Key takeaways
Tribunal Can Interpret Subsequent Contracts
Broad arbitration clauses may cover disputes under later agreements.
Appeal Succeeds on Jurisdiction, Irregularity, and Law
Awarding damages without addressing termination clause was unjust.
Competing Jurisdiction Clauses Are Not Exclusive
Courts assess clauses in context of the entire transaction.
CAFI – Commodity and Freight Integrators DMCC -v- GTCS Trading DMCC [2025] EWHC 1350 (Comm)
The Commercial Court has found that where parties entered a subsequent contract which agreed to vary or extinguish rights under an earlier contract, the arbitral tribunal formed pursuant to the first contract had jurisdiction to interpret the terms of the subsequent contract. Unusually, the Court granted the appeals under sections 67, 68 and 69 of the Arbitration Act 1996 (AA 1996).
The background facts
The underlying dispute related to two contracts for the sale and purchase of Russian milling wheat, between CAFI Commodity & Freight Integrators DMCC (CAFI) as buyers and GTCS Trading DMCC (GTCS) as sellers.
Issues arose under the first contract because CAFI claimed they could not make the payments due to US sanctions against Russia, relying on a clause in the contract excusing performance for reasons of sanctions. GTCS disputed that the payment would be impacted by sanctions. This contract included a GAFTA arbitration clause.
As a way to resolve the dispute, the parties agreed the terms of a second contract for the same goods. This contract was duly performed, but the price for the cargo was lower than in the first contract.
The second contract included a termination clause which provided “Both parties have agreed that Contract No. RMW125-11032022-1 dd. 11.03.2022 [i.e. the First Contract] … is terminated and considered void”. This second contract also included a GAFTA arbitration clause.
GTCS commenced GAFTA arbitration proceedings under the first contract and claimed damages based on the price difference for the cargo between the first and second contracts. CAFI relied on the sanctions exemption in the first contract and on the termination clause in the second contract, contending that the termination clause extinguished all rights and liabilities under the first contract.
The GAFTA First-Tier Tribunal sided with CAFI and held that the parties had extinguished all rights and liabilities under the first contract by virtue of the termination clause in the second contract.
GTCS appealed. The GAFTA Appeal Board took the decision that, because it had been appointed under the first contract, it had no jurisdiction to consider the second contract and it, therefore, disregarded the termination clause. GTCS were awarded damages.
CAFI appealed to the Commercial Court under sections 67, 68 and 69 AA 1996.
The appeal to the Court
S.67 (jurisdiction)
CAFI argued the GAFTA Appeal Board was wrong to find that it had no jurisdiction to interpret the terms of the second contract. Alternatively, CAFI argued that if the Appeal Board was correct on that aspect, it had exceeded its jurisdiction by awarding damages with reference to the second contract (damages being assessed on the basis of the price differential between the two contracts).
S.68 (serious irregularity)
CAFI argued that the decision of the Appeal Board amounted to serious irregularity, leading to substantial injustice, where there was a remaining issue as to whether liability for damages was extinguished by the first contract.
S.69 (error of law)
CAFI also argued that it was an error of law for the Appeal Board to determine liability for damages in respect of a dispute where there was an issue surrounding a termination clause that had not been resolved (the Appeal Board having said that the issue was outside their jurisdiction).
CAFI argued in the alternative that the Appeal Board wrongly construed the second contract. One aspect of this was that the Appeal Board had held that in order to rely on the termination clause, CAFI had to show that the clause was “freely negotiated” or the subject of “clear discussion”.
The Commercial Court decision
Jurisdiction
The Court found as follows:
The GAFTA Appeal Board did have jurisdiction to interpret the terms of the second contract. The arbitration clause in the first contract was broad enough to cover the dispute since it extended to “all claims arising out of or under” the contract.
This was the case even where there were competing jurisdiction clauses and the dispute could also fall within the arbitration clause of the second contract.
The same decision would have been reached had there been no dispute resolution clause in the second contract or if it had contained a different English jurisdiction or arbitration provision.
Had the Appeal Board lacked jurisdiction to interpret the second contract, it would also have lacked jurisdiction to decide on liability in respect of the termination clause in the second contract.
Serious irregularity
The Appeal Board was wrong to have decided that it lacked jurisdiction to interpret the second contract and yet to have awarded damages without considering the impact of the termination clause. This resulted in a serious procedural irregularity that led to substantial injustice for CAFI.
Error of law
The Court held that:
There was an obvious error of law in awarding damages where the issue as to whether the terms of the second contract extinguished any liability for damages had not been determined.
No further error of law arose where the Appeal Board had (wrongly) determined it did not have jurisdiction to construe the terms of the second contract and its impact on the first contract. Therefore, the Court did not need to consider whether the Tribunal was right in stating that the second contract (and its termination clause) needed to have been freely negotiated to be binding.
Comment
Unusually, the appellant succeeded under all appeal avenues: ss67, 68 and 69 AA 1996.
Jurisdiction agreements are not necessarily mutually exclusive and, when faced with competing jurisdiction clauses, it is open to the court/tribunal to determine that either clause applies, instead of one clause applying to the exclusion of the other. The court/tribunal must interpret the parties’ contract in light of the transaction as a whole.
Although the Court did not have to deal with the issue as to whether the termination clause had been duly negotiated and whether additional evidence beyond the final agreement was required, the Court did make obiter comments to clarify the position that the terms of the final written contract will be key to the interpretation.
It will come as a relief to traders who are used to passing drafts back and forth that they need not show that each clause was the subject of “clear discussion”, a task that in practice may cause huge difficulty.
This article was co-authored by Sophie Lee.