THE AUTHOR:
Chris Lai, Associate at LK Law LLP
In Contax Partners Inc BVI v Kuwait Finance House (KFH-Kuwait) & Ors [2024] EWHC 436 (Comm), the English High Court was confronted with allegations of fraud on the Court, which were, in Mr Justice Butcher (‘Butcher J’)’s own words, “very disquieting and of the utmost seriousness”.
The case concerns a peculiar situation where Contax Partners Inc BVI (‘the Claimant’) attempted to enforce a fabricated Kuwaiti arbitral award (‘the Award’), which stemmed from a non-existent arbitration agreement between the Claimant and the Defendants (‘the Arbitration Agreement’).
Butcher J initially made an order granting leave to the Claimant to enforce the Award under section 66 of the English Arbitration Act 1996 and entering judgment in terms of the operative part of the Award (‘the Order’). Upon a subsequent application by the purported Award debtors (‘the Defendants’), he was made aware of the fraud and, therefore, set aside the Order.
The piece first sets out briefly the facts and procedural history of the case, and then discusses the set-aside decision and provides some concluding remarks.
Facts and Procedural History
The Claimant, purportedly represented by its managing director Mr Filippo Fantechi, made a without notice application to the High Court to seek to enforce the Award against the Defendants (‘the Enforcement Application’). The Award was claimed to have been rendered following an arbitration under the auspices of the Kuwait Chamber of Commerce and Industry Commercial Arbitration Centre, pursuant to the Arbitration Agreement. In the Enforcement Application, the Claimant also stated that the Defendants had sought to appeal that award in Kuwait, but the Kuwaiti courts endorsed the Award (‘the Kuwaiti Judgment’).
Butcher J considered the supporting witness statement and the accompanying exhibit which comprised, among other things, the Arbitration Agreement, the Award and the Kuwait Judgment. Acknowledging that the documents might be prepared by non-native English speakers and those with a limited grasp of the English procedure, Butcher J granted the Order despite not finding the documents easy to understand. At that moment, he was not suspicious of any fraud.
The Order was purportedly served on the Defendants. Interim and final third-party debt orders were later applied for and issued against various banks.
Upon the freezing of the bank accounts, the Defendants realised that they were subject to these English enforcement proceedings. They applied to set aside the Order on two grounds: first, the Enforcement Application was made without authority; and second, the Arbitration Agreement and the Award were bogus (‘the Set-Aside Application’).
In respect of the first ground, the Defendants adduced evidence from Mr Fantechi. He claimed that he had not known of, let alone authorised, the Enforcement Application and the underlying arbitration.
With respect to the second ground, the Defendants submitted that the Award was an ‘out and out fabrication’. First, passages in the Award were allegedly copied and pasted from the English High Court’s decision in Manoukian v Société Générale de Banque au Liban SAL [2022] EWHC 669 (QB) (the ‘Manoukian Decision’). Second, the Defendants produced a letter from the Kuwait Ministry of Justice, confirming that there were no Kuwaiti court proceedings between the parties. Third, the so-called Defendants’ counsel and expert witness in the arbitration, as stated in the Award, confirmed that they had not been aware of or involved at all in the case.
Decision on the Set-Aside Application
Before reaching his decision, Butcher J first clarified that he would approach the Set-Aside Application as if it were a summary judgment application. In other words, if the determination of whether the Award should be set aside hinges on a dispositive matter that had no triable issue, then the decision on the Set-Aside Application could be handed down right away. Otherwise, the matter should proceed with a trial where oral evidence would be ordered.
The Court ultimately granted the Set-Aside Application. While the first ground failed as it was uncertain as to who had been properly exercising authority on the Claimant’s behalf, the second ground succeeded as Butcher J found that “there is no real doubt, and no triable issue, that the Award is not genuine and is a fabrication.”
Leaving witness evidence aside, Butcher J found that the Arbitration Agreement could not be genuine. Not only was its original not produced, but there were also no documents evidencing its existence before the Enforcement Application was made in the English Court.
Turning to the Award, Butcher J provided five heads of reasons for concluding the Award was fabricated.
First, various parts of the Manoukian Decision “appeared in almost identical terms” in the Award. They used the same defined terms, phraseology and punctuation, and even English legal terms. The Award contained a word-for-word copy of the factual matrix and legal issues of the dispute, as well as the evaluation of factual and expert witness evidence. Butcher J also found that it was “inconceivable” that the parties in both cases would concede on similar arguments at the same stage of their respective proceedings.
Second, the Award violated Article 183 of the Kuwaiti Civil Procedure Law in that (i) it was in English and not in Arabic; (ii) it did not contain a summary of the Arbitration Agreement; and (iii) the Award was not signed by all arbitrators.
Third, the Kuwaiti Judgment was unlikely to be genuine, because (i) similarly, it was in English and not in Arabic; (ii) it had the drafting style and language of an English court order; (iii) the judges who purportedly issued the Kuwaiti Judgment are not members of the Kuwaiti Court of Appeal; and (iv) the titles ‘Junior Judge’ and ‘Secretary of the Court’, which appeared on the Kuwaiti Judgment, are not used in the Kuwaiti judicial system.
Fourth, as discussed above, there was positive evidence from individuals who were supposedly involved in the underlying arbitration that they had no knowledge of or involvement in it.
Fifth, the Claimant could not produce documents referred to in the Award and the Kuwaiti Judgment.
Concluding Remarks
Although the decision was able to prevent the Claimant from being subject to a fake award, the greater question of who set the wheels in motion for the fraud remains unresolved.
The decision’s takeaway is that practitioners should be critical in verifying the genuineness of clients’ instructions to enforce a foreign award. For instance, one can start by conducting some basic research on the law of the seat to ascertain the essential requirements of an enforceable award, or running a sense-check on the award and other documents on the arbitration file.
It is, however, questionable whether the same can apply to the Court. As Mr Justice Foxton noted in Sodzawiczny v McNally [2021] EWHC 3384 (Comm), “[i]t has long been recognised that [section 66] is intended to provide a summary form of procedure which achieves the outcome otherwise obtainable by an action on an award”. Granted, as a matter of general principle, leave should readily be given to enforce an award as a judgment (Middlemiss & Gould v Hartlepool Corporation [1972] 1 WLR 1643). Having said that, it is equally important to bear in mind that “[s]ection 66 is never a rubber-stamping exercise” (Sterling v Rand & Anor [2019] EWHC 2560 (Ch)). It is therefore crucial for the Court to strike a fine balance between preserving the legitimacy of the arbitral system on the one hand; and providing a speedy mechanism for the enforcement of awards on the other, such that we are not rolling back to the cautious approach propounded in the past by Lord Justice Scrutton in In re Boks & Co and Peter Rushton & Co Ltd [1919] 1 KB 491.
ABOUT THE AUTHOR:
Chris Lai is an Associate at LK Law LLP. He has a broad practice in commercial disputes, with a focus on international arbitration. He has worked on cases administered under HKIAC, ICC, ICSID, LCIA, LMAA, NAI and UNCITRAL rules, and related post-award proceedings.
*The views and opinions expressed by Authors are theirs and do not necessarily reflect those of Daily Jus, Jus Mundi, or Jus Connect.
