Expert Determinations Explained

Expert determinations can be useful in resolving family, shareholder, and post acquisition disputes, says Obaid Kazmi, director of risk consulting at KPMG Lower Gulf

MOST PEOPLE UNDERSTAND how litigation, mediation, and arbitration can assist in resolving complex disputes, but there is another alternative that is perhaps lesser known: expert determinations.

During this dispute resolution process, an independent expert is appointed by the concerned parties to provide an opinion or determination on a specific issue. This person is considered to be an expert in the relevant field based on his or her education and work experience.

To better understand how expert determinations work, let us consider the following example.

Mouse Inc. purchases the Cheese Company’s Gouda department on January 1, 2018 for Dhs100m ($27.2m). The agreement between both companies stipulated that 30 percent (equivalent to Dhs30m) was to be paid up front and the remaining 70 percent would be paid over five years (approximately Dhs14m per year) provided that certain profitability criteria are met.

On January 15, 2019, Jasmeen Jaban and Pilar Paneer (the owners and sole shareholders of the Cheese Company) requested Mouse Inc. to pay Dhs14m of the purchase price. Rafeal Ratón, CFO of Mouse Inc., believed that the Gouda department did not achieve the profitability metrics dictated by the agreement and therefore refused to pay the amount requested.

After much discussion, it was evident that the key difference in both parties’ calculation of profitability rested on one core issue: the manner in which the Mouse Deterrence device, which uses a wide array of stuffed animals and fighter jets to mitigate the risk of mice misappropriating cheese, was being depreciated.