English Commercial Court Clarifies the Legal Effect of Related Sequential Contracts with Overlapping Arbitration Clauses

25 June 2025

In CAFI v. GTCS Trading DMCC, the Commercial Court confirmed that the same dispute can fall within the scope of two separate arbitration clauses contained in related sequential contracts.

Background

The underlying dispute concerned two contracts for the same cargo of wheat. CAFI Commodity & Freight Integrators DMCC (CAFI) was the buyer and GTCS Trading DMCC (GTCS) was the seller under both contracts.

CAFI failed to perform the initial contract (the First Contract). The parties subsequently entered into a second contract which was successfully performed (the Second Contract). The Second Contract contained a termination clause which provided that "both parties" agreed that the First Contract would be “terminated and considered void” (the Termination Clause). The Second Contract contained an arbitration clause in the same terms as the First Contract.

GTCS commenced GAFTA arbitration proceedings against CAFI, alleging repudiatory breach of the First Contract. In its defence, CAFI argued that there was no basis for a damages claim due to the Termination Clause. A Tribunal found that GTCS had waived its entitlement to damages under the First Contract by agreeing to the Termination Clause.

GTCS subsequently appealed to a GAFTA Appeal Board (the Appeal Board). In its award, the Appeal Board found in favour of GTCS. The Appeal Board held that it lacked jurisdiction in those proceedings to assess the effect of the Termination Clause in the Second Contract because no notice of arbitration had been given under the Second Contract. The Appeal Board also noted that there was no evidence indicating that the parties had “freely negotiated” the specific wording of the Termination Clause, nor was there any “clear discussion” on its intended effect. As a result, the Appeal Board ordered that CAFI compensate GTCS in damages.

CAFI's Appeal

CAFI appealed the Appeal Board's Award on three main grounds under the Arbitration Act 1996 (the Act):

First Ground

Under section 67 of the Act, CAFI argued that the Appeal Board’s finding that it lacked jurisdiction to interpret the terms of the Second Contract or how they impacted on the First Contract was incorrect.

Second Ground

CAFI argued in the alternative that if the Appeal Board had no such jurisdiction, then it had exceeded its jurisdiction by finding that CAFI was liable in damages. CAFI alternatively argued that this amounted to a serious procedural irregularity under section 68 of the Act or an obvious error of law under section 69 of the Act.

Third Ground

Under section 69 of the Act, CAFI argued that the Appeal Board had made an obvious error of law by concluding that CAFI could only rely on the Termination Clause if it could demonstrate that (i) it was ‘freely negotiated’ or the subject of ‘clear discussion’, and/or (ii) conclude that the effect of the Termination Clause was not to negate any right to damages under the First Contract.

Decision

The Commercial Court upheld CAFI's appeal.

In relation to the First Ground, the Court found that the Appeal Board did have jurisdiction over the issues in dispute concerning liability for breach of contract and the effect of the Termination Clause. The Court observed that in cases of multiple contracts, contracts must be construed in light of the transaction as a whole and that jurisdiction agreements are not necessarily mutually exclusive. The Court placed emphasis on the fact that the arbitration clause in the First Contract applied to "“[a]ny dispute arising out or under this contract”. That clause was considered sufficiently broad to cover the issues in dispute. Additionally, the fact that the arbitration clause in the Second Contract provided for concurrent hearings of separate arbitrations did not require the commencement of a separate arbitration under the Second Contract in order for the Tribunal under the First Contract to have jurisdiction over the dispute.

Regarding the Second Ground, the Court held that accepting for the sake of argument that the Appeal Board had no jurisdiction to interpret the terms of the Second Contract (as CAFI denied), it exceeded its own jurisdiction by rendering CAFI liable for damages. This was because CAFI’s primary argument was that GTCS waived its entitlement to sue for breach of the First Contract (the Waiver Issue). Deciding the Waiver Issue necessarily implicated an interpretation of the Termination Clause under the Second Contract. If the Appeal Board did not have the jurisdiction to rule on that point, then it had no jurisdiction to determine the Waiver Issue.

The Court also considered CAFI's alternative arguments. In this respect, the Court held that the Appeal Board's decision amounted to a "serious procedural irregularity" under section 68 of the Act. This was because the Appeal Board could not "properly or fairly" determine that CAFI was liable for breach of the First Contract before the Waiver Issue had been determined. Alternatively, the Court held that it was an obvious error of law for the Appeal Board to have determined the Waiver Issue "without interpreting and giving effect to the Second Contract as a binding agreement between the parties directly addressing (at least on CAFI’s case) that very issue."

The Court held that the Third Ground did not arise as the Appeal Board did not attempt to construe the Second Contract as a contract.

Takeaways

This rare, successful challenge under all three of sections 67, 68 and 69 of the Act demonstrates the English courts' willingness to disturb findings of arbitral tribunals where necessary.

Significantly, this decision affirms that in instances where parties enter into related sequential contracts and a dispute arises between them, the question as to whether multiple arbitrations will need to be commenced will depend ultimately on the scope of the arbitration clause in the initial contract. Where the related sequential contracts contain clauses which purport to vary the terms and/or validity of the initial contract, multiple arbitration proceedings will not necessarily need to be commenced. Rather, if the arbitration agreement in the initial contract is sufficiently broad to cover the dispute, a tribunal constituted under the arbitration agreement in the initial contract will still have jurisdiction over that dispute. That tribunal can interpret the initial contract with reference to the terms of the subsequent related contract. This accords with the well-established Fiona Trust presumption that parties generally intend for claims and disputes to be determined in the same forum.

This decision serves as an important reminder for parties entering into related sequential contracts to draft their arbitration agreements in broad and consistent terms to maximise the likelihood of disputes being heard in a single forum. This will help to minimise the risk of duplicate arbitral proceedings and conflicting awards, thereby saving time and costs.

This case also carries significant implications for parties seeking to avoid multiple arbitral proceedings under related contracts. It confirms that even where related contracts contain different arbitration clauses, a dispute arising under both may still be referred to a single arbitration - provided that the clause in one contract is drafted broadly enough to capture the dispute, and the parties and issues are sufficiently connected. This avoids the need to commence parallel arbitrations or rely on consolidation mechanisms, which typically require express party agreement or institutional rules allowing for consolidation.

CAFI – Commodity & Freight Integrators DMCC v GTCS Trading DMCC [2025] EWHC 1350 (Comm)