Starting from 1 January 2020, an additional clause entitled “Methods of Analysis” was added which provides as follows: “Unless otherwise agreed, the terms and conditions of GAFTA Methods of Analysis No.130, are deemed to be incorporated into this contract“.
It should be noted that GAFTA No. 130 applied to contractual pro formas before, however, this was not expressly provided. It seems that by adding the clause GAFTA’s International Contract Committee aimed to exclude all possible grounds for disputes regarding what method analysis to apply.
The change concerns the following Contracts:
1, 2, 4, 5, 6, 8, 9, 10, 15, 18, 19, 21, 23, 24, 25, 27, 30, 31, 40, 41, 45, 47, 48, 49, 54A, 59, 60, 61, 62, 64, 78, 78UA, 79, 79A, 79B, 80, 81, 82, 83, 88, 89, 90, 94, 94A, 95, 96, 98, 99, 100, 100A, 101, 102, 103, 104, 106, 109, 110, 111, 112, 113, 118, 119, 120, 122.
Further, the clause entitled “Brokerage” is now supplemented by the following sentence:
“Any disputes arising out of this clause shall be referred to arbitration in accordance with the arbitration clause.”
The aim of the new clause is to clarify the fact that a broker named in a contract is a party to the contract, notwithstanding that his role is very different from the Seller or Buyer. Therefore in the case of a dispute regarding the payment of a commission, such dispute can be referred to the arbitration in accordance with the provisions of the arbitration clause and rules that are applied.
At first glance, this change also does not seem to be significant, as the GAFTA pro formas mention the broker as the named party to the contract and it would be logical to suppose that the broker can count on the arbitration clause, even without the wording above being included to the respective clause.
However, things may be different when, for various reasons, the broker is not mentioned in the Contract, notwithstanding that the contract was actually executed via the broker. In such a case one may say that the broker can be treated as a third party and likewise has no right under the Contract to enforce any term of it, including the arbitration clause.
The broker will not be in a position to rely on the provisions of the Contracts (Rights of the Third Parties) Act 1999, which allows third parties, subject to certain conditions, to enforce different terms of contracts, which they are not a party to, as GAFTA pro formas clearly exclude the application of this act.
In the event that there is no specific agreement between the broker and the client, clearly displaying the arbitration agreement, this leaves the broker with low chances to protect his interests by means of arbitration.
Now with the Brokerage clause being amended, it seems that even in the event when the broker is not mentioned in the Contract he is still in a position to enforce the arbitration clause of the contract.
The change concerns the following Contracts:
1, 2, 4, 5, 6, 8, 9, 10, 15, 18, 21, 23, 24, 25, 27, 30, 31, 38, 39, 40, 41, 43, 45, 47, 48, 49, 54A, 59, 60, 61, 62, 64, 78, 79, 79A, 79B, 80, 80A, 81, 82, 83, 88, 89, 90, 94, 94A, 95, 96, 97, 98, 99, 100, 100A, 101, 102, 103, 104, 106, 109, 110, 111, 112, 113, 114, 115, 118, 119, 120, 122, 200, 201, 202, 203.
This press-release is prepared by Dmitry Zagorodnyuk and Danil Hristich, Senior Associates at Fortior Law.
