Gafta, the Grain and Feed Trade Association https://fortiorlaw.com/news/gafta-arbitration/ is an international trade organization established in 1878 (originally known as the London Corn Trade Association) with the primary mission of protecting the interests of those involved in the grain market. Headquartered in London, Gafta also has offices in Geneva, Kyiv, Beijing, and Singapore. Among its many functions, one of Gafta's most crucial roles is the creation of standard pro forma contracts for grain trade, which greatly simplify and accelerate the contracting process.

These pro forma contracts are widely used because they eliminate the need for sellers and buyers in different countries to negotiate every term from scratch. Instead, the parties only need to agree on key details such as goods, price, quality, delivery basis, and period, while the pro forma provides a comprehensive set of pre-established terms.

According to Gafta's statistics, more than 80% of the world's grain trade is conducted under contracts based on Gafta pro formas. In the Black Sea region, the most popular pro formas include Gafta 48 (bulk delivery on CIF terms), Gafta 49 (bulk delivery on FOB terms), Gafta 78 and 78UA (rail and road transport), and Gafta 88 (for container deliveries).

Every Gafta pro forma contract includes a clause that stipulates all disputes will be resolved through Gafta arbitration under English law.

Time Limits for Filing a Claim Gafta imposes a standard one-year time limit for filing a claim. This period begins either from the date of the bill of lading, the date of discharge, or the end of the delivery period, depending on the specific delivery terms. For quality disputes requiring sample examination, the time limit is only 21 days. The notice of arbitration must be filed within these deadlines, and the claim itself must be submitted within one year of the notice of arbitration. However, parties can apply for an extension of up to one additional year, allowing claims to be extended for a maximum of six years.

Gafta's records indicate that the average cost of a first-tier arbitration award is £14,654.65. This cost is directly linked to the time arbitrators spend on the case—the longer the process, the higher the cost. While this may appear costly, it is significantly lower than the average cost of arbitration at the London Court of International Arbitration (LCIA), which is around $97,000. Therefore, Gafta offers a relatively affordable option for English arbitration.

The final cost of arbitration may be higher or lower than the initial deposit. If the arbitration costs exceed the deposit, the claimant will need to pay the additional amount. Conversely, if the costs are lower (for example, if the parties reach a settlement), the unspent portion of the deposit may be refunded.

Example: In one case, we filed a claim for non-payment of goods, agreed on a single arbitrator, and paid a deposit of £8,000. After the claim was filed, the defendant contacted us and promised payment within a few days. Once the payment was received, we informed the arbitrator and requested the case be closed. Gafta refunded £7,000 of the unspent deposit.

Gafta Arbitration Rules: Gafta 125 and Gafta 126 Gafta provides different sets of arbitration rules, with Gafta 125 being the standard and most widely used, while Gafta 126 is designed for simpler disputes and offers a faster process. Since Gafta 126 is less commonly applied, the following information focuses on the standard Gafta 125 rules.

Arbitration Process The arbitration process begins with both parties appointing arbitrators, followed by the claimant submitting the claim. After the deposit is paid, Gafta allows the defendant 28 days to respond to the complaint, and then the claimant has 21 days to reply to the defendant’s response. However, the process may not end there. The arbitrators can, at the request of either party, permit additional rounds of submissions. These rounds typically last 7-14 days each. There is no fixed limit to the number of rounds, which can lead to delays in arbitration, particularly in complex cases or when parties exploit the process.