Why did Elysium Global seek to discharge search orders in the DIFC following the English Commercial Court’s decision on Dicey Rule 3?
The dispute arises from a massive tax fraud investigation initiated by Skatteforvaltningen (SKAT), the Danish Customs and Tax Administration, against Elysium Global (Dubai) Limited and Elysium Properties Limited. SKAT alleged that the defendants were involved in a large-scale scheme involving the wrongful refund of withholding tax. To support its global recovery efforts, SKAT obtained search and freezing orders in the DIFC in 2018. The defendants subsequently sought to discharge these orders after Andrew Baker J of the English Commercial Court dismissed SKAT’s claims based on "Dicey Rule 3," which posits that English courts will not enforce foreign revenue laws.
Elysium argued that the English dismissal constituted a material change in circumstances, rendering the continued existence of the DIFC search orders unnecessary and oppressive. They contended that the legal foundation for the DIFC relief had effectively evaporated. However, the Court rejected this, emphasizing that the search orders were part of a broader, agreed-upon procedural framework. As noted in the judgment:
In my judgment, the entitlement to the relief sought by Elysium essentially turns on the terms of the Consent Order and the Conduct of Claims Agreement.
Which judge presided over the application to vary or discharge the search orders in August 2021?
The application was heard and determined by Justice Sir Jeremy Cooke in the DIFC Court of First Instance. The hearing took place on 4 August 2021, with the formal Order with Reasons issued on 5 August 2021.
What were the competing legal arguments advanced by Skatteforvaltningen and Elysium regarding the status of the search orders?
Elysium contended that the English Commercial Court’s application of Dicey Rule 3 was a substantive determination that should logically terminate the DIFC proceedings. They argued that because the English court found the claims to be non-justiciable under English law, the "support" function of the DIFC search orders was no longer valid. Elysium specifically asserted that the English judge’s reasoning regarding the jurisdictional and substantive nature of Dicey Rule 3 should be given effect across all forums.
Conversely, SKAT argued that the search orders were not contingent upon the immediate success of the English claim at first instance. They pointed to the "Conduct of Claims Agreement" and the subsequent Consent Orders, which explicitly contemplated that the DIFC search orders would remain in force throughout the entirety of the English proceedings, including any potential appeals. SKAT maintained that the search orders were granted to facilitate global asset recovery and that the English first-instance decision was merely an interim step in a long-running appellate process.
What was the precise legal question the Court had to answer regarding the interplay between the English Commercial Court decision and the DIFC Consent Order?
The Court had to determine whether the first-instance dismissal of the English claim by Andrew Baker J constituted a "material change of circumstances" sufficient to override the express terms of the 30 September 2019 Consent Order. Specifically, the Court had to decide if the stay of the DIFC proceedings—and the accompanying search orders—was intended to expire upon the first-instance judgment or if it was designed to persist until the final exhaustion of all appellate remedies in England.
How did Justice Sir Jeremy Cooke apply the doctrine of contractual interpretation to the parties' prior Consent Order?
Justice Sir Jeremy Cooke focused on the "scheme" of the litigation as defined by the parties' own agreements. He reasoned that the parties had negotiated a comprehensive framework for the management of the DIFC claim, which included the continued validity of search orders regardless of interim outcomes in the English Commercial Court. The judge found that the parties had explicitly linked the duration of the DIFC stay and the search orders to the final resolution of the English proceedings.
Whilst I accept Elysium’s argument that there is no prohibitory bar on making application to the DIFC Courts for variation by reason of the terms of that order and that agreement, the whole scheme was founded on the basis of the operation of the search orders until final disposal of the English Proceedings, including potential and actual appeals.
The Court concluded that allowing the discharge of the orders at this stage would undermine the procedural certainty that the Consent Order was specifically designed to provide.
Which specific DIFC and English legal authorities were considered in the context of the search orders?
The Court relied heavily on the terms of the 30 September 2019 Consent Order, which governed the stay of the DIFC Claim and the maintenance of the "Previous Orders" (the search orders). The Court also referenced the inherent power of the DIFC Court to grant relief in support of foreign proceedings, noting that these powers are "wide and unlimited by statute." Regarding the English proceedings, the Court considered the impact of "Dicey Rule 3," which the defendants argued was a substantive rule of English law that precluded the enforcement of foreign tax claims. The Court also referenced the "Conduct of Claims Agreement," which established the procedural roadmap for the parties' interaction across jurisdictions.
How did the Court utilize the Conduct of Claims Agreement in its reasoning?
The Conduct of Claims Agreement was used as the primary interpretive tool to define the parties' obligations. Justice Sir Jeremy Cooke utilized the agreement to demonstrate that Elysium had voluntarily submitted to a structured process that prioritized the preservation of evidence until the English litigation reached its final conclusion. The Court held that the agreement created a binding expectation that the search orders would remain in place, effectively preventing the defendants from unilaterally seeking to discharge them based on an interim English judgment.
It is clear, to my mind, that the stay of the DIFC Claim was to operate pending final resolution in England of the English Claim, save for the purpose of putting into effect the Search Orders which had been made, which were to remain in place and to be administered in accordance with the various amending Orders to which I have already referred.
What was the final outcome of the application and the Court’s order regarding costs?
Justice Sir Jeremy Cooke refused the application in its entirety, ordering that all search orders remain in full force and effect until the final disposition of the English Claim. The Court ruled that there would be no order as to costs, noting that while costs usually follow the event, no specific submissions had been made on the matter at the time of the order.
How does this decision impact the practice of seeking search orders in support of foreign proceedings in the DIFC?
This ruling reinforces the sanctity of consent orders and procedural agreements in the DIFC. Practitioners must anticipate that once a search order is granted in support of foreign litigation, the DIFC Court will be highly reluctant to discharge it based on interim developments in the primary forum. The decision confirms that if parties agree to a "scheme" of litigation that ties the duration of DIFC relief to the final exhaustion of all appeals in a foreign jurisdiction, the Court will hold them to that bargain. Litigants should be aware that "material changes" in foreign proceedings will rarely suffice to override clear, pre-existing procedural commitments.
Where can I read the full judgment in SKATTEFORVALTNINGEN v ELYSIUM GLOBAL [2021] DIFC CFI 048?
Full Judgment (DIFC Courts)
CDN Mirror
Cases referred to in this judgment:
| Case | Citation | How used |
|---|---|---|
| N/A | N/A | N/A |
Legislation referenced:
- DIFC Court Law (General powers to grant relief in support of foreign proceedings)
- RDC (Rules of the DIFC Courts)
- Dicey Rule 3 (English Private International Law)