Assignement 2

Legal Environment

Dr Benlamhidi

April 02, 2008

1). Arbitration :

Arbitration is a legal process for the private resolution of disputes and disagreements

outside the court system, where the two parties call for a neutral and impartial third party or

more called the arbitrator(s) who decides the dispute and gives his/her opinion. The two

parties agree to be bound to the decision of the arbitrator and this decision, unlike in the

courts, does not to be justified or explained by the arbitrator. So, arbitration can be best

defined as a form of binding dispute resolution that is similar to litigation in the court system,

but arbitration greatly differs from the negotiation or mediation. In fact, arbitration resolve

conflicts in a fair and impartial manner.

The main characteristics of arbitration are:

Arbitration should be consensual: this means that both parties of the dispute must

agree for arbitration. The existing dispute can be referred to arbitration by a

submission of agreement between the parties where a party cannot withdraw from

arbitration.

The parties choose the arbitrator(s): the parties have the right to choose one sole

arbitrator or to have more than one arbitrator where each party appoints one of the

arbitrators; then those two persons appoints the presiding arbitrator.

The arbitration should be neutral: this means that in addition to choosing the

arbitrators, the parties can also choose the applicable law, the language and the place

of the arbitration through a contractual clause before a dispute emerges. This would

ensure that the two parties are treated reasonably fairly and that no party would have

any advantage over the other.

 Arbitration is a confidential procedure: there are some rules that protect the

confidentiality of any disclosure or award made during the arbitration.

The decision of the arbitrator should be final and easy to enforce: this means that the

parties agree to carry out the decision of the arbitral tribunal without delay.

Today, arbitration is most commonly used for the resolution of commercial disputes. It is

also used in some countries to resolve other types of disputes, such as labor disputes,

consumer disputes or family disputes, and for the resolution of certain disputes between states

and between investors and states.

Concerning the advantages behind the use of arbitration, parties often seek to this

technique because it is faster and cheaper than litigation in courts. Also, the arbitration

process is more flexible than the court system. Add to this that the decisions of the arbitrators

are easier to enforce than the court judgement and the parties are less likely to delay matters.

There are, however, some disadvantages to arbitration which are mainly that the parties must

pay for the arbitrators which add for an additional legal fee. Also, in some cases, the arbitral

decisions can be less enforced than the judgements of the courts. Another disadvantage is that

the rule of applicable law is not obligatory, which can lead arbitrators to decide according to

their personal ideas and views.

2). Analyse of the contract between ORBONOR and Xcan Grain

Limited, Winnipeg, Canada:

The contract takes place between a Moroccan company called Orbonor which imports

wheat from a Canadian multinational company that exports wheat all over the world. This

contract states the details of this business that the two parties agreed on and signed.
This document of the sale contract contains the date when the contract has been assigned and

the number of the sale contract. It includes a series of terms and conditions that both the seller

and the buyer should conform to. First of all, there is the commodity which is the good or

product being sold and bought which is wheat. The quantity and the price are mentioned, as

well as where the product should be delivered and the shipment. Next, this contract discusses

the procedure of payment that takes account of the shipping documents presented by sellers.

Then, the contract talks about the special conditions of the shipment. This part of the sale

contract is very loaded with specific details related to the date limit for the shipment to attain

the delivery place. Also, it states the discharge time and rate of the commodity and how the

loading operation of wheat should take place. Afterwards, this contract talks about the

inspection and the arbitration which should be governed under the rules of GAFTA. The

decision of the arbitrator is final and binding and its the loosing party which is responsible

for the expenses and fees for arbitration. Also, there are some remarks that should be taken

into consideration such the right of Orbonor to send its representatives to inspect the loading

operation of wheat, and the Canadian company should cooperate.

Last but not least, the contract contains an important and substantial section related to

the case of default of either party. It gives details about each situation of default including the

default price and it provides clarification about how the damages are set. Most importantly,

the default case should be resolved by arbitration under the rules of GAFTA and its decision is

absolute and final. The defaulter in breach of contract should definitely pay for the fees of this

arbitration, and he should pay for the damages to the wining party. Last, the document

presents other special conditions about who should pay for the taxes, dues, and duties of the

loading operation of wheat.

3). Analyse of the Procedure of Arbitration of GAFTA:

 As clearly mentioned on the contract, it was the arbitrator GAFTA that governed this

dispute between the sellers (the Canadian company) and the buyers (the Moroccan company

Orbonor). On the 11 august of 1999, GAFTA issued an official form of the award of

arbitration. This document included mainly five parts; the first section concerned the contract

made on 24 February 1998 where ORBONOR agreed to buy two cargoes of Canadian wheat

from the Canadian company. The diverse clauses related to the dispute were also mentioned

which discussed the case where the buyers should pay demurrage to the sellers and the case

where the sellers should pay demurrage to the buyers. This first part also restated, as in the

contract, that any conflict in connection with the contract should be resolved by arbitration

under the rules of GAFTA, and again it is the loosing party that should pay for the fees and

expenses of the arbitration.

The second section of the document of Award of Arbitration dealt with the Facts of the

contract signed between the two parties. This part is quite long and comprehensive where

GAFTA examines step by step all the details concerning where and when the cargoes arrived

and how were they discharged as well as the demurrage rate of each cargo. GAFTA carefully

studied the total time that the buyers used to discharge each cargo, and the time allowed to

them, and then it concluded the time on demurrage on each cargo. After that, GAFTA was

able to calculate the amount of demurrage that sellers invoiced to buyers. Also, this section

states that the sellers informed buyers that they have to pay the demurrage on the two cargoes,

and they declared arbitration by appointing their arbitrator. The buyers responded to revise the

calculation of the demurrage on each on the two cargoes, and then the sellers agreed and

modified their amount of demurrage calling the buyers to pay the full amount to their account.

The facts also showed that sellers kept asking for the payment of the demurrage and GAFTA

appointed an arbitrator on behalf of the buyers as well as a third arbitrator as chairman of the

tribunal.
 The third part of this document issued by GAFTA had to do with the submission of the

sellers who are requesting the buyers to pay the total amount of the demurrage of the two

cargoes, along with the interest of the breach of contract by the buyers.

Concerning the fourth section, it was about the submission of the buyers who havent

actually submitted any document. As a result, the tribunal sent them a message ordering the

buying company to give its submissions to the other party so that the tribunal can reach an

award. Then, the buyers replied to the other party claiming that they have faced an increase in

cost of the import duties, and they added that they were seeking an amicable arrangement to

solve the dispute with the sellers.

In the document of the Award of Arbitration issued by GAFTA, the last section

discusses the findings of the contract. In fact, GAFTA reached some conclusions about the

dispute; it asserted that since the demurrage payments are conforming to the term of the

contract, the buyers must pay to the sellers the total demurrage amount on the two cargoes.

GAFTA further concluded that the argument of the buyers about a higher cost in the

Moroccan import duties is not a valid one for the dispute. Based on these two conclusions, the

arbitrator GAFTA finally ended to the decision that the buyers should pay to the sellers the

demurrage amounts on the two vessels along with an interest rate until the date of the

payment. Additionally, the buyers must pay for the fees of the arbitration that includes the

association fees plus the arbitrators fees, and an additional expense for the appointment with

the arbitrator.

4). The Enforcement of the Decision of the Arbitrators in Morocco:

Concerning this export and import transaction between the Moroccan company and

the Canadian company, the parties to the agreement are from different countries; so there is

more neutrality since the international arbitration allows each party to avoid the domestic
courts in case of dispute and it also eases the enforcement because the foreign arbitral awards

can be easier to enforce than foreign court decisions.

The winning party in the arbitration process (the Canadian company in this case) can

be assured that the national courts will enforce the decision of the arbitrators. So, this will

ensure that the arbitration process will not be aggravated if the losing party refuses to pay or

to satisfy the arbitral award. Meanwhile, the Canadian company can rely on the Canadian and

Moroccan court to ensure that the decision of the arbitrators will be imposed and that the

losing party which is Orbonor will meet its obligations and accept to pay as the arbitration

award oblige.