CL-2024-000080 - [2025] EWHC 1350 (Comm)

ANALYSIS

In their written submissions for the present hearing, GTCS submitted inter alia that there was in fact no jurisdiction issue, properly so called, despite the Appeal Board’s use of the terminology of jurisdiction. They submitted that “[a] refusal to construe a term or terms of contract (under which a tribunal has already decided it has no jurisdiction) is not per se an issue going to “substantive jurisdiction” under s30 Arbitration Act. On the contrary, applying the tests referred above, this is a matter going to the merits, and which permits a range of responses.” Similarly, GTCS submitted as follows in its skeleton argument:

“31.

In any event, and regardless of Award §9.8, the Appeal Board did reference the Termination Clause and its construction (§9.6-§9.7), and considered the Second Contract (which contained the Termination Clause) “good evidence” of what had happened (§9.8).

32.

The Buyers have latched onto the use of the word “jurisdiction” by the Appeal Board in §9.8. The Appeal Board’s language is not legally felicitous: however, trade arbitrators are neither expected nor required to deploy language with the precision of Commercial Court judges, and the Court should read their awards with that in mind. The Appeal Board’s meaning is tolerably clear: there was no jurisdiction – properly understood – under the Second Contract (as also found by the First Tier). However, the Appeal Board – like the First Tier Tribunal – considered the Second Contract was evidence of what happened between the Parties after the First Contract. Such evidence could then be properly weighed and assessed within an arbitration founded on the First Contract.

33.

The First Tier Tribunal and Appeal Board differed in the interpretation they placed on the Second Contract as evidence of later events and how that then fitted into the assessment of the Buyers’ argument that the Sellers had waived their rights. This is a straightforward difference in evaluating evidence. This is not susceptible to a s67 challenge. On the contrary, the Court must be astute to avoid challenges being used to circumvent an Award’s unchallengeable assessment of evidence.”

I do not accept those submissions. Section 30 of the Act indicates that an arbitral tribunal’s substantive jurisdiction includes “what matters have been submitted to arbitration in accordance with the arbitration agreement”. The Appeal Board decided that it had “no jurisdiction to interpret the terms of the [Second Contract] or how any of those terms impact on the [First] Contract. It remains good evidence of what happened after the termination of the [First] Contract”. Further, when purporting to consider the Second Contract in that way, i.e. as ‘evidence’ of what happened after termination of the First Contract, the Appeal Board ignored its actual provisions: see, for example, the Appeal Board’s statement in Appeal Award § 9.6 that there was “no suggestion that the [First] Contract should be specifically considered “void” …”, in circumstances where the Second Contract stated in terms that the First Contract should indeed be “considered void”. The obvious, and indeed only, explanation is that the Appeal Board took that course because it considered that it lacked jurisdiction to consider how the Second Contract, as a contract, affected the parties’ rights and liabilities arising from the First Contract and its termination. Indeed, in oral submissions counsel for GTCS maintained that the Appeal Board did not have jurisdiction to consider that matter: rather, it would have been necessary for CAFI to commence a second arbitration.

Accordingly, the suggestion that no question of jurisdiction arose or arises is in my view wholly without merit. There plainly was a jurisdictional issue, as both parties and the Appeal Board itself recognised at the time.

As to the correct resolution of that issue, CAFI cited (and GTCS did not take issue with) the helpful summary set out in Dicey, Morris & Collins on the Conflict of Laws (16th Edition) at 12-082:

“It may be that the many decisions in this area have over-elaborated the application of familiar principles of construction, but the following propositions can be derived from them:

(1)

Jurisdiction clauses should be construed widely and generously.

(2)

An agreement which is part of a series of agreements should be construed by taking into account the overall scheme of the agreements.

(3)

It is generally to be assumed that just as parties to a single agreement do not intend as rational business people that disputes under the same agreement be determined by different tribunals, parties to an arrangement between them set out in multiple related agreements do not generally intend a dispute to be litigated in two different tribunals.

(4)

Where there are multiple related agreements, the task of the court in determining whether the dispute falls within the jurisdiction clauses of one or more related agreements depends upon the intention of the parties as revealed by the agreements (at the time when they were entered into) as against these general principles.

(5)

Rational business people are unlikely to intend that disputes between them should fall within the scope of two inconsistent jurisdiction clauses.

(6)

What is required is a broad, purposive and commercially-minded construction, in the light of the transaction as a whole, taking into account the overall scheme of the agreements and reading sentences and phrases in the context of that overall scheme.

(7)

This may include enquiring under which of a number of inter-related contractual agreements a dispute actually arises, and seeking to do so by locating its centre of gravity and thus which jurisdiction clause is closer to the claim.

(8)

Nevertheless the normal process of construction may not be able to avoid a degree of fragmentation and overlap.”

The cases also establish that where there are multiple contracts containing arbitration agreements or jurisdiction clauses, the task of the court is to construe the parties’ contract in the light of the transaction as a whole: see, e.g., UBS AG v HSH Nordbank AG [2009] EWCA Civ 585, [2009] 2 Lloyd’s Rep 272 at [83]. Further, jurisdiction agreements are not always mutually exclusive: Deutsche Bank AG v Comune di Savona [2018] 4 WLR 151 at [31]; Albion Energy Ltd v. Energy Investments Global BRL [2020] 1 Lloyd's Rep. 501 at [17].

The arbitration clause in the First Contract, which I have quoted earlier, applied to:

“[a]ny dispute arising out or under this contract”

In my view a dispute about whether CAFI was liable to GTCS for breach of the contract, or whether the parties had subsequently reached an agreement to treat the contract as void and thereby to waive any such liabilities as might have arisen, is a dispute arising out of or under the First Contract: whether or not it might also fall within the Second Contract. I agree with CAFI that the objective intention of the parties at the time of entering into the First Contract must have been that disputes relating to the validity and continuing effect of the First Contract would be resolved under the arbitration agreement in that contract; and, further, that in entering into the Second Contact the parties were not (objectively) intending to carve out a discrete class of disputes relating to the validity and continuing effect of the First Contract – viz disputes arising out of the Termination Clause in the Second Contract – that were not to be subject to the arbitration agreement in the First Contract. Such disputes in my view fell within the scope of the arbitration clause in the First Contract. They may also have fallen within the scope of the arbitration clause in the Second Contract, and the latter would in any event cover disputes of the usual kind about the performance of the sale and purchase transaction provided for in the Second Contract.

In oral submissions, GTCS appeared to accept that if the Second Contract had contained no jurisdiction or arbitration clause at all, then the dispute about the contractual effect of the Termination Clause would have been within the arbitration clause in the First Contract and therefore a matter over which the Appeal Board had jurisdiction. GTCS appeared also to accept that the same would be the case if the Second Contract had contained (a) an English jurisdiction clause or (b) an arbitration clause providing for a regime other than GAFTA. In any event, it is clear in my view that the Appeal Board would have had jurisdiction in all three examples.

However, in its oral submissions (not presaged in its evidence or skeleton argument, nor in the reasoning of either the First Tier Tribunal or the Appeal Board) GTCS argued that the position was different here because the Second Contract provided for GAFTA arbitration. GAFTA rule 3.4 provides that:

“Applications to Gafta for the appointment of an arbitrator shall be accompanied by: -

(a)

prima facie evidence that the parties have entered into a contract subject to these Rules, ..” (emphasis added)

and hence requires that a separate arbitration be commenced in respect of each contract involved. However, unlike the position under section 35 of the Act or under most institutional rules, GTCS submitted, GAFTA rule 7.2 allows a concurrent hearing to be held in respect of more than one arbitration, even without the parties’ agreement:

“In the absence of an agreement from all the parties involved, the tribunal has the right to conduct arbitral proceedings concurrently with other arbitral proceedings, and, in particular, concurrent or consolidated hearings may be held, but separate awards shall be made pursuant to each contract.”

Thus, GTCS argued, the parties’ entry into the Second Contract with a GAFTA arbitration clause showed that they envisaged that any issue relating to the Second Contract would require a second arbitration to be commenced: a tribunal appointed pursuant to the arbitration clause in the First Contract could not take jurisdiction “under” (as GTCS put it) the Second Contract. Further, it would be for CAFI, not GTCS, to commence any such arbitration: as they had belatedly done (subject to any time bar issue, as to which GTCS reserved its position). GTCS also cited in this context A v B [2017] EWHC 3417 (Comm), [2018] Bus LR 778, where Phillips J held to be invalid an attempt under the LCIA rules to commence a single arbitration in respect of two separate contracts between the parties for the sale and purchase of crude oil.

I do not accept that submission. The question of needing two separate arbitrations arises only if the dispute about the effect of the Termination Clause on the First Contract and the parties’ rights and liabilities under it falls outside the scope of the arbitration clause in the First Contract. I see no reason why the parties, by choosing GAFTA arbitration under the Second Contract (including the facility for concurrent hearings of separate arbitrations), should be objectively taken to have varied the arbitration clause in the First Contract, narrowing it so as to exclude any such dispute from its scope and thereby make two arbitrations necessary. Rational parties are in my view unlikely to have intended that.

For these reasons, the Appeal Board in my view reached a conclusion about its substantive jurisdiction that was incorrect. The Appeal Board did have jurisdiction to determine how the Termination Clause in the Second Contract, as a contract, affected the First Contract and the parties’ rights and liabilities under it, including CAFI’s contention that the parties thereby agreed to waive any right to sue for breach of the First Contract. Challenge 1 therefore succeeds.

CAFI submits that if (contrary to CAFI’s primary case) the Appeal Board was right to find that it had “no jurisdiction to interpret the terms of the re-sale or how any of those terms impact on the Contract”, then it would follow that the Board had no jurisdiction to determine the Termination Clause Issue. However, the Board held that CAFI was liable in damages to GTCS. By so holding, the Board effectively determined (sub silentio and presumably without intending to do so) that the Termination Clause did not have the effect of precluding GTCS from claiming damages. That determination exceeded the jurisdiction which (on this hypothesis) the Board enjoyed.

In response to this head of challenge, GTCS submits that the Appeal Board was able and entitled to conclude that there was no waiver of GTCS’s right to damages, having regard to the Second Contract as “good evidence” of what happened after termination of the First Contract (i.e. looking to the factual existence of the Second Contract), together with the surrounding circumstances and GTCS’s prior reservation of rights. Further, this was an evaluative matter going to the merits, not a matter of jurisdiction within section 30 of the Act.

I do not accept that submission. The Second Contract was not merely a piece of factual evidence to be evaluated as part of the circumstances as a whole. It was a binding contract and needed to be treated and interpreted as such. The ‘waiver’ issue could not be determined without doing so, because CAFI’s essential argument was that by the Second Contract GTCS had agreed not to sue for breach of the First Contract. If the Appeal Board did not have the jurisdiction to decide that point itself, then it lacked jurisdiction to determine the waiver issue, and exceeded its jurisdiction by purporting to do so. Challenge 2 therefore succeeds on this basis, pursuant to section 67 of the Act.

In case I am wrong in that conclusion, I consider CAFI’s alternative arguments.

The first was that it was a serious procedural irregularity for the Appeal Board to hold CAFI liable for damages notwithstanding a live issue as to whether the Claimant’s liability for damages was extinguished by the Second Contract. CAFI makes this point by reference to section 68(2)(a) and/or (f) of the Act, i.e. (a) failure by the tribunal to comply with section 33 (general duty of tribunal) and/or (f) uncertainty or ambiguity as to the effect of the award. Of the two, I consider (a) the more pertinent one.

The tribunal’s general duty under section 33 is to:

“(a)

act fairly and impartially as between the parties, giving each party a reasonable opportunity of putting his case and dealing with that of his opponent, and

(b)

adopt procedures suitable to the circumstances of the particular case, avoiding unnecessary delay or expense, so as to provide a fair means for the resolution of the matters falling to be determined.”

CAFI submits that element (a) of the duty was breached by prejudging an issue (the waiver issue) which – on the present hypothesis – could be determined only in another forum.

GTCS refers to the deference which is properly afforded to arbitrators on procedural matters (among others). It submits that a tribunal cannot be expected not to determine an issue as to damages under one contract (under which it has jurisdiction), purely because there is a later contract under which neither party made a reference to arbitration. CAFI could have started its own arbitration under the Second Contract, and that would have been a logical sensible course, as was obvious at least when the First Tier Tribunal declined jurisdiction under the Second Contract; and such an arbitration could have been joined to the existing arbitration. CAFI could also have sought a stay of the arbitration under the First Contract pending an arbitration under the second arbitration. In the event, CAFI started a reference under the Second Contract only when the present challenge was already live. CAFI’s evidence indicates that “It did not occur to the Claimant that the Board might hold the Claimant liable in damages before the dispute as to the effect of the Second Contract had been determined.” However, CAFI ought to have realised it, especially given that the First Tier Tribunal had already observed that there was no notice of arbitration from either party under the Second Contract.

Clearly, CAFI’s position was that the Appeal Board did have jurisdiction to consider the waiver issue in full, including in particular the effect of the Second Contract as such. In principle, CAFI could have asked the Appeal Board, by way of alternative, to stay the proceedings in the event that the Appeal Board took a different view on the jurisdiction issue. However, determination of the waiver issue was logically prior to any decision that CAFI could be liable for breach of the First Contract: the Appeal Board could not properly or fairly determine the latter before the former had been determined. In my view that was serious procedural irregularity, and one which evidently resulted in substantial injustice as it meant the critical waiver issue was pre-emptively determined against CAFI. Challenge 2 would thus also succeed under section 68 of the Act.

In the further alternative, CAFI submits that it was an obvious error of law for the Appeal Board to decide that it could hold CAFI liable in circumstances where there was an issue as to whether any liability for damages had been extinguished, and that issue had not yet been resolved by a competent court or tribunal. Further, the Appeal Board was in substance asked to determine that issue, in that GTCS invited the Appeal Board to conclude that it had no jurisdiction to consider the Second Contract as such, yet invited the Appeal Board nonetheless to hold CAFI liable in damages for breach of the First Contract. CAFI points out that a question of law can be “in play” in an arbitration even if it is not expressly argued by the parties: Gbangbola v Smith & Sheriff Ltd (1999) 1 T.C.L.R. 136, and Merkin and Flannery on The Arbitration Act 1996, 6th edition, §69.9.2.

GTCS cites the decision of the Supreme Court in Sharp v Viterra [2024] UKSC 14 at §51 et seq., holding that:

GTCS submits that the Appeal Board was never asked to determine a question in the terms CAFI formulates. In any event, GTCS says, as part of its consideration of the waiver issue, the Appeal Board expressly referenced the Second Contract, was “seeking to interpret the intentions of the parties as manifested in the phrase “terminated and void”” and concluded that the Second Contract did not amount to a waiver.

As to those points, it was CAFI’s submission before the Appeal Board that GTCS had waived any rights by negotiating and entering into the Second Contract (Appeal Award § 7.4); and that “a reasonable person … would consider that Sellers waived their rights to make claims under the Contract when they negotiated and entered into the re-sale. So much was clear from the express terms of the re-sale …” (Appeal Award § 7.10). GTCS countered by denying “that the terms of the re-sale were relevant to the dispute” (my emphasis). That in my view crystallised an issue, which the Appeal Board had to determine, about whether the express terms of the Second Contract needed to be taken into account in deciding the waiver issue. It is evident from Appeal Award § 9.8 that the Appeal Board concluded that it did not need to seek to apply the Second Contract as a contract: it was sufficient to have regard to it in some other way (but, seemingly, without giving effect to its express terms) in determining the waiver issue. That is what the Appeal Board proceeded to do.

In addition, GTCS submits that the Appeal Board’s approach was not obviously wrong, and did not substantially impact on CAFI’s rights: the Appeal Board reached the same outcome by other reasoning not subject to challenge, having decided that GTCS had not waived its rights. Those submissions are untenable. It was obviously wrong for the Appeal Board to conclude that it could decide 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 fact that the Appeal Board reached a conclusion on this issue without doing so does not assist: to the contrary, that is precisely why CAFI’s rights were impacted.

Further, it is just and proper in all the circumstances for the court to determine the question, despite the parties’ agreement to arbitrate. I am not persuaded by GTCS’s contentions that leave should be refused on the ground that there have already been two hearings before GAFTA tribunals (after all, CAFI succeeded before the first of those) or on the ground that CAFI ‘ought’ to have commenced a second arbitration. GTCS’s complaint that it is being kept out of its money begs the question of whether it has any entitlement in the first place.

Accordingly, I grant leave to appeal on a point of law, and Challenge 2 also succeeds pursuant to section 69 of the Act.

By this further alternative challenge, CAFI contents that if the Appeal Board did construe the Second Contract, as such, then it made obvious errors of law (in relation to which the other requirements of section 69 are also satisfied) in (a) concluding that in order to rely on the Termination Clause in the Second Contract, CAFI had to show that it was ‘freely negotiated’ or the subject of ‘clear discussion’, and/or (b) concluding that the effect of the Termination Clause was not to extinguish any right to damages in respect of the First Contract.

It was (and remained) unclear whether or not GTCS contended that the Appeal Board did in fact purport to construe the Second Contract as a contract. Indeed, GTCS seemed to be seeking to ride two horses at the same time. In its written submissions, it appeared in places to contend that the Appeal Board did construe the contract:

“The Appeal Board in effect construed the phrase “terminated and void” in the Second Contract referring to the First Contract, as allowing the Respondent to retain its right to damages for breach under the First Contract. This is not obviously wrong. The Appeal Board was attempting to construe the (rather unusual) concept of voiding a earlier Contract retroactively by a later contract when that First Contract had already been terminated for breach with the innocent terminating party expressly reserving its rights. The Appeal Board’s statement that the word “void” simply was a reiteration of terminated makes sense in that context ” (§ 82)

“The Appeal Board appears to have reasoned that “void” was only a reiteration of “terminated”. That this made sense within the commercial context at hand is a matter well-suited to the arbitrators’ expertise and knowledge.” (§ 84)

but at other times to contend that the Appeal Board did not do so:

“The Appeal Board’s own explanation was that it was not construing the Second Contract it having determined that it had no jurisdiction over it. On its own analysis, it was looking to the Second Contract as evidence of what happened after the termination of the First Contract … As it was looking at the Second Contract as evidence of facts and intentions, rather than engaging in a standard process of contractual construction, it was not obliged to apply the typical rules of contractual construction” (§ 86(i))

or simply to leave the point unresolved:

“… the Appeal Board’s decision was not obviously wrong insofar as it construed the Second Contract at all (The Board’s own position is that it was not construing the Second Contract, but using it as evidence of later events). Insofar as the Appeal Board in effect construed the phrase “terminated and void” in the Second Contract, it reached a construction that allowed the Respondent to retain its right to damages for breach under the First Contract. This is not obviously wrong. “Void” was read as a reiteration of “terminated”. (§ 88)

In my view it is plain from Appeal Award § 9.8 (“we have no jurisdiction to interpret the terms of the re-sale or how any of those terms impact on the Contract”) that the Appeal Board did not attempt to construe the Second Contract as a contract. Challenge 3 does not therefore arise. Had it arisen, CAFI would have had a strong case that, by searching for ‘free negotiation’ and ‘clear discussion’ outside the terms of the parties’ written agreement, viz the Second Contract, the Appeal Board had gone obviously wrong on a point of law.