July 8th, 2013

ARBITRADE successfully represents its client in pre-arbitral settlement negotiations under GAFTA contract

ARBITRADE has successfully represented its client in negotiations that concerned the issues whether the goods were organic and thus corresponded to their description in the contract of sale.

The contract provided for sale and delivery on CPT terms of specified quantity of Ukrainian organic peas, quality final as per certificates of quality issued by two laboratories with the right of the buyer to take samples at port of delivery for chemical residues analysis.

Payments were to be CAD including provision by the seller of a certificate confirming the organic status of the goods. The balance was payable after loading on the vessel and receipt by the buyer of a certificate confirming that the contract goods were organic under EU regulations for organic goods.

The seller, ARBITRADE’s client, produced both the quality certificates and certificates showing that the goods were organic.

However, later the buyer discovered that the goods contained glyphosate residue which, as the buyer claimed, rendered the goods non-organic. Moreover, having learned of this the second organic certificate was withdrawn by the organisation which issued it making it impossible to resell them as organic within the EU.

The buyer claimed arbitration alleging that since the goods had no longer been organic the seller was in breach of the contract.

The issues included whether the delivered goods were in conformity with the contract’s description and quality, whether the goods were alternatively of merchantable quality and whether the presence of glyphosate was a de minimis issue only, and who should bear liability in light of the risks assumed by the parties to the contract. During the analysis the lawyers of ARBITRADE, inter alia, took into account the ambiguous regulation of herbicide residues in organic goods in EU law.

As a result of the negotiations facilitated by ARBITRADE on the part of the seller the parties have settled the issues on mutually beneficial terms. The case was handled by Yuliya Chernykh, partner, and Iegor Sierov, senior associate of ARBITRADE.

ARBITRADE specializes on dispute resolution, including in the area of commodities trade with the use of GAFTA and FOSFA contracts. ARBITRADE’s dispute resolution practice is recommended by a number of international and national ratings.


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