Changes to the FOSFA Arbitration Rules from 1 April 2018

The Federation of Oils, Seeds and Fats Association (FOSFA) has published revised Rules of Arbitration that apply to disputes arising under contracts concluded on or after 1 April 2018. The previous Rules of Arbitration, published in January 2012, will continue to apply to contracts entered into prior to April 2018.

The main changes in the new rules are:

  • Time limit for commencement of arbitrationFor disputes relating to quality and/or condition the time limit for commencement of arbitration has been extended to 90 days from either (i) the completion of discharge in CIF, CFR and similar contracts; or (ii) the completion of delivery in FOB, ex-tank, ex-mill and ex-store contracts.Meanwhile, a respondent now has 30 days from the notice of commencement of arbitration to appoint an arbitrator and notify the claimant and FOSFA of that appointment.Also note that the new rules make no distinction between claims that are supported by certificates of contractual analysis and those that are not, which distinction caused problems under the previous rules.
  • Claims for ‘monies due’Under the new rules FOSFA no longer treats ‘monies due’ claims as a separate category of dispute. The time limit for commencement of arbitration in respect of such claims will be that which applies to non-quality and/or condition claims, namely 120 days from the relevant starting point under each category of contract (unchanged from the previous rules).
  • First tier arbitration procedureIn arbitrations in respect of quality and/or condition claims the time limit for service of claim submissions has been extended to 30 consecutive days following the appointment of the respondent’s arbitrator, instead of 10 consecutive days from the notice of commencement of arbitration under the previous rules.Likewise, under the new rules the respondent has a period of 30 consecutive days from the receipt of the claimant’s submissions to file its submissions in response.The procedure for the exchange of submissions in arbitrations for claims other than for quality and/or condition remains unchanged under the new rules, both parties having to file their respective submissions ‘without delay’.For all types of claim, the claimant is now required to pay to FOSFA a deposit on account of the fees, costs and expenses of the arbitration. The amount of the deposit is currently set at £5,000, although the tribunal may request further deposits at its discretion.
  • Arbitrators and the ‘two tier’ systemUnder the new rules, in situations where two arbitrators have been appointed by or on behalf of the parties, FOSFA will appoint a third arbitrator who will act as chair of the tribunal. However the parties remain able to agree to appoint a sole arbitrator instead a panel of three arbitrators.As was the case under the previous rules FOSFA continues to operate a two tier arbitration system with an automatic right to appeal against a first tier award.Importantly, under the new rules if a party wishes to make a cross-appeal against the award (after the other party has notified its intention to appeal against the first tier award), it will have to serve a notice of cross-appeal within seven days of receipt of the other party’s notice of appeal and will have to pay to FOSFA a further deposit on account of the fees, costs and expenses of the cross-appeal.

Changes to GAFTA terms from 1 September 2018

There are also important changes to The Grain and Feed Trade Association (GAFTA) Arbitration Rules No. 125 (GAFTA 125) and to the widely-used FOB contract form GAFTA 49.

Importantly, under the new GAFTA 125 effective for contracts entered into as from 1 September 2018, the separate category of claims for ‘amount payable’ has been removed. The relevant time bar applicable to those claims will now be defined on the basis of the parity terms of the contract (FOB, CIF, etc.), as provided under the ‘other disputes’ section of GAFTA 125. The time bars based on the parity of the contract remain unchanged.

The corresponding clauses in the payment section of the standard contract forms have accordingly been removed.

As regards the new GAFTA 49 form, also effective as from 1 September 2018, the provision that required the sellers to have the goods ready ‘at any time within the contract period of delivery’ has been removed. This marks a significant change in that, as per the House of Lords’ judgment in The “NAXOS”, such a term was a condition of the contract.

It remains the case that delivery of the goods will be at ‘buyers’ call’ which requires that the goods be ready for loading when the vessel is presented at the loading port in readiness for the loading operation. That latter obligation is regarded as an intermediate term of the contract which, depending on the circumstances, may give rise to a right to terminate.