STANDARDIZATION OF TRADE RULES - 65th Plenary Meeting in Goiania The 65th Plenary Meeting of the ICAC GOIÂNIA,, BRAZIL 11-1515 SEPTEMBER, 2006 STANDARDIZATION OF TRADE RULES Zbigniew Roskwitalski Vice President of the Gdynia Cotton Association In the age of globalisation of the world economy, including the world cotton market, the multiplicity and diversity of rules governing the cotton trade are the reasons of arising of a next barrier which has a negative impact on the world cotton turnover. A great majority of contracts for cotton, their realisation and settling of technical and quality disputes are based on the rules settled by cotton associations functioning in the world. Right
now, in the world, there are 15 Cotton Associations incorporated in the CICCA and 13 of them enjoys the arbitration rights. G D Y N I A C O T T O N A S S O C I A T I O N CICCA MEMBER ASSOCIATIONS Association Cotoniere Africaine Belgian Cotton Association Alexandria Cotton Exporters Association Bremer Baumwollb örse Associazione Tessile Italiana Gdynia Cotton Association Izmir Mercantile Exchange International Cotton Association Australia Cotton Shippers Association Bolsa de Mercadorias & Futuros Association Francaise Cotoniere East India Cotton Association Japan Cotton Traders Association Centro Algodonero Nacional American Cotton Shippers Association AFRICA BELGIUM EGYPT GERMANY ITALY POLAND TURKEY UNITED KINGDOM AUSTRALIA BRAZIL FRANCE INDIA JAPAN SPAIN USA In spite of the fact that, during last years China has been gaining more and more importance due to the great role played by this country on the world cotton market - with its 40% share in the world cotton consumption and 45% share in the world cotton imports - The China Cotton Association functions outside the CICCA. G D Y N I A C O T T O N A S S O C I A T I O N R A W C O T T O N C O N S U M P T I O N THE REST OF THE W O R L D 60% The rules and by-laws of particular associations incorporate universal notions and customs applied in the world cotton trade. They were built basing on the local laws valid in the region where the association is operating. The diversity of rules and local laws, as well as multiplicity of cotton standardisation systems create obstacles for an efficient operating on the world cotton market, being the reason of disputes often leading to the breaches of contracts.
The number of broken contracts, of disputes etc. is evidenced by non-executed arbitration awards on the world cotton market. Still in the mid 90's, the number of companies which were entered on the CICCA Default List was from 20 to 90 companies. Lately, in 2005 2006, this list contains ca. 300 companies. So, within last 10 years, the number of companies which violated the realisation of contracts and did not conform to the arbitration awards, has been 15 times greater. In Europe, there are 7 Cotton Associations. In 1999, all of them decided to establish the EUROPEAN COTTON CONFEDERATION becoming its members. Besides the tightening of cooperation between the European Cotton Associations, the new organisation aimed at elaborating of a harmonised set of By - laws and Rules of the European Associations.
Facing this challenge and, in effect, creation of the common rules, was possible thanks to the fact that all the so far existing rules of particular European Cotton Association (except for the Liverpool Cotton Association) were based on the civil law/written law system dominating in the continental part of Europe. The draft of the new rules based on the civil law/written law, worked out by way of a compromise was ready in 2001. Next years brought the continuation of works aiming at modification of certain provisions and correction of noticed errors and inaccuracies. In February 2005 the Belgian Cotton Association, and in June 2005 - the Gdynia Cotton Association adopted the "By-laws and Rules of the European Cotton Associations". Association Francaise Cotoniere and Centro Algodonero Nacional are right now acting in order to adopt the Rules in 2006. G D Y N I A C O T T O N A S S O C I A T I O N EUROPEAN COTTON CONFEDERATION RULES APPLIED IN 2006 Association Francaise Cotonniere Association Cotonniere de Belgique Centro Algodonero Nacional Gdynia Cotton Association Bremen Cotton Exchange International Cotton Association Associazione Tessile Italiana (AFCOT) (ACB) (CAN) (GCA) (BBB) (ICA) (ATI) France Belgium Spain Poland Germany U. K. Italy At present, European cotton associations apply 3 kinds of rules: European Cotton Rules, International Rules and Associazione Tessile Italiana Rules. Nowadays, in the times of progressing globalisation and unification of, also, the world cotton market, European and world cotton organisations faced the following issues:,
The answer to both questions should be positive, but it follows from the GCA experience and from the experience of other European Cotton Associations taking part in establishing and adopting the "By-laws and Rules of the European Cotton Associations", that creation of one common set of rules which could be widely accepted on the world cotton market is a difficult and time-consuming task. Particularly difficult are the legal aspects mentioned above following from the differences between the civil law based on the Napoleon's Code prevailing on the European continent and the law based on precedents (the common law) going back to the British tradition and functioning, among others, in the United Kingdom and the USA. Regarding also the variety of cultures and customs in countries engaged in the cotton turnover, it is clear that implementation of a unified set of rules and principles of the international cotton trade is not the matter of a while, but it requires gradual, consequent activities and a close cooperation of cotton organisations in the world. Referring to this, the necessity of a serious discussion related to these issues, which could be undertaken at international meetings Including the forum of ICAC, is emerging.
Thank you!