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Claim No: CA 003/2024

THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS

In the Name of His Highness Sheikh Mohammad Bin Rashid Al Maktoum, Ruler of Dubai

IN THE COURT OF APPEAL
BEFORE JUSTICE ROBERT FRENCH, JUSTICE SIR PETER GROSS AND JUSTICE RENE LE MIERE

BETWEEN

CARMON REESTRUTURA-ENGENHARIA E SERVIÇOS TÉCNIOS ESPECIAIS, (SU) LDA

Claimant/Appellant

and

ANTONIO JOAO CATETE LOPES CUENDA

Defendant/Respondent

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JUDGMENT OF THE COURT OF APPEAL

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UPON the Order of Justice Wayne Martin dated 24 July 2023 for a Worldwide Freezing Order (the “WFO”)

AND UPON the Order with Reasons of Justice Wayne Martin dated 7 September 2023 for the continuance of the WFO

AND UPON the Order of Justice Wayne Martin dated 27 December 2023 (issued ex tempore on 22 December 2023) ordering that the Dismissal Application be granted and the WFO be vacated (the “Order dated 27 December 2023”)

AND UPON Justice Wayne Martin giving permission to the Appellant to appeal the Order dated 27 December 2023

AND UPON the Order with Reasons of Justice Sir Peter Gross dated 4 April 2024 granting the Appellant permission to appeal on the grounds set out in paragraph 8 of the Order dated 27 December 2023

AND UPON Hearing Counsel for the Appellant and Counsel for the Respondent at the hearing held on 26 July 2024 before Justice Robert French, Justice Sir Peter Gross and Justice Rene Le Miere (the “Hearing”)

AND UPON reading the submissions and relevant documents on the Court file

IT IS HEREBY ORDERED THAT:

1. The Appeal is allowed.

2. Orders 1 to 5 of the Order dated 27 December 2023 are set aside.

3. The Respondent is to pay the Appellant’s costs of the appeal and of the Dismissal Application before Justice Martin to be assessed by the Registrar if not agreed.

Issued by:
Delvin Sumo
Assistant Registrar
Date of Issue: 26 November 2024
At: 3pm

 

SCHEDULE OF REASONS

 

Introduction

1. This appeal from the decision¹ of Justice Wayne Martin sitting as the DIFC CFI concerns whether the DIFC Courts can issue a Worldwide Freezing Order (“WFO”) against a respondent in anticipation of a foreign judgment against that respondent which would be enforceable in the DIFC. The question is one of both jurisdiction and power. The appeal raises for consideration the application and/or correctness of the decision of this Court in Sandra Holding Ltd v Al Saleh & Ors (“Sandra Holding”).² That requires some reflection on the place of precedent in the DIFC and the criteria to be applied by this Court in deciding whether to depart from one of its previous decisions.

Procedural history

2. On 24 July 2023, on the Ex Parte Application of the Appellant dated 20 July 2023 in Application No. CFI-051-2023/1, Justice Martin issued a WFO against the Respondent. The WFO applied to funds held in accounts in the Respondent’s name with Emirates NBD Bank PJSC (“ENBD”) or their traceable proceeds. These included two specified bank accounts.

3. In the Particulars of Claim, the Appellant asserted that:

4. The substantive part of the WFO was in the following terms:

“2.1 Until further order of the Court, the Respondent must not, without the prior consent in writing of the Claimant’s legal representatives, in any way dispose of, deal with, or diminish the value of the funds held in any accounts held with Emirates NBD Bank PJSC in his name (the “ENBD Accounts”) or traceable proceeds thereof…”

The WFO went on to specify two accounts included in the category of ‘ENBD Accounts’.

5. There was a further order for the provision of information by the Respondent in relation to the accounts, and an order providing for an application to vary or discharge the WFO. Pursuant to RDC 9.31, the Appellant was given permission to serve the WFO and other documents on the Respondent by alternative service to an address in Hong Kong.

6. The WFO was continued by Justice Martin by an order dated 7 September 2023, following a hearing on 4 August 2023 and further submissions dated 14 August 2023. The Appellant was also required to provide security for its undertaking as to damages. The orders were supported by written reasons.

7. On 15 September 2023, the Respondent made Application No. CFI-051-2023/2 contesting the jurisdiction of the CFI and seeking an order that the WFO be set aside and the claim be dismissed.

8. At a hearing on 22 December 2023, the WFO was set aside and the action dismissed. Justice Martin delivered ex tempore reasons at the conclusion of the hearing. However he granted the Appellant permission to appeal limited to two grounds relating to the decision of this Court in Sandra Holding which he followed in making his decision. He also granted leave to the Appellant to apply to this Court for permission to appeal on grounds relating to whether the decision in Sandra Holding with respect to the jurisdiction of the CFI to make freezing orders in respect of pending foreign proceedings should not be followed because the decision was made per incuriam and/or was wrong. This was referred to later as the ‘paragraph 8’ grounds by reference to the numbered paragraph in the reasons in which they appeared. A sealed copy of the Order was issued on 27 December 2023. The order setting aside the WFO was stayed pending this appeal (the “Order dated 27 December 2023”).

9. On 16 January 2024, the CFI issued an edited version of the transcript of reasons given orally by Justice Martin at the conclusion of the hearing on 22 December 2023.

10. On 7 February 2024, a Consent Order was made in the CFI which included the following:

11. On 2 April 2024, Justice Sir Peter Gross, sitting as the Court of Appeal, made an order granting the Appellant permission to appeal on the “paragraph 8 grounds”. In granting permission to appeal, Justice Gross held that there was an arguable case that Sandra Holding was wrongly decided and identified a number of important policy issues which arose:

12. The following orders were made by Justice Martin in the decision under Appeal:

Legislative and Rules framework

13. Before turning to the decision of Justice Martin under appeal in this case, it is necessary to refer to the relevant statutory provisions and provisions of the Rules going to the questions of jurisdiction and power which are in issue. In so doing it is important to bear in mind that the DIFC Courts are statutory courts whose jurisdiction and powers are conferred by the Laws of the DIFC or pursuant to powers conferred by such Laws.

Judicial Authority Law

14. DIFC Court Law No 12 of 2004, the Judicial Authority Law (“JAL”), a law made by the Ruler of Dubai, established the Courts of the Centre, being the CFI and the Court of Appeal. The jurisdiction of the CFI is set out in Article 5(A), as follows:

The relevant jurisdiction for the purposes of this Appeal is that conferred by Article 5A(1)(e).

15. This Court in Nest Investment Holding Lebanon S.A.L. and Others v Deloitte & Touche (M.E.)³ (“Nest Investment”) described Article 5(A)(1)(e) as “on its face, freestanding, inasmuch as it covers any claim or action where another DIFC Law or DIFC Regulation confers jurisdiction.” The Court added:

“The words “over which the Courts have jurisdiction in accordance with DIFC Laws and Regulations” require the relevant Law or Regulation to have the effect of creating jurisdiction, which must always be a question of construction in the light of the particular provision of the Law or Regulation in question, when seen in the context of the statute or regulation as a whole and the purpose which lies behind the provision and the statute.”⁴

16. The term “DIFC Laws”, appearing in Article 5(A)(1)(e) is defined in Article 2 as “[a]ny laws issued by the Ruler in relation to DIFC”. The term “DIFC Regulations” is defined as “[a]ny rules, regulations, bylaws or orders relating to DIFC issued by the President or by DIFC Bodies.”

17. Article 7 of the JAL deals with the execution of judgments. In respect of foreign judgments, it provides in Article 7(6):

“(6) The judgments, decisions, orders and ratified Arbitral Awards rendered outside DIFC by any court other than Dubai Courts shall be executed within DIFC in accordance with the procedure prescribed in the Rules of the Courts.”

The Court Law

18. The DIFC Court Law, DIFC Law No 10 of 2004, (“Court Law”) deals, among other things, with the CFI and the Court of Appeal of the DIFC, established by the JAL.⁵

19. Article 19(1) of the Court Law deals with the jurisdiction of the CFI:

20. Article 20 deals with “Making of Orders and issuing of Writs” as follows:

21. Article 24 deals with the “Ratification of Judgments”:

It is common ground that the reference to Article 7(4) of the JAL in Article 24 of the Court Law should be a reference to Article 7(6) of the JAL. The erroneous reference arises from the omission to make the consequential amendment to Article 24 of the Court Law following amendments to the JAL.

22. As was said in DNB Bank ASA v Gulf Eyadah Corporation and Another⁶ (“DNB Bank ASA”) at [97]:

“By virtue of Article 24(1)(a) of the DIFC Courts Law read with Articles 7(4) to 7(6) of the JAL, the DIFC Courts has jurisdiction to hear claims for the recognition and enforcement of foreign judgments.”

23. The ratification of foreign judgments is clearly a head of the statutory jurisdiction of the CFI. That jurisdiction attracts incidental powers. Express powers are set out in Article 32. A central question in this appeal is whether the injunctive powers are enlivened in respect of a case in which pending proceedings in a foreign court may give rise to a judgment in that court subject to ratification and enforcement in the DIFC.

24. Article 32 is as follows:

The breadth of those powers, particularly those conferred by Articles 32(b), (c) and (d) is clearly sufficient to encompass freezing orders, including ex parte freezing orders, in aid of the Court’s jurisdiction. As appears below, there is express power to issue such injunctions in RDC 25.1.

The Rules of the DIFC Court 2014

25. The Rules of Court are made pursuant to Article 31 of the Court Law, which relevantly includes the following:

26. RDC 1.2 declares that:

1.2
These Rules are made by the President of the Dubai International Financial Centre on the date specified in the Enactment Notice in respect of these Rules.”

27. By RDC 1.5, the Rules apply to all proceedings in the CFI and the Court of Appeal.

28. The Rules fall within the definition of “DIFC Regulations” in Article 2 of the JAL. This Court so held in Nest Investment.⁷ There was no reason why, in the interpretation of Article 5(A)(1)(e), the expression “DIFC Regulations” should not be given the defined meaning, and every reason why it should, with the inclusion within it of “Rules of the court”. They are therefore covered by Article 5(A)(1)(e) of the JAL.

29. In Nest Investment the Court considered RDC 20.7 which provides that “the Court may order a person to be added as a new party” in circumstances set out in the Rule. The question before the Court was whether that was properly read as giving it the power to assume jurisdiction over a party where the criteria of joinder were met regardless of the Article 5(A)(1)(a)–(d) gateways. The Court said:

“The Rule does not expressly confer jurisdiction, by using that term, but it clearly sets out a criterion for the joinder of a party, in the same way as RDC 21 does in respect of the joinder of additional parties to counterclaims or for the purposes of seeking indemnity or contribution. It is said that the Rules of Court regulate litigation procedure, as Article 2 of the JAL spells out, but this in itself does not mean that jurisdiction cannot thereby be created.”⁸

30. Importantly, the Court observed that if RDC 20.7 did not confer jurisdiction, its contribution to the administration of justice was very limited.⁹ The Court went on to say:

“There can be no reasoned objection to a jurisdiction which is created by Rules of Court which are authorised by statute to do so. Nor can there be any grounded objection by reason of the fact that such an assumed jurisdiction would not necessarily be recognised internationally. The ambit of the undisputed DIFC Courts’ jurisdiction in this Court, created by statute, includes cases where the claimant is the party with the DIFC connection which is also not one which would always be recognised internationally.”¹⁰

31. A Rule can be a source of jurisdiction. The rule-making power in Article 31 of the JAL refers to “rules of procedure” which is, it may be accepted, a term not ordinarily suggestive of sources of jurisdiction. That said, the question whether a rule confers jurisdiction is a matter of construction. If the rule confers that procedural power, which cannot be linked to an express grant of jurisdiction, it may be that the jurisdiction necessary to support the exercise of the power, is to be implied from the grant of the power.

32. The Rules provide for service of process out of the DIFC or Dubai in RDC 9.53–9.56.

33. Part 25 of the RDC deals with interim remedies and security for costs. RDC 25.1 provides, inter alia:

34. Under the subheading ‘Jurisdiction’, RDC 25.4 and 25.5 provide:

35. RDC 25.24 provides for the grant of interim remedies where there is no related claim:

36. RDC 25.25 to 25.32 deal with injunctions generally. RDC 25.33 to 25.36 deal with freezing orders:

37. As appears from the Laws and Rules reviewed, the Court has jurisdiction to recognise and enforce foreign judgments. Whether it can make a freezing order in relation to pending proceedings which may give rise to a judgment which could be ratified by the Court, involves two issues. The first is whether the Court’s jurisdiction in relation to the ratification of foreign judgments is enlivened by an application for a freezing order in pending proceedings in a foreign court. The second is whether it has power in aid of such jurisdiction to issue a freezing order. While it might be said that the two questions are two sides of the one coin, it is important to maintain the conceptual distinction between jurisdiction and power.

38. The conceptual distinction is not always reflected with precision in statutory language. A statute may provide — the Court has jurisdiction with respect to X, and then — the Court has the power to do Y in the exercise of its jurisdiction with respect to X. As already observed, a statutory provision which confers a power to grant a remedy not linked to an express grant of jurisdiction may itself be taken to confer the jurisdiction by necessary implication. That is so where the power does not relate to any other grant of jurisdiction under the relevant statute. As appears later in these Reasons, the requisite jurisdiction in this case may be implied as a matter of construction of the grant of jurisdiction to enforce foreign judgments. An alternative pathway could be found in the power to grant interim remedies in aid of jurisdiction expressly granted.

39. The combined conferral of jurisdiction and power may be analogous to the combined creation of jurisdiction and statutory rights and remedies.

The decision in Sandra Holding

40. It is necessary now to refer to the decision of this Court in Sandra Holding which the primary judge was bound to apply. The factual aspects of the case had some complexity. However, they are relevant to an understanding of the basis of the decision appealed against so far as it relates to what is said to be a jurisdictional issue in this appeal.

41. Sandra Holding and its director and sole shareholder, Mr Nuri Musaed Al Saleh (“Nuri”) were the Respondents in that appeal. Sandra Holding was an entity established under the laws of the Cayman Islands. It owned shares on behalf of Nuri in a Cayman Islands registered entity called Universal Enterprises Ltd (“UEL”). The Appellants were Nuri’s brother, Fawzi Musaed Al Saleh (“Fawzi”) and his wife and children. Nuri, Fawzi and UEL had entered into a Shareholders Agreement governed by the laws of the Cayman Islands and subject to the exclusive jurisdiction of the Cayman Islands and the Commonwealth of Massachusetts.

42. A dispute arose out of the sale of UEL shares in two companies. Sandra Holding and Nuri alleged that Fawzi was in breach of the Shareholders Agreement and UEL’s Articles of Association in various respects. The main cause of action they relied upon was fraud committed by the Appellants during the sale transactions.

43. In August 2021, Sandra Holding and Nuri issued proceedings against Fawzi and his family in Kuwait alleging fraud in relation to the unlawful transfer of USD 43,632,372 from UEL accounts. They sought to have the Kuwaiti court appoint an expert to investigate the validity and propriety of the impugned transactions.

44. In November 2021, Sandra Holding and Nuri also filed an application in the DIFC CFI for a WFO against Fawzi and his family to prevent the dissipation of assets pending the determination of ongoing proceedings commenced in Kuwait. The WFO was sought in respect of the family’s assets up to the value of USD 45 million. The DIFC CFI granted the WFO on 10 November 2021. Nuri and Sandra Holding then filed proceedings with a French Tribunal and obtained an Attachment Order in France for EUR 39.8 million against Fawzi and his family, which was renewed on 7 March 2022. A French prosecutor was appointed to investigate the crimes alleged against Fawzi.

45. On or about 22 November 2021, Sandra Holding and Nuri commenced a second Kuwaiti proceeding seeking the appointment of an expert to investigate various financial transfers. They alleged mismanagement of UEL by Fawzi. The Judge continued the WFO at a return date hearing on 30 November 2021. The first Kuwaiti proceedings were dismissed by the Kuwait Court of First Instance on 21 February 2022. Nuri then issued a fresh proceeding in Kuwait and secured the appointment of a court expert to ascertain the merits of his allegations.

46. On 23 May 2022, a Massachusetts Court rejected an application for recognition of the WFO. The second Kuwaiti proceedings were dismissed by the Kuwait Court of First Instance on 27 April 2022. That matter was then appealed. Sandra Holding and Nuri filed a criminal complaint with a civil action for damages in French Courts on 28 April 2022 and commenced a committal proceeding against the Appellants for failure to comply with the WFO.

47. On 24 August 2022, nine months after the WFO was granted by the DIFC CFI, Fawzi and his family applied in the CFI to set it aside and to discharge the Disclosure Order which had been made. The grounds of the application were that the DIFC Court did not have jurisdiction to grant an injunctive order against the Fawzis. The Judge, however, held that the Court had jurisdiction.

48. In the meantime, the French prosecuting authority dismissed the criminal complaint for want of jurisdiction. On 23 March 2023, the court appointed expert in the Kuwait Court of First Instance found no evidence and no merit in support of Sandra Holding and Nuri’s case.

49. At the time that Sandra Holding came before this Court on appeal from the CFI, the French criminal complaint and the first and second Kuwaiti proceedings had been dismissed. Sandra Holding and Nuri had been unable to secure a money judgment against Fawzi and his family.

50. The first ground of appeal in that case was that there was no jurisdiction in the DIFC Court to issue a WFO in support of foreign proceedings outside of the gateways in Article 5(A)(1) of the JAL.

51. The question before the Court of Appeal was identified by the Court thus:

“…whether the DIFC Courts have jurisdiction to grant the WFO in circumstances where none of the parties fall within the scope of Article 5A(1)(a) – (d) of the JAL, the case does not fall within Article 5A(2) and the only gateway relied on is Article 5A(1)(e).”¹¹

52. Sandra Holding and Nuri relied upon a combination of Article 5(A)(1)(e) and Rules 20.7 and 25.24 as conferring the requisite jurisdiction. The Court characterised the basis of their argument as “unpersuasive”.¹² It held that the RDC cannot add to nor extend the DIFC Courts’ jurisdictional powers without clear expressive words to confer such powers. As to that, it may be said that the question is not one of, addition to, or extension of, the DIFC Courts’ jurisdiction or powers. The question is whether the DIFC Court has a relevant jurisdiction and, if so, what powers are available under the DIFC Laws in aid of that jurisdiction.

53. The Court held it would have to make an assessment on a case-by-case basis to determine the true effects of RDC Rules and ascertain whether the relevant Rule in fact conferred jurisdiction. The Rules relied upon by Sandra Holding and Nuri in that case provided for persons to be joined as a new party so that the Court could resolve all matters in dispute in the proceeding. In the case of an interim remedy, RDC 25.24 provided that if the remedy were sought in relation to proceedings taking place or to take place outside the DIFC the application must be made in accordance with Part 8 of the Rules. The Court held that the wording of RDC 25.24 provided a general power which the Court might exercise when granting an interim remedy in aid of foreign proceedings. The words did not confer jurisdiction.

54. The operation of the Rule was found not to be “forceful” enough to confer jurisdiction. It operated when a prospective applicant sought a remedy in support of foreign proceedings. It was procedural. The Court also rejected Sandra Holding’s reliance on RDC 25.1(6)(a)-(b) and (7) which provide for interim remedies and specifically for a freezing order restraining a party from dealing with any assets whether located within the jurisdiction or not. It was accepted that the language of these Rules were general powers granted to the Court when read in conjunction with the interim remedy provision in RDC 25.24. The Court held that these general powers envisaged a prospective claim being issued in a different court.

55. The Court considered arguments advanced by Sandra Holding that Articles 22, 24 and 32 of the Court Law supported their claim that the DIFC CFI was empowered with jurisdiction to hear their claim. These Articles related to judicial review and injunctions, the ratification of judgments, including judgments of foreign courts and specific powers in proceedings. The Court of Appeal held that the three Articles of the Court Law, as with other Articles of that Law, were intended to provide general powers in the creation of the DIFC Courts. Individual provisions of that Law were not intended to confer special powers or jurisdictions unless clearly worded.¹³

56. The jurisdiction to ratify a judgment, order or award was not a source of jurisdiction where there was no judgment or award to ratify. This was a proposition of some importance and was, with respect, too limited to answer the question before the Court. It did not determine the question whether there was power, in aid of that jurisdiction, to issue a freezing order in relation to a pending foreign proceeding to prevent the jurisdiction from being thwarted. If it be necessary for a complete analysis, such a power could be said to attract the ancillary jurisdiction necessary to protect the express grant of jurisdiction.

57. The Court of Appeal held that it was not bound by the CFI decision. That decision drew heavily on the notion of the “enforcement principle” which concluded that injunctions are ancillary to the enforcement of a prospective foreign judgment and fall within the Court’s jurisdiction.¹⁴ In that case, Justice Martin, sitting in the CFI, had suggested that the Court Law provided the Court with an unrestricted power to grant injunctive relief and that it would require clear and unequivocal constraints or qualifications on the Court’s powers to decide otherwise. The Court of Appeal held that the necessary question with which the Court has always been concerned, is whether it has jurisdiction under its statute to grant such relief. The question was not whether it should have jurisdiction merely in order to avoid a less corrupt and “perverse” outcome.

58. Here again, the distinction must be made between the existence of a jurisdiction and the powers that may be exercised in aid of it. An implication as to jurisdiction may flow from the grant of power.

59. The DIFC Court had been willing to grant injunctions in support of enforcement in relation to foreign judgments or arbitral awards acting in its capacity as a conduit jurisdiction. The Court of Appeal held that it did not have any statutory basis to assume jurisdiction extending the conduit jurisdiction principle to matters not within the scope of the DIFC Court. The fact that, in the DIFC Courts, permission must be obtained to serve process outside the DIFC, could not be read as conferring jurisdiction on DIFC Courts to hear cases like the one before the Court in Sandra Holding. The Court’s jurisdiction could not be established simply on the basis of effective service per se. The Court referred to its decision in Akhmedova v Akhmedov.¹⁵ There it had dismissed an injunction application on the basis that the CFI’s jurisdiction relating to the enforcement of a foreign judgment only extended to enforcement against parties to those judgments.

60. The Court also rejected a submission that it should be more willing to grant an injunction where there is an allegation of international fraud. Reliance had been placed on ArcelorMittal v Essar Limited & Ors.¹⁶ There was a dictum in that decision that in cases of international fraud the court would not look for such strong connecting factors with England as it would in other cases. The Court held that while English courts might be more willing to intervene in such a case, that position must be distinguished from the court’s jurisdiction where serious issues must be considered before the court could write an injunctive relief order and act as international police. Even if an element of fraud were present, that would not be sufficient to trigger the Court’s jurisdiction because of its qualified statutory nature.

61. The Court in Sandra Holding then considered whether there was a good arguable case. There was no judgment or order in the matter. An application to enforce a foreign order in the DIFC Court would require there to be a pre-existing foreign judgment or order pursuant to Article 7 of the JAL. In any event there was insufficient evidence that Sandra Holding and Nuri had an arguable case for successfully obtaining a money judgment against Fawzi and his family. The Court held that even if jurisdiction had been established under one of the gateways, it would still have been necessary for Sandra Holdings and Nuri to have an actual judgment to be a judgment creditor. The DIFC Court did not have jurisdiction over Fawzi and his family and the WFO must fail and be dismissed on that basis.¹⁷

62. The key proposition emerging from the judgment was that an application to enforce a foreign order in the DIFC Court would require there to be a pre-existing foreign judgment or order pursuant to Article 7 of the JAL. In the present case, the question is whether the Court’s jurisdiction to enforce foreign orders or judgments attracts the power conferred by the Rules of Court relating to the issue of interim remedies necessary to prevent the jurisdiction from being thwarted by dissipation of the prospective judgment debtor’s assets.

63. The Court in Sandra Holding went on to consider discretionary issues, which it is unnecessary to address here.

The Reasons for the Order of Justice Martin of 7 September 2023

64. The Reasons given by Justice Martin for the continuation of the WFO on 7 September 2023 set out the factual context necessary for a determination of the jurisdictional question on this appeal.

65. The application for the WFO had been supported by an affidavit of Ms Adelina Martins, a Director of Accounting and Finance of the Appellant. There was a substantial bundle of documents affixed to that affidavit.

66. The Appellant is a construction company incorporated in Angola. The Respondent was employed by the company from its inception in 2007. He was a most senior officer of the Appellant and a high degree of trust and confidence was reposed in him.

67. According to the affidavit material, the Appellant entered into a Cooperation Agreement with China Railway 20 Bureau Group (the “CR20”) relating to the construction of an airport in Angola. Bank accounts were required in Hong Kong to facilitate transactions relating to the airport construction project.

68. The Appellant asserted that the Respondent was sent to Hong Kong in November 2016 to set up a branch of the Appellant. Because of possible difficulties opening bank accounts in the Appellant’s name in Hong Kong, it was necessary to incorporate another company in Hong Kong (“Carmon HK”) and for the Respondent to serve as its sole director and shareholder. He controlled the bank account of Carmon HK at DBS Bank and was its sole signatory.

69. The Appellant contended that it had been agreed with the Respondent that the Respondent would act as its nominee in his role as director and shareholder of Carmon HK and that the Appellant would have ultimate beneficial ownership and control of Carmon HK and its assets.

70. The relationship between the Appellant and the Respondent deteriorated. In the event, the Respondent tendered his resignation on 9 August 2022.

71. The Appellant then discovered that login details for the bank account held by Carmon HK had been changed. The Respondent failed to provide new login details when requested. The last known balance of the account was approximately USD 23 million.

72. The Appellant commenced proceedings in the Hong Court courts. A domestic Mareva injunction was issued against Carmon HK and the Respondent, together with a Disclosure Order.

73. According to the material before Justice Martin, DPS Bank Hong Kong provided information in January 2023, pursuant to the Disclosure Order, from which it was apparent that transfers had been made from Carmon HK’s account to various accounts held by the Respondent in his own name in other banks and in other countries, including two accounts in his name at ENBD.

74. On 14 March 2023, the Respondent filed an affidavit in compliance with a Disclosure Order issued by the Hong Kong Court. The Mareva injunctions issued by the Hong Kong Court continued in force until final judgment pursuant to an order made by that court by consent on 16 March 2023. The Respondent challenged the jurisdiction of that court by an application on 8 June 2023. At the time of the application before Justice Martin, the application before the Hong Kong Court had not been determined.

75. In March 2023, the Appellant gave notice to ENBD of the orders that had been made by the Hong Kong Court. In April 2023, ENBD or it responded that the orders made by the Hong Kong Court or any court outside the UAE were not enforceable in the UAE unless and until those orders had been recognised by the Courts of the UAE. The Appellant asserted that the delay in commencing the proceedings in the DIFC was occasioned by the difficulties encountered when transferring funds to the UAE in order to fund the proceedings.

76. Justice Martin characterised the application before him as inviting the Court to exercise its powers to preserve assets from dissipation so that if and when judgment were obtained in the Appellant’s favour in proceedings in Hong Kong, the assets might be available in the exercise of this Court’s power to enforce that judgment.

77. Justice Martin was also referred by counsel for the Appellant, during the ex parte hearing, to affidavits sworn by the Respondent in the course of the Hong Kong proceedings. The Respondent had given a very different version of events resulting in the creation of Carmon HK from the version for which the Appellant contended. He asserted that he was the ultimate owner and controller of Carmon HK and rejected the suggestion that he held shares in that company or his office of director as a nominee for the Appellant. However, the Appellant’s counsel drew the Court’s attention to an assertion by the Respondent in one of his affidavits in the Hong Kong proceedings to the effect that following his resignation, the Appellant had offered to buy his shares in Carmon HK. This would have been inconsistent with the Appellant’s assertion that it was the beneficial owner of Carmon HK. Counsel for the Appellant accepted that the Respondent’s assertion, if believed, could amount to a complete defence. However, he asserted that there was no documentary evidence of any offer by the Appellant to purchase the shares in Carmon HK.

78. Justice Martin expressed the view that there was an arguable case to the effect that there was a significant prospect that a judgment might be obtained in the Hong Kong proceedings which could be enforced in the DIFC CFI and that there was a risk of dissipation of the funds in the bank accounts the subject of the application if the orders were not granted on an ex parte basis.

79. He then referred to a lengthy affidavit served by the Respondent in opposition to the continuation of the freezing order. However, although the freezing order required him to provide information in relation to dealings in the relevant bank accounts, he did not provide that information nor any explanation for his failure to do so. His Honour then went on to refer to the Respondent’s account of the dealings between himself and the Appellant and denied that he had ever signed the agreement alleged by the Appellant.

80. It was contended for the Respondent, that the freezing order should be discontinued on the basis that there was no seriously arguable case or a case with a real prospect of success and/or that the Appellant had breached its duty of disclosure at the ex parte hearing.

81. As to the seriously arguable case submission, Justice Martin held that it would be for the foreign court not the DIFC Court to determine the merits of the Appellant’s case against the Respondent. He then set out the principal matters upon which the Respondent relied for the proposition that the case against him was not seriously arguable or had no real prospect of success. It is not necessary to canvass the details of that in this appeal which has to do with the question of jurisdiction. In the event his Honour concluded that none of the matters raised by the Respondent sustained the conclusion that the Appellant had failed to establish a seriously arguable case, or that it had no real prospect of success at trial.

82. Information provided to the CFI following the hearing disclosed that the Respondent held five accounts with ENBD.

83. Reference was then made to the orders made in the Hong Kong proceedings and a finding that there was a strong prima facie case to the effect that the Respondent had breached the Hong Kong Court orders.

84. In the event, his Honour concluded that there was a serious case to be tried in the Hong Kong Court and that if the WFO were not continued, there was a serious risk that assets which might be available for the enforcement of the judgment of the Hong Kong Court in due course, would be put beyond the reach of the DIFC CFI. On that basis, the WFO was to be continued without interruption.

The Reasons for the Order of Justice Martin of 27 December 2023

85. There were three applications before the CFI on 22 December 2023. These were:

86. It was common ground that the Stay Application was academic having regard to the passage of time. The Disclosure Application would depend upon the outcome of the Dismissal Application.

87. His Honour proceeded to determine as the first question whether the Dismissal Application should be granted.

88. The Respondent relied upon Sandra Holding. The decision was said to have changed the perceived law with respect to the Court’s jurisdiction in the grant of freezing orders and compelled the conclusion that the orders made and maintained by Justice Martin were without jurisdiction.¹⁸

89. The decision was said to establish that the Court did not have jurisdiction to grant freezing orders in support of the prospective enforcement of decisions of foreign courts which had not yet been made unless the Court had such jurisdiction established through one of the pathways specified in Article 5(A) of the JAL.¹⁹

90. The Respondent had contended that if the CFI was bound by the decision of the Court of Appeal in Sandra Holding that decision nevertheless sustained the jurisdiction because the case fell within the categories of exceptional circumstances recognised by that Court as grounding jurisdiction to grant a freezing order even where the Court lacked jurisdiction to determine the substantive dispute, or even if there were no pathways to jurisdiction through Article 5(A) of the JAL.²⁰

91. An alternative argument put before His Honour was that he was not bound by the decision in Sandra Holding on jurisdiction because it was obiter as the Court had concluded that the facts did not sustain the continuation of the order in that case. Secondly, it was put that the decision was per incuriam as the result of the Court having been misled on several significant principles of law. The further contention was put that the Court of Appeal decision was wrong.²¹

92. His Honour referred to paragraph 99 of the judgment in Sandra Holding, which it is convenient to reproduce here:

93. The text of paragraph 99 corresponded almost exactly with principle 4 set out in paragraph 27 of a judgment of Popplewell J in ICICI Bank UK Plc v Diminco NV.²²

94. In his consideration, his Honour first was satisfied that the “two exceptional circumstances” set out in paragraph 99 of the Sandra Holding judgment, existed in this case.²³

95. The first was established by the fact that, on the evidence, the Appellant was living in Dubai and the bank accounts the subject of the WFO were being held at a bank in Dubai. Neither the Respondent nor the bank were within the DIFC. His Honour then referred to the “conduit jurisdiction” rendering orders and judgments of the DIFC Courts enforceable in the onshore courts. The DIFC CFI was arguably a court which could most effectively grant and enforce orders in the case along with the onshore courts.²⁴

96. The second exceptional circumstance existed, namely that the DIFC CFI was being asked to act as an international policeman. Freezing orders had been granted in Hong Kong courts but some of the funds affected by those orders had been transferred to a bank in Dubai. This was the reason for the commencement of proceedings in the DIFC CFI seeking to restrain further dissipation.²⁵

97. His Honour’s finding as to the existence of the “exceptional circumstances” left open the question whether, on the proper construction of paragraph 99 of Sandra Holding, the jurisdictional threshold had been crossed.

98. His Honour referred to the general conclusion apparent from the reasons in Sandra Holding that “there was no freestanding jurisdiction to grant freezing orders in support of the prospective enforcement of foreign proceedings in which judgment had not been entered.”²⁶

99. The Court of Appeal in Sandra Holding had held that the facts failed to establish a likelihood of a judgment capable of enforcement in the CFI. Against the argument that the Court of Appeal ruling on jurisdiction was therefore obiter, his Honour held that there was a clear ruling that there was no jurisdiction.²⁷

100. Continuing his analysis of the judgment, his Honour cited paragraph 106 as significant. In that paragraph the Court of Appeal had observed:

“So even if the Respondent satisfied the condition to obtain the prima facie jurisdiction of the DIFC Court, on the facts of this case, the discretion issue should be exercised in favour of the Appellant and not the Respondent.”²⁸

This his Honour saw as an important guide to the meaning to be given to paragraph 99 and reinforced the proposition that it was concerned with discretionary factors in limited circumstances.

101. His Honour also concluded that the text of paragraph 99 in Sandra Holding, corresponding as it did almost exactly with the text of the judgment of Popplewell J referred to earlier, was using words, as Popplewell J had, governing the exercise of discretion not the exercise of jurisdiction.²⁹ Moreover in the preceding paragraphs, the Court of Appeal had emphatically stated that there was no jurisdiction to grant a freezing order unless one of the pathways to jurisdiction under Article 5(A) was established.

102. His Honour considered the arguments that the views about jurisdiction expressed in Sandra Holding were obiter or per incuriam. His Honour held that in order to reach the conclusions that it did, it was essential that the Court of Appeal concluded that it lacked the jurisdiction to make the order.30 He also held that the Court’s decision was not per incuriam. The latter submission was a rather odd one to put before a single Justice bound to follow a decision of the Court of Appeal.

103. His Honour also observed that there was no authority cited to him under which the Court had granted permission for collateral use of information provided under an order of the Court which was a nullity. Sandra Holding had concluded that the orders made in that case were legal nullities. Thus, the orders under which the information was provided were nullities. In the event, his Honour held he had no need to determine the Stay Application. The Dismissal Application was granted and the Disclosure Application dismissed.

The Grounds of Appeal

104. The Grounds of Appeal set out in the Appeal Notice dated 30 January 2024, were as follows:

The Appellant’s contentions

105. The Appellant contended that the essential question for this Court was whether the DIFC CFI has jurisdiction under the Court Law to make a freezing order in support of the prospective enforcement of a judgment in proceedings pending in a foreign court or whether its jurisdiction is limited to the case where judgment has already been rendered by the foreign court. This was said to be a question of statutory construction. This Court would also be required to consider whether it should depart from its own earlier decision in Sandra Holding that the DIFC CFI lacks jurisdiction to grant relief, save in the case of an existing foreign judgment.

106. The Appellant pointed to the circumstance that in England and Wales and other common law jurisdictions, the DIFC CFI would follow the judgment of the Privy Council in Broad Idea International Ltd v Convoy Collateral Ltd³¹ ( “Broad Idea”) and hold that the DIFC CFI would have jurisdiction to make a freezing order in support of a prospective foreign judgment. The Appellant submitted that the answer should not be different because the jurisdiction of the DIFC Court derives from the gateways of the JAL and not from rules on service out of the jurisdiction.

107. The Appellant referred to a number of propositions which had been advanced by the Respondent in his Consolidated Skeleton Argument of 23 April 2024. They were as follows:

108. The Appellant in response submitted that:

109. The Court of Appeal in Sandra Holding was said to have erred in failing to give effect to what was called the “enforcement principle” which it had held to be part of DIFC Law when construing the Court Law. The correct application of that principle would have led the Court to construe the Articles as conferring jurisdiction to order relief in support of a prospective judgment when it was most likely to be of use in preventing the dissipation of assets.

110. The Court had wrongly attached importance to the absence of specific wording in the Court Law conferring jurisdiction to grant freezing orders in support of pending foreign judgments. No such specific wording was required because it was irrelevant whether judgment had yet been rendered.

111. The Court of Appeal was said to have erred in concluding that the exercise of jurisdiction would be exorbitant because anyone validly served with the application would be subject to the jurisdiction of the DIFC Court. The Appellant had never argued that the DIFC Court has jurisdiction to grant a freezing order against any person anywhere in the world. The jurisdiction was only available where the claimant could show that it would in due course be able to obtain a judgment entitled to recognition in the DIFC in accordance with DIFC conflicts of law principles. There was nothing exorbitant in such a jurisdiction. The DIFC Court would be rendering its assistance to the foreign court with jurisdiction over the merits. Reference was made to the decision of Justice Sir Jeremy Cooke in Jones v Jones³⁴ (“Jones”).

112. The Appellant submitted that the Court should not hesitate to reverse the decision in Sandra Holding, contending that:

113. The Appellant submitted that this Court, like the superior court of most judicial systems, has the power to overrule its own previous judgments albeit in very limited circumstances.

114. The present case was said to be one which cries out for correction. The Court of Appeal in Sandra Holding had taken a seriously wrong turning on the law. As a result, the DIFC Court stands alone among common law courts in holding that it is powerless to intervene in support of the enforcement of the future judgment of a foreign court so as to prevent such a judgment being frustrated.

115. The decision was said to run contrary to the trend in the DIFC and in other common law courts as exemplified by the decision in Broad Idea. It referred to three first instance judgments of the DIFC Court which have drawn upon Broad Idea to hold that the DIFC Court does have jurisdiction to assist in the enforcement of pending foreign judgments and that there are powerful public reasons why it should have such jurisdiction. The cases referred to were Lateef v Liela (“Lateef”)³⁵, Jones” and Global Investment Holdings Ltd v Commercial Bank of Dubai.³⁶

116. Sandra Holding was also said to conflict with the decision of this Court in Neal v Nadir³⁷ which held that the Court has jurisdiction under the Arbitration Law to recognise a freezing order made by an Arbitral Tribunal by way of interim award even where the seat of arbitration was not in the DIFC.

117. Akhmedova v Akhmedov³⁸ was said to be readily distinguishable and distinguished in Lateef and Jones.

118. The Appellant relied upon Article 5(A)(1)(e) of the JAL which provides that the CFI will have “exclusive jurisdiction” to hear and determine:

119. Reliance was also placed upon the judgment of Justice Sir Jeremy Cooke in Nest Investment in which he made the point that sub-paragraph (e) was “on its face, freestanding” covering any claim or action where another DIFC Law or DIFC Regulation conferred jurisdiction. The question in relation to such a DIFC Law or Regulation was whether the provision was “apt on its proper construction, in context, to confer jurisdiction upon the court.” It did not need to confer jurisdiction in express terms. In that decision it was held that RDC 20.7 empowering the DIFC Court to add a new party to existing proceedings as a “necessary and proper party” to the proceedings, created jurisdiction with respect to that party for the purposes of Article 5(A)(1)(e).

120. Reference was made to Articles 24(1) of the Court Law and Article 7(6) of the JAL. These provisions conferred jurisdiction on the DIFC Court to recognise and enforce the judgments of foreign courts. It is not a prerequisite to enforcement that the defendant should have assets in the DIFC. Reliance was also placed upon the injunction provisions, Article 22(2) and Article 32 of the Court Law. These provisions did not themselves confer jurisdiction without the need for a gateway.

121. The enforcement provisions and the injunction provisions could not be considered in isolation from one another to support the conclusion that neither conferred jurisdiction. They must be read together to give effect to the intention of the legislature. The Appellant did not suggest that Articles 22(2) and 32 conferred jurisdiction to make a freezing order in literally any case, subject only to service on the defendant. Nor was the enforcement principle a source of jurisdiction. Rather, it was said, that the enforcement principle explained that the Court had power under Articles 22(2) and 32 to make a freezing order in support of a judgment which in due course it would have jurisdiction to enforce under Article 24.

The Respondent’s contentions

122. In his consolidated skeleton argument, the Respondent contended that the Court in Sandra Holding was correct to find that territorial jurisdiction does not arise in respect of a claim to enforce a foreign judgment until there is a foreign judgment to enforce. This position was said to be consistent with prior authority of the Court of Appeal and to have been reinforced by the decision of the Privy Council in Broad Idea.

123. The fundamental point in Broad Idea was that the court’s power to grant a freezing order was not ancillary to an underlying cause of action. It derived from the court’s power to grant injunctions codified in the English Senior Courts Act (1981), s 37. The territorial jurisdiction of the English court would have to be established before that power could be exercised. Were it established, there was no need for an existing cause of action because the power was not ancillary to a cause of action.

124. The Court of Appeal was therefore correct to hold that there was a stark choice between:

The alternative would involve the conclusion that the DIFC Court has territorial jurisdiction to grant an injunction against anyone anywhere for anything.

125. Fundamentally, it was said the Appellant’s submission conflated issues of territorial jurisdiction with the powers of the Court when it has jurisdiction. In that case, the territorial jurisdiction of the British Virgin Islands Court was derived from the Rules of Court for service out, not from the source of the power to grant an injunction.

126. The Respondent submitted that if the Court does revisit this area, it is essential that it does so on an accurate footing. The Appellant’s argument was said to mischaracterise the decision in Sandra Holding. In that case, the Court of Appeal did not confuse its jurisdiction to hear a claim with its jurisdiction to enforce a foreign judgment or to issue a freezing order. The Appellant was said not to have grappled directly with the Court’s reasoning.

127. Broad Idea could not assist this Court in determining whether Articles 22 and 32 give rise to territorial jurisdiction. That is a uniquely DIFC law issue which depends on whether those provisions are apt to confer territorial jurisdiction in conjunction with Article 5(A)(1)(e) of the JAL.

128. The Respondent submitted that Article 24 provides for jurisdiction to ratify judgments, orders or awards of any recognised foreign court. Article 7(6) provides for the execution by Dubai Courts of the judgments, decisions, and orders of any court other than the Dubai Courts. Neither Article 24 nor Article 7(6) of the JAL conferred jurisdiction on the DIFC CFI unless there were already a judgment or award to ratify.

129. The decision in Sandra Holding was also said to be consistent with Akhmedova v Akhmedov.³⁹

130. The Respondent submitted that where a party seeks to enforce a foreign judgment, the cause of action is the claim on the foreign judgment which falls within Article 24 of the Court Law and Article 7(6) of the JAL. On the approach adopted in Broad Idea:

131. On the question of revisiting the decision in Sandra Holding, the Respondent accepted that a superior court in most judicial systems would on occasion overrule its own previous judgment. However, the circumstances in which it will do so are very limited. A number of authorities in the United States, Australia, Singapore and the United Kingdom were cited. The Respondent also pointed to the decision of this Court in AINL v KPMG & Anor.⁴⁰

132. The Appellant was said to have provided no coherent argument to explain how Article 24 or Article 7(6) confer jurisdiction to grant a freezing order where there is not any judgment or order or award to enforce.

On revisiting past decisions

133. A preliminary statement of the doctrine of precedent in the hierarchy of courts in the United Kingdom was formulated in the Third Edition of Rubert Cross’ Precedent in English Law:

134. The exception for the House of Lords had its origin in the well-known Practice Statement made by the Lord Chancellor in 1966. Up to that time, the House of Lords had regarded itself as bound by its own previous decisions. The Practice Statement was in the following terms:

Although not expressly stated, the distinction between the position of the House of Lords and other courts in the English hierarchy resided in the character of the House of Lords as the final appellate court.

135. The Practice Statement reflected a departure from the law in relation to the binding effect of prior decisions of the House of Lords as stated in Beanish v Beanish⁴³ and London Street Tramways Co Ltd v London County Council.⁴⁴ There has been considerable debate over the years concerning whether the Court of Appeal of England and Wales could depart from its own previous decisions. It is not necessary to review the history of that debate for the purposes of this case. In the DIFC, the Court of Appeal is the final appellate court.

136. The Practice Statement of 1966 continues in effect with respect to the UK Supreme Court, the successor to the House of Lords. In January 2023, Lord Reed, the President of the Supreme Court, delivered a lecture on the experience of that Court in departing from precedent.⁴⁵ The Supreme Court, like the House of Lords before it, will depart from its previous decisions or from decisions of the House of Lords “where it is right to do so”. When would it appear right? The answer was “not very often”. The Supreme Court would be “very circumspect” before invoking the 1966 Practice Statement. It would not overrule a past decision simply because the Justices would decide the case differently today.⁴⁶ Lord Reed put it this way:

137. The Court would also be likely to be slower to reconsider detailed questions of construction of legislation or other documents which were often matters of impression rather than broader questions of legal principle.⁴⁸

138. Lord Reed referred to the particular caution deriving from the Practice Statement where to overrule a previous decision would risk retrospectively disturbing the basis on which contracts and other commercial transactions had been entered into. The same would be true of settlements of property and tax arrangements. There was also a need for certainty in the criminal law. Relevantly to the present case, he said:

The Court would also consider whether any suggested change in the law was so complex or carried potential injustices or wider implications that it was more appropriately left to the legislature. It would reconsider a decision impeding the proper development of the law or clearly causing uncertainty, administrative difficulties, or individual injustice.

139. Departures from precedent had occurred in cases in which it was clear that the law had taken a wrong turn and there was no prospect of legislative reform to address it. Departures from precedent had also occurred where it was clear that doing so was consistent with “the needs, expectations and values of contemporary society”.⁵¹

140. Lord Burrows in the Lord Toulson Memorial Lecture 2024 referred to what Lord Reed had said in his extra-judicial lecture and added three comments about the approach that the courts had been taking and the criteria that had been developed in relation to the use of the 1966 Practice Statement.

141. First, the main question should be whether the past decision was clearly wrong as a matter of law. Just because the later court would have reached a different decision than the earlier court, did not mean that the earlier decision should be overruled. Second, he expressed doubt about the proposition that there should be greater reluctance to overrule a past decision that turned on statutory interpretation than a matter of common law. This, he suggested, should turn on how clear it was that the previous interpretation was incorrect. He quoted Viscount Dilhorne in Jones v Secretary of State for Social Services:

Reference was made to decisions of the House of Lords overturning precedents on statutory interpretation.⁵⁴

142. His third comment was that the age of the precedent should not be of any importance in itself:

Lord Burrows proposed two major criteria to be taken into account in applying the 1966 Practice Statement:

• how clear is it, with the benefit of hindsight, that the past decision was legally incorrect;
• how disruptive the overruling would be given that the common law operates by retrospective overruling.⁵⁶

143. In 1989 in John v Federal Commissioner of Taxation⁵⁷ (”John’s Case”) the High Court of Australia set out four considerations relevant to whether it should overrule its own previous decision.

John’s Case and the earlier decision of Commonwealth v The Hospital Contribution Insurance Fund of Australia⁵⁸ were relied upon in Imbree v McNeilly⁵⁹ (“Imbree”) in which the Court overruled its previous decision in Cook v Cook⁶⁰ concerning the standard of care owed by a learner driver. This was an overruling on a question of common law.

144. A further relevant consideration was suggested in Imbree. That is whether or not “change is necessary to maintain a better connection with more fundamental doctrines and principles”.⁶¹ The Court has also considered whether overruling a previous decision will bring about an improvement in the law. That consideration was in play in Esso Australia Resources Ltd v Federal Commissioner of Taxation⁶² in which the Court overruled its previous decision in Grant v Downes⁶³ which had held that at common law legal professional privilege attached only to documents brought into existence for the sole purpose of submission to legal advisors, for advice or for use in legal proceedings. This ‘sole purpose’ test was replaced by a ‘dominant purpose’ test in Esso.⁶⁴

145. In practice, the DIFC Courts apply a doctrine of precedent. The Court of Appeal will generally follow its own prior decisions but may depart from them in limited circumstances. It is not necessary for present purposes to set out those circumstances exhaustively. In addition to Lord Reed’s observations, the major criteria proposed by Lord Burrows, coupled with the considerations set out in the decision of the High Court of Australia in John’s Case, provide helpful guidance.

146. If this Court reaches the conclusion that one of its earlier decisions embodied an error of law that may impede the effective administration of justice, there may be a case for review having regard to considerations of the kind set out by the High Court in John’s Case. Where such considerations do not favour departure from the previous decision, it may be that the best course for a later Court of Appeal, which has formed the view that a previous decision was affected by a legal error, is to draw the matter to the attention of the legislature.

147. Sandra Holding does not rest upon a principle carefully worked out in a significant succession of cases. Nor is there evidence that it has been independently acted on in a manner which militates against its reconsideration. Applying Lord Burrows’ criterion, a conclusion that the decision in Sandra Holding was wrong, so far as it rested upon a finding as to the jurisdiction of the CFI, would not appear to be disruptive. It was a decision about the absence of a relevant jurisdiction and power. This may be contrasted with the hypothetical case in which the prior decision found the existence of a jurisdiction and powers upon which parties and lower courts had subsequently acted. Then it might be said that an overruling could be disruptive.

The DIFC Courts — jurisdiction and power

148. The approach to be taken by this Court in considering the jurisdiction and powers of the DIFC Courts must have regard to the function and purpose of those Courts. They are statutory courts integral to the operation of the DIFC as a Financial Free Zone.

149. The DIFC was established as a Financial Free Zone pursuant to Federal Decree No 35 of 2004, issued by the President of the United Arab Emirates. In 2021, the Ruler of Dubai made Law No (5) of 2021 Concerning the Dubai International Financial Centre. Article (4) sets out a number of objectives of the DIFC which include the following:

150. The Law refers to the Courts in Article (14) and includes the following:

151. The jurisdiction and powers of the DIFC Courts derive from statute law, including the JAL and the Dubai Court Law. As Justice Michael Black KC recently observed in Gate Mena DMCC and Another v Tabarak Investment Capital Limited and Another:

152. The DIFC Courts exercise their jurisdiction and their powers in hearing and determination of disputes which may be domestic or transnational. Their jurisdiction and powers are to be found in statutes and rules expressly, and in some cases by implication.

153. Article 24 of the Court Law confers jurisdiction on the CFI to “ratify any judgment, order or award of any recognised foreign court”. It has power under Article 7(6) of the JAL to execute foreign judgments. It has power under Article 32 of the Court Law to issue interim or interlocutory orders in proceedings before the Court. By operation of Article 5(A)(1)(e) of the JAL, the Rules of Court fall within the category of ‘DIFC Regulations’ which can be a source of jurisdiction. The first resort is to the express grant of jurisdiction in relation to foreign judgments to determine whether or not it necessarily carries with it the jurisdiction to entertain an application for interim relief where proceedings are pending in a foreign court to prevent pre-emption by dissipation of the prospective judgment debtor’s assets. Whether a Rule of Court carries with it a grant of jurisdiction will be a matter of construction. Ordinarily, such Rules are not likely to confer jurisdiction. However, jurisdiction may be conferred by rule where, in its absence, the rule would be of no effect or would have a lacuna in its operation.

154. If a defendant in proceedings in a foreign court, whose judgment could be enforced in the DIFC, were to dissipate its assets to defeat execution of an apprehended judgment in the foreign jurisdiction and in the other jurisdictions in which the foreign judgment might be enforced, that would be a step which would render the jurisdiction and powers of an enforcing court nugatory.

155. The ability of a potential judgment debtor in a commercial dispute to make a pre-emptive strike against enforcement of any judgment against it would be inimical to the rule of law in trade and commerce, domestically and transnationally. The DIFC Courts are part of a growing network of international commercial courts in a number of jurisdictions around the world. Where their jurisdiction and powers are amenable to constructions supporting the rule of law in transnational trade and commerce, such constructions should be preferred. In our opinion, Article 24 of the Court Law properly construed confers jurisdiction 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 Rules providing for interim freezing orders, read with the express grant, could also be viewed as a source of the requisite protective jurisdiction.

156. The expansive powers of the DIFC CFI to award interim remedies include cases in which the remedy is sought in relation to proceedings which “… will take place outside the DIFC” — see RDC 25.24(1). That consideration, coupled with the express jurisdiction and associated powers to enforce foreign judgments, suggests that the Court has the jurisdiction and powers to ensure that that express jurisdiction is effective. On that basis, there is a strong case for the proposition that the Court has the power to award a freezing order in respect of the assets of a potential judgment debtor in proceedings in a foreign court whose judgment may be amenable to recognition and execution by the CFI.

157. Whether such a jurisdiction and power should be exercised is a matter of discretion. It should not be exercised lightly. It should not be more expansive than is necessary for the purposes of the case in point.

158. Against that background, it is appropriate to refer to relevant case law which was cited to the Court.

Relevant case law

159. The Court was referred to a number of decisions of the DIFC Courts, and the courts of the United Kingdom and Australia in aid of the respective arguments advanced. It is convenient to refer to some of those authorities.

160. Among the English decisions cited in DIFC decisions was that of the Privy Council in Mercedes Benz AG v Leiduck.⁶⁶ That case concerned the powers of the High Court of Hong Kong to issue a worldwide freezing order or Mareva Injunction in aid of proceedings in Monaco which had no connection with Hong Kong. As summarised in the headnote in the authorised report, the Privy Council held that the power of the Court to serve proceedings out of the jurisdiction (under O 11 r 1(1) of the Rules of the Supreme Court of Hong Kong, corresponding to the English RSC Ord 11 Rule 1(1)) authorised service, on a person not otherwise compellable to appear before the local court, of a document commencing an action intended to ascertain substantive rights. It did not permit service out of the jurisdiction of a writ claiming Mareva relief. The Rule was not intended to assert an extra-territorial jurisdiction based solely on the presence of assets within the territory. The Judicial Committee applied The Siskina. ⁶⁷

161. Lord Nicholls, in dissent, observed that:

162. In relation to the question of subject matter jurisdiction His Lordship examined the case of two people living in Hong Kong, one of whom defaulted under a contract containing a clause that all disputes should be determined exclusively by the courts of a foreign country. The innocent party commences proceedings in the foreign court claiming damages and then discovers that the defaulting party is planning to remove his assets from Hong Kong in order to thwart enforcement of the judgment the plaintiff is having to seek abroad. The Hong Kong court has jurisdiction to grant a Mareva Injunction to prevent him from doing so. Justice and convenience suggested an affirmative answer. So long as the foreign judgment when obtained would be recognised and enforceable in Hong Kong, the Hong Kong court should be able to exercise its wide powers to grant an injunction in such a case, as in a case where the judgment is sought from the Hong Kong court itself.⁶⁹

163. His Lordship went on to describe Mareva relief as “not so much relief appurtenant to a money claim as relief appurtenant to a prospective money judgment.”⁷⁰ It was granted to facilitate the process of execution or enforcement which would arise but only when the judgment for payment of an amount of money had been obtained. His Lordship then said:

164. As to the question whether O 11 r 1(1)(b) a writ claiming a Mareva Injunction could stand alone in an action on its own feet as a form of relief granted in anticipation of and to protect enforcement of a judgment yet to be obtained in other proceedings. On that basis Mareva relief was not interim relief in the sense relevant to O 11 r 1(1)(b).

165. The decision of the majority in Mercedes Benz and the dissenting analysis by Lord Nicholls turned on the construction of O 11 r 1. The majority held that the purpose of that Order was to authorise the service on a person who would not otherwise be compellable to appear before the English court of a document requiring him to submit to the adjudication by the court of a claim advanced in an action or matter commenced by that document. Such a claim would be for relief founded on a right asserted by the plaintiff and enforced by the medium of a judgment given by the court. Absent a claim based on a legal right which the defendant could be called upon to answer of a kind falling within O 11 r 1(1), the court would have no right to authorise the service of the document on the foreigner, or to invest it with any power to compel him to take part in proceedings against his will.⁷²

166. This analysis is not relevant in the context of the DIFC or to this case where the asserted jurisdiction and power is not limited by territorial considerations albeit such considerations may be relevant to discretion.

167. Mercedes Benz had been decided many years before the jurisdiction of this Court to recognise and enforce foreign judgments was considered in DNB Bank ASA, which has already been mentioned. As the Court there stated, when the DIFC Courts recognise and enforce a foreign judgment, the product is itself a judgment of the DIFC Courts which can therefore be executed under Article 7 of the JAL. There is no requirement that there be assets within the DIFC:

168. And further:

169. Justice Sir David Steel in a separate concurring judgment in DNB Bank ASA, described the judgment issued by the DIFC Courts in recognition and enforcement of a foreign judgment as:

170. Akhmedova v Akhmedov⁷⁷ was a judgment of the Court of Appeal delivered on 19 June 2018 by a Court comprising Justice Sir David Steel, Justice Sir Richard Field and Justice Judith Prakash. The case concerned a freezing order issued by the DIFC CFI in aid of the enforcement in the DIFC CFI of a judgment of the High Court of England and Wales.

171. The English judgement was a financial remedy order, granting ancillary relief in divorce proceedings and was in the sum of GBP 453,576,152, comprising 41.5% of total marital assets. The husband against whom the order was made, was ordered to pay his wife a lump sum of GBP 50,000,000 and to transfer certain properties. Other entities were joined in as parties to the English proceedings and made jointly and severally liable with the husband.

172. The freezing order made by the First Instance Judge restrained the defendants from removing any of their assets which were in Dubai until the return date or further order. These included a large pleasure yacht. The interest of one of the defendants in the pleasure yacht had been assigned through sequential transactions, ultimately to a Liechtenstein Anstalt called ‘Straight’. Straight was not a party to the English judgment and contended on the return of the freezing order that the Court lacked jurisdiction to continue it. The primary judge dismissed Straight’s jurisdiction challenge and continued the freezing order without amendment.

173. The Court of Appeal observed that:

174. The Court made the further observation that it would have been open to the respondent in that case to apply to the English court to have Straight joined as a party against whom judgment would be made, thereby establishing jurisdiction over Straight in the DIFC Courts.

175. Interestingly, as appears from paragraph 23 of the judgment, counsel for Straight informed the Court that it would regard itself as free to sail the vessel away from Dubai if the judge’s order against his client were discharged. In those circumstances, the Court was of the view that notwithstanding Straight’s success on its appeal, it was appropriate to grant quia timet relief by continuing the order of the judge against Straight pending the determination of the respondent’s application for permission to amend her case against Straight.

176. The decision to issue quia timet relief was significant because it indicated a preparedness on the part of the Court to grant such relief against a party who was not a party to a judgment which could be enforced by the Court, but was likely to become liable under such a judgment. The decision necessarily implies the existence of a power on the part of the Court to grant such relief by continuing a freezing order against a party in prospect of a judgment against that party which might be enforced in the DIFC.

177. Justice Sir Richard Field referred to Akhmedova in a judgment which he delivered on 25 December 2018, sitting as the Court of First Instance in VIH Dubai Palm Jumeirah Ltd (Cayman Islands) v ASSAS OPCO Ltd and Others.⁷⁸ The case concerned an application for orders for contempt arising out of alleged breach of an injunction, issued by the CFI under the Arbitration Law.

178. There was an argument in that case that the effect of a decision of the Court of Cassation was that the DIFC Court had never had jurisdiction to issue the injunction. That was said to be fatal to the contempt application.

179. Justice Field considered the application in the DIFC of the English approach that an order of the court should be obeyed unless and until it had been set aside. The English approach distinguished the position of a superior court of record from that of an inferior court. In the latter case an order that the inferior court lacked jurisdiction to issue will be a nullity that could not found a committal order for contempt. The Judge held that there was no reason why the English law reflecting the ancient distinction between superior courts of record and inferior courts should be adopted and applied by the DIFC Courts. The policy reasons behind the principle that orders of a court should be obeyed unless and until set aside were compelling and justified its adoption by the DIFC Courts.

180. Justice Field went further and said that if English courts were to be the touchstone of what the law on a subject in the DIFC should be, the situation of a DIFC Court stood to be equated with an English superior court of record. He observed:

181. In the course of considering arguments about the jurisdiction of the Court to entertain a contempt application in respect of a non-party, Sir Richard agreed with Justice Roger Giles’ observation in Nest Investment v Deloitte & Touche CFI 027-2016 at [105], that when considering whether a provision in the DIFC Law or Regulation gives the DIFC CFI jurisdiction under Article 5(A)(1)(e), the Court must be satisfied that there is a sufficiently clear conferral of jurisdiction by that provision. In that connection, he held that Article 43 of the Arbitration Law conferred jurisdiction. That Article provides:

182. In Sir Richard Field’s judgment, Article 43 properly construed as a self-contained provision within the DIFC Court Law, was intended to be read as a conferral of original jurisdiction on the Court to determine allegations of contempt of court made against parties over whom the Court otherwise does not have jurisdiction. At paragraph 105 of his judgment, Sir Richard accepted that his construction of Article 5(A)(1)(e) and Article 43 of the Arbitration Law meant that the Court may have jurisdiction over third party respondents wherever they are in the world, although in reality, it would be rare for entities or persons based outside Dubai to be parties alleged to be guilty of third party contempt.

183. It is important to bear in mind the expansive approach informed by public policy to the question whether jurisdiction is conferred by Rules of Court in a particular case, adopted by this Court in Nest Investment. Although that case concerned joinder of a party, the scope of the joinder power was linked to the jurisdiction associated with it. The Court said:

That decision involved the effect of a Rule conferring a power to join a party and the question whether it extended to a party not caught by one of the gateways in Article 5(A)(1)(a)–(d). It reflected an approach to construction consistent with the position of the DIFC Courts as courts exercising jurisdiction in an international dispute resolution setting not confined to purely domestic disputes. That public policy consideration is relevant to the question whether the Court can be found to have jurisdiction and associated power to issue a freezing order in relation to a potential judgment debtor in proceedings in a foreign court whose judgment would be capable of recognition by the DIFC Court.

184. A further English decision of significance in the relevant chronological order was Broad Idea,⁸¹ a decision of the Privy Council. The Supreme Court of the British Virgin Islands had made freezing orders against a British Virgin Islands company and a Hong Kong resident alleged to be the beneficial owner of the company’s assets. Permission was given to serve the Hong Kong resident out of the jurisdiction. Those orders were later set aside. An appeal against the setting aside orders was dismissed. In relation to the order against the company, it was dismissed on the basis that the courts below had been correct to find that there was insufficient evidence to establish that the Hong Kong resident was the beneficial owner of the company’s assets. In dismissing the appeal against the setting aside of the permission to serve the Hong Kong resident out of the jurisdiction, the Court interpreted the relevant Rule by reference to “settled case law to the effect that similarly worded rules of court did not empower a court to authorise proceedings to be served out of the jurisdiction where the only relief claimed within the jurisdiction was a freezing injunction.” The only relief sought against the Hong Kong resident within the British Virgin Islands was a freezing injunction therefore permission should not be granted to serve him out of the jurisdiction.

185. That said, the Board held that a court with equitable and/or statutory jurisdiction to grant injunctions where it is just and convenient to do so, would have the power to grant a freezing injunction against a respondent over whom the court had personal jurisdiction provided that the applicant had already been granted or had a good arguable case for being granted a judgment or order whether or not through the domestic courts or directly against the respondent for payment of a sum of money enforceable through the process of the domestic court and where the respondent held assets or was liable to take steps that would reduce the value of assets against which a judgment could be enforced. The dicta of Lord Nicholls in Mercedes Benz were applied in this connection.

186. Lord Leggatt JSC, with whom Lord Briggs, Lord Sales and Lord Hamblen JJSC agreed, observed at [59]:

187. Reference was made to the transformation in the ease and speed with which money and other financial assets can be moved around the world.⁸² His Lordship quoted Lord Neuberger in Linsen International Ltd v Humpuss Transportasi Kimia:

188. A cogent consideration was that the decision in The Siskina which was applied in Mercedes Benz and Mercedez Benz itself, form part of the legal background against which the relevant civil procedure rules were introduced in 2000. Where legislation re-enacted a provision that subject of authoritative judicial interpretation it was generally to be inferred that the new provision was intended to bear the meaning that case law had already established.⁸⁴

189. Under the heading ‘The enforcement principle’, Lord Leggatt, referring to Lord Nicholls’ dissenting judgment in Mercedes Benz, observed that:

190. This rationale was referred to as “the enforcement principle” in JCS BTA Bank v Ablyazov (No 1).⁸⁶ The principle was said to explain the basis and scope of the jurisdiction to grant a freezing injunction against the third party against whom no claim for substantive relief lay. The ordinary prerequisite was that the third party was in possession or control of an asset against which a judgment could be executed.⁸⁷ In each case it was said the key question was whether assets are or would be available to satisfy a judgment through some process of enforcement. Once that principle was appreciated, it was apparent that there was no reason in principle to link the grant of such a freezing injunction to the existence of a cause of action.

191. What in principle mattered was that the applicant would have a good arguable case for being granted substantive relief in the form of a judgment that would be enforceable by the court from which a freezing injunction is sought. It was said to be “a pointless insularity” to limit the remedy to cases where the judgment was being sought in the territorial jurisdiction where the injunction was needed to preserve assets against which the judgment can be enforced.⁸⁸ Such an approach was also said to undercut regimes intended to make the court’s process for enforcing its own judgments available to enforce arbitration awards and foreign judgments. ⁸⁹ No relevant distinction was drawn between a judgment recognised pursuant to statute or enforced by means of an action founded on the judgment.

The legal principle in Sandra Holding should not be followed

192. The jurisdiction of DIFC Courts is statutory as are the powers which may be exercised in aid of that jurisdiction. The express conferral of jurisdiction in aid of it may give rise to an implied incidental power necessary to prevent the express grant of jurisdiction from being thwarted. And if it be necessary for a complete analysis the implied power may bring with it an ancillary implied jurisdiction in aid of the express grant.

193. Lord Morris of Borth-y-gest said in Connelly v Director of Public Prosecutions:⁹⁰

194. The grant of a jurisdiction to recognise and enforce a foreign judgment must encompass, if only by implication, the grant of power necessary to prevent that jurisdiction from being thwarted. The DIFC Court has express jurisdiction to recognise and enforce foreign judgments. The jurisdiction is thwarted if a party defendant to a foreign proceeding which may yield such a judgment can dissipate its assets whether within the DIFC or otherwise.

195. An apposite case from Australia is PT Bayan Resources TBK v BCBC Singapore Pte Ltd⁹², a decision of the High Court of Australia.

196. The case concerned the jurisdiction and power of the Supreme Court of Western Australia. The relevant jurisdiction to recognise and enforce a foreign judgment was conferred by federal law — the Foreign Judgments Act 1991 (Cth).

197. Under the Australian Constitution, the Parliament may make laws conferring federal jurisdiction on State courts. One class of federal jurisdiction is jurisdiction with respect to matters arising under a law of the Commonwealth.

198. In PT Bayan the High Court held that the Supreme Court of Western Australia could issue a freezing order on an ex parte application by a party who was a plaintiff in a proceeding pending in the High Court of Singapore. Money judgments of the High Court of Singapore were able to be recognised and enforced in the Supreme Court of Western Australia, pursuant to the Foreign Judgments Act.

199. The jurisdiction was uncontroversial. The question was one of power. In the event, five members of the Court said in a joint judgment:

“It is well established by decisions of this Court that the inherent power of the Supreme Court of a State includes the power to make such orders as that Court may determine to be appropriate “to prevent the abuse or frustration of its process in relation to matters coming within its jurisdiction”⁹³. And it has been noted more than once in this Court that a freezing order is “the paradigm example of an order to prevent the frustration of a court’s process.”⁹⁴

200. The Court rejected a submission that the power of the Supreme Court was limited to circumstances in which a substantive proceeding had been commenced in that court. The arguments missed a critical point:

“Even where a court makes a freezing order in circumstances in which a substantive proceeding in that court has commenced or is imminent, the process which the order is designed to protect is” a prospective enforcement process”. That description is drawn from the explanation of the nature of a freezing order given by Lord Nicholls of Birkenhead in Mercedes Benz AG v Leiduck. That passage was cited with approval by five members of this Court in Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia [No 3]. In a passage which (subject to presently immaterial qualifications) was itself adopted as a correct statement of principle by four members of this Court in Cardile v LED Builders Pty Ltd.”⁹⁵

201. The Court further cited Lord Nicholls and went on:

“The power to make a freezing order in relation to an anticipated judgment of a foreign court, which when made would be registrable by order of the Supreme Court under the Foreign Judgments Act, is within the inherent power of the Supreme Court. That is because the making of the order is to protect a process of registration and enforcement in the Supreme Court which is in prospect of being invoked.” ⁹⁶

202. The same logic applies to the scope of the power of the DIFC CFI to issue freezing orders. It has power to grant interim remedies under Pt 25 of the RDC, including freezing orders which extend to freezing orders restraining a party from dealing with any assets whether located within the jurisdiction or not – RDC 25.1(6). Further, the Court may grant such a remedy whether or not there has been a claim for a final remedy of that kind — RDC 25.3. Those powers are available to prevent the Court’s jurisdiction being thwarted. That includes its jurisdiction to recognise and enforce foreign judgments. 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.

203. There is, of course, always a question of discretion as to whether a freezing order should be granted in such a case and, if so, the scope of the order. In many cases it would be expected that such a freezing order would be limited to assets within Dubai. While there is power to make a WFO, the question of discretion — whether such an order should be made — is one which requires careful consideration.

204. 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 apply the criteria proposed by Lord Burrows and referred to earlier, it is clear with the benefit of full and further consideration, that the past decision was legally incorrect. Further, a refusal to follow the legal principle enunciated in Sandra Holding would not be disruptive. It appears that on the merits the case for a WFO was not established — that suggests that the result would have been the same even had Sandra Holding found there to be jurisdiction and power to make the order sought. Further, the relevant legal principle as enunciated by Sandra Holding involved the proposition that there was a want of power to issue a freezing order where there was no foreign judgment to be recognised or enforced. This places the case in a different category from a case in which a court finds for the existence of a positive jurisdiction and power which is then invoked in subsequent cases.

205. Applying the criteria in John’s Case, it cannot be said that rested upon a principle carefully worked out in a significant succession of cases. Further, it can be said to have generated inconvenience in the sense that the absence of the power to issue a freezing order in respect of a prospective foreign judgment may result in the jurisdiction of this Court to recognise the foreign judgment ultimately issued being thwarted. The correct analysis, in our respectful view, is whether the Court had power (and if it be necessary to say so, ancillary jurisdiction) to do so in order to avoid the thwarting of its undisputed express jurisdiction to recognise and enforce a foreign judgment. We are clear that the answer is Yes. We would add that considerations of policy for this Court are overwhelmingly in favour of granting the injunction. So too, are all discretionary considerations. The appeal should be allowed.