International arbitration: the independence of party-appointed experts: fact or fiction?

December 2019 | SPECIAL REPORT: INTERNATIONAL DISPUTE RESOLUTION

Financier Worldwide Magazine

December 2019 Issue

Expert evidence can play a critical role in the outcome of an arbitration. That outcome can in turn impact significantly the corporate balance sheet.

Take, for example, a complex international infrastructure project which is in heavy delay and in which key system components do not appear to meet the contractual specifications. Factual questions will almost invariably turn on more intricate technical issues of cause and effect (for delay issues) and complex engineering norms (for system defect issues). Expert evidence will therefore be necessary in order to prove or establish facts that are relevant to the merits of the parties’ dispute. Each party will be keen to engage one or more experts to provide a written report to the arbitral tribunal and to give oral testimony at a hearing, if earlier settlement is not possible.

Experts in international arbitrations are thus most often selected, instructed and paid by a party. Some would say that expert evidence is ‘bought’ by the party presenting it.

The interest of each party to the dispute – and their legal counsel – is naturally to maximise their chances of winning the case. Their aim will be to emphasise the impact on the arbitral tribunal of the strongest aspects of the case and minimise the impact of the weakest. In order to achieve this, they will want to be able to control the territory that their experts are asked to cover. A party simply would not present the expert testimony to the tribunal if an expert’s opinion were unfavourable to its case.

Contrast this with the position of the arbitral tribunal. The interest of the tribunal is to understand the technical aspects involved and to receive honest opinions and assistance from the experts to be able to decide the specialist issues in dispute fairly as between the parties.

In all fields of knowledge, it is a fact of life, however, that there can be robust disagreements between experts and genuine differences of opinion. Technical expert evidence is rarely an exact science. Indeed, experience has demonstrated the prevalence of legitimate and reasonably held differences of opinion upon complex technical issues.

What this ultimately means is that an arbitral tribunal can find itself faced with deciding between the opinions of opposing experts who have provided diametrically opposite opinions.

The purpose of this article is to look at the inherent tensions in deploying party-appointed experts and the extent to which they may be more apparent than real.

Credibility is paramount

In order to maximise the investment when buying a property, the universal adage is ‘location, location, location’. When a party purchases the services of a technical expert in relation to an arbitration, the analogous adage should be ‘credibility, credibility, credibility’.

No matter how eloquent or well-practised the expert may be, if the arbitral tribunal perceives that expert to be partisan, any credence that the tribunal may otherwise have accorded to that expert’s testimony will be significantly impaired, if not wholly undermined. If the technical evidence in question is pivotal to all or part of a party’s case, this may well result in that party losing the arbitration or key parts of its claims or its defence, having nonetheless incurred what are often not insignificant fees for that expert evidence.

It is very important to the arbitral tribunal’s acceptance of the credibility of the expert that the expert is perceived as being independent.

Independence refers to the absence of certain personal or financial relationships with the parties. Both the ‘International Bar Association (IBA) Rules on the Taking of Evidence’ and the Chartered Institute of Arbitrator’s (CIArb’s) protocol require that a party-appointed expert disclose any past or present relationships that may create a conflict of interest with another participant in the arbitration. It also refers to a quality of mind: the ability of an expert to remain impartial and objective, resisting the influence of factors irrelevant to the area of expertise concerned. An expert is a witness. His or her primary role is to testify before the tribunal, not to act as advocate for the appointing party.

The question this raises is how is it possible to reconcile, on the one hand, the fact that the expert is instructed and remunerated by one party with the aim of supporting that party’s case with, on the other, the need for the expert to be seen by the arbitral tribunal as being impartial and objective?

In reconciling these inherent tensions, a number of checks and balances come into play. It is instructive to look at these tensions from the perspective of each of the relevant stakeholders, namely the party engaging the expert, the expert and the arbitral tribunal.

Perspective of the appointing party

As we have seen, key drivers to the effectiveness of an expert’s evidence are independence and impartiality. A well-advised party will recognise the importance of selecting an expert who not only has the specific expertise in the relevant field, but who combines integrity with the ability to convey his or her expertise in a persuasive and credible manner, while remaining impartial and resistant to undue influence from the appointing party or its counsel. A lack of these characteristics will undermine the reliability of the expert’s opinion and negatively impact the tribunal’s trust in that expert. It is important from the appointing party’s perspective that the expert puts his or her reputation and credibility above economic remuneration.

In the selection process, it is always advisable to interview potential candidates in advance of an engagement and, where appropriate, to take soundings from other practitioners who are familiar with the expert. It is also worth checking what an expert has published to identify any potential issue conflicts, i.e., positions taken by the candidate that might conflict or undermine their position in the arbitration.

Expert evidence should be rigorously tested by the instructing legal team to ensure that the expert is being objective, and has properly considered the contrary views and explanations. It is in no one’s interests for experts to provide a rose-tinted view, or to push points that are not tenable. The expert should be capable of resisting competing pulls from various stakeholders within the client organisation appointing the expert, each with their own responsibilities, reporting lines and personal constraints, which can influence their approach to the services they expect from the expert and make it difficult to be objective.

The reality from a corporate governance viewpoint is that reputable companies looking to appoint an expert for an arbitration want an honest assessment early on from their expert of a dispute’s prospects, so they can make proper provision for the claim. No corporate client will relish the prospect of getting a provision significantly wrong, especially in the face of contrary advice from the expert. The fact is that early involvement of the expert allows counsel to identify and understand the salient technical issues in dispute, to assess the client’s chances of success meaningfully, and to plead the client’s case from the start in the knowledge that the expert’s evidence will be fully supportive.

Once satisfied that the candidate as expert is able to support a party’s case substantively (even if not on every aspect), that expert’s remit should be clearly defined in their written instructions.

Perspective of the expert

From the expert’s perspective, the first point worth noting is that they may well be members of professional associations and thus subject to the codes of conduct to which many such professional organisations require their members to adhere. These codes of conduct frequently contain ethical rules for their members serving as expert witness in arbitrations and other contentious proceedings and these ethical rules usually include a duty to act independently. Indeed, the primacy of the expert’s independence is recognised, for example, in the ‘IBA Rules on the Taking of Evidence in International Arbitration’, which require an expert’s report to contain a statement by the expert of his or her independence from the parties, their legal advisers and the tribunal and affirm the expert’s genuine belief in the expressed opinions. The importance of independence is also explicitly referenced in many arbitration rules. In a number of jurisdictions, independence may even be considered to be part of the expert’s overriding duty to the arbitral tribunal.

If an expert is seen as taking a polarised or partisan approach, it is hugely damaging to his or her reputation. The arbitration world is relatively small and an expert who is prepared to squander his or her reputation for short-term gain would be acting foolishly against their own interests. Efforts must be made by the expert to resist the various influencing factors, especially where, as is often the case, the evidence is not clear-cut, and while experts have to be subjective, they must use their best judgment to ensure their findings are robustly independent. An expert should ideally be proactive in requesting necessary information or documents in order to carry out an investigation of the relevant facts.

The more objective and independent the expert appears, the more credible they are likely to appear in the eyes of the tribunal. To this end, experts should: (i) avoid moving outside their primary field of expertise into areas on which they are not properly qualified to express an opinion; (ii) ensure they set out their instructions, assumptions, reasoning and basis for conclusions clearly and in a manner that the tribunal will be able to follow; (iii) inform the tribunal of any limitations in the conclusions reached, or the effect that relevant alternative assumptions would have on those conclusions; and (iv) be willing to concede points where appropriate to do so.

By ignoring evidence which is not helpful to their own party’s case or by systematically opting for an interpretation or approach that favours their instructing party, an expert runs a very serious risk that the arbitral tribunal will attach far less weight to that expert’s evidence and even that the evidence of the other expert will be preferred in its entirety.

Thus, independence and objectivity require that the expert should be candid in their evidence, identify matters that might adversely affect their opinions and take care in expressing opinions accurately. The expert’s role is thus distinct from that of a factual witness who is expected to tell the truth as to the facts, but not to approach the facts objectively.

Perspective of the arbitral tribunal

The statements, opinions and conclusions put forward by a party-appointed expert are simply a means of evidence. The arbitral tribunal must assess their admissibility and probative value according to the same rules the tribunal will apply to other forms of evidence, such as the contemporaneous documents or fact witness statements. This means that the arbitral tribunal must engage in the constructive evaluation of the expert evidence.

As we have seen, it can be a very challenging task for the arbitral tribunal to make a reasoned judgment between two diverging expert opinions. Partisanship tendencies on the part of an expert are not necessarily blatant, as bias can permeate the subtleties of complex technical evidence. Procedural innovations have been developed in the last decade or two to assist the tribunal in identifying and navigating the possibility of bias of experts. A number of mechanisms are designed to identify and narrow the areas of agreement and disagreement between opposing experts.

The most obvious is for the arbitral tribunal to order a meeting of experts followed by a joint report of those experts in which they are required to focus on the points on which they are unable to agree and to explain the reasons for their differences. This encourages constructive progress and can generate intervention points that the tribunal can then use to focus efforts on what they need from the experts in order to determine the technical issue in question. If one of the experts refuses unreasonably to engage in constructive discussions for the preparation of a joint expert report, that expert’s behaviour is telling and would strongly indicate an unwillingness to act independently in order to assist the arbitral tribunal.

The arbitral tribunal may also ask that the parties have their experts on the same issue testify together in a panel discussion in front of the tribunal at the hearing, with the tribunal leading the discussion. An expert witness conference (also known as ‘hot tubbing’) can help the arbitral tribunal to cut through any posturing by an expert and encourage the experts to discuss and debate their differences, crystallise the real issues and can even build a degree of consensus.

While these mechanisms can reduce the question of possible partisanship or bias of experts, they cannot eliminate altogether the risk. Combined, however, with effective cross-examination of each party’s experts by counsel for the other side, they can significantly reduce the risk of bias or at least ensure that such bias does not go unnoticed by the arbitral tribunal when weighing the probative value of the expert evidence.

Fact or fiction?

Expert testimony has become the predominant means of evidence for dealing with technical (or indeed financial quantum) matters. Party-appointed experts are today a routine feature of international arbitration. Independence is critical to the effectiveness of an expert in influencing the outcome of an arbitration. Parties would be very ill advised to present expert evidence of an evidently partisan expert witness who would be seen by the tribunal as no more than a ‘hired gun’ for the instructing party.

Independence is more fact than fiction. Multiple checks and balances exist (and are constantly evolving) to help ensure that independence is no mere chimera. Importantly, the reputational self-interest of an expert witness and basic market economics for a party engaging expert witness services militate heavily in favour of independence.

Peter Rosher is a partner at Reed Smith LLP. He can be contacted on +33 (0)1 44 34 80 95 or by email: prosher@reedsmith.com.

Peter Rosher

Reed Smith LLP