CARMON REESTRUTURA-ENGENHARIA E SERVIÇOS TÉCNIOS E v ANTONIO JOAO CATETE LOPES CUENDA [2024] DIFC CA 003 — Appellate clarification on WFO jurisdiction in support of foreign proceedings (26 November 2024)

Does the DIFC Court have jurisdiction to grant a Worldwide Freezing Order (WFO) against Antonio Joao Catete Lopes Cuenda in support of ongoing Hong Kong proceedings involving the alleged misappropriation of USD 20 million?

The dispute centers on the Appellant’s attempt to secure assets held by the Respondent, Antonio Joao Catete Lopes Cuenda, within the DIFC—specifically funds held in Emirates NBD Bank PJSC accounts—to prevent the dissipation of assets while substantive litigation proceeds in Hong Kong. The Appellant, Carmon Reestrutura-engenharia E Serviços Técnios Especiais, (Su) LDA, alleged that the Respondent misappropriated over USD 20 million. While the Hong Kong courts issued a Mareva injunction, the Appellant sought a mirror order in the DIFC because the local bank, ENBD, indicated it was not bound by the Hong Kong order.

The core of the dispute involves the intersection of RDC 25.24 and the jurisdictional limits of the DIFC Courts. The Appellant argued that the DIFC Court possesses the inherent power to grant interim relief to protect the integrity of future enforcement proceedings, even in the absence of a substantive claim within the DIFC. The Respondent successfully argued at the Court of First Instance (CFI) that the court lacked the requisite jurisdiction, relying on the restrictive interpretation of the Judicial Authority Law (JAL) established in previous jurisprudence.

Which judges presided over the Court of Appeal hearing for Carmon Reestrutura-engenharia E Serviços Técnios Especiais, (Su) LDA v Antonio Joao Catete Lopes Cuenda [2024] DIFC CA 003?

The appeal was heard by a distinguished panel of the DIFC Court of Appeal, comprising Justice Robert French, Justice Sir Peter Gross, and Justice Rene Le Miere. The judgment, delivered on 26 November 2024, addressed the procedural history following the CFI’s decision to vacate the WFO and dismiss the action.

What specific legal arguments did Ms. Zoe O’Sullivan KC and Mr. Tom Montagu-Smith KC advance regarding the interpretation of the Judicial Authority Law?

Ms. Zoe O’Sullivan KC, representing the Appellant, argued that the DIFC Courts must possess the power to grant interim relief where there is a clear nexus to the DIFC—such as assets held in local banks—to ensure that any eventual foreign judgment is not rendered nugatory. She contended that a narrow reading of the JAL would undermine the DIFC’s role as a global commercial hub. The Appellant emphasized that the CFI’s reliance on Sandra Holding was overly restrictive and failed to account for the court's broader duty to prevent the dissipation of assets that are subject to potential enforcement.

Mr. Tom Montagu-Smith KC, for the Respondent, maintained that the DIFC Courts are courts of limited jurisdiction. He argued that the JAL does not provide a "free-standing" power to grant freezing orders in the absence of a substantive claim over which the court has jurisdiction. He relied heavily on the precedent set in Sandra Holding, asserting that the CFI correctly identified that the court lacked the statutory authority to act as a global "policeman" for foreign proceedings, and that any expansion of this power must come from legislative amendment rather than judicial interpretation.

What was the precise doctrinal issue the Court of Appeal had to resolve regarding the interplay between RDC 25.24 and the Judicial Authority Law?

The Court of Appeal was tasked with determining whether the DIFC Courts possess the jurisdiction to grant a WFO in support of foreign proceedings where there is no underlying substantive claim within the DIFC. This required an analysis of whether RDC 25.24—which allows for interim remedies where there is no related claim—could independently confer jurisdiction, or whether it is merely a procedural rule that requires a pre-existing jurisdictional hook under Article 5(A) of the JAL. The court had to reconcile the need for effective asset preservation with the principle that the DIFC Court's jurisdiction is strictly defined by statute.

How did the Court of Appeal evaluate the "exceptional circumstances" test and the self-contradictory reasoning identified in the CFI’s judgment?

The Court of Appeal scrutinized the CFI’s reasoning, noting that the lower court had struggled to reconcile its dismissal of the action with its own acknowledgment that jurisdiction might exist in "exceptional circumstances." The Court of Appeal highlighted the tension between the requirement for territorial jurisdiction and the practical necessity of interim relief.

The Court’s decision was self-contradictory in that having apparently held that it would not have jurisdiction to make a freezing order save where it had territorial jurisdiction over the defendant pursuant to Article 5(A)(1) or 5(A)(2) of the Judicial Authority Law, it nonetheless went on to hold in paragraph 99 of its judgment that it would have jurisdiction in exceptional circumstances.

The Court of Appeal further addressed the Respondent’s reliance on the Sandra Holding precedent, noting the complexity of the arguments presented:

The Respondent had contended that if the CFI was bound by the decision of the Court of Appeal in Sandra Holding that decision nevertheless sustained the jurisdiction because the case fell within the categories of exceptional circumstances recognised by that Court as grounding jurisdiction to grant a freezing order even where the Court lacked jurisdiction to determine the substantive dispute, or even if there were no pathways to jurisdiction through Article 5(A) of the JAL.

Which specific statutes and rules were central to the Court of Appeal’s analysis of the DIFC Court’s jurisdiction?

The Court’s analysis focused on the interpretation of Article 5(A)(1)(e) of the Judicial Authority Law (JAL), which governs the jurisdiction of the DIFC Courts, and Article 24 of the DIFC Courts Law. The court also examined the application of RDC 25.24, which provides the procedural framework for interim remedies. The court noted that the jurisdictional inquiry is fundamentally a matter of statutory construction:

It follows that whether the Court had jurisdiction over Straight involves an exercise in interpreting Article 5(A)(1)(e) and Article 7(6) of the Judicial Authority Law (as amended) and Article 24(1) of the DIFC Courts Law in the context of proceedings to enforce a foreign judgment.

How did the Court of Appeal distinguish or apply the precedents of Sandra Holding, DNB Bank ASA v Gulf Eyadah, and ArcelorMittal v Essar Limited?

The Court of Appeal engaged in a rigorous review of its own precedent in Sandra Holding Ltd v Al Saleh & Ors, which had previously been interpreted as a significant barrier to granting WFOs in support of foreign proceedings. The court also considered DNB Bank ASA v Gulf Eyadah Corporation, which established the court's jurisdiction to hear claims for the recognition and enforcement of foreign judgments. The Court of Appeal emphasized that the DIFC Courts must distinguish between the power to grant a remedy and the existence of jurisdiction to hear the underlying dispute, noting that the interpretation of RDC rules must not exceed the statutory grant of jurisdiction. The court noted that it would have to make an assessment on a case-by-case basis to determine the true effects of RDC Rules and ascertain whether the relevant Rule in fact conferred jurisdiction.

What was the final disposition of the appeal, and what orders were made regarding the WFO and costs?

The Court of Appeal allowed the appeal, effectively reinstating the possibility of the WFO by setting aside the CFI’s order that had vacated the injunction and dismissed the action.

1. The Appeal is allowed.
2. Orders 1 to 5 of the Order dated 27 December 2023 are set aside.
3. The Respondent is to pay the Appellant’s costs of the appeal and of the Dismissal Application before Justice Martin to be assessed by the Registrar if not agreed.

What are the wider implications of this decision for practitioners seeking interim relief in the DIFC in support of foreign litigation?

This decision signals a potential shift in the DIFC Court’s approach to interim relief, suggesting that the court may be more willing to exercise its powers to prevent the dissipation of assets where there is a clear nexus to the DIFC, even if the substantive dispute is being litigated elsewhere. Practitioners should anticipate a more nuanced application of the "exceptional circumstances" test. While Sandra Holding remains a key authority, the Court of Appeal has opened the door for arguments that focus on the court’s inherent power to protect the efficacy of future enforcement, provided that the jurisdictional requirements of the JAL are carefully navigated.

Where can I read the full judgment in Carmon Reestrutura-engenharia E Serviços Técnios Especiais, (Su) LDA v Antonio Joao Catete Lopes Cuenda [2024] DIFC CA 003?

The full judgment is available on the DIFC Courts website: https://www.difccourts.ae/rules-decisions/judgments-orders/court-appeal/carmon-reestrutura-engenharia-e-servicos-tecnios-especiais-su-lda-v-antonio-joao-catete-lopes-cuenda-2024-difc-ca-003

Cases referred to in this judgment:

Legislation referenced:

• Article 5(A)(1)(e) of the Judicial Authority Law
• Article 24 of the DIFC Courts Law
• Article 32 of the DIFC Courts Law
• RDC 25.1
• RDC 25.24