No more nominations – Chartered Accountants ANZ nomination clauses now defunct
A feature of many commercial agreements are clauses that create a mechanism by which something may be valued in the future, a dispute may be settled, or other decisions made. This can involve a nominated third-party making a decision that binds the parties.
A common example of this type of clause is the Chartered Account ANZ (CAANZ), or its predecessor the New Zealand Institute of Chartered Accountants (NZICA), President Nomination clause. If triggered, the President of CAANZ would nominate an independent expert to resolve a dispute or provide valuation services. This service was known as President Nominations and was most frequently used in connection with share valuations.
No more nominations
In 2017, CAANZ announced that it was no longer fulfilling requests to nominate an expert for valuations or dispute resolution. Despite the announcement, clauses requiring the nomination of an expert by CAANZ have made their way into contracts since then. There are many more contracts signed before the announcement that also contain President Nomination clauses.
What is the effect?
The cessation of the President Nominations service means clauses in a large number of commercial contracts can no longer operate as intended. This is because a President Nomination clauses is now unenforceable. The effect is that many contracting parties do not now have an agreed approach to appointing an independent expert.
CAANZ has said that now, when it receives requests for President Nominations, it will direct the request to the New Zealand Law Society, New Zealand Dispute Resolution Centre, or the Resolution Institute. While these entities do offer dispute resolution and or nomination services, a party that has agreed to a President Nomination clause is not bound to accept these other entities’ services as they have not agreed to do so.
Where parties cannot agree to an alternative to a President Nomination, the parties will have to resort to litigation to resolve matters. Our experience to date is that even in hostile disputes, parties have been prepared to agree to an alternative appointment process.
What we recommend
We recommend all internally drafted contracts are reviewed before signing for this particular issue. Many contracts are drafted by reference to a previously used document – and the “back end” clauses are frequently given little attention.
For further information, please contact a member of our litigation and dispute resolution team.
Disclaimer: the content of this article is general in nature and not intended as a substitute for specific professional advice on any matter and should not be relied upon for that purpose.