Interpretation of a clause - is it Arbitration or Expert Determination?
The Defendant was applying for a stay of Part 8 proceedings issued by the Claimant pursuant to the Arbitration Act 1996 or the inherent jurisdiction of a Court. The Defendant claimed that it had invoked a dispute resolution provision in the Agreement between the parties which they said was an arbitration clause to which the Act applied. The Claimant contended that the dispute resolution provision was for expert determination; that, therefore, the Arbitration Act was of no application; and thus they were entitled to have issued a Part 8 claim to have the Court rule upon various matters.
How should the provisions of the Agreement between the parties be interpreted?
The relevant term of the contract was as follows:-
“22. If there is any difference or dispute as to the meaning or effect of the terms of this letter of appointment, or the calculation of a profit share to be paid thereunder, we agree and acknowledge that either you or we acting independently should be at liberty to refer any such dispute to an independent expert to be appointed by either you or ourselves jointly, but in the event that you or ourselves cannot agree upon such an expert, then either we or yourselves shall request the president of the Royal Institution of Chartered Surveyors to appoint an expert to determine the dispute, whose decision thereon, and the liability for the costs of the referral, shall be binding upon ourselves and yourselves.”
Mr Richard Snowdon QC (sitting as Deputy Judge of the High Court) considered whether that clause amounted to an arbitration agreement in the first instance.
His Lordship observed that the Act did not attempt to answer the basic question of, “what is an arbitration?” but he was referred to the leading textbook (Mustill & Boyd) which urged that the question should be answered intuitively. His Lordship observed that the obvious place to start was the agreement and prima facie, parties who had expressly chosen to refer to their dispute to an expert should not be taken to have intended a reference to arbitration. His Lordship considered that he could not fi nd anything in the wording of the clause which intended that the reference to an “independent expert” was intended to be a reference to an arbitrator.
Accordingly, the Defendant urged His Lordship to consider the substance of the dispute that the decision maker was being required to make. It was argued that the Clause required the decision maker to sett le a dispute that had arisen and it was argued that that was a distinguishing feature of an agreement for arbitration. The Defendant referred to various authorities which His Lordship declined to accept were general authority for the proposition that a process that provided for a binding determination of dispute that had already arisen was an arbitration rather than an expert determination, particularly when the clause was clear. Accordingly, His Lordship did not consider that the Defendant was entitled to a stay of the action under the Arbitration Act 1996. In actual fact His Lordship’s view was the Court should not use its inherent jurisdiction to stay the claim either.
It is clear that when interpreting a contract for either expert determination or arbitration that the normal meaning of the words used should be considered and will be persuasive. If the words remain unclear, there is authority for the proposition that one can look to the subject matter of the dispute and what it is the decision maker is being asked to do to consider what label should be put upon the decision making process. If one is acting as an expert or an arbitrator and remains unsure it may be wise to seek clarification from the instructing parties prior to undertaking work so that it is clear what process is being invoked.