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Legal costs in GAFTA and FOSFA arbitration are recoverable from the losing party, subject to certain conditions. The recovery regime in both forums departs from the English default of “costs follow the event” and operates differently in each: in GAFTA, each party bears its own legal costs as a rule, and recovery is only possible where the parties have entered into an express written agreement; in FOSFA there is no such prohibition, and legal costs incurred on the written stage are recoverable under the general principles. Below I explain what exactly is recoverable in each forum and how a GAFTA/FOSFA lawyer prepares a case so the client gets the maximum possible return.
As a practising GAFTA and FOSFA lawyer, I represent clients in both forums on the claimant and respondent side, and the question of cost recovery comes up in every single case. If you need an assessment of the cost budget and recovery strategy for a specific dispute, please get in touch directly — my contact details are in the box below and at the end of the article.
What Counts as “Costs of the Arbitration” Under English Law
Both forums have their seat in London, so the framework is set by the Arbitration Act 1996. Section 59 defines “costs of the arbitration” as three components:
- arbitrators’ fees and expenses;
- fees and expenses of the arbitral institution — GAFTA or FOSFA;
- “legal or other costs of the parties” — the legal and other costs incurred by the parties themselves.
In English practice these costs have historically been divided into costs of the award (administration of the arbitration: tribunal fees, institutional charges, interpreters) and costs of the reference (work of lawyers and representatives, witnesses, experts, document translations). The 1996 Act merged both categories into a single concept — “costs of the arbitration” — but the distinction remains useful in practice, because in GAFTA and FOSFA these categories are recovered on different principles.
Section 61(2) of the AA 1996 sets out the general rule: the tribunal awards costs on the “costs follow the event” principle unless the circumstances of the case justify a different approach. Section 63 sets the reasonableness standard: “such reasonable costs as are reasonably incurred” — any doubts about reasonableness are resolved in favour of the party paying (s.63(5)).
Section 63(1) of the AA 1996 expressly allows the parties to agree a different recovery regime — and that is the very door both GAFTA and FOSFA have walked through, each adopting its own rules on legal representation. Here is how those rules work.
Recovering Legal Costs in GAFTA: Two Models
GAFTA No. 125 offers parties two working models, depending on whether or not they have entered into a written agreement on legal representation.
Model 1: Express Written Agreement Under Rule 17.1 — Full Cost Recovery
This is the primary and most predictable route. Rule 17.1 expressly provides that the parties may agree in writing to be represented in the arbitration and/or appeal, including at oral hearings, by legal representatives (solicitors, barristers or other legally qualified advocates wholly or principally engaged in private legal practice). Where such an agreement exists, the tribunal or Board of Appeal determines the legal representation costs to be awarded.
Rule 9.1 then kicks in, empowering the tribunal to award costs of and connected with the reference, and Rule 12.5(d) does the same at appeal stage, using the direct formula “such costs, fees and expenses will normally follow the event”. Together, these provisions mean that, where an express agreement is in place, the successful party recovers its reasonable legal costs on the general principles of the AA 1996.
In practice, the express agreement is documented by an exchange of letters between the parties confirming mutual consent both to the engagement of lawyers and to the recoverability of those legal costs.
Model 2: No Express Agreement — What the Successful Party Recovers Anyway
Even without a written agreement on legal representation, the losing party still pays the winner a substantial part of its costs:
- the arbitrators’ and Board of Appeal’s own fees;
- GAFTA’s administrative fees (fees and expenses of Gafta);
- the cost of translations, copying, expert reports, certificates, and surveyor attendances.
What is not recoverable without an express agreement is the fees of a lawyer in private practice. Rule 17.2 provides that the parties are free to engage legal representatives to prepare submissions, but the costs of doing so are not recoverable absent a written agreement. Rule 17.4 enshrines the same principle as the default rule: “Unless expressly agreed otherwise, in writing, each party shall bear all their own costs including their own legal and representation costs”.
The practical takeaway is simple: if you are going into a GAFTA arbitration with a lawyer and you want the option of recovering those fees from the other side, put the express agreement question on the table at the very start. It takes one letter.
How Arbitrators Assess the Costs Claimed
Where an express agreement is in place, the tribunal’s task is to check that the rates and volume of work are reasonable under the s.63(5) AA 1996 standard. A well-documented cost schedule — with hourly breakdown, justification of the representatives’ seniority (senior counsel, junior, solicitor) and explanations for each line item — significantly strengthens a party’s position at costs submissions stage and drives the final percentage recovered.
Recovering Legal Costs in FOSFA
The FOSFA Rules of Arbitration and Appeal (1 April 2026 edition) are structured differently from GAFTA: there is no stand-alone block of rules on representation costs; instead the regime is spread across Rule 4(e) (arbitration procedure), Rule 6(a) (arbitrators’ powers on costs), Rule 9(a) (appeal procedure) and Rule 9(e) (Board of Appeal’s powers). What this means for recovering legal costs is set out below.
The Lawyer on the Written Stage: Costs Recoverable Under Rule 6(a)
The key difference from GAFTA is that the FOSFA Rules contain no provision equivalent to GAFTA Rule 17.2 expressly excluding the recovery of legal costs absent an express agreement. A lawyer can fully participate in the written stage — preparing claim submissions, defence, counterclaim, analysing evidence, handling procedural correspondence — and those costs fall within the general power vested in the arbitrators under Rule 6(a):
“the arbitrator/s shall have the power to assess and award their fees and award by whom these and other fees and expenses of the arbitration shall be paid”.
At appeal stage the equivalent power sits in Rule 9(e): the Board of Appeal “shall award the payment of appeal fees, costs, and expenses of, and incidental to, the appeal”. Under the general principle of s.61(2) of the AA 1996 — costs follow the event — reasonable and reasonably incurred legal costs are awarded against the losing party.
An award of costs is always a matter for the tribunal’s discretion. FOSFA practice has seen cases where the successful party was refused the recovery of its legal fees on the basis that the case was straightforward enough not to warrant the engagement of a lawyer. In my experience that approach is receding: modern FOSFA tribunals increasingly treat the party’s choice to instruct a lawyer as its own to make, with the question narrowing to a reasonableness review of rates and volume of work under s.63(5) of the AA 1996. Carefully prepared costs submissions setting out rates, the lawyer’s seniority and the volume of work materially increase the prospect of full recovery.
The Lawyer at Oral Hearings: Admission Via a “Special Importance” Ruling
An important caveat: FOSFA arbitration is a written procedure by default (so is GAFTA). At first instance oral hearings are rare; most cases are decided on the exchange of submissions and documents. At appeal stage, hearings before the Board of Appeal are more common. In most cases, therefore, the question of a lawyer appearing at an oral hearing simply does not arise — the legal costs of the written work are recovered under the general principles discussed above.
If a hearing is in fact convened, FOSFA imposes a direct restriction. Rule 4(e) (at first instance) and Rule 9(a) (on appeal) provide that the parties may be represented by a listed representative — an authorised person nominated by a Federation member in the Trading, Full Broker or Full Non-Trading category. Counsel, a solicitor or any other member of the legal profession wholly or principally engaged in private legal practice is admitted to the hearing only where the tribunal (or the Board of Appeal) has, in its sole discretion, ruled the case to be “of special importance”. The moment that ruling is given, the other side automatically acquires equivalent rights to legal representation.
When, in practice, FOSFA tribunals will classify a case as “of special importance”:
- substantial sum in dispute — indicatively from USD 1 million, although the rules set no fixed floor;
- difficult legal issues going beyond the usual quality/condition dispute — construction of unusual contract terms, application of international sanctions, cross-border regulatory issues;
- precedent value for the oils and fats trade;
- parallel court proceedings or multiple overlapping arbitration references calling for legal coordination.
An application for a “special importance” ruling is best made as soon as the tribunal is constituted — ideally together with the first procedural letter. The earlier it is filed, the better the chance of success: the tribunal has not yet formed a view of the case as “straightforward” and is looking at the application purely on the criteria set out above.
Section 65 AA 1996: A Cost Cap as Protection Against the Other Side’s Over-spending
Beyond the GAFTA and FOSFA Rules, English arbitration also has section 65 of the Arbitration Act 1996: the tribunal may (unless the parties have agreed otherwise) limit the recoverable costs to a specified amount — a cost cap. The limit must be imposed sufficiently in advance to allow the parties to budget around it.
For a party worried about being on the receiving end of a large costs claim from the other side, an application under s.65 is a practical tool of control. It is not often invoked in GAFTA and FOSFA proceedings.
Comparison Table: GAFTA 125 v FOSFA 2026 on Legal Costs
| Issue | GAFTA No. 125 | FOSFA Rules 2026 |
|---|---|---|
| Lawyer at oral hearings | Admitted by express written agreement of the parties (Rule 17.1) — full cost recovery available | Admitted on a tribunal ruling that the case is “of special importance” (Rule 4(e) / 9(a)) — both sides acquire equal rights |
| Lawyer on written stage | Permitted; costs recoverable only with express agreement (Rule 17.1), not recoverable without one (Rule 17.2) | Permitted; costs recoverable under the general power in Rule 6(a) and the costs-follow-the-event principle (s.61 AA 1996) |
| Default rule | Each party bears its own costs unless there is an express agreement (Rule 17.4) | No special rule; the general principle of s.61 AA 1996 applies |
| “Costs follow the event” | Expressly stated for appeals (Rule 12.5(d)); applied at first instance via Rule 9.1 | Applied via Rule 6(a) and Rule 9(e) on the AA 1996 principle |
| How to secure recovery from the outset | Put an express agreement under Rule 17.1 in place through procedural correspondence | Prepare proper costs submissions; if an oral hearing is convened, apply for a “special importance” ruling |
FAQ: Frequently Asked Questions on Legal Cost Recovery
Can you recover legal costs in a GAFTA arbitration?
Yes, with qualifications. GAFTA No. 125 Rule 17.1 expressly allows the recovery of legal costs where the parties have entered into an express written agreement on legal representation. Without such an agreement, Rule 17.4 applies as the default: each party bears its own legal and representation costs, and a lawyer may only work on the written stage with no right of recovery. So the answer almost always turns on whether an express agreement was put in place at the start of the arbitration.
Can you recover legal costs in a FOSFA arbitration?
Yes. The FOSFA Rules 2026 do not prohibit the recovery of legal costs incurred on the written stage — which is the primary format in which FOSFA cases are decided. Those costs are recoverable under the general power of the arbitrators (Rule 6(a)) and the “costs follow the event” principle (s.61 AA 1996). If an oral hearing is convened and a party wants a lawyer in private practice at that hearing, this requires a separate ruling by the tribunal that the case is “of special importance” under Rule 4(e) or Rule 9(a).
What does “of special importance” mean in FOSFA?
It is the category of case in which a FOSFA tribunal, exercising its sole discretion, permits the parties to be represented at an oral hearing by a lawyer in private practice. The rules do not formalise the criteria, but tribunals in practice look at the sum in dispute, the legal complexity, the precedent value, and any connection with parallel proceedings. A ruling that a case is “of special importance” automatically gives the other side the same right.
Is the other side’s consent needed to engage a lawyer?
In GAFTA, to recover costs at an oral hearing, yes — an express written agreement between both parties is required (Rule 17.1). In FOSFA the other side’s consent is not needed, but a “special importance” ruling from the tribunal is. On the written stage, in both forums, a lawyer can work without the opposing party’s consent.
Which costs exactly are recoverable?
Arbitrators apply the s.63(5) AA 1996 standard: reasonable costs reasonably incurred, with any doubts on reasonableness resolved in favour of the party paying. This covers the lawyer’s hourly rates — proportionate to seniority — a justified volume of work, and reasonable disbursements (expert reports, translations, site visits). Excessive rates or over-inflated volumes of work can be reduced by the tribunal on assessment.
What if the contract simply says the loser pays all costs?
That kind of clause is void if entered into before the dispute arose. Section 60 of the AA 1996 expressly renders invalid any agreement that one party shall pay all or any part of the costs of the arbitration in any event, where that agreement was made before the dispute arose. Cost allocation agreements are only effective if concluded after a dispute has arisen.
Practical Takeaways for Traders and Their Lawyers
If you are heading into a GAFTA arbitration with a lawyer, put the express agreement point into your very first procedural letter. That gives you the direct right to recover on success and takes Rule 17.4 off the table. Bear in mind that such an agreement requires the consent of both parties: an opponent who rates its own prospects as weak may refuse, and your legal costs will then remain on your side of the ledger. Evaluate the merits of the case and the negotiating dynamic in advance.
If you are going into a FOSFA arbitration, in most cases the dispute will be decided on the written stage, and the legal costs of preparing submissions are recoverable under the general principles. If an oral hearing is in fact convened (more often on appeal) and you want a lawyer at that hearing, prepare the “special importance” application in advance, grounded on the sum in dispute, the legal complexity and the precedent value. Submit it immediately on constitution of the tribunal, so as to get in before any view of the case as “straightforward” has formed.
Prepare detailed costs submissions. Arbitrators test the reasonableness of rates and volume of work against s.63(5) AA 1996. A schedule with hourly breakdown, a justification of the lawyer’s seniority (silk? junior? trainee?) and an explanation of each line item is the standard that modern arbitrators expect — and it drives the final percentage recovered.
Consider a s.65 AA 1996 cost cap if you are the respondent and worried about runaway costs on the claimant’s side. An application for a cap is a way to delimit your exposure on costs in advance.
Conclusion
Legal costs in GAFTA and FOSFA arbitration are recoverable, provided the procedural groundwork is laid. In GAFTA the key tool is an express written agreement under Rule 17.1, put in place at the start of the arbitration; it opens the door to full recovery on the general principles of the AA 1996. In FOSFA, a lawyer’s work on the written stage is recoverable under Rule 6(a) without any additional formalities, while a lawyer’s attendance at an oral hearing (which in FOSFA is convened less often — more often on appeal) requires a “special importance” ruling. In both forums, modern arbitral practice is tending towards respect for party autonomy in the choice of legal representation, and towards assessment of the costs claimed against the reasonableness standard.
Understanding this logic from the outset lets you structure the dispute so that victory translates into actual cost recovery — and not just a moral one.
If you are considering commencing a GAFTA or FOSFA arbitration, budgeting a dispute, or assessing your prospects of cost recovery in a specific case, please get in touch:
