Dispute Resolution and Arbitration in the Grains Industry. Pat O Shannassy CEO Grain Trade Australia

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1 Dispute Resolution and Arbitration in the Grains Industry Pat O Shannassy CEO Grain Trade Australia

2 DISCLAIMER

3 GTA Mission To facilitate & promote trade by providing products, services and advocacy for the Australian grain value chain.

4 Industry Driven and Self Managed Framework to Facilitate Trade Breeding & Classification Grain Trading Standards Trade Rules & Contracts Dispute Resolution Services Trade & Market Access Industry Skills & Capability Driven by Market Signals to ensure customer & End Product Focus Reflect Requirements and capabilities in: 1. Regulation 2. Production Sector 3. Supply Chain 4. Consumptive Sector Improves Market Efficiency. Ensures confidence in commercial dealings by providing legal rigour Underpins Contractual Arrangements & Performance Engaging with Policy makers to ensure fair & equitable trade and access to domestic & global markets Increase Industry capacity by providing vocational training and development programs Industry driven and managed

5 Code of Practice 1. Desire by industry to self-regulate and: Implement and promote best management practice Show compliance with all laws and regulations Comply with industry trading standards, processes and procedures where contractual obligations dictate Improve the standards of service within the industry 2. Demonstrates to customers (domestic and export) a whole of industry approach to deliver a quality product.

6 Is there a legal basis to GTA arbitration?

7 Is there a legal basis to the GTA DRS? 1. Commercial Arbitration Act NSW 2010 Uniform legislation pan Australia Aligned to Model Law on International Commercial Arbitration (as adopted by the UN Commission on International Trade Law). and the 2. GTA Dispute Resolution Rules Refer to Commercial Arbitration Act 2010

8 Arbitration is: Formal a formal dispute resolution process; governed by the Commercial Arbitration Act 2010 NSW in which two or more parties refer their dispute to an independent third person (the arbitrator) for determination. Principled & fair Conducted according to the principles of natural justice Flexible Procedures may be varied by the parties to suit the size and complexity of their dispute. Arbitrators are not limited by crowded court lists Enforceable Result of arbitration the Award how enforceable? Awards are final and it is very difficult to succeed on appeal. Private - by law Effective - It is usually less costly and time consuming than litigation BUT

9 Arbitration will usually be more costly and time consuming than mediation or direct negotiation.

10 How Does it Work? Dispute Resolution Rules Arbitrators Industry Arbitrators (trade and growers) with commerical and industry experience supported by Legal Secretariat (incl preparation of award) Arbitrators consider it an honour and learn from the process Awards are published for industry learning

11 The Alternative is Court Upfront costs may be higher, but recoverable Reduce frivolous claims Legal representation not a requirement Centralised not different courts in different states Informal , don t need to present in person (usually) Don t need formal witness statements and avadavats etc Specialised Can be more predictable Quick

12 To participate include an arbitration clause in a contract. All GTA proforma contracts contain the following clause: This contract expressly incorporates the GTA Trade Rules in force at the date of contract and the GTA Dispute Resolution Rules in force at the commencement of the arbitration.

13 Dispute Resolution Service So how effective is it?

14 Dispute Resolution Service National crop size (tonnes) 35,000,000 Avg. turnover 3 Tonnes traded nationally 105,000,000 Avg. contract size (tonnes) 500 No. of contracts 210,000 Avg. no. of arbitrations 10 % of arbitrations over all contracts 0.005%

15 Dispute Resolution Service - stats Since 2003: 218 Arbitrations initiated 55% settled before an Award is reached 43% of Respondents do not participate 10 appeals of which 9 were unsuccessful

16 Tricks and Traps

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18 Know the Rules Contracts are written for when things go wrong Diving into the Trade Rules when you re in dispute is too late. Understand the risks of the trade

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20 Prepare for things to go wrong Make it absolutely crystal clear and insert on the cover page of the contract: This contract expressly incorporates the GTA Trade Rules in force at the date of contract and the GTA Dispute Resolution Rules in force at the commencement of the arbitration.

21 Records & Rules Claims must be substantiated

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23 Simplicity Avoid overly complicating and frivolous claims Submissions should focus on the specific terms and conditions of the contract Peer review of your submission

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26 Key principles to avoid probems- KYC Due diligence of the organisation you are selling to GTA member / Industry Association? Known to you? Unknown and $5 over market call the police!!!! Dealt with them before? Track record? Peer review / references First trade appropriate not substantive. Work into a relationship Credit insurance - it s a given for the trade - why not growers?

27 Key principles to get the contract right Record details of conversation Understand your commitment especially with forward contracts. Can a contract be formed over the phone? Price basing point? Farm/silo/port? Delivery period Quality standards - i.e. No 1s

28 Oils ain t oils, Prices ain t Prices Key Components of a contract: Beginning Delivery Time Place Quality (by who) Weights & Quantity (by who) Payment Terms All the above are needed to define a price

29 All the things that can go wrong a) The legal name/abns of the Parties to the contract b) Date of Contract c) Kind and Quality Grade of Commodity d) Type of Quality Inspection e) Quantity f) Type of Weights g) Packaging h) Price i) Price Basing Point j) Transportation Specification k) Delivery or Shipment Period l) Applicable Trade Rules m) Levies and Statutory Charges n) Payment Terms o) Other Terms and Conditions

30 Problem???? We can adopt the ostrich position. Seems to work for them

31 Source: Greg Kostal

32 Summary Points 1) Conduct due diligence 2) Cover off all terms 3) Reconfirm conversation 4) Issue/check the contract confirmation 5) Discrepancy?... sort it IMMEDIATELY

33 $$- Value of getting it right - $$ Increase confidence in Markets / Counterparties Increase confidence of performance (banks have more confidence) Increased Reputation Facilitates trade Lowers risk Lowers credit / capital Increases investment