A note on the changes to Gafta 125 Arbitration Rules

The new 125 Arbitration Rules (Rules) came into effect from 1 September 2016 and have been incorporated into all Gafta contracts from that date. The changes have been made to address a number of practical concerns raised by Gafta arbitration users since the last version was released in 2014.

For the most part the amendments tidy up the Rules. Some changes though are a breath of fresh air that demonstrate Gafta’s often stated resolve to provide a leading commercial dispute resolution forum.

As well as some more minor amendments, there are three significant changes which we discuss below:

1. Give: the time limit for claiming arbitration in respect of a dispute relating to quality and condition has been increased from 21 days to one year (Rule 2.2).

This is arguably the most significant change and one that could bring about an increase in claims. The context is this: all too often quality/condition issues do not immediately present themselves and frequently they take some time to document. Lengthening the time limits from 21 days to one year provides some breathing space, which will be welcomed by buyers.

It also neatly streamlines with the general Gafta one year time limit for other types of dispute, which is especially helpful to users in cases where it is not clear whether the claim is one of general breach or one of quality/condition - a not infrequent occurrence.

Generally, one year is seen by most as an acceptable commercial time limit. For example, it is the same limit set by the Hague and Hague Visby Rules. All but the most unusual disputes will have arisen within that period and the Rules still provide for a discretionary further extension in certain circumstances.

2. Take: a time limit for a claimant paying a deposit has been introduced. If the deposit is not paid within 60 days of being called for, the arbitration shall be deemed to be waived and barred (Rule 4.1).

This no-nonsense approach will be welcomed by many. The intention plainly is to root out any frivolous arbitration claims at an early stage, rather than to permit them to linger in the books.

3. Give: arbitrators have been given greater flexibility to consolidate cases (Rule 7.1-7.2, 12.4).

In the age of long chains, this is a sensible provision - one Paranagua case alone that we are handling involves a chain of over 50 parties. Used appropriately by commercial arbitrators, this provision should cut through red tape, speed up the process and reduce costs, demonstrating Gafta’s practical and commercial approach to resolving disputes.

In summary, Jonathan Waters, Gafta’s General Counsel, says: “We believe that the amended Rules will be beneficial to all those who are involved in Gafta arbitration. Going forward, we will, through the Arbitration Committee in particular, keep the Rules under regular review and any member who has any comments is invited to contact me direct.”