In February 2024, the High Court was faced with an extraordinary case in which an Arbitration Award and the Arbitration Agreement were fabricated. The facts of the case, Contax Partners Inc BVI v Kuwait Finance House (KFH-Kuwait) & Ors, are concerning, especially for the future as AI and Large Language models (LLMs) become increasingly sophisticated.
Background to the decision
On 21 June 2023, an arbitration claim was commenced by the Claimant (Contax BVI) against the Defendants, comprised of three companies in a banking group. The claim sought to enforce, under section 66 of the Arbitration Act 1996, what was said to be a Kuwaiti Arbitration Award dated 28 November 2022 (the Award). The Award was said to have been rendered in pursuance of an Arbitration Agreement between Contax BVI and the Defendants dated 31 August 2021. The Claim Form was signed by Hamza Adesanu, a Solicitor at H&C Associates, based in London. It stated that it was made on behalf of Contax BVI. Mr Filippo Fantechi, who said he was Contax BVI’s managing director, also provided a witness statement to the Court.
H&C Associates served an Order to the Defendants. After the lapse of 28 days, during which no set aside application had been made, a Third Party Debt Order (TPDO) of £70,634,614.04 against several banks was granted upon application of the H&C Associates.
The Defendants only became aware of the Order and proceedings against them after their bank accounts were frozen. They argued that the order had not been validly served ‘but, ‘more than this, … there was never an arbitration at all’.
The decision
This application was made before Mr Justice Butcher on a without notice basis, for consideration on the papers, which is typically how such applications are made. The Court gave plenty of allowance for the fact that the documents were prepared by people who were not native English speakers and/or whose grasp of English law procedure was not perfect. However, Mr Justice Butcher stated that he was “not on the lookout for fraud” and did not suspect it.
The Court concluded that there was no doubt that the Arbitration Award was fraudulent for the following reasons:
- There was no original copy of the Award. “No original has been produced. There is no documentary (in which I include electronic) evidence of the existence of this alleged agreement before June 2023, when it was exhibited to the witness statement of, or supposed to be of, Mr Fantechi in support of the application to enforce the award.”
- The Award itself contained substantial passages taken from Manoukian [v Société Générale de Banque au Liban SAL [2022] EWHC 669 (QB). The wording used “exactly the same phraseology”, including the jargon of English judgments (‘be that as it may’, ‘the submission is not entirely without merit’, ‘that said’, ‘fall to be considered’) and the same punctuation, “even when it was not obvious, and arguably incorrect”. Mr Justice Butcher stated “The almost identical assessment of factual and expert evidence could not, in my view, have been the result of chance, and the echoing of the terms of Justice Picken’s judgment was “not the result of the adoption of transposable legal reasoning”.
- There was evidence that the Award was in English rather than Arabic and this, along with other aspects of the judgment, did not comply with Kuwaiti law.
In setting the Order aside, Mr Justice Butcher declared:
“The result of this decision is that there are a considerable number of unanswered, but serious, questions, and in particular as to who was responsible for the fabrications which I have found to have been made, and whether there is culpability (and if any whose) as to the way in which the application for permission to enforce the purported award was presented to the court.
“Those are matters which are likely to require investigation hereafter.”
What does this decision mean for the future of arbitration?
The Defendants will likely bring claims against all those involved in fabricating the documents and the fictitious Arbitration Award. However, the problem remains that although the English Court could refuse to recognise or enforce the Award, it does not have the jurisdiction to set it aside. This means the Award could be enforced in another country that is party to the New York Convention on the recognition and enforcement of foreign arbitral awards – regardless of Mr Justice Butcher’s decision.
The other primary concern is that further fabrications of Arbitration Awards could be made using sophisticated LLMs. As Mr Justice Butcher said, he did not suspect nor was he looking for forgery. Following this case, it is vital that English Courts pay close attention to the wording of an Award and the evidence supporting its existence to avoid substantial fraud and injustice.
To discuss any points raised in this article, please call us on +44 (0) 203972 8469 or email us at mail@eldwicklaw.com.
Note: The points in this article reflect sanctions in place at the time of writing, 09 April 2024. This article does not constitute legal advice. For further information, please contact our London office.
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