FOSFA (Federation of Oils, Seeds, and Fats Associations) is a renowned organization that has been governing the global trade of oils, seeds, and fats since 1863. With 85% of the worldwide trade in oils and fats occurring under FOSFA contracts, it is essential for traders and businesses to understand the FOSFA arbitration rules. This comprehensive guide will cover the ins and outs of the arbitration process, the costs involved, and how to improve your chances of success under these rules.
Overview of FOSFA
FOSFA’s primary objective is to protect and promote the trade of oils, seeds, and fats. The organization achieves this through three main areas of activity:
- Providing a platform for the development and protection of its business
- Administrating arbitration
- Drafting standard pro forma contracts
There are currently more than 50 pro-forma FOSFA contracts, each with a specific number and varying in terms of commodity and delivery basis. For instance, FOSFA 53 is used for the sale of vegetable oil and fish oil on FOB terms, while FOSFA 54 is used for the sale-purchase of the same commodity on CIF terms.
Key Aspects of FOSFA Arbitration
Applicable Law and Arbitration Clause
English law governs disputes between parties in FOSFA contracts. The FOSFA model arbitration clause, known as the “Scott v Avery” clause, has its own particularities. Unlike the GAFTA arbitration clause, the FOSFA clause prohibits parties from seeking interim measures before the courts, such as “worldwide freezing orders” (WFO). Parties can exclude the application of this clause if they do not wish to limit themselves to the provisions prohibiting the obtaining of interim measures.
Arbitration Rules to Apply
The latest version of the FOSFA arbitration rules is dated 1 April 2021. It is crucial to apply the rules in force at the time the contract was made, not at the time the dispute arose. The rules and pro formas are not publicly available and are chargeable. FOSFA members can request old pro forma contracts and regulations.
FOSFA regularly updates its arbitration rules and pro formas, which can significantly impact the outcome of arbitration.
Time Limits
FOSFA rules provide for two different time limits for submitting a notice of claim, depending on the type of dispute:
- Quality disputes: 90 days from the date of unloading of the goods
- All other disputes: within 1 year from the actual shipment or delivery of the goods, or from the end of the contract period for shipment or delivery (whichever ends later).
Cost of Arbitration
Within 30 days of filing a claim, the claimant must pay a deposit of £5,000 at the first tier and £10,000 at the appeal. The costs are usually borne by the losing party.
Unlike GAFTA, FOSFA does not prohibit the recovery of legal costs from the losing party. However, this does not guarantee full reimbursement for the successful party. In recovering legal costs, arbitrators consider factors such as the conduct of the parties and the proportionality of the costs to the claim. In practice, if the party wins, 60-80% of the costs can be recovered.
FOSFA Arbitration Procedure
FOSFA is a two-tier arbitration system, consisting of a first tier and an appeal. There are several versions of the arbitration rules, including the FOSFA Rules of Arbitration and Appeal (under which most disputes are handled) and the Rules for Small Claims Single Tier
First Tier Arbitration
All documents and applications must be submitted by the parties in writing or electronically. Based on these documents, the arbitrators hear the disputes and make decisions. In exceptional cases, arbitrators may initiate oral hearings.
Appeal Process
Parties may appeal to FOSFA within 28 days from the date the award was made. The respondent has 21 days to prepare a reply to the appeal. As in the first tier, the parties can request permission from the arbitrators to exchange further explanations.
An appeal involves a re-examination of the case, and the parties may submit new evidence. Additionally, parties may appeal the arbitration awards (both first tier and appeal) to the High Court of Justice in London. However, such appeals are only possible on certain grounds set out in the Arbitration Act 1996, and successful appeals are rare.
Enforcement of FOSFA Arbitration Awards
The procedure for the recognition of an award is formal, with the court verifying that the arbitration clause and the parties have complied with it, as well as that the award is enforceable. If the award is recognized, it is referred to the enforcement authorities for the recovery of the debtor’s assets or other coercive measures against the debtor.
Tips for Improving Your Chances of Success in FOSFA Arbitration
- Ensure familiarity with the applicable FOSFA arbitration rules, as well as any updates or changes to the rules.
- Adhere to the time limits for submitting claims, as well as the procedural requirements for filing and responding to claims.
- Retain experienced legal counsel, preferably with expertise in FOSFA arbitration, to assist in presenting a strong case and navigating the arbitration process.
- Cooperate with the arbitrators and other parties throughout the arbitration process, as arbitrators consider the conduct of the parties when determining costs.
- Be thorough in the preparation and presentation of evidence, keeping in mind that new evidence can be submitted during the appeal process.
In conclusion, understanding and adhering to the FOSFA arbitration rules is crucial for traders and businesses involved in the oils, seeds, and fats trade. By familiarizing oneself with these rules and following the tips provided in this guide, parties can improve their chances of success in FOSFA arbitration.
