DIFC Court warms to Worldwide Freezing Orders4 March 2025

FACTUAL AND PROCEDURAL TIMELINE

• Carmon (the “Appellant”) is an Angolan construction company and Cuenda (the “Respondent”) was a senior officer of Carmon from 2007 until 2022;
• in November 2016, the Respondent was sent by the Appellant to Hong Kong to establish a local branch of the Appellant (“Carmon HK”). This included the opening of Hong Kong bank accounts, for which the Respondent was the sole signatory and controller, but the Appellant was the ultimate beneficial owner and held ultimate control;
• following the Respondent’s resignation in August 2022, he was found to have changed the login details for the Hong Kong accounts, such that the Appellant was unable to access them. The last known balance was US$23m;
• the Appellant obtained freezing and disclosure orders in the Hong Kong courts against Carmon HK and the Respondent. The disclosure revealed that funds from Carmon HK’s account had been transferred to multiple accounts in the Respondent’s name, including two Emirates NBD accounts.
• when the Appellant notified Emirates NBD of the freezing order made by the Hong Kong courts, the bank’s response was that the Hong Kong order needed recognition in the UAE to be enforceable;
• the Appellant applied to the DIFC Court of First Instance, on a without notice basis, for a WFO which was granted in respect of the Respondent’s accounts with Emirates NBD. However, the Respondent then applied for the WFO to be set aside and contested the jurisdiction of the DIFC Court of First Instance. The DIFC Court of First Instance followed Sandra Holding and allowed the set-aside application; and
• the Appellant was granted permission to appeal, bringing us to the present judgment.

KEY LEGISLATION

In both Carmon v Cuenda and Sandra Holding, the following legislation was given particular consideration:

a) the jurisdictional gateways under Article 5 of the Dubai Judicial Authority Law 12/2004, specifically Article 5(A)(1), which provide as follows (emphasis added)

“1) The Court of First Instance shall have exclusive jurisdiction to hear and determine:

(a) Civil or commercial claims and actions to which the DIFC or any DIFC Body, DIFC Establishment or Licensed DIFC Establishment is a party;
(b) Civil or commercial claims and actions arising out of or relating to a contract or promised contract, whether partly or wholly concluded, finalised or performed within DIFC or will be performed or is supposed to be performed within DIFC pursuant to express or implied terms stipulated in the contract;
(c) Civil or commercial claims and actions arising out of or relating to any incident or transaction which has been wholly or partly performed within DIFC and is related to DIFC activities;
(d) Appeals against decisions or procedures made by the DIFC Bodies where DIFC Laws and DIFC Regulations permit such appeals; and
(e) Any claim or action over which the Courts have jurisdiction in accordance with DIFC Laws and DIFC Regulations.”

b) Rule 25.24 of the Rules of the DIFC Courts, which addresses the procedure for an interim remedy relating to proceedings outside of the DIFC:
“Where a party wishes to apply for an interim remedy but:

(1) the remedy is sought in relation to proceedings which are taking place, or will take place, outside the DIFC…

any application must be made in accordance with Part 8.”

c) Rule 24 (1) of the DIFC Court Law (DIFC Law No. 10 of 2004):

(1) “Pursuant to Article 7(4) of the Judicial Authority Law, the Court of First Instance has jurisdiction to ratify any judgment, order or award of any recognised:
(a) Foreign court;
(b) Courts of Dubai or the United Arab Emirates;
(c) Arbitral Award;
(d) Foreign Arbitral Award; or
(e) orders for the purposes of any subsequent application for enforcement in the courts of Dubai.”

A BRIEF LOOK BACK AT SANDRA HOLDING

Sandra Holding centred on allegations of fraud in share transactions made by Cayman Islands entity Sandra Holding and Mr Nuri, the sole shareholder of the company. Mr Nuri brought proceedings against the defendants in Kuwait and France and successfully applied for a WFO in the DIFC Court in November 2021 in support of those proceedings, due to the risk of dissipation of assets. In August 2022, the defendants applied to set aside the WFO on the basis that the DIFC Court lacked jurisdiction to issue it.

The DIFC Court of Appeal allowed the appeal and set the WFO aside. It held that the DIFC Court lacked jurisdiction where the defendants “have no assets in the DIFC, and they owe no allegiance to the DIFC Court by way of domicile, residence or some other apparent reasons.” Where these gateways to jurisdiction did not exist, neither the DIFC Court Law nor the Rules of the DIFC Courts empowered the DIFC Court with jurisdiction to order a WFO pursuant to Article 5(1)(e).

KEY ISSUES

The Court in Carmon v Cuenda considered two interlinked but distinct issues:

• 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; and
• whether it has power in aid of such jurisdiction to issue a freezing order.

DECISION/ANALYSIS

The Court in Carmon v Cuenda overturned Sandra Holding and in doing so adopted a broader and more purposive approach to the DIFC Courts’ powers in respect of freezing orders. The Court placed particular emphasis on Article 24(1) of the DIFC Court Law in reaching its decision that the DIFC Courts’ jurisdiction was enlivened by a freezing order application. This meant adopting a policy-driven and practical approach, on the basis that deciding against the DIFC Courts’ jurisdiction would risk the dissipation of assets by a foreign defendant, meaning that “the rule [Article 24] would be of no effect or would have a lacuna in its operation.”

The Court focussed particularly on the DIFC Courts’ international standing to reach the view that “where their jurisdiction and powers are amenable to constructions supporting the rule of law in transnational trade and commerce, such constructions should be preferred.”

The Court further relied on Rule 25.24 of the Rules of the DIFC Courts in holding that the DIFC Courts had the power, as well as the jurisdiction, to award a freezing order in support of foreign proceedings. The exercise of such powers would prevent the Court’s jurisdiction to enforce a foreign judgment from being thwarted by the pre-emptive dissipation of assets by a defendant.

The Court cited several cases in support of this approach, including the Australian High Court case of PT Bayan Resources TBK v BCBC Singapore Pte Ltd [2015] HCA 36, in which it was held that the Supreme Court of Western Australia could make a freezing order relating to an anticipated judgment in Singapore. The Supreme Court of Western Australia’s power included “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”. The same logic applied to the DIFC Courts’ power to issue freezing orders.

The Court reached the view that “Sandra Holdings 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.” In reaching this conclusion, it relied upon the legislation cited above, as well as its powers under the following Rules of the DIFC Courts:

a) Rule 25.1(6) – to grant freezing orders restraining the removal of assets within the DIFC or dealing with such assets whether within or outside the DIFC; and
b) Rule 25.3 – to grant an interim remedy whether or not there has been a claim for a final remedy.

The Court’s significant and bold ruling was not without a message of caution, however. The judgment made clear that the question of whether a WFO should be made requires careful consideration and sought to distinguish itself from Sandra Holding on two bases:

1. in Sandra Holding, the merits did not militate for the ordering of a WFO; and
2. the incorrect principle established 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.”

KEY TAKEAWAYS

• Carmon v Cuenda overturned the Court’s previous decision in Sandra Holding, demonstrating the DIFC Courts’ willingness to facilitate justice regarding foreign proceedings.
• the decision indicates a potential step change in the DIFC Courts’ approach; it may become more policy-driven and assertive in adjudging its jurisdiction and powers. In addition, the Court clearly endeavours to use the rule of law to facilitate international trade and commerce; and
• however, the DIFC Courts’ discretion will remain carefully exercised regarding WFOs. They will continue to require a good arguable case on the merits and a real risk of the dissipation of assets.

This article was written by Dubai Partner Natalie Jensen and Associate James Lehmann.