An Overview of FOSFA

FOSFA (Federation of Oils, Seeds and Fats Associations) was established in London in 1863 with the primary goal of protecting and promoting the trade of oils, seeds, and fats.

FOSFA operates in three main areas: it provides a platform for business development and protection, administers arbitration, and drafts standard pro forma contracts. Notably, 85% of the global trade in oils and fats is conducted under FOSFA contracts.

There are over 50 standard FOSFA contracts, each designated by a number and varying in terms of commodity and delivery basis. For example, FOSFA 53 is used for the sale of vegetable and fish oil on FOB terms, while FOSFA 54 applies to CIF terms. FOSFA 4a is used for European oilseeds trade, among others.

Key Considerations for FOSFA Arbitration Clauses

Applicable Law and Arbitration Clause: FOSFA contracts stipulate that disputes are governed by English law. The standard FOSFA arbitration clause, known as the "Scott v Avery" clause, prohibits seeking interim measures from courts, such as "worldwide freezing orders" (WFO). If parties do not wish to be restricted by this prohibition, they should explicitly exclude it in the contract. A breach of this clause, such as seizing disputed goods, can lead to an "anti-suit injunction" from the High Court of Justice, which not only prohibits the case from being heard outside arbitration but also imposes cost penalties on the breaching party.

Applicable Rules: The latest FOSFA arbitration rules date back to April 1, 2021. The rules applicable are those in effect at the time the contract was made, not when the dispute arose. For instance, if a contract was signed in December 2020 and the dispute emerged after April 1, 2021, the rules from April 1, 2020, apply. FOSFA regularly updates its rules and pro formas, which can significantly impact arbitration outcomes. For example, the current rules have extended the time limits for non-quality claims from 120 days to one year.

Time Limits: FOSFA rules specify different time limits for filing claims based on the type of dispute:

Quality Disputes: 90 days from unloading (for CIF, CIFFO, C&F contracts) or delivery (for FOB, Ex-tank, Ex-mill, and Ex-store contracts).
Other Disputes: One year from shipment or delivery or from the end of the contract period, whichever is later.

Costs of Arbitration

FOSFA arbitration is among the least expensive commercial arbitrations in England. The claimant must pay a deposit within 30 days of filing a claim: £5,000 for the first tier and £10,000 for appeals. Generally, the losing party bears the costs.

Unlike GAFTA, FOSFA allows the recovery of legal costs from the losing party. However, arbitrators consider factors such as the parties’ conduct and cost proportionality. Typically, 60-80% of legal costs can be recovered, though there are instances where arbitrators have denied cost recovery if they deemed the dispute straightforward.

Arbitration Procedure

FOSFA arbitration consists of two tiers: the first tier and an appeal. Most disputes are handled under the FOSFA Rules of Arbitration and Appeal, with simpler cases under the Rules for Small Claims Single Tier.

After the claimant appoints an arbitrator, the respondent has 30 days to appoint their arbitrator. FOSFA then appoints a third arbitrator to head the tribunal. Alternatively, the parties may agree on a sole arbitrator.

All submissions are made in writing or electronically. Arbitrators typically resolve disputes based on these documents but may call for oral hearings in exceptional cases. The document exchange process involves the claimant filing a claim, the respondent replying, and the claimant submitting an objection to the reply. Additional exchanges can be requested, potentially delaying the case.

Challenging an Arbitration Award

Parties can appeal within 28 days of the award. FOSFA appoints a Board of Appeal consisting of five arbitrators. The respondent has 21 days to reply to the appeal, with the possibility of further document exchanges upon request. The appeal process involves a re-examination of the case, allowing new evidence.

Arbitration awards can also be appealed to the High Court of Justice in London, though only on specific grounds outlined in the Arbitration Act 1996, making successful appeals rare.

Enforcing an Arbitration Award

If the losing party does not voluntarily comply, the successful party can seek enforcement through the national court where the debtor resides or holds assets. The court will verify the arbitration clause compliance and enforceability before referring the case to enforcement authorities.