How does Gafta promote international trade?
Whilst it might not draw in as many tourists as a West End theatre show or popular art gallery, for those in agri-commodities, London is the exclusive home to a useful prospect: arbitrating a commodities dispute at the Gafta headquarters.
The Grain and Feed Trade Association (“Gafta”) aims to protect the interests of those trading agri-commodities worldwide and as a result, promotes international trade. It does this in several ways:
1. Running a specialist, independent arbitration service
Arbitration, a form of alternative dispute resolution, enables individuals and companies to enforce contracts and resolve disputes more effectively.
By avoiding the lengthier (and often costlier) process of going to court, as well as the difficulties that may arise when attempting to enforce a judgment in foreign jurisdictions, arbitration has become an important mechanism for resolving international disputes.
As mentioned above, Gafta runs a highly regarded arbitration service to deal with disputes. As its contracts are written under English law, Gafta’s awards can be enforced globally in 168 countries under the New York Convention.
In addition to overseeing the practical aspects of conducting international arbitration, Gafta also has its own set of arbitral rules, including high standards for arbitrators and other experts.
2. Maintaining lists of approved registers, as well as member contacts and defaulters
To remain in compliance with Gafta contracts, parties must select from an approved register of superintendents, fumigators and analysts who have been externally audited to meet the Gafta standard.
Also, Gafta provides its members with lists of both trusted contacts and defaulters. Members can therefore reduce financial and counterparty risks associated with contracting with new, international parties. Some of these risks include the possibility of non-delivery, the need for parent company guarantees when dealing with a foreign subsidiary, and many others.
3. Developing contracts, rules and regulations
Gafta designs and maintains standard forms of contract on which it is estimated that 80% of the world’s trade in grain is shipped. This is in no doubt due, at least in part, to the specificity of Gafta’s contracts, which have some ‘quirks’ when compared with the rules of other arbitration institutions.
Gafta’s rules aim to provide traders with a certain legal predictability – from the negotiation of contracts to any disputes that may arise. Perhaps the flipside of this is that a party not well versed in the particularities of Gafta’s terms, or indeed, English law, may struggle to achieve equality of arms in their arbitration.
4. Influencing global trade policy
Gafta represents its members’ opinions on trade policy to the relevant authorities, as well as publishing key industry news and updates.
Having the power of a highly regarded institution such as Gafta that aims to raise issues and influence policy changes provides a significant impetus for improved international trade. Among other things, Gafta promotes free trade in agri-commodities and global reduction in tariff and non-tariff barriers to trade.
5. Networking and training events
Whilst we’ve all heard the phrase, “it’s not what you know it’s who you know”, Gafta’s networking and training events aim to consolidate both.
Training courses are regularly available on Gafta’s contracts, relevant law, shipping practices and international arbitration for members and non-members. There are also various networking receptions and other seminars around the world, with the aim of creating positive, long-term business relationships.
What is the role of Gafta in international trade?
Whilst even the presence of a highly regarded arbitration institution can do wonders, Gafta also promotes international trade by developing standardised contracts and clauses, trade assurance, influencing global trade policy as well as holding training and networking events.
Gafta differs in some ways from other arbitration institutions, such as the LCIA or the ICC, as it has a particular specialist nature, yet its services are accessible to both members and non-members.
For any queries regarding Gafta, arbitration or other commercial legal advice, please contact Lawrence Jacobson, In-House Barrister at Carlsons Solicitors, or get in touch with the team.