Arbitration (international commercial arbitration)
Resolution of a dispute by arbitrators chosen by the parties instead of state courts, in a confidential and final procedure. Institutions such as ICC, LCIA, SIAC or ISTAC, or the rules of commodity associations (GAFTA, FOSFA, LME), are commonly used. Thanks to the New York Convention, awards can be recognised and enforced in more than 170 countries, which usually makes arbitration more effective than litigation between parties in different countries. The clause should name the institution, seat, language and number of arbitrators.
Related terms
Sales contract
The core document setting out the parties’ rights and obligations in an international raw material sale. It should cover the product and specification, quantity and tolerance, price and currency, Incoterm and named place, shipment period, payment method, quality and quantity determination (inspection), insurance, force majeure, remedies for breach, governing law and dispute resolution. Where the parties’ countries allow it, the UN Convention on Contracts for the International Sale of Goods (CISG) applies unless expressly excluded.
Force majeure
A contract clause covering events beyond the parties’ control that could not be foreseen or avoided – war, earthquake, epidemic, embargo, port closure – which temporarily or permanently prevent performance. A good clause lists the events, sets a notice period (often 7–14 days), defines the evidence required (e.g. a chamber of commerce certificate) and gives a right to terminate if the event lasts beyond a set time. Price increases or market changes are normally not force majeure.
GAFTA and FOSFA standard contracts
London-based trade associations that provide standard contract forms, sampling and analysis rules and an arbitration system: GAFTA (Grain and Feed Trade Association) for grains, pulses, feed and spices, and FOSFA (Federation of Oils, Seeds and Fats Associations) for oilseeds, vegetable oils and animal fats. Much of the world’s grain and vegetable-oil trade is done by reference to forms such as GAFTA 100, GAFTA 64 or FOSFA 54. Because these forms settle quality determination, late shipment, default and arbitration in advance, they cut negotiation time and legal risk.