For the past two consecutive years, arbitration requests at the ICA have escalated to over five times their normal yearly average. Continued market volatility is a major cause and has resulted in more parties failing to honor their contractual obligations, which is having a direct impact on the number of disputes brought for arbitration.
“It is extremely difficult to predict how the situation will evolve during 2013, but as we move into the first quarter the pace does not seem to be slowing down,” says ICA President, Ahmed Elbosaty. “It has been a very challenging time for us, but the situation has given rise to a number of new initiatives"
He adds, "We have introduced a new business intelligence process that will put the spotlight on firms that are using dishonorable trading practices. We have expanded ICA membership to include agents and we are working hard to promote good trading practice across the global supply chain - delivering free training sessions and educational workshops that focus on responsible contracting and the ICA trading rules".
“Our arbitration system must be fit for purpose and we are continually looking at ways we can reduce the cost and the time taken for arbitrations. We also plan to increase the quality and effectiveness of our awards procedure by introducing a pool of 10 "ICA Chairmen” later this year, which will monitor the cost and time of arbitrations and the quality of arbitrators, in order to produce more enforceable awards.”
The ICA believes that the current situation highlights the importance of contract sanctity and responsible trading: “Trading with defaulters is not a good business strategy nor is it an honourable way to do business. If the cotton community sticks together and stands firm on defaulters then we may be able to reduce the stress being placed on the cotton supply chain and improve its economic sustainability. We are confident that the initiatives we have put in place will, in time, have a positive impact and create a safer trading environment.”
International Cotton Association
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