Partner Singapore
"The English Commercial Court has determined that a dispute may fall within two (or more) different arbitration agreements in different contracts relating to the same transaction."
CAFI – Commodity & Freight Integrators DMCC v GTCS Trading DMCC [2025] EWHC 1350 Comm
The English Commercial Court has determined that a dispute may fall within two (or more) different arbitration agreements in different contracts relating to the same transaction. In circumstances where such an overlap exists, the claimant can choose which arbitration agreement to trigger.
Background
Genesis of the dispute
The dispute concerned two contracts for the sale of the same cargo of Russian milling wheat by GTCS Trading DMCC (“GTCS”) to CAFI Commodity & Freight Integrators DMCC (“CAFI”), with delivery C&FFO to one Egyptian Mediterranean port.
The first contract provided that CAFI would pay a price of US$465 PMT for the cargo (the “First Contract”). However, whilst the cargo was enroute to Egypt, CAFI stated that it was unable to make payment due to Russian sanctions, which was a permitted reason for non-payment under the First Contract. GTCS disputed that CAFI was unable to make payment.
After the vessel arrived in Egypt, the parties agreed a second contract in relation to the same cargo, via a broker, for a revised price of US$440 PMT (the “Second Contract”). The Second Contact contained a clause stating that the First Contract was terminated and considered void.
Both contracts contained arbitration clauses providing for disputes to be settled by arbitration under the Grain and Feed Trade Association (“GAFTA”) Rules. GTCS commenced proceedings under the First Contract, claiming damages based on the price differential between the two contracts.
GAFTA Arbitration
GTCS claimed that by failing to pay for the cargo, CAFI had committed a repudiatory breach of the First Contract. CAFI argued that since the First Contract had been terminated (pursuant to the termination clause in the Second Contract), GTCS was not entitled to claim under the First Contract for CAFI’s failure to make payment.
GTCS argued that performance under the First Contract had been concluded and thus was not voidable. Additionally, since the tribunal was constituted under the First Contract, it had no jurisdiction to consider the termination clause in the Second Contract. Finally, if CAFI wished to rely on the termination clause, it would need to commence a separate arbitration under the Second Contract.
The First-tier Tribunal issued an award dismissing GTCS’s claim (the “First Award”). It found that whilst it had no jurisdiction under the Second Contract, the termination clause in the Second Contract was evidence that could not be ignored. Accordingly, by executing the Second Contract, GTCS had waived its claim for damages under the First Contract.
GAFTA Appeal Board
GTCS appealed the First Award to the GAFTA Appeal Board. CAFI again relied on the termination clause in the Second Contract to deny payment under the First Contract and GTCS again argued that the termination clause was ineffective. GTCS also argued that neither the First-tier Tribunal nor the Appeal Board had jurisdiction to consider the Second Contract, since both were constituted pursuant to the arbitration agreement in the First Contract.
The GAFTA Appeal Board found that, since no notice of arbitration was given under the Second Contract, neither the First-tier Tribunal nor the GAFTA Appeal Board could rule on matters arising under the Second Contract, including the termination clause. However, the Second Contract remained good evidence of matters taking place after the termination of the First Contract.
The GAFTA Appeal Board found that CAFI was not excused from making payment under the First Contract and CAFI’s failure to pay was a repudiatory breach entitling GTCS to damages. Finally, the GAFTA Appeal Board held that GTCS had not waived its rights to claim against CAFI under the First Contract merely by entering into the Second Contract.
The GAFTA Appeal Board therefore issued an award requiring CAFI to pay GTCS US$700,000 plus interest, fees and costs (the “Appeal Award”).
"The arbitration clause was wide enough to cover the dispute, since it applied to “all claims arising out of or under” the First Contract."
Commercial Court Decision
CAFI challenged the Appeal Award under sections 67, 68 and 69 of the Arbitration Act 1996. The English Commercial Court held as follows.
Jurisdiction – s.67
- the GAFTA Appeal Board’s conclusion on its substantive jurisdiction was wrong. The GAFTA Appeal Board did have jurisdiction to determine how the termination clause in the Second Contract affected the parties’ rights and liabilities under the First Contract;
- this was because the arbitration clause was wide enough to cover the dispute, since it applied to “all claims arising out of or under” the First Contract;
- this was so, even where there were competing jurisdiction clauses and the dispute could also fall under the arbitration agreement in the Second Contract;
- this would also have been the case if there was no dispute resolution mechanism in the Second Contract, or if the Second Contract had contained a different arbitration agreement to the First Contract; and
- further – and on the other hand – if the GAFTA Appeal Board had no jurisdiction to interpret the Second Contract then, logically, it would have exceeded its jurisdiction by interpreting the Second Contract and finding CAFI liable for the price differential between the first and second contracts.
Serious Irregularity – s.68
- the GAFTA Appeal Board’s failure to determine whether CAFI’s liability was extinguished by the termination clause in the Second Contract was a serious irregularity, leading to substantial injustice.
"It was obviously wrong for the GAFTA Appeal Board to award GTCS damages under the First Contract without interpreting and giving effect to the terms of the Second Contract."
Error of law – s.69
- it was obviously wrong for the GAFTA Appeal Board to award GTCS damages under the First Contract without interpreting and giving effect to the terms of the Second Contract; and
- the GAFTA Appeal Board had posited that in order to bind on the parties, the termination clause in the Second Contract would need to have been freely negotiated and discussed. The Court did not need to decide this matter where it had already determined that the GAFTA Appeal Board had wrongly concluded it did not have jurisdiction to consider the Second Contract. However, obiter, the Court commented that the Appeal Board’s approach on this point was obviously wrong as a matter of law.
Comment
It is not every day that a party succeeds in appealing an arbitral award under sections 67, 68 and 69 of the Arbitration Act 1996.
This is a sensible decision reflecting the commercial reality of contract layering in international trade. The Commercial Court’s judgment should offer comfort to trading companies who regularly enter (and amend) different contracts relating to the same goods. In particular, it is welcome clarification that the existence of separate arbitration agreements will not constrain a tribunal from considering the full contractual nexus relating to a particular transaction, where the scope of the relevant arbitration agreement allows.
"Parties should ensure harmonious arbitration agreements or clearly state which agreement takes precedence in the event of a dispute."
It is also a timely reminder that, when negotiating related contracts, parties should ensure harmonious arbitration agreements or clearly state which agreement takes precedence in the event of a dispute. The Court did not further consider the effect of its finding that arbitration agreements are not always mutually exclusive (such that theoretically, two or more arbitration agreements can apply to disputes under the same transaction). The practical effects of this judgment remain to be seen, particularly where the Arbitration Act 1996 (or 2025) does not consider how concurrent arbitrations in relation to the same subject matter might be dealt with.
If you have any concerns about how this judgment may affect you, please reach out to us or to your usual WFW contact for more information. We are experts in commercial advisory work, and regularly structure agreements to avoid issues before they arise.
Key contacts
Partner Singapore
Senior Associate Singapore
