REUTERS | Shamil Zhumatov

GAFTA: updates to the arbitration rules

The Grain and Feed Trade Association (GAFTA) have recently amended both the GAFTA 125 Arbitration Rules and GAFTA 126 Simple Disputes Arbitration Rules (now renamed the Expedited Arbitration Procedure Rules).

Only one significant amendment has been made to GAFTA 125, which were last updated in 2016. The time-bar provision previously contained in Rule 2.3 and applicable to “amounts payable” claims has now been removed. The intention behind Rule 2.3 was to impose a relatively short time-bar (60 days) in respect of purely monetary claims. Unfortunately, the definition of “amounts payable” was notoriously unclear, giving rise to frequent arguments about whether the 60 days time-bar applied. All “amounts payable” claims are now subsumed within the other broader categories of claim for the purposes of time-bar. The move mirrors similar streamlining amendments made earlier in the year to the Federation of Oils, Seeds and Fats Associations (FOSFA) Arbitration Rules, whereby time-bars applicable to claims for monies due were subsumed within broader categories of claims for quality or condition and other claims. (GAFTA and FOSFA granted each other reciprocal membership earlier this year, and it will be interesting to see whether the two arbitration schemes will further be aligned in the future.)

By contrast, GAFTA 126 has undergone a major overhaul. Like many other institutions, GAFTA offers a streamlined and expedited dispute resolution mechanism, suitable for smaller or simpler claims which parties wish to dispose of quickly and (relatively) cheaply. The basic mechanism remains the same (single-tier arbitration with a brisk timetable and no appeal to the Board of Appeal or to the court). However, the rules have been restructured and redrafted to reflect more closely with the supportive provisions of the Arbitration Act 1996 (AA 1996), to which express reference is made in the pre-amble.

The amendments to GAFTA 126 introduce several substantive changes, the most significant of which are:

  • The seat of arbitration is now designated as England (previously it had been the domicile of the arbitrator). This lends certainty and predictability, and very firmly roots the arbitral reference in the AA 1996.
  • The procedure for commencement of arbitration has been tightened up, with express provision now for service of a notice of arbitration. Notice must be served and then produced, along with the contract, when requesting GAFTA to appoint an arbitrator. This is consistent with the AA 1996, which proceeds on the basis that an arbitration is “commenced” when a notice of arbitration is served.
  • The rules set out a number of time-bars, mirroring those in Rule 2 of the updated GAFTA 125. However, failure to comply with the specified time-bar no longer necessarily gives rise to a waiver of time-bar. The arbitrator has a discretion to admit a claim, if satisfied that the circumstances were outside the reasonable contemplation of the parties when they entered into the contract and that it would be just to extend time, or where the conduct of one party makes it unjust to hold the other to the strict time limit (Rule 9). The wording of this provision clearly replicates both the equivalent provision in GAFTA 125 and the wording of section 12 of the AA 1996, which permits the court to extend time for commencing arbitration. It is likely that authorities on section 12 will be of relevance to the exercise of the tribunal’s discretion under this provision.
  • GAFTA has taken steps to protect its own position, and that of the tribunal, with regard to the costs of the arbitration. The rules now expressly provide for the payment of an appointment fee (Rule 3.3), a deposit in respect of fees and costs (Rule 4.1), and a further deposit in respect of costs of any hearing, if ordered by the tribunal (Rule 4.7).  A failure to pay the deposit provided for in Rule 4.1 will result in the claim being regarded as waived and barred. Although worded in broad terms, these provisions are presumably intended to focus on the costs of the tribunal and of GAFTA, since Rule 7 now provides that, unless otherwise agreed, the parties are to bear their own costs (including the costs of legal representation). In this regard, there is perhaps a potential inconsistency between Rules 7 and 6.1. Rule 6.1 empowers the arbitrator to assess and award costs. In so far as the parties’ costs are concerned, there will be nothing to award under Rule 6.1 where Rule 7 applies.
  • There is now an express rule empowering the arbitrator to rule on issues of substantive jurisdiction, mirroring section 30 of the AA 1996 (Rule 5).
  • There is no longer any absolute bar on legal representation. The parties may expressly agree to legal representatives (Rule 4.7). Although GAFTA 126 is intended to provide a speedy and (relatively) cheap dispute resolution mechanism, the reality is that in many cases where legal representation is barred, the parties nevertheless engage their lawyers as “behind the scenes” consultants, drafting and replying to submissions which are then relayed by the parties. In such cases, parties may wish to allow for the involvement of lawyers, even in relatively small or simple disputes, and the rules now allow for this.
  • There is now express provision for defaulters to be posted, including parties who fail to pay GAFTA any costs or expenses due (Rule 10).

The new rules have attracted relatively little comment, but on the whole, appear to have effected improvements by tightening up time-bar provisions and more generally, ensuring that the arbitration mechanism properly reflects the applicable legislation and the interests of the parties.

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