In this article, we’ll cover how Gafta arbitration https://fortiorlaw.com/news/gafta-arbitration/ functions, its associated costs, and strategies to increase your chances of winning and recovering funds from your debtor.

Gafta, short for the Grain and Feed Trade Association, was founded in 1878 as the London Corn Trade Association. Based in London, with offices in Geneva, Kyiv, Beijing, and Singapore, Gafta aims to safeguard the interests of grain market participants. Its primary role is to create standard pro forma grain trade contracts, which simplify and accelerate the contracting process. When sellers and buyers are in different countries, they can refer to a Gafta pro forma, which already contains detailed terms, rather than negotiating every detail afresh.

According to Gafta’s data, over 80% of the world’s grain shipments are conducted using Gafta pro formas. Common pro formas in the Black Sea region include Gafta 48 (bulk delivery on CIF), Gafta 49 (bulk delivery on FOB), Gafta 78 and 78UA (rail and road), and Gafta 88 for container shipments. All these contracts include a clause specifying that disputes will be settled through Gafta arbitration under English law.

Time Limits for Filing a Claim

Gafta’s standard time limit for filing a claim is one year, starting from the bill of lading date, the discharge date, or the end of the delivery period, depending on the terms. For quality disputes requiring sample examination, the time limit is 21 days. The notice of arbitration must be filed within this timeframe, and the claim itself must be lodged within one year of the notice. Extensions of up to one additional year can be requested, allowing for a maximum postponement of 6 years.

The final arbitration costs may differ from the initial deposit. If the costs exceed the deposit, the claimant must pay the difference. If the costs are lower (e.g., due to a settlement), a portion of the unused deposit may be refunded.

Example: We submitted a claim for non-payment, agreed on a single arbitrator, and deposited £8,000. After the defendant committed to paying, we informed the arbitrator to close the case. Gafta refunded £7,000 of the deposit.

The Arbitration Process

The arbitration process is designed to be straightforward:

• The arbitration rules are contained in just 15 A4 pages, making them simpler compared to many national civil procedure codes.
• Typically, there are no oral hearings, which means no need to travel to London. Decisions are based solely on documents submitted electronically.

Who Pays for the Arbitration?

Initially, the claimant covers all arbitration costs. If the claimant wins, the losing party is responsible for these costs.

Recovering Legal Costs

Gafta Arbitration Rules stipulate that legal costs are recoverable only if the parties have agreed to this. Usually, such agreements are not in place, so legal costs are generally not recoverable.

How Disputes are Adjudicated

Gafta offers two sets of arbitration rules: Gafta 125 and Gafta 126. Gafta 125 is the standard procedure, while Gafta 126 is designed for simpler disputes and offers an expedited process. This overview focuses on the Gafta 125 rules.

Initially, the parties appoint arbitrators and the claimant files a claim. After paying the deposit, the defendant has 28 days to respond, followed by 21 days for the claimant to reply. The arbitration may involve additional rounds of clarifications, potentially extending the process if the case is complex or if parties use the process excessively.

All communications are handled through Gafta’s secretary, with no direct interaction between the parties and arbitrators. Oral hearings are rare and are only held if deemed necessary by the tribunal. Virtual hearings are available, which helps reduce costs.

Challenging an Award

Gafta’s appeal process allows any party to challenge the initial arbitration award. The appeal involves a full review of the case without needing to justify the grounds for appeal.

The appeal process mirrors the initial procedure, with a three-member board if the first-tier award was made by a sole arbitrator, or a five-member board if it was made by a three-arbitrator tribunal. Parties also have the option to challenge the award in the High Court of Justice in London, but such challenges are limited in scope and are rarely successful.