Injunctive relief in the DIFC: A narrowing of the DIFC Court’s jurisdiction

Introduction

In what might be considered a blow to those who had welcomed the DIFC Court’s expansive attitude, the DIFC Court of Appeal has overturned previous authority providing that the court had a freestanding jurisdiction to grant injunctions in support of proceedings outside of the DIFC.  Instead, in Sandra Holdings v Saleh CA 003/2023,¹ the Court of Appeal rowed back from the previous approach adopted by Justice Sir Jeremy Cooke in Jones v Jones CFI 043/2022,² and held that the DIFC Court’s jurisdiction to grant injunctive relief in support of foreign proceedings arose only in circumstances where the DIFC Court would have jurisdiction over the defendant under one of the statutory gateways.

The decision will be disappointing to those who had supported the prospect of the DIFC Courts playing a broader regional, if not global, role in support of cross-border litigation.  It means that parties to cross-border disputes will be less able to access the DIFC Court in executing their global litigation strategy.

Background

In September 2022, Justice Sir Jeremy Cooke issued his judgment in Jones v Jones, in which he held that the DIFC Court did have the jurisdiction to grant a freezing injunction despite (1) there being no underlying claim in the DIFC Court, (2) the defendant having no assets in the DIFC or (3) the DIFC Court not otherwise having jurisdiction over the defendant.³  In other words, there was no connection to the DIFC.  In this regard, Cooke J considered that the DIFC Court (and any common law court) has an unfettered freestanding jurisdiction to grant injunctions in support of foreign proceedings. 

The issue arose, again before Justice Sir Jeremy Cooke in the DIFC Court of First Instance, in Sandra Holdings v Saleh. For present purposes, the background can be summarised briefly and will be familiar to those with experience in cross-border litigation. The Claimants had commenced proceedings in Kuwait, France and the US against the Defendants alleging that certain assets were wrongly (and in the French proceedings, fraudulently) misappropriated from a Cayman entity.  In support of the proceedings in Kuwait and France, the Claimants made an application to the DIFC Court for a worldwide freezing order (“WFO”) to prevent the Defendants from dissipating assets, even though the Defendants did not have any connection with (and no assets in) the DIFC.

The WFO was granted on 10 November 2021.  The Defendants, very belatedly, applied for the freezing order to be set aside and the matter came before Cooke J.  Following his decision in Jones v Jones, Cooke J took the view that the DIFC Courts had jurisdiction to grant the WFO even though there was no connection with the DIFC, and was satisfied that the other tests for the granting of an injunction were met.⁴

The Court of Appeal’s decision

The Defendants appealed, and the DIFC Court of Appeal unanimously overturned the decision and set aside the injunction.  For the purposes of this discussion, the key reasons were as follows:

1. The jurisdiction of the DIFC Court arises from Article 5A of the Judicial Authority Law (“JAL”).  In short, Article 5 of the JAL gives the DIFC Court the jurisdiction over (1) entities based or licenced in the DIFC, (2) contracts or transactions performed, partly performed or to be performed in the DIFC, or (3) where the DIFC Laws or Regulations otherwise have jurisdiction.  These are referred to as the ‘gateways’.
2. Nothing within the JAL or the Rules of the DIFC Courts (“RDC”) grants the DIFC Court the jurisdiction to act outside of the above gateways.  In other words, Cooke J was wrong to find that there was some form of unfettered freestanding jurisdiction to grant injunctions in the absence of establishing jurisdiction in the usual course.  The Court of Appeal specifically quashed the notion that the DIFC Court might issue injunctions in support of foreign proceedings absent establishing jurisdiction through the JAL:

“The impact of the Judge’s decision in the Court of First Instance would ultimately lead to the prospect of the DIFC Courts having jurisdiction over any foreign proceedings anywhere in the world, whereas in fact the Court’s jurisdiction has been constrained to the circumstances outlined in Article 5 of the JAL and is therefore neither wide nor expansive enough to cover any party around the world under any circumstances.”⁵

3. The Court of Appeal noted the DIFC’s role in the enforcement of a judgment or arbitral award that had already been handed down, but distinguished that from the present circumstances:

“The DIFC Courts have been willing to grant injunctions in support of the enforcement principles in respect of foreign judgments or arbitral awards on the basis that the Court would be acting in its capacity as a conduit jurisdiction. However, the Court does not have any statutory basis to assume jurisdiction by extending the conduit jurisdiction principle to matters which are not within the scope of the DIFC Court.”⁶

However, there was no basis to extend that principle in order to justify establishing jurisdiction to issue an injunction for proceedings that have not yet been determined:

“The fact that there may be a judgment in the Kuwaiti Proceedings at some point in the future does not confer power on the DIFC Court to grant an injunction in the meantime.”⁷

4. Finally, although the Court of Appeal held the DIFC Court had no jurisdiction to grant the WFO in the first place, for completeness the Court of Appeal noted that, had jurisdiction been established, it would not have ordered the WFO on the basis that the applicable tests were not satisfied.

In reaching its decision, the Court of Appeal drew a comparison with the approach under English law.  In this regard, the English courts’ jurisdiction to issue injunctive relief in the form of a WFO arises from section 25 of the Civil Jurisdiction and Judgment Act 1982 which confers powers to grant interim relief in respect of proceedings which have been or are to be commenced in a ‘contracting state’⁸.  The Court of Appeal noted that there was no equivalent statutory power available to the DIFC Court. 

Further, in many common law systems, jurisdiction is established when a defendant is properly served with the relevant proceedings.  If the defendant is outside the jurisdiction, then leave from the court must ordinarily be obtained before service can be effected (which would involve the court being satisfied as to various tests).  However, in the DIFC, parties do not require leave to serve proceedings outside the jurisdiction (RDC 9.53).  Therefore, the Court of Appeal found that it did not follow that the DIFC’s jurisdiction was established simply by virtue that service could effectively be carried out.

The DIFC Court of Appeal granted the appeal and dismissed the WFO.

Comment

Cooke J’s decision in Jones v Jones was seen as somewhat controversial as it opened the door to the DIFC Court being used for a variety of supporting injunctions, including worldwide freezing orders, without any apparent connection to the DIFC.  The Court of Appeal’s decision ends that notion, and confirms that the DIFC Court’s jurisdiction to grant injunctions in support of foreign proceedings remains firmly rooted in Article 5 of the JAL.

The decision is therefore a significant narrowing of the jurisdiction post Jones v Jones, and confirms that the DIFC Court will only be able to grant a supporting injunction where the gateways in Article 5 of the JAL are met.  That does not mean the underlying case must be heard in the DIFC, but there must be some connection with the DIFC for jurisdiction to be established.

While the Court of Appeal’s judgment is well-reasoned and logical, it will nevertheless be disappointing to those who had been keen to see the DIFC Court exercise its jurisdiction in an expansive manner, akin to that exercised by the English courts.  The overall result will ultimately be that less litigants will be able to  include the DIFC as part of their  broader regional and international cross-border litigation strategy. Whether this decision acts as a catalyst for legislative reform to introduce a provision akin to section 25 of the Civil Jurisdiction and Judgments Act 1982 in the DIFC remains to be seen.

Authored by Randall Walker and Ardil Salem.

References

1. Sandra Holdings v Saleh CA 003/2023.  The full judgment can be found at: https://www.difccourts.ae/rules-decisions/judgments-orders/court-appeal/1-sandra-holding-ltd-2-nuri-musaed-al-saleh-v-1-fawzi-musaed-al-saleh-2-ahmed-fawzi-al-saleh-3-yasmine-fawzi-al-saleh-4-farah-el

2. Jones v Jones CFI 043/2022.  The full judgment can be found at: https://www.difccourts.ae/rules-decisions/judgments-orders/court-first-instance/cfi-0432022-1-william-allan-jones-2-coffee-planet-llc-3-coffee-planet-roastery-fze-v-robert-anthony-jones-2

3. The underlying claim in that case was being heard in the onshore Dubai courts, but the principle laid out was of general application and capable of being applied to proceedings in any jurisdiction outside the DIFC.

4. The tests for satisfying an application for a worldwide freezing order are outside the scope of this article.

5. At [62].

6. At [71].

7. At [65].

8. Namely a state which is party to the Convention on Choice of Court Agreements concluded on 30th June 2005 at the Hague (the 2005 Hague Convention).