“When will mankind be convinced and agree to settle their difficulties by arbitration?”

Benjamin Franklin

We think that Mr Franklin was correct.

Arbitration is a formal, private and binding process where disputes are resolved by a final award made by one or more independent arbitrators.

The process of arbitration is a faster, simpler and less expensive alternative to litigation. The recent hike in court fees has thrown this particular argument into the ring for discussion again.

Many trade organisations such as AIC, GAFTA and FOSFA produce their own set or arbitration rules and by incorporating their terms into a contract there is an obligation to use that method of settling disputes.

Commodity traders, shippers, merchants, maltsters, compounders, millers in the UK and across the world often include an arbitration clause (or reference to an arbitration clause by reference, for example, GAFTA 125 Arbitration Rules), in their contracts which refers any dispute arising from that contract for determination by arbitration; that is a group of commercial people from the industry who have experience and knowledge and are, arguably, better versed to determine a commodity dispute rather than settlement through the courts.

Depending on the rules of the trade organisation there is generally an appeal procedure so a dissatisfied party can have a fresh hearing. There is limited appeal further than the appeal procedure.

An award of arbitration is enforceable through the courts and even when the losing counterparty is outside the EU, the award can be enforced through countries which have subscribed to the New York Convention 1958.

With arbitrators being able to use wider procedural powers and the parties being able to agree on the mandatory areas, cost effectiveness and timeliness, parties to a contract should consider a standard binding arbitration clause, or referral to terms and conditions which contain an arbitration clause, in their contracts which refers any dispute to arbitration.

The parties involved in a dispute must consent to arbitration which is normally through an pre-agreed arbitration clause contained in a contract or can even be by consent after a dispute has arisen. This means that parties who have not agreed to dispute resolution by arbitration can still agree that is the best method to be used and can still use rules such as those as the Simple Dispute Arbitration Rules contained in this website (simple arbitration rules) . In England and Wales, the Arbitration Act 1996 is the statute by which arbitrations are conducted but arbitral bodies such as AIC, GAFTA and FOSFA have their own rules which govern many parts of the arbitration procedure which allows, over time, rules to be modified by users of the system to bring them in line with trade practice.

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