The counterparty has failed to deliver, failed to pay, missed the contractual deadline or simply disappeared. The first reaction is understandable: “That is it. We are going to GAFTA.” The instinct may be right, but an arbitration begins with less dramatic questions: what does the arbitration clause say, which standard form applies, and has the time bar already expired?
The market may forgive many things. Deadlines are less accommodating.
Start with the contract. Does it incorporate a GAFTA standard form? Does it contain an effective arbitration clause? The words “as per GAFTA” do not necessarily mean that every dispute will automatically be referred to GAFTA arbitration. An arbitration without a valid arbitration agreement is an expensive jurisdictional problem.
For many sale-of-goods disputes, a notice of arbitration must be served within one year. The date from which that period runs depends on the applicable terms and the basis of the sale. Where the tribunal must examine samples in a quality dispute, the notice period may be as short as 21 days.
While the parties have one more commercial conversation, the deadline may quietly expire.
A notice of arbitration is not an emotional claim letter. It is the procedural act that commences the arbitration within the applicable time bar. It should clearly identify the relevant contract and state that the dispute is being referred to arbitration under the applicable arbitration agreement and rules.
The dispute may be heard by a sole arbitrator or a tribunal of three. If the respondent fails to participate in the appointment process, GAFTA can make the necessary appointment and the arbitration can continue.
Current deposits range from approximately £8,000 for a sole arbitrator to £15,000 for a three-member tribunal, depending on the composition of the tribunal and the parties’ membership status. The deposit is an advance, not necessarily the final cost, and any unused balance may be returned.
GAFTA arbitration is primarily a written process. The parties will usually not need to travel to London. GAFTA sets a timetable for claim submissions, defence submissions, reply submissions and any further rounds that may be required.
The tribunal decides the case on the evidence before it. Relevant material may include the contract, amendments, notices, correspondence, bills of lading, certificates, invoices, statements of facts, time sheets, calculations and evidence of loss.
If the file has been maintained on the basis that “it was somewhere in WhatsApp”, the arbitration can quickly become an excavation exercise. An arbitration does not repair a poorly assembled case. It decides the dispute on the material actually presented.
The tribunal issues an award deciding who owes what to whom. Arbitration costs will commonly follow the outcome, while legal costs are generally not recoverable unless the parties have agreed otherwise.
An award under the standard GAFTA 125 Rules may be appealed within GAFTA. The appeal deadline is short and should be checked immediately. Under the expedited GAFTA 126 procedure, there is no internal GAFTA appeal. Further challenges in the High Court in London are available only on limited grounds.
Most importantly, an award is not the same thing as payment. It must still be recognised and enforced where the debtor has assets. The New York Convention makes enforcement possible across most major trading jurisdictions.
The first question in a GAFTA dispute is not simply whether the claim is right. It is what the contract says, what can be proved, and what must be done before the deadline expires. Justice has office hours. Late arrivals should not expect the door to remain open.