Introduction
A commodity is generally understood as any “substance or product that can be traded, bought, or sold”.[1] From grain and oil to sugar, coffee, cocoa and spices, commodities form the backbone of global trade and supply chains.[2] Their pricing, distribution, and availability exert profound economic, social and political influence worldwide.[3]
Commodity trading is predominantly structured through standard-form contracts issued by industry trade associations and widely adopted in international practice.[4] These contracts typically contain arbitration clauses referring disputes to specialised tribunals operating under the auspices of the relevant trade association.[5] The scale, speed and volatility of commodities transactions, often involving multiple jurisdictions and complex contractual chains, making disputes an inherent feature of commodity trading, and arbitration the preferred mechanism for their resolution.
Commodities arbitration is one of the earliest forms of international commercial arbitration.[6] It became increasingly prominent as global trade expanded and leading trade associations, such as Grain and Feed Trade Association (“GAFTA”) and Federation of Oils, Seeds and Fats Associations (“FOSFA”), London Metal Exchange (“LME”) and London Rice Brokers Association (LRBA) emerged in the nineteenth century.[7] The standard-form contracts issued by GAFTA and FOSFA are now governing a substantial share of global trade in their respective sectors. Approximately 80% of global grain and feed trade is conducted under GAFTA standard‑form contracts.[8] In parallel, FOSFA contracts regulate around 85% of international trade in oils, seeds and fats. [9]
This article will outline the core features of commodities arbitration and explores how these characteristics are embodied in the arbitration rules of GAFTA and FOSFA. It will conclude with an overview of the main issues that businesses in Türkiye should be wary of.
Special Characteristics of Commodities Arbitration
While each trade association has their own set of rules, commodities arbitration as a type of arbitration has some defining characteristics. These common features, which will be explained in more detail below, reflect the practical needs of the international commodity trade with an emphasis on industry expertise and efficiency.
Commercial Industry Experience
A defining feature of commodities arbitration is the limited involvement of lawyers.[10] This general exclusion of lawyers aims to prevent the proceedings from becoming overly legalistic and ensuring that the system is conducted “for the trade, by the trade”.[11] Historically, only traders possessed the necessary knowledge to assess the quality of goods to decide on the disputes enabling them to push lawyers out of the commodity arbitration sphere.[12] Despite some more room being allowed for lawyers, the tradition still persists today.[13]
In most cases, arbitrators are commercial individuals with substantial industry experience rather than legally trained professionals.[14]
Furthermore, many trade association rules expressly prohibit lawyers from participating in hearings.[15] This restriction is principally aimed at lawyers in private practice, such as those working in law firms or chambers.[16] As a result, parties commonly navigate the prohibition by appointing their in‑house counsel to represent them, relying on the notion that such individuals qualify as traders by virtue of their employment.[17] Nevertheless, formal legal representation remains the exception rather than the rule in commodities arbitration. However, despite the lack of formal legal representation, lawyers often assist parties behind the scenes by preparing written submissions.
GAFTA Arbitration Rules No. 125 (“GAFTA Rules”) provide a strict framework for legal representation. Article 4.8 states that the parties shall not be represented “by a solicitor or barrister, or other legally qualified advocate, wholly or principally engaged in private practice, unless legal representation is expressly agreed”.[18] A similar prohibition applies at the appeals stage under Article 12.2.[19] Under these provisions, a party may only engage a lawyer in two specific situations: i) the lawyer is not wholly or principally engaged in private legal practice, or ii) the parties expressly agreed to allow legal representation.
In addition, GAFTA Rules restrict who may serve as an arbitrator. Only GAFTA Qualified Arbitrators may be appointed,[20] and while in-house lawyers working for GAFTA members can qualify, lawyers primarily engaged in private practice cannot. [21]
The FOSFA Rules of Arbitration and Appeal dated 1 April 2025 (“FOSFA Rules”) adopt a similar approach. Parties may not “have present or be represented by counsel, solicitor or any member of the legal profession wholly or principally engaged in private legal practice unless at the sole discretion of the Tribunal, the case is of special importance, and in such case the other party shall have the same rights”.[22] A corresponding rule applies at the appeals stage, where the decisions rests exclusively with the appeal board rather than the tribunal. [23] FOSFA Rules also prohibit persons wholly or principally engaged in private legal practice from acting as arbitrators.[24]
The FOSFA framework differs from GAFTA in one significant respect: the parties themselves cannot agree to permit legal representation. The discretion solely lies with the tribunal at first instance and the appeal board on appeal.
Domicile Clause
The arbitration rules of trade associations generally provide for a domicile clause, designating London as the seat of arbitration and English law as the applicable law. This is the case even in the absence of any connection of the parties or the dispute to England.[25] The longstanding linkage that commodities arbitration has with the trade associations and England as a jurisdiction, remains to be one of its defining features. [26]
Both GAFTA and FOSFA Rules stipulate London, England as the seat of arbitration, and their standard‑form contracts incorporate domicile clauses specifying English law as the governing law.[27]
Speed and Efficacy
Arbitration rules of trade associations typically impose significantly shorter time limits for commencing claims compared to general statutory limitation periods.[28] This approach is designed to promote certainty and finality in trade.[29] In line with the emphasis on efficiency, first-tier arbitrations are commonly decided on a documents-only basis, without extensive disclosure of documents, enabling a faster resolution of the dispute.[30]
Under FOSFA Rules, parties must initiate arbitration for quality/condition claims within 90 consecutive days from either the discharge of the goods or the completion of the delivery, depending on the contractual framework.[31] All other claims must be initiated within one year from the expiry of contract period of shipment or of the date of final discharge of goods.[32]
GAFTA rules are even stricter; in case of quality and condition claims, arbitration must be commenced no later than 21 consecutive days after the completion of loading, delivery or discharge.[33] An exception applies to disputes arising under the “Rye Terms”[34] clause, where the time limit is shortened further to the 10th consecutive day following the final discharge.[35] All other claims must be initiated within one year from the defined dates depending on the contractual framework.[36]
These time limits are much shorter than the statutory limitation period defined under English law, which typically allows six years from the date the cause of action occurs for contractual claims.[37]
Multi-tier Arbitrations Incorporating Appeal Procedures
The arbitration rules of trade associations generally offer a multi-tier system.[38] Once the first-tier arbitration is concluded, the losing party may seek a review of the award through an appeal board constituted within the structure of the trade association, typically comprised of three to five arbitrators appointed directly by the association.[39] This appeal mechanism entails a de novo hearing, and permits the introduction of new evidence by the parties.[40] Moreover, whereas the first-tier is usually decided on a document-only basis, the appeal board will usually hold an oral hearing, ensuring the parties’ right to present their case.[41] However, the losing party shall keep in mind that if the challenge concerns the jurisdiction of the tribunal, it must be raised before the English courts within the time limits prescribed by the English Arbitration Act 1996, and not with the appeal board.[42]
Both FOSFA and GAFTA Rules provide for appeal mechanisms.[43] Under the FOSFA Rules, an appeal must be lodged within 28 days from the date of the award, whereas under the GAFTA Rules, the appeal notice must be filed no later than noon on the 30th consecutive day following the award.[44] Both set of rules allow for a de novo hearing at the appeal stage.
Consolidation
In commodity trading, it is common for goods to be sold and resold while still aboard the vessel.[45] These successive transactions are typically entered into through contracts that are nearly identical, differing only in details such as dates, parties, and price.[46] Such chains of back-to-back contracts are referred to as ‘string contracts’.[47] When disputes, especially those from quality and condition of the goods, arise, conducting multiple parallel proceedings would be inefficient, and could result in inconsistent awards.[48]
To address this, some trade associations offer a special system called ‘string arbitrations’.[49] In these string arbitrations, the arbitration will be conducted between the first seller and the ultimate buyer and the ensuing awards will be binding and enforceable upon all the intermediary parties.[50] This mechanism designed with the realities of international commodity trading in mind, offers an efficient solution to the problem of parallel proceedings while also allowing to keep the costs to a minimum.
On the other hand, some trade associations offer more traditional consolidation powers in their arbitration rules providing broader discretion to the tribunal for consolidating arbitrations.[51] This could be due to common questions of law or fact, as well as the interconnectedness of the relief sought.[52] Tribunals may also enjoy broader discretion to decide when to consolidate arbitrations.[53] The consolidation mechanism could still be used to address the complexities arising out of the ‘string contracts’.
FOSFA Rules provide a special provision for disputes arising out of a string of contracts enabling the arbitration to be conducted between the first Seller and the last Buyer, provided that the dispute is related to the quality or condition of the goods.[54] The arbitration for other types of claims may also be conducted between the first seller and the last buyer if all of the parties in the string agree in writing and all the intermediate contracts are submitted to the tribunal, however, in such case the tribunal will make an award in respect of each contract.[55]
Similarly, GAFTA Rules provide that if the parties agree in writing, the tribunal may hold a single arbitration between the first seller and the last buyer, but the award will be binding on all of the parties in the string.[56] In the absence of an agreement in writing, the tribunal may still choose to conduct arbitral proceedings concurrently but shall issue separate awards.[57]
Both FOSFA and GAFTA allow for string arbitrations only when the contracts between the parties are identical on all material points, except for the names of the parties, the contract price and the date.[58]
Enforcement
Another distinctive feature of commodities arbitration is the supervisory role exercised by the relevant trade associations.[59] Many associations include ‘defaulter provisions’ in their arbitration rules, empowering them to monitor compliance with the award, and at their discretion publish the non-compliant award debtor in their defaulter lists.[60] Although this may appear as a modest sanction, it carries significant commercial consequences. Being listed exerts considerable pressure on the debtor to satisfy the award and may hinder their ability to enter into new business transactions, as other market participants may regard them as an unreliable business partner.[61]
At first glance, this mechanism may seem at odds with the confidential nature of the arbitration. However, the applicable arbitration rules expressly provide that, by choosing to arbitrate under the trade association’s rules, the parties have consented to such disclosures being made by the trade association.[62]
FOSFA Rules provide that if a party fails to pay an award within 28 consecutive days, FOSFA may, at its discretion, publish a notice of non‑payment on its notice board or circulate it to its members.[63] By agreeing to arbitrate under the FOSFA Rules, all parties are deemed to have consented to FOSFA taking such action.[64]
In the same vein, under the GAFTA Rules, if a party fails to abide by a final award, GAFTA may publish the default on the GAFTA Notice Board, its website, or circulate it among its members upon the request of the award creditor.[65] GAFTA Rules also provide that the parties are deemed to have consented to such action.[66] However, the GAFTA framework includes an important caveat: if the party requesting GAFTA to take this action is already listed as a Defaulter, it is prohibited from making such a request.[67]
Practical Implications for Traders in Türkiye
Türkiye is amongst the leading producers and exporters of various commodities, including olive oil, sunflower seed, cottonseed, barley and rye.[68] In light of the recent surge in global commodity prices driven by the ongoing conflict in the Middle East,[69] producers in Türkiye face a heightened risk of encountering a greater number of disputes with their global trading counterparts.
Against this backdrop, traders in Türkiye must be particularly mindful of the unique features of commodity arbitrations and should appreciate that they come with their own structural risks and constraints. As such, it is essential for them to understand the practical implications of resolving their disputes within GAFTA and FOSFA framework.
Firstly, while industry expertise unquestionably brings valuable technical insight to dispute resolution process, the relevant commodity markets have relatively small number of actors, meaning that the members of the arbitral tribunals may also be trading partners or opponents of the parties to the dispute, making it difficult to ensure impartiality of the arbitrators. [70]
Secondly, the absence of legal professionals from the proceedings may lead to inconsistent decisions, making it challenging to predict the outcome of the disputes.[71]
Moreover, while larger companies would have their internal counsel teams, smaller actors may find themselves at a disadvantage. Of course, the absence of legal representation, does not mean the complete absence of lawyers from the proceedings. Often, lawyers advise their clients from behind the scenes, assisting them with their written pleadings. In fact, GAFTA Rules Article 17.2, explicitly provides that parties are free to engage legal representatives for written proceedings. However, the costs of such representatives will not be recoverable, which may create a significant obstacle for the parties to engage legal representation, putting the companies who have internal legal counsel at a competitive advantage.
Traders in Türkiye must also pay close attention to the choice of English law under both GAFTA and FOSFA standard‑form contracts. Given the significant divergences between English and Turkish law, legal teams should be thoroughly familiar with the former to avoid unexpected complications during contractual performance or subsequent disputes.
As London is the designated seat of arbitration, GAFTA and FOSFA awards are not directly enforceable in Türkiye and must undergo enforcement proceedings under the New York Convention. By the same token, any potential set‑aside proceedings will fall under the jurisdiction of the English courts.
Parties trading under GAFTA and FOSFA frameworks must also pay close attention to the applicable time limits when initiating dispute resolution procedures. Failure to comply may result in the loss of their rights, even if the statutory limitation periods have not yet expired.
That being said, the arbitration mechanisms under FOSFA and GAFTA undeniably offer significant benefits for traders in the grain and feed, as well as the oil, fat and seed markets, ensuring swift and effective resolution of disputes and reinforcing compliance through commercial pressure. Their standard‑form contracts are also increasingly becoming the predominant, if not the only, framework for entering into international commodities transactions in their respective sectors, making their arbitration systems ever more integral to the global trade practice.
——
[1] Cambridge Dictionary, “Commodity”, Cambridge University Press, https://dictionary.cambridge.org/dictionary/english/commodity, accessed 25 March 2026.
[2] Michael Swangard and Tamsyn Pickford, “The Arbitration Agreement and Arbitrability, Commodity Arbitrations”, in Christian Klausegger et al. (eds.), Austrian Yearbook on International Arbitration, 2016, (“Swangard and Pickford”), p. 29.
[3] Id.
[4] Elena Trabaldo-de Mestral, “Arbitrating Commodity Trading, Shipping and Related Disputes”, in Manuel Arroyo (ed.), Arbitration in Switzerland: The Practitioner’s Guide, 2nd ed., 2018 (“Trabaldo-de Mestral”), p. 1323.
[5] Id.
[6] Aceris Law, “Commodity Arbitrations”, 1 March 2021, https://www.acerislaw.com/commodity-arbitrations/, accessed 25 March 2026.
[7] Id.; Trabaldo-de Mestral, pp. 1323-1324.
[8] GAFTA, “Contracts”, https://www.gafta.com/contracts/, accessed on 25 March 2026.
[9] FOSFA, “FOSFA Contracts”, https://www.fosfa.org/contracts/, accessed on 25 March 2026.
[10] Swangard and Pickford, p. 33.
[11] Ciarb, “The Essentials of Commodities Arbitration”, 23 July 2024, https://www.ciarb.org/news-listing/the-essentials-of-commodities-arbitration/, accessed on 16 March 2026.
[12] Iryna Polovets, Matthew Smith and Bradley Terry, “Gafta Arbitration is the Most Appropriate Forum for Disputes Resolution in Grain Trade”, Arizona Journal of International & Comparative Law, Vol. 30, No. 3, 2013, p. 575.
[13] Id., p. 576.
[14] Trabaldo-de Mestral, p. 1324.
[15] Swangard and Pickford, p. 39.
[16] Id.
[17] Laura Williams, “Arbitration in the Energy and Natural Resources Sector: What Can We Learn from Commodity Trade Association Arbitration?”, in Carlos Gonzalez-Bueno (ed.), 40 Under 40 International Arbitration 2021, (“Williams”), p. 420.
[18] GAFTA Arbitration Rules No. 125 (“GAFTA Rules”), art. 4.8.
[19] GAFTA Rules, art. 12.2.
[20] GAFTA Rules, art. 3.7.
[21] GAFTA, “How to Become a GAFTA Qualified Arbitrator”, https://www.gafta.com/arbitration/how-to-become-a-gafta-qualified-arbitrator/, accessed on 25 March 2026.
[22] FOSFA Rules of Arbitration and Appeal dated 1 April 2025 (“FOSFA Rules”), art. 4(e).
[23] FOSFA Rules, art. 9(a).
[24] FOSFA Rules, art. 2(b).
[25] See e.g. FOSFA Rules, Preamble; GAFTA Rules, art. 1.2; LME Arbitration Regulations (“LME Regulations”), arts. 7.7, 16; SAL Rules and Regulations, arts. 126-127.
[26] Aceris Law, “Commodity Arbitrations”, 1 March 2021, https://www.acerislaw.com/commodity-arbitrations/, accessed 25 March 2026; Swangard and Pickford, p. 46.
[27] FOSFA Rules, Preamble; GAFTA Rules, Art. 1.2. See also GAFTA, “Contracts”, https://www.gafta.com/contracts/, accessed on 25 March 2026; and FOSFA, “FOSFA Contracts”, https://www.fosfa.org/contracts/, accessed on 25 March 2026.
[28] Williams, p. 421.
[29] Trabaldo-de Mestral, p. 1325.
[30] Williams, p. 421.
[31] FOSFA Rules, art. 1(a).
[32] FOSFA Rules, art. 1(b).
[33] GAFTA Rules, art. 2.1.
[34] Rye Terms are specific contractual provisions found in certain GAFTA contracts that provide assurances to the buyer regarding the condition of the goods upon arrival.
[35] Id.
[36] GAFTA Rules, art. 2.2.
[37] English Limitation Act 1980, sect. 5.
[38] Swangard and Pickford, p. 36.
[39] Id.
[40]Jacques Covo, “Commodities, Arbitrations and Equitable Considerations”, ASA Bulletin, Vol. 10, Issue 2, 1992, (“Covo”) p. 140.
[41] Williams, p. 421.
[42] Swangard and Pickford, pp. 36-37.
[43] FOSFA Rules, art. 7; GAFTA Rules, arts. 10-12.
[44] FOSFA Rules, art. 7(a); GAFTA Rules, art. 10.1(a).
[45] Swangard and Pickford, pp. 40-41.
[46] Id.
[47] Id.
[48] Id., Williams, p. 422.
[49] See e.g., GAFTA Rules, art. 7.1; FOSFA Rules, art. 6(c). FOSFA and GAFTA Rules do not offer a separate consolidation mechanism, and in the absence of a ‘string of contracts’ the arbitrations will have to be conducted separately.
[50] Williams, p. 422 for consolidation powers.
[51] British Coffee Association London Arbitration Rules 2012, part 4; LME Regulations, sect. 11.
[52] See e.g., LME Regulations, sect. 11.
[53] See e.g., British Coffee Association London Arbitration Rules 2012, part 4.
[54] FOSFA Rules, art. 6(c).
[55] Id.
[56] GAFTA Rules, art. 7.1.
[57] Id., art. 7.2.
[58] GAFTA Rules, art. 7.1; FOSFA Rules, art. 6(c).
[59] Williams, p. 422.
[60] Swangard and Pickford, p. 43.
[61] Id.
[62] Id.
[63] FOSFA Rules, art. 11(c).
[64] Id.
[65] GAFTA Rules, art. 24.1.
[66] Id.
[67] Id., art. 24.3.
[68] Foreign Agricultural Service U.S. Department of Agriculture, “Production – Turkey”, https://www.fas.usda.gov/data/production?commodity=almonds, accessed 25 March 2026.
[69] Marketplace, “War in the Middle East is Pushing Up Agricultural Commodities’ Prices”, 25 March 2026, https://www.marketplace.org/story/2026/03/09/ag-commodities-prices-grow-as-war-in-middle-east-continues, accessed on 16 March 2026.
[70] Covo, p. 139.
[71] Williams, p. 421; Swangard and Pickford, p. 39.
