DIFC Courts reassert their jurisdiction to issue worldwide freezing orders in support of foreign proceedings
In a landmark decision issued in the case of Carmon Reestrutura-engenharia E Serviços Técnios Especiais, (Su) LDA v Antonio Joao Catete Lopes Cuenda [2024] DIFC CA 003, the DIFC Court of Appeal has confirmed that the DIFC Courts have jurisdiction to issue worldwide freezing orders in support of proceedings outside of the United Arab Emirates.
In the proceedings, the appellant alleged that the respondent had misappropriated USD 20 million, with some of the funds being transferred to two accounts at Emirates NBD Bank in the UAE. A worldwide freezing injunction was granted by the Hong Kong Courts, but Emirates NBD denied it was bound by the injunction because it was issued in Hong Kong. The appellant sought a worldwide freezing order from the DIFC Courts, which was granted at a without notice hearing on 23 July 2023 but set aside on 6 September 2023 on the basis of the precedent set by the Court’s decision in the case of Sandra Holding Ltd and others v Fawzi Musaed Al Saleh and others [2023] DIFC CA 003.
Handed down in September 2023, the Sandra Holding judgment surprised the UAE legal community by establishing that the DIFC Courts lacked jurisdiction to grant a worldwide freezing order as the relevant sections of the Judicial Authority Law and the Rules of the DIFC Courts relating to the grant of interim remedies did not expressly confer jurisdiction on the DIFC Courts for the purposes of Article 5(A)(1)( e) of the Judicial Authority Law. The Court in Sandra Holding found that the DIFC Courts’ jurisdiction to grant interim relief was necessarily established by one of the other gateways in Article 5(A) of the Judicial Authority Law which generally require a nexus to the DIFC (e.g. because a party is established in the DIFC, or because part or all of the underlying contract or tort had a factual connection to the DIFC).
In the Carmon case, the Court took a more “expansive approach informed by public policy” in the interpretation of its powers which it said was consistent with the objectives of the DIFC as a global financial hub, while confirming that it had the inherent jurisdiction to issue freezing orders to assist foreign courts. The Court clarified its position, stating "It is the respectful opinion of this Court that the Court in Sandra Holding took a wrong turning in an unduly restrictive view of the powers of this Court which may be deployed in aid of its express jurisdiction to recognise and enforce foreign judgments."
The Court justified its decision to depart from Sandra Holding, saying that that judgment was legally incorrect, it caused inconvenience by allowing the Courts’ jurisdiction to be thwarted whilst emphasizing that overturning Sandra Holding would not be disruptive given the short time frame since the precedent was set. Overturning the earlier decision was a necessary step to ensure the DIFC Courts’ jurisdiction could be exercised effectively in support of the rule of law in international trade and commerce.
It is worth noting that, despite the Court’s decision to assert jurisdiction for issuing worldwide freezing orders in support of foreign proceedings, it was made clear that the DIFC Courts remain committed to a cautious application of worldwide freezing orders (and other interim relief orders) to ensure that such powerful tools are used appropriately, in the Courts’ discretion, and only when an applicant can demonstrate in the case of a worldwide freezing order, “a good arguable case on the merits of the underlying claim in the foreign proceedings and that there is a real risk of dissipation of assets."
On the exercise of the Courts’ discretion, the Court of Appeal identified that “in many cases it would be expected that such a freezing order would be limited to assets within Dubai”, leaving the door open for respondents to interim relief applications and orders to mount challenges in cases where there is no or little prospect of enforcement of the fruits of the foreign proceedings within the DIFC’s jurisdiction.
The Carmon decision firmly demonstrates the DIFC Courts’ willingness to assist parties to achieve justice in foreign proceedings, and is a significant milestone that is likely to be welcomed by the international legal community and commercial parties alike.
