert must answer, the costs and the deadline. The final question is whether "final and binding" matches the commercial intent, and whether any threshold carve-out or review right is wanted.
Artificer Legal would also pressure-test the clause against the risk of it being characterised as arbitration, and against the drafting traps that produce threshold fights of the kind seen in Campbelltown. If the clause is being added to a contract that already has a general dispute resolution clause, we would make the precedence express and put the relationship beyond argument. If you are on the receiving end of a clause, we would tell you what it commits you to, and which parts to push back on before signing.
Which clause applies when a dispute arises?
The drafting choice that most often decides who wins is the scope of the clause and its relationship with the contract's other dispute resolution machinery. That is exactly where the parties in Campbelltown ended up in court, not over the substance of their dispute but over which process applied to it. The most-skipped element is the deadlock mechanism: what happens when the parties cannot agree on an expert. Both are cheap to fix at drafting stage and expensive to litigate later.
In short, a workable expert determination clause defines the scope, names the expertise required, builds in a default appointment mechanism, prescribes the process and the deadline, decides who pays, states whether the determination is final and binding, and says how the clause interacts with the rest of the contract. An expert determination clause is only as strong as those drafting choices, and a lawyer can test each of them against the commercial reality of your contract before you sign.