ICA tells Vietnam to play by rules

The UK-based association’s (ICA) president Antonio Vidal Esteve, managing director Kai Hughes and Richard Pollard, chairman of the ICA Rules Committee, last week met with leaders of key ministries and cotton industry players in Vietnam to discuss solutions to the large numbers of arbitration cases that have arisen recently, due to Vietnamese cotton importers’ failure to abide by the ICA’s globally recognised bylaws and rules.

The ICA mission also held talks with leaders of the Delegation of the European Union to Vietnam and the British embassy to explore means to raise awareness and encourage compliance with the ICA bylaws and rule Vietnam.

Pollard, chairman of the ICA Rules Committee, told VIR that about 44 arbitrations had been initiated over the past 18 months against Vietnamese cotton importers and the number of arbitrations might continue to rise in the coming months.

“Between August 2010 and March 2011, there was a violent spike in global cotton prices rising to a high of $2.20 per pound from an average price of 70 cents before falling sharply again to the usual rates. This placed Vietnamese cotton spinners, who had contracted to buy cotton at high prices, into grave difficulties in the falling market. Instead of talking with the suppliers to find a solution many Vietnamese firms simply broke their contracts with foreign cotton exporters,” Pollard said.

Pollard declined to name the Vietnamese spinning mills concerned citing confidentiality between the parties, but stressed that: “Those Vietnamese spinning mills which defaulted on contracts and refused to comply with ICA arbitration awards will be listed on the ICA list of defaulters together with associated companies. ICA members are not permitted to trade with companies on the default list putting Vietnamese cotton spinners at a significant disadvantage in the market.”

The Vietnam Cotton and Spinning Association reported that Vietnam annually imported around 400,000 tonnes of assorted cotton, accounting for 5 per cent of the world’s total cotton output. Locally-sourced cotton could currently meet only 1 per cent of local production demand. The country was also a big garment and textile exporter which last year earned nearly $16 billion from exporting garment and textile products and has enjoyed 20 per cent annual growth for the past five years.

Vietnam’s textile and garment industry employed more than 2.5 million people and made up some 15 per cent of the country’s export revenue. Textile and garment revenues for 2012’s first half stood at $7.5 billion.

“We are increasingly concerned about the high proportion of Vietnamese partners who are defaulting on their contracts. The recent fluctuations in cotton price was a global problem but in other countries buyers negotiated with sellers to reach a compromise solution. Thus we have to come to Vietnam to discuss the solutions and understand the country’s rules in settling international trade disputes and enforcing the awards of foreign arbitral institutions,” Pollard said.

One of the ICA’s primary functions is its arbitration service. If cotton is traded under ICA bylaws and rules, parties have the right to apply for ICA arbitration in the event of a contract dispute. The service is impartial and internationally recognised.