It is often difficult to differentiate a proper arbitration agreement and an expert determination clause.
The difference is however significant since the decision rendered as a result of an arbitration proceeding is binding and subject to very limited review, whereas the decision rendered as a result of an expert determination process leaves open the possibility to litigate before a court in case of disagreement on the expert's findings.
The difference between arbitration clauses and other types of dispute resolution clauses (in particular expert determination clauses) have been subject to a number of disputes. Courts and scholars have identified criteria to differentiate those two types of clauses (Ch. Jarrosson, "Les frontières de l’arbitrage", Rev. arb. 2001.5; P. Duprey, "Arbitrage et expertise: où sont les frontières", Gaz. Pal., 26 Apr. 2006, p. 967).
The very title of the clause, ie "clause d'arbitrage" or “Arbitration clause”, is irrelevant. Courts are not bound by the wording used by the parties and must analyse the nature of the mission conferred on the third party to determine the qualification of the clause (French Supreme Ct, 31 March 1862; Paris Ct App., 12 Jan. 1979; French Supreme Court, 2nd civ. div., 7 Nov. 1974; 1st civ. div., 26 Oct. 1976, Bull. civ. I, No 305). The court however may nevertheless take into account the wording to determine the intention of the parties (Lyon Ct App., 12 Oct. 1953; TGI Paris, 22 Apr. 1985) and have a tendency not to disqualify clauses entitled "arbitration" but to qualify as arbitration agreement clauses entitled expert determination (J-Cl. Fasc., 1005 § 71, Rev. arb. 1990.717; Paris Ct App., 24 Oct. 1991, Joyaux v Gan).
The criteria usually which are relevant to differentiate the two types of agreements are the following ones:
- 1st criterion: The existence of a dispute with diverging positions. This criterion is not sufficient by itself. The existence of a legal dispute is a condition for the qualification of the clause as an arbitration clause since the referral to a third party in the absence of dispute is not considered to be a reference to arbitration. However, a dispute can be submitted to an expert for determination.
- 2nd criterion: A clause can only be qualified as an arbitration clause if the parties vest the third party with the power to render a decision which is binding upon them. If the parties ask for the intervention of the third party without conferring the power to render a binding decision, then the clause is not an arbitration clause.
- 3rd criterion: The nature of the mission conferred on the third party. As a general rule, the arbitrator must give a decision on a legal dispute as opposed to a purely technical analysis. The arbitrator goes beyond a mere analysis of facts and provide the legal consequences of a given factual situation. On the contrary, expert determination proceedings generally consist in obtaining from a third party a factual and technical analysis and to expose the result in a written report. Hence, whereas third parties empowered to assess the amount of the damage suffered as a result of a loss are experts (French Supreme Court, 21 Feb. 1887, DP 1887.1.297), those who have, in addition, received the mission to render a decision to which the parties must abide are arbitrators (Paris Ct First Instance, 25 Jan. 1984, Rev. arb. 1984.376, cited in B. Moreau, Arbitrage en droit interne, Rép. civ. Dalloz, para. 10, Apr. 2008).
- 4th criterion: the decision of the third parties must result of a procedure subject to specific requirements, such as the respect of due process. The fact that the clause refers to the appointment of a third "expert" in case of disagreement between the two party-appointed experts has been seen as indicating that the clause is an arbitration clause (Versailles Ct App., 17 Jan. 1979, RGAT 1980.361).
- French courts are very cautious not to frustrate the parties' intention to have recourse to arbitration and often favour the qualification of arbitration. Charles Jarrosson, a leading French Professor on arbitration, wrote: "Unless it appears from the interpretation of the parties' intent that the parties wanted to have recourse to something else than arbitration, one should favour the qualification of arbitration as frequently as possible, not only because its regime is well defined and offer serious warranties to the parties, but also because arbitration often corresponds to what the parties intended." According to this author, the qualification as arbitration clause should therefore be a fall back position in case of doubt.
- The fact that the contract policy also contains a choice-of-forum clause could however be used to interpret the intention of the parties and to conclude that the clause provided in other part of the contract is mere expert determination clause since the parties have otherwise expressed their intention to submit their disputes to a national court. As a general matter, under French law, an arbitration agreement would prevail over a choice-of-forum clause (French Supreme Ct, 2nd civ. div., 18 Dec. 2003, No 02-13410, Gaz Pal, 22 May 2004, No 143, p. 20).
The expert determination clause is binding in the sense that it precludes any legal action before a court as long as the party-appointed experts' report is not released (French Supreme Court, 19 Jan. 1942; Paris Ct App., 4 March 1981). It has been held that the expert determination clause precludes the recourse to judicial appraisal as long as the party-appointed experts have not submitted their report (French Supreme Court, 1st civ. div., 26 Apr. 1978; on the contrary: Paris Ct App. 13 March 1978, La Protectrice).
If the parties want to challenge the decision of the party-appointed experts, they have to demonstrate “manifest errors” in the finding of the experts (J. Kullmann [dir.], Lamy Assurances 2008, para. 4702). Courts and tribunals have been consistent in rejecting recourses against party-appointed expert’s reports when the parties, seeking to obtain a new expertise, did articulate precise arguments demonstrating severe mistakes of the party-appointed experts (French Supreme Ct, 1st civ. div., 10 March 1992, No 90-19.147; French Supreme Ct, 1st civ. div., 29 Apr. 1997, No 94-20.688, RGDA 1997.865). There is therefore a presumption that the expert report is authoritative. Before deciding if the parties are bound by the report, the courts nevertheless verify whether the expert made a serious work and whether the report is sufficiently detailed (S. Pinguet, J.-Cl. Resp. civ. Ass., 2007, Fasc. 520-20, para. 94). This is in line with the case law prevailing in cases of sales, when the determination of the price is left to a third party. In that case, the price fixed by the third party is binding on the parties. They can only challenge the price fixed by the expert if they can demonstrate gross negligence or manifest errors by the expert (for example French Supreme Ct, com. div., 6 June 2001, JCP E, 2002, 1292).