In a landmark judgment issued on 6 September 2023 in (1) Sandra Holding Ltd (2) Nuri Musaed Al Saleh (together the “Respondents“) v. (1) Fawzi Musaed Al Saleh (2) Ahmed Fawzi Al Saleh (3) Yasmine Fawzi Al Saleh (4) Farah El Merabi (together the Appellants) [2023] DIFC CA 003 (the “Judgment”), the DIFC Court of Appeal (CA) has overturned a Worldwide Freezing Order (WFO) issued by the Court of First Instance on the basis that the DIFC Courts did not have the jurisdiction to grant the WFO against the parties who had no jurisdictional nexus to the Dubai International Financial Centre (DIFC).
The Judgment is significant as it limits the availability of interim measures that can be adopted in the DIFC in support of foreign judicial proceedings for cases that do not fall within the gateways for jurisdiction of the DIFC courts outlined in Article 5A of the Dubai Judicial Authority Law 12/2004 (JAL). This is opposite to the approach previously taken by Justice Sir Jeremy Cooke’s September 2022 decision in Jones v. Jones [CFI 043/2022].
Factual Background
The proceedings in the DIFC is one of a series of proceedings initiated by a member of a wealthy Kuwaiti family against his brother and other family members, alleging fraud during the execution of certain transactions related to a jointly owned Cayman Islands entity. Apart from the DIFC proceedings, the Respondents launched civil claims in the state courts in Kuwait as well as criminal proceedings in France. Notably, the Kuwaiti proceedings have since been dismissed by the local courts in Kuwait, which dismissal has in turn been appealed by the Respondents.
The Respondents requested the DIFC Courts to issue the WFO to prevent the dissipation of assets pending the determination of the ongoing foreign civil court proceedings commenced in Kuwait, although the Appellants were not licensed in the DIFC, no contracts were performed in the DIFC, and the Appellants had no assets in the DIFC. The Appellants did however own onshore assets in Dubai.
The Court of First Instance granted the WFO requiring the Appellants to disclose all of their assets worldwide valued in excess of USD 150,000 within 48 hours of service of the WFO. The Appellants appealed against the WFO.
Court’s Conclusions on the Matter of Jurisdiction
The central question before the CA was whether the DIFC Courts had jurisdiction to grant the WFO where none of the parties falls within the jurisdiction of the DIFC Courts, as provided by Article 5A(1)(a)-(d) or 5A(2) of the JAL.
Article 5A of the JAL sets out the cases when DIFC Courts have jurisdiction, such as when a party is licensed in the DIFC, a contract was executed or performed within the DIFC, or where the parties agreed to the jurisdiction of the DIFC Courts. None of the parties argued that any of the grounds provided in Article 5A(1)(a)-(d) or (2) were present, however, the Respondents relied on Article 5A(1)(e) of the JAL.
Article 5A(1)(e) reads as follows: “The Court of First Instance shall have exclusive jurisdiction to hear and determine … any claim or action over which the Courts have jurisdiction in accordance with DIFC Laws and DIFC Regulations.” The CA confirmed that this provision confers a source of jurisdiction by way of laws and regulations which by definition includes any laws issued by the Ruler in relation to the DIFC and any rules, regulations, bylaws or orders relating to the DIFC issued by the President or by DIFC Bodies.
The question was then whether any of the laws and regulations relied on by the Respondents conferred on the Court of First Instance the jurisdiction to issue the WFO in the current circumstances.
The CA held in the negative relying on inter alia the following conclusions:
- DIFC Courts have a form of territorial jurisdiction over entities based in or licensed in the DIFC, over contracts performed or partly concluded within the DIFC, or where parties agree to confer jurisdiction on the Courts by virtue of Article 5A(1)(a)–(d), (2) and (3) of the JAL.
- Article 5A(1)(e) of the JAL confers a further source of jurisdiction by way of laws and regulations. However, in order for a specific law or regulation to extend the DIFC Courts’ jurisdictional powers, there has to be “clear expressive words to confer such powers”. Therefore, the specific rule or regulation needs to be assessed on a case-by-case basis to determine its true effects and ascertain if it in fact confers jurisdiction to the DIFC Courts.[1]
- Rule 25.24 of the Rules of the DIFC Courts (RDC), relied on by the Respondents, provides a general power which the Courts may exercise when granting an interim remedy in aid of foreign proceedings. The words used in that rule are not meant to confer jurisdiction, but are rather procedural. The rule should be read consistent with the gateways of Article 5A of the JAL, meaning that the interim remedy shall only be granted provided the Courts are satisfied that the jurisdiction condition has been met by the prospective applicant seeking such relief.
- Article 24 of the DIFC Law No. 10 of 2004 (Court Law), which was also relied on by the Respondents, provides jurisdiction to ratify a judgment, order or award. However, it is not a source of jurisdiction where there is no judgment or award to ratify. None of the Articles in the JAL, the Court Law or the RDC provide the Courts with the power to issue injunctions in aid of “anticipatory” foreign judgments.
The Practical Effect of the Judgment
The CA overturned the principles previously decided in Jones v. Jones and limited the availability of interim remedies to cases where the jurisdiction of the DIFC Courts can be established independently on the basis of Article 5A(1)(a)-(d) or 5A(2) of the JAL. This means that, where the potential judgment debtor is not based in or licensed in the DIFC, the contracts are not performed or partly concluded within the DIFC, and parties have not agreed to jurisdiction of the DIFC Courts, interim remedies may not be available from the DIFC Courts while the foreign court proceedings are pending.
Notably though, the Judgment did not overturn the principles outlined in DNB Bank v. Gulf Eyadah Corporation [CA-007-2015], specifically, that if the enforcement of an existing foreign judgment is sought in the DIFC Courts, DIFC Courts do have jurisdiction to enforce it in appropriate circumstances, despite the debtor having no assets within the DIFC.
Other Observations Made by the CA
The CA also reiterated the general pre-conditions that must be satisfied when applying for a freezing injunction in the DIFC Courts. The applicant must satisfy the Courts that:[2]
- it has a “good arguable case”;
- the defendant has or may have assets which will be available to satisfy the judgment against him, if given in the applicant’s favour;
- there is a real risk that the judgment will not be satisfied by reason of an “unjustifiable” disposal of those assets; and
- that in all the circumstances it is “just and convenient” to make the order sought.
Furthermore, the following discretionary factors are also to be taken into account, once prima facie jurisdiction has been established:[3]
- whether making the order will interfere with the management of the case in the primary court, where the order is inconsistent with an order in the primary court or overlaps within it;
- whether it is the policy in the primary jurisdiction not to make a WFO/Disclosure Order;
- whether there is a danger that the orders made will give rise to disharmony or confusion and/or risk of conflicting or overlapping order in other jurisdiction, in particular the courts of the state;
- whether at the time the order is sought there is likely to be a potential conflict as to jurisdiction rendering it inappropriate and inexpedient to a WFO; and
- whether, in a case where jurisdiction is resisted and disobedience to be expected, the court will be making the order which it cannot enforce.
In respect of the time period within which to raise jurisdictional challenges, and whether a late challenge equates to a deemed submission to jurisdiction, the CA found that submission to jurisdiction (actual or deemed) is insufficient to confer jurisdiction on the DIFC Courts.[4]
The CA also confirmed that where jurisdiction is challenged, the burden of proof lies with the party seeking the recognition of jurisdiction.
[1] Judgment, para 58.
[2] Judgment, para 81 / Ithmar Capital v 8 investment [CA-001-2008].
[3] Judgment, para 98 / Arcelormittal USA LLC v Essar Steel Limited & Others [2019] EWCH 724 (Comm) [72].
[4] Judgment, para 76.
