In this article, we will delve into the FOSFA https://fortiorlaw.com/news/fosfa-arbitration/ arbitration process, its associated costs, and strategies to maximize your chances of a successful outcome.

Ukraine is a leading global producer and exporter of sunflower oil. Traders in this sector often face disputes due to unmet obligations, which are primarily resolved through FOSFA arbitration.

FOSFA (Federation of Oils, Seeds and Fats Associations), established in London in 1863, aims to protect and advance the trade in oils, seeds, and fats.

FOSFA’s activities are centered on three main areas: facilitating business development and protection, managing arbitration proceedings, and drafting standard pro forma contracts. According to FOSFA, 85% of global oil and fat trade is conducted under its contracts.

Currently, there are over 50 pro forma FOSFA contracts, each identified by a number and designed for specific commodities and delivery terms. For instance, FOSFA 53 is used for the sale of vegetable and fish oils on FOB terms, FOSFA 54 for CIF terms, and FOSFA 4a for European oilseeds.

Key Considerations for FOSFA Arbitration Clauses

Governing Law and Arbitration Clause: FOSFA contracts stipulate that disputes are governed by English law.

The FOSFA arbitration clause, known as the "Scott v Avery" clause, differs from other clauses like those in GAFTA contracts. It restricts parties from seeking interim court measures, such as "worldwide freezing orders" (WFO). If the FOSFA clause is included but parties wish to retain the option for interim measures, they must explicitly exclude this restriction. If the clause is breached (e.g., if a party seizes disputed goods), the affected party can request an "anti-suit injunction" from the High Court of Justice to ensure the case is heard only in arbitration, usually with the breaching party covering the associated costs.

Applicable Rules: The latest version of the arbitration rules was issued on 1 April 2021. It is essential to apply the rules in effect at the time the contract was made, rather than when the dispute arises. For example, if a contract was signed in December 2020 and the dispute occurred after 1 April 2021, the rules effective from 1 April 2020 would apply.

These rules and pro forma contracts are not publicly accessible and must be purchased. FOSFA members can request older pro forma contracts and regulations.

FOSFA regularly updates its arbitration rules and pro forma contracts, which can significantly affect arbitration outcomes. For instance, recent updates have extended the time limits for non-quality claims from 120 days to one year.

Time Limits: FOSFA arbitration rules specify two distinct time limits for submitting a notice of claim, depending on the type of dispute:

• Quality Disputes: 90 days from the date of unloading (for CIF, CIFFO, CF contracts) or delivery (for FOB, Ex-tank, Ex-mill, Ex-store contracts).
• Other Disputes: Within one year from the actual shipment or delivery of the goods, or from the end of the contract period for shipment or delivery (whichever is later).

Note that the previous rules (valid until 1 April 2021) provided a shorter time limit of 120 days for non-quality disputes.

Arbitration Costs: FOSFA arbitration is among the most cost-effective commercial arbitration options in England. A claimant must pay a deposit of £5,000 for the first tier and £10,000 for appeals within 30 days of filing a claim. Typically, the losing party covers these costs.

Unlike GAFTA, FOSFA does not prevent the recovery of legal costs from the losing party, though this does not guarantee full reimbursement. Arbitrators consider various factors, such as the parties’ conduct and the proportionality of the costs to the claim. In practice, a winning party can recover 60-80% of its costs, but there have been instances where arbitrators have denied cost recovery if the dispute was deemed straightforward and did not necessitate legal representation.