FOSFA Arbitration: A Comprehensive Guide

Fosfa arbitration

The global trade in oils, seeds, and fats is a complex and extensive industry, and disputes between parties are common. FOSFA arbitration is a popular dispute resolution mechanism in this sector, providing an effective and efficient means of resolving disputes. This comprehensive guide will explore FOSFA arbitration, its rules, procedures, and costs, as well as tips for success in these proceedings.

Introduction to FOSFA

FOSFA (Federation of Oils, Seeds and Fats Associations) is an organization established in 1863 in London, with the primary objective of protecting and promoting the global trade in oils, seeds, and fats. FOSFA has three main areas of activity:

  1. Serving as a platform for the development and protection of its business;
  2. Administrating arbitration for disputes within the industry;
  3. Drafting standard pro-forma contracts for trade in oils, seeds, and fats.

According to FOSFA, approximately 85% of the global trade in oils and fats is conducted under FOSFA contracts. There are over 50 pro-forma FOSFA contracts, each with a specific number and tailored to different commodities and delivery terms.

FOSFA Arbitration: Key Concepts

Applicable Law and Arbitration Clause

FOSFA contracts stipulate that disputes between parties are governed by English law https://fortiorlaw.com/news/fosfa-arbitration. The FOSFA model arbitration clause, also 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).

If parties wish to exclude the application of this clause, they must do so explicitly. Failure to comply with the clause may result in the other party applying for an "anti-suit injunction" from the High Court of Justice, which can prohibit the case from being heard anywhere other than in arbitration and may require the breaching party to pay costs.

FOSFA Arbitration Rules

The latest version of the FOSFA arbitration rules is dated 1 April 2021. It is essential to apply the rules in force at the time the contract was made, not at the time the dispute arose. The rules and pro-forma contracts are not publicly available and are chargeable, with older versions available to FOSFA members upon request.

FOSFA regularly updates its arbitration rules and pro-forma contracts, which can significantly impact the outcome of arbitration. For example, the current FOSFA arbitration rules have extended the time limits for non-quality claims from 120 days to one year.

Time Limits

FOSFA rules provide for two different time limits for submitting a notice of claim, depending on the type of dispute:

  1. Quality disputes: 90 days from the date of unloading the goods (for CIF, CIFFO, C&F contracts) or delivery (for FOB, Ex-tank, Ex-mill, and Ex-store contracts);
  2. 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).

These time limits differ from the previous rules, which stipulated a shorter 120-day time limit for non-quality disputes.

Cost of Arbitration

FOSFA arbitration is considered one of the most cost-effective commercial arbitrations in England. 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 stage. The costs are typically 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 that the successful party will be fully reimbursed for its costs. Arbitrators consider various factors when determining the recovery of legal costs. In practice, a winning party may recover 60-80% of their costs, though some FOSFA arbitration decisions have denied cost reimbursement due to the simplicity of the dispute.

FOSFA Arbitration Procedure

FOSFA arbitration is a two-tier system, consisting of a first tier and an appeal stage. 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 (where a sole arbitrator hears the dispute with no appeal option).

First Tier Arbitration

After the claimant appoints an arbitrator, the other party has 30 days to appoint an arbitrator on its side. FOSFA then appoints a third arbitrator, who serves as the head of the tribunal. Alternatively, the parties may agree to appoint a sole arbitrator.

All documents and applications must be submitted in writing or electronically. Arbitrators review these documents to make decisions, with oral hearings initiated in exceptional cases. The exchange of documents typically follows this order:

  1. Claimant files a claim after arbitrator appointment;
  2. Respondent files a reply;
  3. Claimant files an objection to the reply;
  4. Parties may request permission from the arbitrators to exchange objections again, which can lead to delays in the case.

Appeal Procedures

Parties may appeal a first-tier arbitration award within 28 days of its issuance. FOSFA appoints a Board of Appeal consisting of five arbitrators. The respondent then has 21 days to prepare a reply to the appeal. Similar to the first tier, parties can request permission from the arbitrators to exchange further explanations.

An appeal involves a re-examination of the case, allowing parties to submit new evidence. Additionally, parties may appeal arbitration awards (both first tier and appeal) to the High Court of Justice in London. However, such appeals are only possible on specific grounds outlined in the Arbitration Act 1996, and successful appeals are rare.

Enforcing a FOSFA Arbitration Award

If the losing party does not voluntarily enforce the award, the successful party may apply to the national court where the debtor is domiciled or where its assets are located. The court verifies the arbitration clause and the parties' compliance, as well as the award's enforceability. If the court recognizes the award, it is referred to the enforcement authorities for the recovery of the debtor's assets or other coercive measures against the debtor.

Tips for Success in FOSFA Arbitration

  1. Ensure familiarity with the applicable FOSFA arbitration rules and pro-forma contracts, as well as any updates or changes that may impact the outcome of arbitration.
  2. Strictly adhere to the time limits for submitting claims and responses, as failure to do so may result in a loss of rights.
  3. Ensure that all documents and applications are submitted in the required format and within the specified deadlines.
  4. Consult with experienced legal counsel to navigate the complexities of FOSFA arbitration and maximize the chances of success.
  5. Prepare a thorough and well-supported case, including comprehensive evidence, to bolster the credibility of the claim or response.

In conclusion, FOSFA arbitration is an essential dispute resolution mechanism within the global trade of oils, seeds, and fats. Parties engaging in this industry must familiarize themselves with FOSFA's rules, procedures, and costs, and be prepared to navigate the complexities of arbitration effectively. By following the tips for success outlined in this comprehensive guide, parties can improve their chances of achieving a favorable outcome in FOSFA arbitration.