Interview with Marc van Maanen and Thomas Giesbertz
Anticipating risks from decertification
During a webinar on 11 January 2022 Van Traa’s international trade laywers, Marc van Maanen and Thomas Giesbertz, explained how decertification of batches of organic raw materials can have major consequences for both sellers and buyers. In an interview in the Food & Agri journal they elaborated on this issue by referring to the ways in which companies could anticipate this risk.
The trade in organic raw materials has increased substantially. Sellers and buyers would do well to guard themselves against additional risks.
The decertification of a batch of organic raw materials can have major consequences for both the seller and the buyer. International trade lawyers Marc van Maanen (57) and Thomas Giesbertz (33), both associated with law firm Van Traa, explain during a webinar in the Biokennisweek how companies can arm themselves against the risks of decertification. According to Van Maanen, by no means is it always clear which party will bear the costs after decertification.
How common is decertification of organic goods?
“Not often, but with some regularity. Sometimes it is not affect just a batch of raw materials, but a whole company. In the latter case the consequences are, of course, even greater.”
Is fraud a big problem in organic trade?
“Fraud is everywhere, but fortunately in the organic sector fraud cases form an exception. In most cases it involves an accidental contamination of a batch of raw materials for food or feed.”
Are organic entrepreneurs aware of the risks and liabilities under contracts of sale in relation to decertification of organic goods?
It often hangs over their heads like a sword of Damocles. If it goes wrong, it can go wrong badly. Writing down a batch of organic raw materials to conventional can easily cost a company a few million euros.”
How can companies arm themselves against this risk?
“That is difficult. The problem is that to the present date, no insurance covers these kind of risks. For parties further down the chain a liability policy could sometimes offer some relief. The example that comes to mind is a situation in Germany where a batch of mixed feed was decertified after the delivery thereof by an animal feed company. This meant that the organic poultry farmers also suffered damages as a result of decertification of the eggs they had produced. These types of damages could be covered by a liability insurance. But that is mainly it when it comes to insuring risks.”
How could parties anticipate this?
“By providing for the correct clauses in contracts. Only this way parties can cover themselves against such high risks. Large companies often have their own legal experts who deal with this type of clauses, but we can also assist companies in drawing up contracts.”
Does any uniform legislation for the global trade in organic raw materials exist?
“International sales law contains open standards that are interpreted differently. The basic principle in international sales law is, for example, that in general, parties bear their own losses. However, case law exists which shows that a buyer is allowed to have certain expectations. There also is the Vienna Sales Convention, to which most countries, except for England, have become a party. Unfortunately, the Convention is not very well known and unknown makes unloved. In addition, some countries doubt whether this Convention is appropriate for the trade in raw materials and food. The Convention contains no mandatory rules and parts of the treaty are easily circumvented by excluding certain matters, for instance in the general terms and conditions. Nevertheless, we believe that the Convention could contribute to providing for more clarity.”
In practice, which party most often has to bear the loss after decertification of raw materials, the buyer or the seller?
“Unfortunately, there is no clear trend visible yet. The problem is that there are conflicting opinions and statements. The case law is limited and not all decisions of the dispute resolution committees of interest groups are made public. Parties should be aware of that.”
Van Traa Advocaten
Van Traa Advocaten in Rotterdam is a law firm specialised in international trade, transport and logistics. It assists companies that operate in the trade in commodities such as grains, seeds and leguminous vegetable, with more and more companies that are active in the trade of end products.
The law firm has specialist knowledge of legal issues related to the production of and trade in organic goods. For instance, the law firm regularly deals with supervisory matters.
Van Traa observes that the trade in organic raw materials has grown rapidly. For example, more and more organic raw materials for animal feed originate from countries such as Ukraine, Romania, Bulgaria and China. Logically, an increase in trade leads to more legal conflicts.
J.W. Veldman, ‘Decertificering bio-grondstoffen fors risico’, Food & Agri 2022, nr. 1, p. 4.