In Carmon v Cuenda [2024] DIFC CA 003 (26 November 2024), the DIFC Court of Appeal has ruled that the Court has jurisdiction to make a freezing order in support of pending proceedings before a foreign court. In doing so, it departed from its earlier judgment in Sandra Holding v Al Saleh [2023] DIFC CA 003 that the court only has jurisdiction to make a freezing order where the foreign proceedings have already resulted in a judgment.

This landmark judgment means that the DIFC Court can now return to making effective orders to prevent defendants from dissipating assets located in Dubai prior to judgment. It is of great importance not just to those who practise in the DIFC Courts, but to any party who might want to seek to freeze assets in Dubai.

The jurisdiction

The jurisdiction of the DIFC Court is exclusively statutory and is to be found in Article 5A of the Judicial Authority Law (DIFC Law No. 12 of 2004). Articles 5A(1)(a) to (d) establish a number of grounds of in personam jurisdiction. But often the claimant may have no connection with the DIFC and the defendant will have no other connection other than assets in “onshore” Dubai. In such a case, the claimant will need to rely on Article 5A(1)(e), which provides that the court has jurisdiction to hear and determine

“any claim over which the Courts have jurisdiction in accordance with DIFC Laws and DIFC Regulations.”

One DIFC Law which undoubtedly confers jurisdiction on the DIFC Court to recognise and enforce foreign judgments is Article 24 of the DIFC Court Law. The Court also has jurisdiction to make freezing orders under Articles 22(2) and 30(b) and an express power under RDC 25.24, whose wording assumes that an order can be sought in proceedings taking place outside the DIFC. However, in Sandra Holding the Court of Appeal inexplicably construed its jurisdiction very narrowly to find that it could only make a freezing order in support of foreign proceedings once there is a judgment to enforce, even though in most cases a freezing order will usually be of greatest practical use prior to judgment.

The Court of Appeal held that the law had taken a wrong turning in Sandra Holding and the decision ought not to be followed. The correct analysis was that, given the Court’s undisputed express jurisdiction to recognise and enforce a foreign judgment, it also had the power (and if necessary, an ancillary jurisdiction) to make an order to avoid its express jurisdiction from being thwarted.

 “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” (see [192]).

The Court’s judgment gives effect to the enforcement principle as explained in Broad Idea v Convoy Collateral [2023] AC 239, which recognises that a freezing order is a prospective enforcement process whose rationale is to prevent the future enforcement of the judgment being frustrated by the dissipation of assets.

The Court cautioned, though, that even though there is jurisdiction, the making of a freezing order will always be a matter for the discretion of the court, and that in many cases it would only be appropriate to make an order limited to assets in Dubai.

Departing from a binding precedent

The other reason why the Carmon judgment is so important for DIFC jurisprudence is that for the first time the Court addressed the question whether it would be appropriate to depart from its own previous decision and if so why. The DIFC Court is a court of precedent, meaning that the Court of Appeal will generally follow its own previous decisions. This gives a desirable degree of certainty to the law. Nonetheless, all superior courts reserve to themselves the right to depart from their own binding judgments where they consider it necessary to do so, although such cases will be rare. The Court relied in particular on the decision of the High Court of Australia in John v Federal Commissioner of Taxation (1989) 166 CLR 417, which set out four considerations of particular relevance:

1. Whether or not the previous decision rested upon a principle carefully worked out in a series of cases.
2. Whether there were differences in the reasoning that led to the precedent decision.
3. Whether the precedent decision had achieved no useful result but considerable inconvenience.
4. Whether or not the precedent decision had been independently acted upon in a manner which militated against reconsideration.

The Court also referred to two criteria proposed by Lord Burrows JSC in the Lord Toulson Memorial Lecture of 2024:

1. How clear is it, with the benefit of hindsight, that the past decision was legally incorrect.
2. How disruptive the ruling would be given that the common law operates by retrospective overruling.

Applying these criteria, the Court indicated that it was right that the principle in Sandra Holding should not be followed. It was clear that the decision was legally incorrect. A failure to follow it would not be disruptive: the actual outcome of Sandra Holding was correct because the case for a freezing order was not made out. The case did not rest upon a principle carefully worked out in a series of cases and could be said to have generated inconvenience in that the absence of the power to issue a freezing order could result in the Court’s jurisdiction to recognise the foreign judgment ultimately made being thwarted.

Zoe O’Sullivan KC, instructed by Afridi & Angell, successfully represented Carmon in their appeal.

To read the full judgment, please click here.