Ukraine is a major player in the production and export of sunflower oil, but the intense trading activity often leads to disputes due to unfulfilled obligations. When these issues arise, they're typically resolved through FOSFA arbitration.
In this article, we'll explore the FOSFA https://fortiorlaw.com/news/fosfa-arbitration/ arbitration process, its costs, and some tips to improve your odds of success. FOSFA stands for the Federation of Oils, Seeds, and Fats Associations, a London-based organization established in 1863 to support and regulate the oils, seeds, and fats trade.
FOSFA has three main functions: it promotes the industry, administers arbitration, and creates standardized pro forma contracts. According to FOSFA, about 85% of global oils and fats trading uses FOSFA contracts.
FOSFA offers over 50 standardized contracts, each with a unique number that varies based on commodity type and delivery terms. For example, FOSFA 53 is for the sale of vegetable oil and fish oil under FOB terms, while FOSFA 54 applies to the same commodities under CIF terms. FOSFA 4a is designed for trading European oilseeds, and so on.
Key Points About FOSFA Arbitration
Governing Law and Arbitration Clause: FOSFA contracts operate under English law, but their arbitration clause, known as the "Scott v Avery" clause, has unique stipulations. Unlike GAFTA, the FOSFA clause prevents parties from seeking court-issued interim measures, such as "worldwide freezing orders" (WFO). If you want the option to pursue such measures, the contract should exclude this limitation. Violating this clause, for example, by attempting to seize disputed goods, can lead to an anti-suit injunction from the High Court of Justice, often with costs borne by the party at fault.
Applicable Rules: The most recent FOSFA arbitration rules are from 1 April 2021, but remember that the rules in force when the contract was signed are the ones that apply. For instance, if a contract was signed in December 2020 and the dispute arose after 1 April 2021, the relevant rules would be from 1 April 2020, not the latest version.
Regular Updates: FOSFA frequently revises its arbitration rules and pro formas, which can influence arbitration outcomes. For example, the latest rules extended the time limit for non-quality claims from 120 days to one year.
Time Limits: The FOSFA rules define different time limits for various types of disputes. For quality-related disputes, the limit is 90 days from unloading (for CIF, CIFFO, CF contracts) or delivery (for FOB, Ex-tank, Ex-mill, Ex-store contracts). For other disputes, the limit is one year from the actual shipment or delivery, or the end of the contract period for shipment or delivery, whichever is later.
Cost of FOSFA Arbitration FOSFA arbitration is among the most cost-effective commercial arbitrations in England. Claimants must pay a deposit within 30 days of filing: 5,000 at the first tier and 10,000 at the appeal tier. Generally, the losing party covers the arbitration costs. Although FOSFA allows for the recovery of legal costs, arbitrators consider various factors, such as the parties' conduct and whether costs were proportionate. Typically, successful parties can expect to recover about 60-80% of their costs. However, some arbitrations have denied cost recovery if arbitrators felt the dispute didn't require legal representation.
FOSFA Arbitration Process FOSFA follows a two-tier arbitration system: the first tier and an appeal tier. Most disputes use the FOSFA Rules of Arbitration and Appeal, while smaller claims are resolved under a single-tier system with a sole arbitrator and no appeal.
The process begins with the claimant appointing an arbitrator, followed by the respondent appointing theirs within 30 days. The Federation then appoints a third arbitrator, usually as the tribunal head. The parties can also agree to a sole arbitrator. Submissions and documents are exchanged in writing or electronically, with arbitrators typically deciding based on this written evidence. However, in some cases, oral hearings may be requested. The standard document exchange process is:
- The claimant files a claim.
- The respondent submits a reply.
- The claimant may submit a rebuttal.
- Further exchanges can be requested but may cause delays.
This is an overview of FOSFA arbitration, its costs, and key procedures. I hope this helps you understand the basics and provides a guide for navigating FOSFA-related disputes.
