In a recent ruling in Carmon Reestrutura-engenharia E Serviços Técnios Especiais, (Su) LDA v Antonio Joao Catete Lopes Cuenda [2024] DIFC CA 003 (“Ruling“), the DIFC Court of Appeal (“Court“) reconsidered and overruled the position made in the (1) Sandra Holding Ltd (2) Nuri Musaed Al Saleh v (1) Fawzi Musaed Al Saleh (2) Ahmed Fawzi Al Saleh (3) Yasmine Fawzi Al Saleh (4) Farah El Merabi [2023] DIFC CA 003 (“Sandra Holding“) decision issued last year. The Court reconsidered whether the DIFC Courts have jurisdiction to issue Worldwide Freezing Orders (WFOs) against respondents in anticipation of a foreign judgment against those respondents which would be enforceable in the DIFC, when the DIFC Courts would not otherwise have jurisdiction over the claim on the merits.
- Sandra Holding
Sandra Holding (reported here) concerned a series of cases initiated by a member of a wealthy Kuwaiti family against his brother and other family members, alleging fraud during the execution of certain transactions related to a jointly-owned Cayman Islands entity. Apart from the DIFC proceedings, the applicants (the claimants in the foreign proceedings) launched civil claims in state courts in Kuwait as well as criminal proceedings in France. The applicants requested the DIFC Courts to issue a WFO to prevent the dissipation of assets pending the determination of the ongoing foreign civil court proceedings commenced in Kuwait, although the respondents were not licensed in the DIFC, no contracts were performed in the DIFC, and the respondents had no assets in the DIFC. The respondents did however own onshore assets in Dubai.
The Court concluded that neither Rule 25.24 of the Rules of the DIFC Courts (RDC) nor Article 24 of the DIFC Law No. 10 of 2004 (“Court Law“) confers jurisdiction on the DIFC Courts to order WFOs when other jurisdictional gateways of Article 5A of the Dubai Judicial Authority Law 12/2004 (JAL) are not present.
- Summary of the Case
The case in front of the Court in the Ruling concerned an assertion that the respondent had misappropriated the claimant’s funds and transferred part of those funds to two accounts held at Emirates NBD in onshore Dubai (ENBD). Courts in Hong Kong issued a Worldwide Mareva Injunction, but ENBD informed the claimant that it was not bound by the injunction issued in Hong Kong unless and until the injunction was recognized by the courts in the UAE. Accordingly, the claimant applied to the DIFC Courts for a WFO.
The DIFC Court of First Instance granted the WFO pre-Sandra Holding. However, following Sandra Holding, it vacated the order granting the WFO on the basis of Sandra Holding and dismissed the application for the WFO. The claimant appealed the order vacating the WFO arguing that Sandra Holding should not be followed, as the interpretation made by the Court to the Court Law in Sandra Holding was incorrect. The claimant argued that the DIFC Courts had jurisdiction to assist in the enforcement of future foreign judgements when the proceedings are still pending, relying mostly on Article 24(1) of the Court Law, which conferred (in combination with Article 7(6) of the JAL) jurisdiction on the DIFC Court to recognise and enforce the judgments of foreign courts. It further argued that “the enforcement principle explained that the Court had power under Articles 22(2) and 32 [of the Court Law] to make a freezing order in support of a judgment which in due course it would have jurisdiction to enforce under Article 24.”
Therefore, the Court had to consider and decide whether the precedent established in Sandra Holding should be followed.
- Conclusions of the Court
After careful analysis of Sandra Holding on the law and the facts, the Court concluded that Article 24 of the Court Law, which provides for the jurisdiction of the DIFC Courts to recognise and enforce foreign court judgements, also confers jurisdiction on the DIFC Courts “to entertain proceedings by way of an application for such relief as may be necessary to prevent its pre-emption by a dissipation of the assets of a prospective judgment debtor in proceedings in a foreign court whose judgment can be recognised and enforced in the DIFC Courts.” The Court emphasized that this power is discretionary and must be exercised cautiously.
The Court also took into account that the powers of the DIFC Court to order interim remedies are available when the proceedings “will take place outside the DIFC” (RDC 25.24(1)), which suggests that the DIFC Courts have the jurisdiction and powers to ensure that the jurisdiction to enforce foreign court orders is effective.
The Court considered that the powers to order interim remedies are available to prevent the DIFC Courts’ jurisdiction being thwarted, and that “jurisdiction may be thwarted if a party to a foreign proceeding seeks to dissipate its assets in advance of an apprehended judgment which might be susceptible to recognition and enforcement in the DIFC.”
On this basis, the Court concluded that the principles in Sandra Holding should not be followed as they were unduly restrictive.
Notably, the Court stated that this power was a matter of discretion and should not be exercised lightly. In this respect, it analyzed the facts of Sandra Holding and pointed out that the relevant test would not have been met in that case under its specific facts.
- The effect of the Ruling
The Ruling is an important development as it revises the previously adopted restrictive approach to the availability of interim remedies, including WFOs, in the DIFC in support of foreign court proceedings. Although the Court emphasized that this power should be exercised cautiously, the Ruling provides for an important tool to facilitate effective enforcement of foreign courts’ judgements in the UAE.
