The peculiar case of the arbitration that never was – UK Court overturns enforcement order after finding the underlying award was fabricated

What happens when someone tries to enforce an arbitral award when the arbitration never happened? This was the question the Commercial Court had to ask itself at a hearing in January 2024 in Contax Partners Inc Bvi v Kuwait Finance House & Ors. The judgment was handed down at the end of February.

Background

The case centres around an alleged arbitral award in favour of a BVI-registered company, Contax Partners Inc BVI (Contax) against three companies within the Kuwait Finance House banking group (the KFH companies). The award was said to have been made under the auspices of the Kuwait Chamber of Commerce and Industry Commercial Arbitration Centre in November 2022, and ordered that the KFH companies pay Contax €53m. Ostensibly, the award had been upheld by not only Kuwait’s Commercial Court, but also its Court of Appeal.

In June 2023, Contax issued a claim in the English High Court under s66 of the Arbitration Act 1996 seeking to enforce the award. Mr Justice Butcher considered the application on the papers. The application was supported by a witness statement from both Contax’s lawyer and its Managing Director, Mr Filippo Fantechi (Mr Fantechi), as well as a number of supporting documents including the arbitration agreement and the award itself.

Butcher J considered the application in August 2023, and, despite noting that he “did not find it all very easy to understand” made an order on 9 August 2023, giving Contax leave to enforce the award (the August Order). Importantly, Butcher J, speaking retrospectively, has since said that he “was not on the lookout for fraud, and did not suspect it”. 

The August Order was purportedly served at a London office of the KFH group and no application to appeal it was made. Contax’s lawyers therefore applied for various Third Party Debt Orders (signed by Mr Fantechi as "judgment creditor") in order to freeze the KFH companies’ bank accounts. It was at this point that the KFH companies said that they had never been served with any order at all and, more importantly, had never heard of the proceedings or arbitration at all.

The KFH companies therefore applied to the English Court to, in the first instance, prevent payment under the Third Party Debt Orders. Accompanying this application was a skeleton argument saying that:

1. the arbitration had never actually happened;
2. that substantial parts of the award itself had been clearly lifted (in some cases word for word) from a 2022 judgment in an English High Court case, Manoukian v Société Générale de Banque au Liban SAL; and
3. that a Mr Fantechi had recently met with the KFH companies’ solicitors and informed them that he had never heard of the arbitration. 

Unsurprisingly, an order was issued by the English Court the next day in the KFH companies’ favour, effectively pausing the enforcement of the Third Party Debt Orders until a further hearing could be listed to look more closely at the issues. 

A full application to set aside the August Order was subsequently made, which itself was supported by further witness statements from, amongst others:

1. individuals named in the award stating that they had no knowledge of the arbitration and had not participated in it (including Mr Fantechi, who emphasised he had never authorised it); and
2. a partner from Charles Russell Speechlys (acting for one of the KFH companies) stating that he had contacted the named counsel for the KFH companies in the arbitration as well as a supposed expert witness for Contax, who both stated that they had had no involvement in the case. 

The final hearing was listed for January 2024, but one further revelation was yet to materialise. On the eve of the hearing, the Court was notified that Contax’s counsel were actually instructed not by Contax BVI, but by Contax Partners LLC – a company incorporated in Wyoming in October 2023, which had taken an assignment of the debt under the August Order from Contax BVI in exchange for a sum of $3.23m payable to a ‘legal representative’ of Contax BVI in Kuwait, as well as a share of 40% of the amount recovered. The Deed of Assignment was produced, purportedly signed by Mr Fantechi. As a result of this, Contax BVI had, at least for the Court’s purposes, effectively disappeared.

The Judgment

There were two questions that the Court had to determine:

1. whether Contax BVI had had the authority to bring the application for the August Order in the first place; and
2. whether the award was genuine. 

The first question was dealt with briefly – Butcher J held that it was unclear whether Contax BVI had had sufficient authority. Butcher J concluded that had this been the only issue, he would have ordered a full trial “making provision for oral evidence and the possibility of cross-examination of witnesses”. 

As for the second question, Butcher J believed that there was sufficient evidence on the papers that the award was a fabrication. As part of his reasoning, Butcher J pointed to the fact that no original arbitration agreement had been produced, and that there was no documentary evidence that it had even existed before June 2023.

Further, Butcher J held that the level of duplication between the award and the Manoukian judgment strongly indicated that the former was copied from the latter – in fact, this was so clear that Butcher J did not feel any sort of expert evidence would be needed as the examples of duplication could “speak for themselves”. Many of the issues identified in the award mirrored “largely word for word” those in Manoukian, and the “almost identical assessment of factual and expert evidence could not… have been the result of chance”. 

The final nails in the coffin included the fact that the award did not comply with Kuwaiti law (including being in English rather than Arabic), and the fact that very few of the documents referred to in the award could be produced. 

The August Order was therefore set aside, with Butcher J noting that there were still “a considerable number of unanswered, but serious, questions” which would need further investigation.

Commentary

Cases of such an extreme nature are rare but that does nothing to detract from the potency of this one. The Commercial Court will be on high alert for similar fraudulent attempts such that repeat cases are highly unlikely to slip through the net at the ex parte stage. However, whilst this was not an overly sophisticated fraud, in the age of AI we should expect fabrications to become increasingly difficult to spot. Practitioners can never be too careful.