Commercial arbitration is a service provided by the trade for the trade. Arbitration has been part of the judicial system of England since 1698 when the first Arbitration Act was passed. As its very name implies—it comes from a Latin word meaning to take a decision—arbitration is a means of settling, justly and fairly, disputes between parties. Arbitrations take place in respect of contractual claims, wage claims and in a whole variety of trades and industries, and particularly in respect of commercial contracts. In fact it seems to me that arbitration is particularly well suited to commodity trades.

Commodity trades are based on the purchase and sale of goods on forward contracts, and traders use their judgment and expertise as to when to buy and sell goods. The benefit of their expertise is eventually passed on to the consumers, who are able to buy manufactured products or foodstuffs in shops at prices which are more advantageous than they would be if traders did not have latitude to buy at the best prices.

Commercial arbitration in commodity trades was originally related to the quality or condition of the goods. Traders wished to have their disputes settled by people whom they knew to be not only men of integrity but men well qualified by experience to judge the commodities in which they dealt, and so arbitrators were chosen who had experience in the trades concerned and knowledge of the articles involved. These arbitrators were appointed to judge impartially whether or not the goods complied with the contractual specifications and if they did not, they would decide how the matter should be settled fairly between the parties. Usually, settlements involve payment of a monetary allowance, but arbitrators do have the right to order specific performance.

As trade has become more complicated, the number of arbitrations on contractual points, which we call technical arbitrations, has multiplied enormously and at the same time the increasing efficiency of agriculture and transport and the increased knowledge and experience of traders have tended to reduce the number of arbitrations on quality, which we call physical arbitrations. However, physical arbitration is still widely resorted to, although in certain trades it is now sometimes used by importers as a means of obtaining an official classification of the goods as well as a basis of claims for allowances.

In recent years the complexity of trade has been aggravated by the actions of governments. There has been a deplorable tendency for national governments of exporters of agricultural commodities to take legislative action which has interfered with parties’ ability to carry out their contractual obligations. This is, of course, much more than regrettable; it affects the whole sanctity of contracts and, therefore, the whole basis of the contract system of trading. It means that some parties who entered