Judgment Citation: CAFI v. GTCS Trading DMCC [2025] EWHC 1350 (Comm)
Judgment Date: 3 June 2025
Court: High Court (Commercial)
Judge: Mr Justice Henshaw
Case Background
The case arose over a dispute concerning a contract for the sale of wheat, which was alleged by GTCS Trading DMCC, (“the Seller”), to have been repudiated by Commodity & Freight Integrators DMCC (CAFI), (“the Buyer”). The parties subsequently agreed to a second contract for the same sale, this time at a lower price, which included a new termination clause, stipulating that the first contract was “terminated and considered void” (“the Termination Clause”). The Buyer understood that the effect of this clause was to bring the first contract to an end negate any potential claim against them arising out of their (alleged) repudiation of the first contract.
A GAFTA tribunal found that GTCS had waived its right to damages under the first contract by agreeing to the Termination Clause in the second. In a subsequent arbitration before the GAFTA Board of Appeal (“the Board”), the Seller argued that the Board could not consider the second contract’s Termination Clause, as this was outside the scope of the first contract – under which the arbitrators had been appointed. Accordingly, any arbitration relating to the Termination Clause would have to be commenced under the second contract’s arbitration clause.
The Buyer disagreed with this, arguing that the dispute over the Termination Clause and the Seller’s rights to claim damages was material to both contacts’ arbitration agreements. The Board agreed with the Seller finding that it had no jurisdiction to consider the effect of the Termination Clause in the second contract and in the absence of such a defence, proceeded to make an unconditional award of damages in favour of the seller. The decision was challenged under ss. 67 to 69 Arbitration Act 1966 before the High Court.
Decision
In the Commercial Court, Mr Justice Henshaw agreed with the Buyer, upholding its appeal and rejecting the notion that jurisdiction agreements must always be considered mutually exclusive. Instead, matters must be looked at in the round and the Court found that either clause may apply at the option of the parties, rather than only one at the expense of the other. In support of his decision the judge cited previous dicta in Deutsche Bank AG v Comune di Savona [2018] and Albion Energy Ltd v Energy Investments Global BRL [2020] had hinted at a willingness among English courts to accept the applicability of multiple jurisdiction clauses as to the same dispute.
Dealing with the GAFTA Board’s initial decision, the Court held that the award of unconditional damages to the Seller constituted a procedural irregularity (in the sense that it pre-judged the Buyer’s defence by disregarding the Termination Clause arguments), jurisdictional error (in that the Board had effectively resolved the dispute relating to the Termination Clause over which it had no authority), and a serious error of law. Whilst the question of law of whether an award of damages was available to the Board once it had ruled it had no jurisdiction had not been argued directly before the Board, the Court accepted the approach outlined in Gbangbola v Smith & Sherif (1999). That is to say, a question of law had been “in play” making it susceptible to appeal under s 69 if it is deemed “integral to the resolution of the dispute” presented to the arbitrator even if not directly argued.
Analysis and Commentary
This was a very bad day for the GAFTA Board of Appeal, their award being set aside on all three grounds under ss 67-69 of the 1996 Act. The Court’s acceptance that either one of competing jurisdiction clauses in related transactions can apply to the same matter, and that they are not mutually exclusive, is both pragmatic and commercial, as the facts of this case illustrate. It allows all relevant matters of dispute to be resolved in a single forum, without the risk of inconsistent or incoherent findings. Parties should still take care in drafting and reviewing their arbitration clauses, and lawyers should ensure they are aware of potential overlapping jurisdictions and the opportunities or challenges that this may present.
If you would like advice on how the implications of overalapping arbitration clauses can affect all parties please contact Andrew Purssell.
