English High Court Sets Aside Permission To Enforce Fabricated Arbitral Award

In a recent decision in Contax Partners Inc BVI v Kuwait Finance House (KFH-Kuwait) & Ors [2024] EWHC 436 (Comm), the English Commercial Court (the Court) set aside its earlier decision granting leave to the Claimant, Contax Partners Inc BVI, to enforce an arbitral award under s. 66 of the Arbitration Act 1996 and entering judgment in terms of the operative part of the Award. The Court found that the award was a fabrication and indeed that there was no arbitration agreement or arbitration giving rise to such award.

Background

The issue arose from the Claimant's application (Application) seeking to enforce a Kuwaiti arbitration award (Award) rendered pursuant to a purported arbitration conducted under the auspices of the Kuwait Chamber of Commerce and Industry Commercial Arbitration Centre between the Claimant and the three Defendant companies. For the purposes of the Application, the Claimant was said to have been represented by its managing director and the Application was supported by his witness statement and that of a solicitor from the firm representing the Claimant. It was remarked in these statements that the Defendants had sought to appeal the Award before the Kuwaiti courts, which had endorsed the Award. The documents produced alongside the Application included an arbitration agreement, the Award, a judgment of the Commercial Court of Appeal of Kuwait upholding the Award, the Claimant's profile and identification documents of the Claimant's managing director.

The Application was made on a without notice basis and, not suspecting fraud, the Court made an order granting leave to enforce the Award and entering judgment in terms of the operative portion of the Award (the Order). This decision was claimed to have been served on the Defendants and, thereafter, interim third party debt orders (TPDOs) came to be issued against various banks. One of these resulted in the grant of a final TPDO directing payment of Ł3,176,376.30 (out of a total debt amounting, by this time, to Ł70,634,614.04) to the Claimant.

The Defendants discovered the proceedings when their accounts were frozen in compliance with the TPDOs and eventually applied to set aside the Order. This application was accompanied by various witness statements and documents informing the Court that the arbitration proceedings were a fabrication as was the Award and that various passages of the Award had been lifted from a previous judgment of the High Court. The Defendants also produced other statements and documents to the effect that there had been no proceedings as claimed before the Kuwaiti courts, that the judgment of the Commercial Court of Appeal of Kuwait was also a fabrication, that counsel and witnesses in the purported arbitration had no knowledge of the arbitration and had not participated in those proceedings. The Defendants also produced a statement from the Claimant's managing director stating that he was unaware of the English court proceedings, the arbitration and any claim by the Claimant against the Defendants.

Decision

The application to set aside the Order was made on two grounds - first, that the arbitration claim before the Court was commenced without authority and therefore liable to be struck out and second, that the arbitration agreement and Award did not exist.

The Court found in favour of the Defendants and allowed their application to set aside its earlier Order granting leave to enforce the Award.

On the first ground, the Court found that question of who had and was properly exercising authority on behalf of the Claimant and, in particular, the role of the Claimant's managing director was not clear and one which raised a triable issue. The application could not therefore be allowed on that basis without a trial.

On the second issue, the Court found that there was no real doubt (nor any triable issue) that the Award was a fabrication.

The Court concluded that the arbitration agreement was not genuine - the original had not been produced and there was no evidence of the existence of such agreement before June 2023, when the Claimant first approached the Court.

The Court also found that there were strong grounds to conclude that the Award itself was a fabrication. The Court's analysis revolved around five factors, which are summarised below:

Language of the Award: Substantial passages were taken from a previous judgment of the English High Court, which suggested that both cases had the same issues, identical assessment of evidence and a concession made at the same stage of a similar argument. In the Court's view this similarity was "miraculous" and not likely to be a result of chance.
• Evidence of Kuwaiti law: The Award did not comply with basic requirements of Kuwaiti law in that it was in English, rather than Arabic, did not contain a summary of the agreement to arbitrate and was not signed by all arbitrators.
• The Kuwaiti judgment: The Kuwaiti judgment was in English instead of Arabic, followed the drafting style and language of an English court order, and importantly, the names of the judges who issued the ruling were not members of the Court of Appeal in Kuwait.
• Positive evidence: There was evidence that individuals said to have been involved in the arbitration were not so involved.
• Negative evidence: No documents referred to in the Award or the Kuwaiti judgment were produced, including documents from the file of the arbitral body or the arbitrators.

Interestingly, although the Claimant (or at least its assignee, Contax Partners LLC) continued to participate in the proceedings until the very end and also belatedly filed some further witness statements, it did not produce any material that swayed the Court.

Having so assessed the facts, the Court concluded that there was no arbitration agreement or arbitration and that the Award and the Kuwaiti judgment were fabrications and proceeded to set aside its Order granting leave to enforce the Award.

Comment

Every so often, there comes a case that serves as a reminder to legal practitioners everywhere not to accept matters at face value, to exercise caution and always act with diligence when dealing with counterparties. Fortunately, in this case, the facts were discovered before any lasting harm was done to the victims. With increasingly sophisticated AI and other technology becoming widely available, this case demonstrates the importance of thoroughly reviewing all materials and evidence with a critical eye. It will be interesting to see how legal procedures develop, especially in light of the pro-enforcement bias that most advanced arbitration jurisdictions foster, to address increasingly novel challenges that arise with evolving technology and put in place measures to ensure authenticity of claims made in without notice applications.

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