Expert determination or arbitration – some insights from Delaware

Arbitration or expert determination? The distinction matters enormously – yet dispute resolution clauses often blur the line. A recent Delaware decision, with a direct parallel to Swedish law, offers a useful framework.

A September 2025 decision from the Delaware Court of Chancery[1]  offers an analysis of a question that arises frequently in M&A disputes: when does a contractual dispute resolution clause constitute arbitration rather than expert determination?

The Buyer acquired a biotech Target in 2016 for $150M upfront, plus up to $450M in contingent milestone payments. When the Buyer commenced Phase 1 clinical trials on a new antibody allegedly derived from the Target's technology, the Sellers claimed a $50M milestone had been triggered. The Buyer refused to pay. Before reaching the merits, the court had to determine whether the contract's dispute resolution clause mandated arbitration.

The clause was ambiguous on its face. It repeatedly used the words "arbitration" and "arbitrate," yet called the decision-maker an "Expert" – language more consistent with expert determination. The court resolved the tension by applying an authority test: the decisive question is not what the clause calls the process, but what power it grants to the decision-maker.

Three factors pointed toward arbitration:

First, the contract itself distinguished between the two mechanisms elsewhere. A separate provision governing purchase price adjustments explicitly stated that the accountant would act "as an expert and not as an arbitrator." The absence of equivalent language in the milestone clause was telling – the parties clearly knew how to draft an expert determination when they wanted one.

Second, the clause established full procedural machinery: written submissions, oral hearings, defined deadlines, and allocation of costs – hallmarks of a judicial-style proceeding rather than a technical assessment.

Third, and most importantly, the decision-maker was empowered to determine not only a factual question (the biochemical characteristics of the antibody) but also whether a Milestone Event had occurred – a determination that directly triggers multimillion-dollar contractual liability.

Based on this, the court held that the dispute fell to be resolved by arbitration, not in court.

The Swedish law parallel

Swedish law draws the same fundamental distinction between arbitration and expert determination (godmansförfarande). The question whether clause constitutes an arbitration clause or clause on expert procedure is determined by reference to what the parties can be considered to have agreed regarding the legal character of the outcome. The decisive question is whether they intended the result to carry the legal effects of an arbitral award. Where the clause is ambiguous, the presumption runs against arbitration – the matter should in case of doubt be treated as expert determination, and the party asserting the existence of an arbitration agreement bears the burden of establishing it.

A stipulation that the third party's determination shall be binding on the parties is not, by itself, sufficient to establish an arbitration agreement. This was confirmed in NJA 1974 s. 573 ("Husqvarna Vapenfabriks tjänstegrupplivförsäkring"), where the Swedish Supreme Court held that referral of a dispute to an advisory board did not give "unequivocal expression of an intention" that the matter be decided by arbitrators. Conversely, where the parties have expressly conferred on the third party the powers of an arbitrator, an arbitration agreement may be found – as in NJA 1925 s. 29, where a lease provided that surveyors should hold the authority vested in arbitrators. It is also worth noting that the distinction does not turn on whether the question referred is one of fact or law: there is nothing under Swedish law to prevent a factual question from being resolved through arbitration, nor a legal question from being submitted to expert determination.

 Author:

Mikael Ericson is a partner at Hellström lawfirm in Stockholm, specialising in dispute resolution

Email: mikael.ericson@hellstromlaw.com