Why Russia will not help a record harvest

In the U.S., which ranks first in the export of grain in the world, there is its counterpart GAFTA – the national Association of grain and feed (National Grain and Feed Association, NGFA), which offers standardized rules of grain trade, code of ethics, as well as opportunities for dispute resolution under arbitration. A similar organization also exists in Australia (Grain Trade Australia).

Standard forms of contracts and recommendations GAFTA accelerate the phase matching buyers and sellers of grain of the contractual terms and avoid numerous disputes. Long-term practice of application of the same standards preclude ambiguous interpretation of contracts and reduces the risks of violations.

If disputes do arise, GAFTA offers industry-specific arbitration (arbitration Tribunal). GAFTA arbitrators are lawyers who know the market and understand the industry conditions of contract. This allows us to consider the dispute as quickly and efficiently without any extra time costs and monetary costs. The possibility of recourse to such arbitration arises from “wired” in a typical contract of an arbitration clause that refers to arbitration rules of GAFTA.

It is significant that, despite the significant number of contracts concluded in accordance with the standard forms of GAFTA worldwide, the number of disputes dealt with under the rules of GAFTA is only a few hundred per year. As they say in most GAFTA, the parties wish to either settle the dispute as soon as possible and profitable or not, in principle, to break the contract and keep the relationship with the partner.

Despite the size of the domestic market in Russia are still missing as their standardized rules of grain trade, and industry-specific arbitration, which would allow effectively and professionally to resolve disputes and to shape the practice of using buyers and sellers of grain of standard forms and terms of contracts.

The result is the following situation, where each player plays by its own rules until, until faced with their violation and dispute. The dispute goes to state court, which may not always provide effective resolution, as it requires specific knowledge of the customs and practices of the grain market. As a result, the dispute in the best case, takes a lot of time that you want the judge to understand the features of the grain trade. And at worst leads to an unexpected result and the formation of controversial, harmful market practices. All this is conducive neither to efficiency in the domestic market of grain trade or the competitiveness of Russian exporters in the foreign market.

It would seem that the easiest way out is to introduce on the market of foreign rules and forms, such as GAFTA. But it’s impossible. First, the rules of GAFTA is based on English law, is fundamentally different from the Russian. Second, these rules are effective only when there are arbitrators who understand them, and the courts, ready to refer to them. In the list of arbitrators in GAFTA only one Russian referee who works outside of Russia. Despite the fact that London continues to be one of the most attractive locations for “libel tourism” Russian business output overseas domestic grain disputes are costly and not logical.

So the only real solution is to develop their own standards and rules for the Russian grain market. World experience shows that such rules may not be “top-down”. To meet the request of the grain market was in demand, in the process of their development should be involved, the main participants in this market interested in its development.

At the end of July 2018 this initiative was first announced in the framework held in Moscow the working meeting of the main players of the grain market of Russia, devoted to self-regulation and standardization of the market of agricultural products. The head of the working group was Kirill Podolsky, CEO of technology start-up Smartseeds.

If the Russian grain market wants to continue its growth and strengthen its position on the world stage by the next harvest in 2019 such uniform rules and standards should be developed and implemented in the relations between the Russian buyers and sellers. You need to form a panel of Russian referees who will understand the specifics of relations in the market of grain trading. First and foremost, it’s the lawyers working in the industry, as well as professionals, who will participate in the development of standard forms and contracts in the framework of the formed working groups.

The potential application of the Russian rules of grain trade in case their development is not limited only by Russia. For example, they can be perceived by the CIS countries that have historically faced similar problems and have a related legal system. It is important that the environment of rapid digitization of everything can be immediately “sew” the standard for the digitization of the grain industry: from the conclusion of smartcontract between companies on the basis of the expanded market participants branch of the blockchain to “overserving” transportation of agricultural commodities and the resolution of disputes between players online.

Leave a Reply

Your email address will not be published. Required fields are marked *