With these pro forma contracts, even if a buyer and a seller are located in different countries, they don't need to negotiate all contract terms from scratch every time. They just need to agree on the major terms (such as product, price, quality, delivery conditions, etc.) and refer to a specific pro forma for the rest, significantly streamlining the contracting process.

According to Gafta https://fortiorlaw.com/news/gafta-arbitration/ over 80% of global grain trade is based on contracts derived from Gafta pro formas. In the Black Sea region, the most commonly used pro formas are Gafta 48 (bulk delivery on CIF), Gafta 49 (bulk delivery on FOB), Gafta 78 and 78UA (rail and road), and Gafta 88 (container delivery).

All Gafta pro forma contracts stipulate that disputes are settled through Gafta arbitration under English law.

What is Gafta?

Gafta isn't just about resolving disputes; it's an international trade association—the Grain and Feed Trade Association—established in 1878 (formerly known as the London Corn Trade Association). Gafta's purpose is to represent and protect the interests of participants in the grain market. Headquartered in London, Gafta also has offices in Geneva, Kyiv, Beijing, and Singapore. Among its various functions, Gafta is best known for creating standard pro forma contracts for the grain trade, which simplifies and expedites the contracting process.

Time Limits for Filing a Claim

Gafta has a one-year deadline for filing claims, calculated from the bill of lading date, the discharge date, or the end of the delivery period, depending on the contract terms. If the dispute involves quality and requires the examination of samples, the time limit is 21 days. You must file your arbitration notice within these time frames, with the actual claim required within one year of the arbitration notice. However, parties can request a one-year extension, allowing for up to a total of six years to settle claims.

Is Gafta Arbitration Expensive and Complicated?

According to Gafta, the average cost for a first-tier arbitration award is £14,654.65. The exact cost depends on the amount of time arbitrators spend on the case. While this may seem high, it's much less than the typical cost of arbitration at the London Court of International Arbitration (LCIA), where the average cost is around $97,000. This makes Gafta a more affordable option for arbitration.

When you file a claim with Gafta, you need to pay a deposit. The amount varies based on the number of arbitrators and whether the parties are Gafta members. If three arbitrators hear the case, the deposits are:

• £12,000 if both parties are Gafta members.
• £13,500 if only one party is a Gafta member.
• £15,000 if neither party is a Gafta member.

For a single arbitrator:

• £8,000 if both parties are Gafta members.
• £9,700 if only one party is a Gafta member.
• £11,400 if neither party is a Gafta member.

The final arbitration cost might be higher or lower than the deposit. If the total cost is higher, the claimant must cover the difference. If it's lower (for example, if the parties settle before the case concludes), a portion of the deposit may be refunded.

For example, in a case where a claim was filed for non-payment, we agreed to use a single arbitrator and paid an £8,000 deposit. Shortly after filing the claim, the defendant promised to pay within a few days. Once the payment was received, we notified the arbitrator and closed the case. Gafta refunded us £7,000 from the unspent deposit.

Is Gafta Arbitration Easy to Navigate?

Yes. The arbitration rules are just about 15 A4 pages long, much shorter than many countries' civil procedure codes. Moreover, Gafta arbitration generally doesn't require oral hearings, so you don't have to travel to London. Decisions are typically made based on documents submitted via email.

Who Pays the Arbitration Costs?

Initially, the claimant covers all the costs of the dispute. However, if the claimant wins, the losing party usually covers the arbitration costs.

Can Legal Costs Be Recovered?

Under Gafta's Arbitration Rules, legal costs can only be recovered if both parties agree. Typically, such agreements aren't in place, so it's rare to recover legal costs from the opposing party.