Evidence in International Arbitration. Expert Evidence / Expert Determination Clause. 莫世傑 / Danny Mok CILTHK 9 April 2017

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1 Evidence in International Arbitration / Expert Determination Clause 莫世傑 / Danny Mok CILTHK 9 April

2 Why necessary Finding of facts is the duty of the judge / arbitrator, but he or she should not be expected to know everything. science & technology, special professions, special knowledge 2

3 Why necessary Factual witness => direct evidence about the facts in issue Expert witness => given opinions and make inference in relation to the factual issues in dispute 3

4 Why necessary Foreign law - Common law approach foreign law is considered as a fact that needs to be proved by expert evidence - International approach adopted by international commercial courts (such as the Courts of Dubai International Finance Centre, Singapore International Commercial Court) allowing foreign law to be presented by way of submission as law 4

5 Danger of opinions (essential considerations): Expertise Intention to assist the judge or arbitrator; Considered opinion 5

6 The problem of hired-gun Lord Arbinger v Ashton (1873) 17 Eq 358: Undoubtedly there is a natural bias to do something serviceable for those who employ you and adequately remunerate you. It is very natural, and it is so effectual that we constantly see persons, instead of considering themselves witness, rather consider themselves as the paid agents of the person who employ them. 6

7 The problem of hired-gun Lord Woolf in Access to Justice Report (1996): Most of the problems with expert evidence arise because the expert is initially recruited as part of the team which investigates and advances a party s contentions and then has to change roles and seek to provide the independent expert evidence which the court is entitled to expect. Expert advisor litigation privilege Expert witness 7

8 Problems of Arbitral Tribunal s neutral expert costs difficult to find real expertise uncertainty to the parties etc == > Admiralty Court in England 8

9 The judicial guidance on the conduct of an expert by Cresswell J in the The Ikarian Reefer (1993) 2 LLR 68: 1. Expert evidence presented to the Court should be, and should be seen to be, the independent product of the expert uninfluenced as to form or content by the exigencies of litigation (Whitehouse v. Jordan, [1981] 1 W.L.R. 246 at p. 256, per Lord Wilberforce). 2. An expert witness should provide independent assistance to the Court by way of objective unbiased opinion in relation to matters within his expertise.. An expert witness in the High Court should never assume the role of an advocate. 9

10 3. An expert witness should state the facts or assumption upon which his opinion is based. He should not omit to consider material facts which could detract from his concluded opinion (Re J sup.). 4. An expert witness should make it clear when a particular question or issue falls outside his expertise. 5. If an expert's opinion is not properly researched because he considers that insufficient data is available, then this must be stated with an indication that the opinion is no more than a provisional one (Re J sup.). 10

11 5. (Continue) In cases where an expert witness who has prepared a report could not assert that the report contained the truth, the whole truth and nothing but the truth without some qualification, that qualification should be stated in the report (Derby & Co. Ltd. and Others v. Weldon and Others, The Times, Nov. 9, 1990 per Lord Justice Staughton). 6. If, after exchange of reports, an expert witness changes his view on a material matter having read the other side's expert's report or for any other reason, such change of view should be communicated through legal representatives to the other side without delay and when appropriate to the Court. 11

12 7. Where expert evidence refers to photographs, plans, calculations, analyses, measurements, survey reports or other similar documents, these must be provided to the opposite party at the same time as the exchange of reports 12

13 CPR s solutions: overriding duty It is the duty of an expert to help the court on the matters within his expertise. The duty overrides any obligation to the person from whom he has received instructions or by whom he is paid. single joint expert statement of truth I confirm that I have made clear which facts and matters referred to in this report are within my own knowledge and which are not. Those that are within my own knowledge I confirm to be true. The opinions I have expressed represent my true and complete professional opinions on the matters to which they refer. 13

14 Finding the right expert One-off and Professional Experts; Recommendations, The Academy of Experts and other institutions; Law firm s private list; Multi-national law firms; party s own in-house expert; etc 14

15 Leave to adduce expert evidence Oral evidence-in-chief Written Expert Report in lieu of evidence-in-chief; To be exchanged shortly before hearing, usually after the exchange of Witness Statement; Expert witness who did not give Expert Report is not permitted; Etc 15

16 Meeting of experts Joint Memorandum Cross-examination Witness-conferencing/ Hot-Tubbing 16

17 Immunity of witness Historically, expert witnesses enjoyed complete immunity from suit from all claims including negligence and defamation, except for reasons of bad faith. Jones v. Kaney (2011) UKSC 13 Lord Philips: It follows that I consider that the immunity from suit for breach of duty that expert witnesses have enjoyed in relation to their participation in legal proceedings should be abolished. I emphasise that this conclusion does not extend to the absolute privilege that they enjoy in respect of claims in defamation 17

18 Immunity of witness Jones v. Kaney (2011) UKSC 13 Lord Brown: the gains to be derived from denying them immunity from suit for breach of that duty substantially exceed whatever loss might be thought likely to result from this. the most likely broad consequence of denying expert witnesses the immunity accorded to them will be a sharpened awareness of the risks of pitching their initial views of the merits of their client's case too high or too inflexibly lest these views come to expose and embarrass them at a later date. High costs of expert evidence 18

19 Expert Determination Clause What is an expert determination clause? An informal and affordable dispute resolution method or a method which prevents a dispute from occurring A method which is commonly used in commercial contracts in relation to specialists or technical issues, pricing or valuation An individual is appointed as an expert to determine certain issues in accordance with the provisions of the clause Quality in commodity contract, construction contract, share valuation under shareholder agreement, rent review under rental agreement, hire adjustment under charterparty. 19

20 Expert Determination Clause Examples of expert determination clause Quality and quantity, basis shoretank, to be determined by a mutually agreed independent inspector at the loading installation, in the manner customary at such installation. Such determination shall be final and binding for both parties, except in case of fraud or manifest error. The price of a share sale should be determined by the auditors for the time being of the company whose valuation acting as experts and not as arbitrators shall be final and binding on all parties. 20

21 Expert Determination Clause Examples of expert determination clause "(A) In the event of any dispute regarding (i) the amount of any profit or loss allocations due to a Member pursuant to Clause 9 or (ii) any payment due to an Outgoing Member under Clause 17, any affected party may refer the matter or matters in dispute to a partner in an independent firm of internationally recognised chartered accountants agreed upon between them, or failing such agreement within 7 days to be selected at the instance of any party by the President for the time being of the Institute of Chartered Accountants of England and Wales. (B) Such accountant shall act as an expert and not as arbitrator and shall determine the matter or matters in dispute (which may include any dispute concerning the interpretation of any provision of this Agreement or his jurisdiction to determine the dispute or the content or interpretation of his terms of reference) and his decision shall be final and binding on the parties hereto. 21

22 Expert Determination Clause Expert determination (ED) vs Arbitration (A) Both ED and A are dispute resolution methods expressly agreed by the contractual parties. The scope of ED and A are defined by the terms of the contract but in ordinary cases the contract usually prescribed certain matters to be determined by ED. A is usually governed and supported by the curial law of the seat of the arbitration. ED solely operates in accordance with the agreed terms of the contract. 22

23 Expert Determination Clause Expert determination (ED) vs Arbitration (A) A is a quasi-judicial process and natural justice applies. No such consideration applies to ED. The decision of ED can be enforced as a matter of contract whereas the award of A can be enforced in accordance with the applicable curial law and New York Convention. An arbitrator has immunity while an expert can be sued for negligence. 23

24 Expert Determination Clause Final and Binding?: Challenging the decision In Campbell v Edwards (1976) 1 LLR 522, Lord Denning said: It is simply the law of contract. If two persons agree that the price of property should be fixed by a valuer on whom they agree, and he gives that valuation honestly and in good faith, they are bound by it. Even if he has made a mistake they are still bound by it. The reason is because they have agreed to be bound by it. If there were fraud or collusion, of course, it would be different. Fraud or collusion unravels everything. 24

25 Expert Determination Clause Final and Binding?: Challenging the decision Bernhard Schulte v Nile Holdings (2004) LLR 352, Cooke J said: The determination will be binding between them unless it can be challenged on the basis of fraud, collusion, bias or material departure from instruction, but if there has been negligence on the part of the expert, the damaged party may sue the expert in respect of any loss suffered. 25

26 Expert Determination Clause Final and Binding?: Challenging the decision Fraud & Collusion Natural justice, Independence & Bias * Natural justice comprises of two rules: 1. the decision maker must afford an opportunity to be heard to a person whose interest will be adversely affected by the decision 2. the decision maker must be disinterested or unbiased in the matter to be decided. * Should natural justice be implied into the expert determination clause? === > NO. See Bernhard Schulte v Nile Holdings (2004) LLR 352, Owen Pel Limited v Bindi (London) Limited (2008) 26

27 Expert Determination Clause Final and Binding?: Challenging the decision Natural justice, Independence & Bias (continue) * Independence? Probably not unless the clause specifically requires so. * Bias - Two types of Bias: apparent bias and actual bias Apparent bias: where the fair-minded and informed observer, having considered the facts, would conclude that there was a real possibility that the tribunal was biased Porter v. Magill (2001) 2 AC

28 Expert Determination Clause Final and Binding?: Challenging the decision Natural justice, Independence & Bias (continue) Actual bias: where a judge had been influenced by partiality or prejudice in reaching his decision, and where it had been demonstrated that a judge is actually prejudiced in favour of or against the party. Re Medicaments and related classes of goods (2001) WLR 700 * The expert s decision will be vitiated if actual bias of the expert is proved. 28

29 Expert Determination Clause Final and Binding?: Challenging the decision Mistake If he has answered the right question in the wrong way, his decision will be binding. If he has answered the wrong question, his decision will be a nullity. Nikko Hotels (UK) Ltd v. NEPC Plc (1991) 2 EGLR

30 Expert Determination Clause Final and Binding?: Challenging the decision Material Departure from instructions - Kollerich v The State Trading Corporation of India [1980] 2 LLR 32 - Veba v Petrotrade (2002) 1 LLR 295 a departure from substantive instructions would be material and would automatically invalidate a decision unless it was trivial whereas a departure from express or implied procedural instructions or unfairness will not always do so. 30

31 A real life example A ship building contract dispute The VESSEL, including its machinery and equipment, shall be designed and constructed in accordance with the rules and regulations of the Classification Society issued and having become effective up to an on the date of signing this Contract Decision of the Classification Society as to the compliance or noncompliance with the classification rules and regulations including those statutory rules and regulations which the Classification Society is authorized to act on behalf of the relevant authorities shall be final and binding upon the Parties hereto. 31

32 A real life example A ship building contract dispute If any dispute arises between the Parties hereto in regard to the design and/or construction of the Vessel, its machinery and equipment, and/or in respect of the materials and/or workmanship thereof and/or thereon, and /or in respect of interpretations of this Contract or the Specifications and Plans, the Parties may, by mutual agreement, refer the dispute to the Classification Society or to such other expert as may be mutually agreed between the Parties hereto In the event the Parties hereto do not agree to settle a dispute according to the above and / or in the event of any other dispute of any kind whatsoever between the Parties and relating to this Contract or its rescission or any stipulation herein, such dispute shall be submitted to arbitration in Hong Kong. 32

33 THANK YOU 33