BREAKING GROUND IN ARBITRATION: AM OKTARINA’S KEY ROLE IN FCC
CASE AA4718
Contributor:
Ricko Anas Extrada, S.H.
Muhammad Ardin Ardiansyah, S.H.
Reviewer:
Noverizky Tri Putra Pasaribu, S.H., L.LM. (Adv).
Aflah Abdurrahim, S.H.
Image Sources: https://pin.it/2O3fZnoeI
A. Background
AM Oktarina Counsellors At Law Secures Significant Victory in International
Arbitration under the Federation of Cocoa Commerce (FCC) in London
Kemang Point, 3rd floor, Unit 3-02 Jl.
Kemang Raya No. 03,
South Jakarta. Jakarta 12720
Phone: 021-22716290
www.amoktarina.net
2
AM Oktarina Counsellors At Law has successfully secured a significant victory in an
international arbitration dispute under the Federation of Cocoa Commerce (FCC) in
London. The case, identified as AA4718, revolved around the interpretation of
contractual clauses related to the choice of arbitration forum, the fulfillment of
contractual obligations, and arbitration jurisdiction under international legal principles.
In this matter, AM Oktarina represented its client, an Indonesian company, against
claims brought by the buyer (claimant) in an international cocoa trade transaction. This
achievement not only highlights AM Oktarina’s legal expertise but also reinforces legal
certainty in resolving disputes through international arbitration mechanisms.
The dispute arose from an international cocoa sale transaction where the parties agreed
to refer disputes to FCC arbitration, as stated in the contract clause: “The parties agreed
that any issues to be resolved, arising out of the contract, will be referred to Arbitration
under the prevailing rules of the Federation of Cocoa Commerce Limited, London.”
The claimant alleged that the respondent (AM Oktarina’s client) had breached the
contract; however, the claim was filed without adhering to the FCC’s procedural rules,
such as the requirement to provide a formal written notice declaring the respondent in
default.
Through comprehensive legal arguments, AM Oktarina successfully persuaded the
arbitration tribunal that the claimant’s claims were legally unfounded and violated the
formal procedures stipulated in the FCC Arbitration and Appeal Rules. Consequently,
the tribunal ruled in favor of the respondent, declaring that no breach of contract had
occurred and releasing the respondent from all claims.
Summary of Case AA4718 Chronology at the FCC
1. Contract Formation:
Kemang Point, 3rd floor, Unit 3-02 Jl.
Kemang Raya No. 03,
South Jakarta. Jakarta 12720
Phone: 021-22716290
www.amoktarina.net
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On January 27, 2023, the claimant (Kamala Consumer Care PVT Ltd.) and the
respondent (PT Surya Kakao Internasional) signed a purchase agreement for 160 MT
of Natural Cocoa Butter at USD 3,700 per MT, totaling USD 592,000. The agreed
delivery schedule was from March to August 31, 2023 (FOB Jakarta). Payment terms
included a 30% deposit and 70% upon scanning the shipping documents.
2. Delivery Schedule Breach:
Out of the eight scheduled shipments, only three were completed before the deadline
(August 31, 2023). The fourth shipment was made on September 10, 2023, exceeding
the agreed timeline.
3. Contract Termination:
On April 24, 2024, the respondent declared its inability to continue the contract due to
a sharp increase in raw material prices (cocoa beans). The respondent claimed that the
price of Grade “A” Natural Cocoa Butter had soared to USD 40,000 per MT, far above
the initial contract price.
4. Arbitration Claim Submission:
On June 29, 2024, the claimant submitted an arbitration claim to the FCC, accusing the
respondent of failing to deliver the remaining 80 MT and seeking damages for financial
and reputational losses.
5. Respondent’s Defense:
Represented by AM Oktarina Counsellors At Law, the respondent argued that the
claimant’s submission exceeded the 56-day deadline as stipulated by the FCC
Arbitration Rules. The respondent also rejected the claimant’s demand for USD
2,904,000 in damages, citing unrealistic and inaccurate calculations.
6. Arbitration Proceedings:
Kemang Point, 3rd floor, Unit 3-02 Jl.
Kemang Raya No. 03,
South Jakarta. Jakarta 12720
Phone: 021-22716290
www.amoktarina.net
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The FCC Tribunal reviewed submissions and arguments from both parties. It concluded
that the claimant had failed to formally declare the respondent in default in compliance
with FCC Rules.
7. Final Decision:
The tribunal ruled that while the respondent wrongfully terminated the contract on April
24, 2024, the claimant had also failed to meet procedural obligations. The tribunal
ordered the contract to remain enforceable for the remaining deliveries but split the
arbitration costs evenly, with each party bearing their legal expenses.
This case exemplifies the importance of adhering to procedural rules in arbitration and
underscores AM Oktarina Counsellors At Law’s ability to navigate complex
international legal disputes effectively.
Legal Basis
1. FCC Arbitration and Appeal Rules (Applicable to contracts concluded on or after 0
July 2021) [“FCC Arbitration and Appeal Rules”]
2. Contract Rules for Cocoa Beans (Applicable to contracts concluded on or after 01
March 2023) [“CP4 Rules”)
3. Arbitration Act 1996
Disputing parties in international transactions generally predetermine the forum and/or
applicable law to be used when disputes arise. Determining such formalities is critical
since the parties often come from different countries with distinct legal systems.
Therefore, choice of forum and choice of law are essential for contracting parties when
determining which international arbitration forum will be used to resolve future
disputes.
Kemang Point, 3rd floor, Unit 3-02 Jl.
Kemang Raya No. 03,
South Jakarta. Jakarta 12720
Phone: 021-22716290
www.amoktarina.net
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When parties have predetermined their preferred international arbitration forum for
resolving disputes, they must clearly and explicitly state this choice in a written
agreement prior to any dispute. This ensures legal certainty for the contracting parties
and provides the arbitral tribunal with the necessary legal standing or authority to
adjudicate the dispute.
In the case experienced by our client, the arbitration was conducted under FCC
Arbitration, where the parties had explicitly stated in their contract:
“The parties agreed that any issues to be resolved, arising out of the contract, will be
referred to Arbitration under the prevailing rules of the Federation of Cocoa Commerce
Limited, London.”
Additionally, both parties must agree and declare that they are aware of, familiar with,
and willing to comply with the agreement incorporating the FCC Arbitration Rules. In
other words, one party must not exploit a dominant position to the detriment of the other
party’s understanding of the FCC Arbitration or other binding cocoa trade regulations.
Article 1.2 CP2 Rules:
“Any contract incorporating the Contract Rules for Packed Cocoa Products on Buyer’s
Call (CP2) shall also be deemed to incorporate the FCC Arbitration and Appeal Rules,
which the Parties declare they are familiar with and agree to, and shall form part of
the contract.”
If the choice of forum has been clearly stated and agreed upon in a written contract, any
aggrieved party under the contract has the legal standing to submit a claim against the
Respondent through the FCC Arbitration Secretary, as stipulated in Article 1.2 FCC
Arbitration Rules:
Article 1.1:
Kemang Point, 3rd floor, Unit 3-02 Jl.
Kemang Raya No. 03,
South Jakarta. Jakarta 12720
Phone: 021-22716290
www.amoktarina.net
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“The objective of FCC Arbitration is the prompt, economical, fair, and confidential
resolution, by Arbitrators, of disputes arising out of, or relating to, any contract for the
sale and/or purchase of cocoa beans and/or cocoa products concluded under the
Contract Rules of the FCC.”
Article 1.2:
“Any dispute arising out of, or relating to, any contract for the sale and/or purchase of
cocoa beans and/or cocoa products which is subject to the Contract Rules of the FCC
shall be referred to FCC Arbitration. The parties may, either pursuant to an arbitration
clause in a contract or by other written agreement, submit any other dispute to FCC
Arbitration.”
Furthermore, before submitting a claim, the Claimant must first issue a written warning
declaring the Respondent in default or breach, as stipulated under Article 19.1.1.2 FCC
CP4 Rules:
“If the seller fails to fulfill delivery within the agreed period, the buyer has five business
days to declare the seller in default.”
Article 18.4:
“Notwithstanding any other provision in these Contract Rules, if before the fulfillment
of their respective contractual obligations either Party displays an intention not to
perform or an inability to perform, the Counterparty may, by notice in writing to the
Party, declare the Party to be in default and call for the contract to be closed out.”
In this case, the arbitration application filed by the Claimant was deemed procedurally
premature as it was not preceded by a required written legal notice declaring the
Respondent in default. This preliminary and mandatory action must be satisfied by the
Claimant to establish the default of the Respondent and determine whether the contract
will continue.
Kemang Point, 3rd floor, Unit 3-02 Jl.
Kemang Raya No. 03,
South Jakarta. Jakarta 12720
Phone: 021-22716290
www.amoktarina.net
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Article 2.1:
“If a dispute is not subject to the time limits stipulated in the Contract Rules of the FCC,
the Claimant shall notify the Respondent of an application for FCC Arbitration and
submit its application for FCC Arbitration to the Secretary of the Federation within 56
consecutive days of the dispute having arisen, unless otherwise agreed by the parties.”
Article 2.2:
“The Claimant shall apply to the Federation for arbitration in accordance with Rule
2.1 and shall pay to the Federation any fees and/or expenses as provided in Rules 1.14
to 1.16 inclusive. The application must be made in writing, in five copies, and each
copy of the application must be accompanied by:
(a) details of the contract and the dispute;
(b) a copy of the notice of the application for FCC Arbitration that has been given to
the Respondent in accordance with Rule 2.1.”
Article 2.3:
“In the event of non-compliance with any provisions of Rule 2.2, arbitration claims
shall be deemed to be waived and barred, unless the Arbitrators shall, in their
discretion, determine otherwise.”
The tribunal ruled that although the respondent was found to have wrongfully
terminated the contract on April 24, 2024, the claimant also failed to fulfill its
procedural obligations. Furthermore, the tribunal declared that the respondent is not
obligated to make payment on the claimant’s claim of USD 2,904,000, as the claim
lacks sufficient legal basis. The tribunal also decided to dismiss the claimant’s claim
for damages. The arbitration costs are to be shared equally, and each party shall bear its
own legal expenses.
Kemang Point, 3rd floor, Unit 3-02 Jl.
Kemang Raya No. 03,
South Jakarta. Jakarta 12720
Phone: 021-22716290
www.amoktarina.net
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Based on the points above, the Claimant is legally obligated to notify the Respondent
appropriately and within the specified timeframe under Articles 2.1, 2.2, and 2.3 of the
FCC Arbitration and Appeal Rules.
B. Conclusion
Failure to consider the formal procedural requirements in arbitration proceedings may
result in serious legal implications and jeopardize the validity of the arbitral award
itself. In this context, formal requirements—such as the obligation to issue a written
notice to the party alleged to be in default—are procedural prerequisites that cannot be
ignored.
Thus, if arbitration proceeds without fulfilling these formal requirements, the resulting
award will be legally defective and may serve as grounds for annulment or refusal of
enforcement in a competent court. Consequently, the disregard of such prerequisites
constitutes not only a procedural oversight but also a violation of fundamental
principles in arbitration law, which can lead to significant legal consequences for all
parties involved.
In the discussion outlined above, AM Oktarina Counsellors At Law successfully
leveraged and highlighted the deficiencies and non-compliance of the claimant’s
submissions.
For further information, please call:
– partner@amoktarina.net
– n.pasaribu@amoktarina.net
– 0817779122
BREAKING GROUND IN ARBITRATION: AM OKTARINA’S KEY ROLE IN FCC CASE AA4718
