15 Sep 2023

DIFC Court of Appeal: One Door Closes… But the Gateways Remain Open

Authored by: Harriet McLaughlin, Adrian Chadwick

In Brief

The end of the summer seems to be consistently marked with a DIFC ruling on the ambit of the DIFC Court’s jurisdiction. On 6 September 2023, the DIFC Court of Appeal in its most recent landmark decision in Sandra Holdings v. Al Saleh CA 003/2023, overturned Justice Sir Jeremy Cooke’s September 2022 decision in Jones v Jones CFI 043/2022 (the “Decision”)The Decision is an unexpected but significant narrowing of the scope of the DIFC Court’s jurisdiction to grant injunctive relief in support of foreign proceedings. 

Background – Sandra Holdings v. Al Saleh CA 003/2023

The Claimants initiated proceedings in Kuwait against the Defendants, alleging that assets were wrongly taken from a Cayman-based entity. The Claimants also made an application to the DIFC Courts seeking an injunction order to prevent the dissipation of assets by the Defendants. They obtained an ex parte Worldwide Freezing Order (the “WFO”) against the Defendants.

The Court of First Instance in granting the WFO based its jurisdiction on the wording of rule 25.24 of the Rules of the DIFC Court (“RDC”), which mandates that parties seeking interim remedies in support of foreign proceedings may apply for such via the Part 8 of the rules, despite the Defendants seemingly having no connection with the DIFC, with no assets within the DIFC either. The Defendants failed to acknowledge or comply with the WFO. 

The Claimant issued an application for contempt, and the Defendants an application to set aside the CFI Order. Justice Sir Jeremy Cooke dismissed the set aside (the “Dismissal”), quoting his reasoning in Jones v Jones and found the Defendants in contempt, imposing significant sanctions.

The Court of Appeal, comprised of Chief Justice Zaki Azmi, H.E. Deputy Chief Justice Ali Al Madhani and Justice Lord Glennie, concluded that the approach in Jones v Jones was incorrect. 

The Defendants’ case

The Defendants’ primary case was that in arriving at the decision in the Dismissal, and in previous decisions in the DIFC Courts, the Court had not correctly drawn the necessary distinction between the limited statutory jurisdiction of the DIFC Courts and other common law courts (such as the English Courts). The Defendant argued that in order for the DIFC Courts to have jurisdiction over foreign proceedings, and therefore grant interim relief in the form of the WFO, where no substantive claim existed in the DIFC, one of the jurisdictional gateways in the Judicial Authorities Law must still be made out. The DIFC Court must have in personam jurisdiction despite the wording of RDC 25.24. RDC 25.24 alone, did not expand the ambit of the DIFC Courts’ jurisdiction as Justice Sir Jeremy Cooke had concluded, amongst other things, in Jones v Jones. The fact that the DIFC Courts do not have inherent sovereign jurisdiction, set it apart from other common law courts, and in the absence of any rule, regulation or provision which expressly conferred an extension of jurisdiction beyond that envisaged by the Judicial Authorities Law, it’s the scope of the DIFC Courts’ jurisdiction could not be expanded by RDC 25.24 or judicial rulings. 

The Claimants’ case

The Claimants contended that Justice Sir Jeremy Cooke was indeed correct in his assessment that the DIFC Court has an unfettered freestanding jurisdiction to grant interim relief where it considers that it is just and convenient to do so. Article 32 of DIFC Law No. 10 of 2004 (as amended) (the “Court Law”) had been correctly interpreted to grant equivalent general powers to the DIFC Court, as Section 37 of the Senior Courts Act 1981 does to the English Courts. 

Key elements of the Court of Appeal’s decision

The Court of Appeal, with Chief Justice Zaki Azmi presiding, determined that the basis of the Claimants’ arguments was wrong. In the schedule or reasons issued on 6 September 2023, we note the following key takeaway points:

  • The burden is on the party seeking recognition of jurisdiction to satisfy the court that it has jurisdiction according to the gateways set out in Article 5 of the JAL. 
  • RDC 25.24 does not expressly state that the DIFC Courts have jurisdiction to grant interim relief outside the grounds of Article 5(1)(a)-(d) and 5(A)(2) of the JAL, but simply refers to procedural matters of a general power which the Court may exercise when granting interim relief in support of foreign proceedings. It is not meant to confer additional jurisdiction.
  • In paragraph 58 of the judgment, Chief Justice Zaki Azmi stated that “[t]he RDC cannot add nor extend the DIFC Courts’ jurisdictional powers without clear expressive words to confer such powers”. Unless the wording is express, the provisions in the RDC read in conjunction with Article 5(1)(e) of the JAL cannot extend the jurisdiction of the DIFC Court beyond the established jurisdictional gateways of Article 5(1)(a)-(d), 5(A)(2) and 5(A)(3) of the JAL.
  • RDC 24.25 cannot simply be read in isolation but must be read in parallel with and in a manner consistent with the jurisdictional gateways of the JAL. 
  • Articles 22, 24 and 32 of the Court Law are not intended, unless clearly worded, to confer any special powers or jurisdictions on the DIFC Courts, but instead are intended to create general powers. The Court Law is worded in a manner to express why the DIFC Courts were created and provide “generally the set-up” and “general jurisdictions and powers” of the DIFC Courts. 
  • Article 24 of the Court Law is not a source of jurisdiction where there is no judgment or award to ratify, nor does it in conjunction with Article 5A(1)(e) establish a broad jurisdiction on the DIFC Courts.
  • Article 7(4) to Article 7(6) of the JAL read in conjunction with Article 5(1)(e) will only confer jurisdiction in respect of the enforcement of a foreign judgment or award, not in respect of the provision of interim remedies sought for future foreign judgments. 
  • The question for the Court to decide, is always whether or not it has jurisdiction under relevant regulations, and not whether it granting the relief is necessary to avoid a “less corrupt and “perverse” outcome”. 
  • There is no equivalent statutory provision applicable to the DIFC Court, to section 25 of the Civil Jurisdiction and Judgments Act 1982 in England. 
  • Under RDC 9.53, a claimant does not need to seek permission to serve an originating process outside of the jurisdiction, but this does not mean that the DIFC Court must therefore have jurisdiction to grant interim relief in support of foreign proceedings when there is no connection with the DIFC. Being properly served outside of the jurisdiction with DIFC Court proceedings does not automatically mean a party is subject to the jurisdiction of the DIFC Court. 
  • Just because a defendant does not dispute the jurisdiction of the DIFC Court within the requisite time limits, cannot mean that the defendant has automatically submitted to the DIFC Court’s jurisdiction. Nor can RDC 12.5 be cited in supporting a claim that by failing to challenge jurisdiction, the Court’s jurisdiction is deemed to be accepted. 
  • There is a distinction between “prima facie jurisdiction” i.e. the jurisdictional gateways, and “ordinary jurisdiction” i.e. once prima facie jurisdiction has been established, the Court can consider the concept of “ordinary jurisdiction”. Chief Justice Zaki Azmi provided in his schedule of reasons, the example of a scenario where the parties had opted out of the jurisdiction of the DIFC Court, then it is correct to pursue a Part 12 jurisdictional challenge. 

Concluding remarks. 

The Judgment issued on 6 September 2023 in Sandra Holdings v Al Saleh, brings an end to the extension expansion of the DIFC Courts’ jurisdiction following what some viewed as a controversial decision in September 2022 in Jones v Jones

Litigants now have sufficient clarity vis-à-vis the scope of the DIFC Courts’ jurisdiction so far as it relates to the provision of interim relief, including worldwide freezing orders, in support of foreign proceedings. Applications must first establish prima facie jurisdiction under the gateways established in the JAL, before invoking any general powers conferred on the DIFC Courts by virtue of the RDC.  

A copy of the full Decision can be found here

For further information related to this article, or proceedings in the DIFC Court, we would recommend reaching out to Adrian Chadwick, Partner, or Harriet McLaughlin, Associate, in our Dispute Resolution Team.