26.01.2022

Litigation Funding in the UAE

What is Litigation Funding

Litigation funding or Third Party Funding (TPF) where a party (the funder), who is an unrelated party to a dispute, financially aids one of the parties (the funded party) to the dispute. The funder covers the legal costs and disbursements. Each Litigation Funding Agreement (LFA) is different, however the funder is generally reimbursed its investment in addition to an agreed percentage of the sum recovered. Cost of  litigation proceedings, whether in a court of law or arbitral, can often be substantial and may bar genuine claims from being pursued. In the best interest of the public policy of access to justice TPF can be seen to be on a rise globally. TPF is not only an attractive for parties who could not afford the cost of dispute but also, those parties who wish to manage their finance by ensuring their working capital is not diverted into litigation proceedings.

The legal situation regarding TPF in the UAE is a bit fogged. The UAE being a Civil Law Jurisdiction is free from the embedded common law limitations due the principles of champerty and maintenance. As a result, there is no express prohibition on TPF, however it lacks a regulatory framework. Thus there is uncertainty about the permissibility of its use. Nonetheless there’s an increasing trend of litigation funding in the UAE as will be discussed henceforth. 

Offshore Dispute Resolution

The Dubai International Financial Centre (DIFC) and the Abu Dhabi Global Market (ADGM) are financial economic free zones having their own jurisdictions. Both of these free zones have their own Courts and Arbitration Centres. 

Arbitrations which have either DIFC or ADGM as its legal seat are subject to either DIFC Arbitration Law or ADGM Arbitration Regulation. TPF is permitted by both the DIFC (as per the Practice Direction on Third Party Funding issued March 2019) and ADGM (as per the Litigation Funding Rules issues April 2019).

DIFC 

Litigation funding at the DIFC is regulated by Order No.4 of 2019 prescribing the Mandatory Code of Conduct for Legal Practitioners in the DIFC Courts (the “Order”). The Order defines the obligations on practitioners, funded parties and funders. The key obligations are; that the funded party must disclose to all parties to the dispute and the DIFC Court Registry that they have entered into an LFA, the identity of the funder must be disclosed, the funder’s influence over the matter should be expressly defined and the practitioner is prohibited from receiving any referral fee or benefits of any kind from the funder.

ADGM 

The ADGM, unlike DIFC, adopts English law as a whole (including its principles of equity) and incorporates numerous English statutes by express reference. The ADGM rule on litigation funding are quite similar to that of DIFC’s however the disclosure of the TPF is not required by the ADGM Courts. The ADGM Courts prior to the enactment of the Rules, issued a public consultation paper and they received positive comments on the draft framework presented from key stakeholders including lawyers, funders and potential litigants. This goes to show the strong interest for clarity about third party funding within the region. 

The key provisions of the ADGM Litigation Funding Rules are; the Funder’s principal business must be funding proceedings, the Funder  must not be a party, the Funder must have qualifying assets of at least USD 5 million, LFA must contain terms to ensure there is no conflict of interests

Onshore Dispute Resolution

Arbitrations which have their legal seat onshore UAE are subject to both the Civil Procedure Code and the Federal Arbitration Law No.6 of 2018. There is no provision in either law governing TPF. However in 2017, the draft of the new Dubai International Arbitration Centre (DIAC) Arbitration Rules was reported, Article 53 seemingly contained provisions for the disclosure of a TPF. This could be deduced as an implicit approval of litigation funding. However the final version of the rules is yet to be published and they might not include the provision for TPF, nonetheless considering increased demand for TPF, setting up of litigation funds within the UAE and UAE’s aim to become the leading arbitration center in the MENA region there will be a positive response. 

On Shore Litigation Funding 

As touched upon earlier, there are no rules or law that prohibit litigation funding in the UAE, as it being a civil law jurisdiction it is not bound by the TPF limiting doctrines of champerty and maintenance. There is a compelling case in favor of litigation funding which is consistent with the cornerstone principle of Sharia Law, in that a transaction should be of the public interest (maslaha), as litigation funding could provide access to justice for genuine claims which would otherwise might not be availed.

The Future of Litigation Funding 

There is hope that the litigation funding in UAE shall soon be regulated so that clarity and certainty can be established. Litigation funding opens the door for merit-worthy claims which would otherwise have not been initiated due to the lack of funds and hence TPF can serve to be an effective means of providing access to justice. Given the strong case of litigation funding being in accordance with Shariah Law and the UAE’s ambition and commitment to the administration of justice and becoming the leading center of dispute resolution in the region, litigation funding has a promising future.

Understanding Litigation / Third-Party Funding (TPF)

Third-party funding (TPF) is an arrangement where an outside financier pays some or all of a party’s legal costs in exchange for a return that depends on the outcome of the case. In the UAE, TPF is expressly recognised in the common-law free zones (DIFC and ADGM), with DIFC Courts and ADGM Courts setting out definitions and requirements for a “Litigation Funding Agreement (LFA)”.

Payment models: how funders get paid

Non-recourse: If the case loses, the funded party owes nothing to the funder; if it succeeds, the funder receives an agreed return (percentage of proceeds or multiple of capital). This is the most common model in commercial TPF.

Recourse (loan-style): Funding behaves more like debt that must be repaid, regardless of the outcome, sometimes with interest. Actual litigation funding in major markets typically avoids recourse to preserve alignment and manage risk.

Fee-based / success fee/hybrid: Returns can be structured as (i) a success-based fee (percentage of recoveries), (ii) a multiple of deployed capital, or (iii) a hybrid combining a lower multiple plus a small percentage or vice-versa. Free-zone guidance and market practice contemplate such structures within LFAs.

Key terms you’ll see in LFAs

Champerty & maintenance: Historic common-law doctrines that discouraged third parties from supporting litigation for profit; modern regimes (including DIFC/ADGM frameworks) regulate TPF by disclosure and control safeguards rather than prohibiting it outright.

LFA (Litigation Funding Agreement): The contract between funder and funded party governing funding, returns, control, disclosure and termination—formally defined in DIFC PD 2/2017 and regulated in ADGM by the 2019 Rules.

Merits test: Funders’ investment diligence—liability prospects, damages quantum, enforcement pathway, budget and timetable—used to screen cases before committing capital.

Disclosure: In regulated UAE free zones, parties must disclose the existence of TPF and identify the funder to the court; ADGM rules also impose specific commitments on funders (e.g., submission to court jurisdiction for costs issues).

Control: LFAs typically confirm that legal privilege remains with the client and counsel. Funders may receive information and have consultation rights on strategy and settlement; however, courts and rules emphasise that funders should not direct the conduct of proceedings.

Why it matters in the UAE: TPF can expand access to justice and support high-value litigation and arbitration, including in insolvency and enforcement contexts, whereas the DIFC/ADGM regimes provide parties with a more straightforward pathway to compliant funding structures.

Market Data & Trends

Market size & transparency. The UAE’s TPF market is active but still opaque: major firms report no publicly available statistics on the number or value of funded cases, even as utilisation rises in DIFC/ADGM and in arbitrations seated in the UAE. That said, proxy indicators suggest rapid growth in dispute finance demand: DIAC registered ~355 arbitrations in 2023, remaining one of the MENA region’s busiest centres, while Dubai and Abu Dhabi free zones posted record financial-sector growth—conditions that historically correlate with higher TPF activity and regulatory acceptance. DIFC (Practice Direction 2/2017) and ADGM (Litigation Funding Rules 2019) provide express TPF frameworks (disclosure duties; funder commitments on confidentiality/costs), which commentators identify as key enablers for funding across litigation and arbitration. DIAC’s 2022 Rules likewise contemplate third-party funding, aligning arbitration practice with court frameworks.

Key players. Global funders have established a direct presence in the UAE, including Burford Capital (with a regional team focusing on enforcement and asset recovery) and Omni Bridgeway (with an office in the DIFC, located in the Index Tower). Their offerings span classic non-recourse funding, portfolio facilities, and enforcement finance. Leading disputes practices (international firms and UAE boutiques) increasingly originate and structure LFA pipelines for commercial disputes and investor-state claims. On the institutional side, DIAC (Dubai), DIFC Courts, and ADGM Courts anchor the UAE’s ecosystem; international institutions (ICC, LCIA users) continue to seat cases in the region amid generally arbitration-friendly decisions.

Growth drivers.

1. Caseload & enforcement environment: Strengthening enforcement pathways and arbitration confidence are repeatedly cited as prerequisites for funder entry; where uncertainty persists, funders price risk accordingly.
2. Capital inflows: DIFC and ADGM report surging AUM, licences and profits—a rising tide that supports sophisticated financing tools (including TPF and law-firm portfolios).
3. Regulatory clarity: Clear disclosure/control guardrails in the DIFC/ADGM lower the friction of adoption for corporates and counsel.

Case studies

1. Commercial contract claim (UAE-seated arbitration): Funder commits USD 3–5m under non-recourse LFA; return = 3x deployed or 20% of proceeds, whichever is higher; DIAC-seated; disclosure to tribunal per DIAC Rules; outcome: partial award + funded enforcement budget. (Structure reflects standard market terms and DIAC disclosure practice.)
2. Judgment/award enforcement finance: The funder advances capital, offering a “money-now/money-later” approach to monetise an award, assuming asset tracing and cross-border recovery tasks—an increasingly visible product in Dubai-focused recoveries.
3. Headwinds: Commentators note data scarcity, perceived enforcement risk, and novel conflicts/control questions as lingering hurdles; nonetheless, sentiment is net-positive with expectations of continued uptake across UAE litigation and arbitration.

Here’s Section 3. If this works, say “next” and I’ll draft the following section.

Benefits & Risks

Benefits to fundees. Third-party funding (TPF) converts legal spend into non-recourse finance, enabling businesses to pursue meritorious claims, retain top counsel, and preserve working capital. In the UAE’s free zones, clear guardrails support this model: DIFC Practice Direction 2/2017 requires the funded party to disclose the existence of funding and identify the funder to other parties, enhancing transparency; ADGM Litigation Funding Rules 2019 embed conflict-check obligations and other funder duties; DIAC 2022 Rules likewise require disclosure of the funder’s identity and whether it has committed to adverse-costs liability.

Benefits to funders. TPF offers exposure to uncorrelated legal assets with upside tied to claim value (typically a multiple of deployed capital and/or a percentage of recoveries), and portfolio funding diversifies case risk. That said, capital is genuinely at risk under non-recourse models—if the case fails, the investment can be lost.

Key risks and mitigations.

• Moral hazard: A funded party might become less price-sensitive or settlement-averse. Mitigate via staged budgets, approval gates, and periodic cost reporting in the LFA.

• Conflicts of interest & control: Funders should not direct the conduct of proceedings; DIFC/ADGM/DIAC frameworks emphasise client control and require conflict checks and disclosure. Draft LFAs with consultation (not control) rights and explicit conflict procedures.

• Cost overruns: Litigation budgets can expand as proceedings evolve. Use caps, reforecasting triggers, and clearly assign responsibility for overruns (to the client, funder, or insurer). (Best practice guidance from market commentary.)

• Counterclaims & adverse costs: Consider ATE insurance or negotiated funder commitments for adverse-costs exposure; tribunals/courts may consider funding when deciding security for costs.

• Confidentiality & privilege: Share only necessary information with funders and include confidentiality/common-interest provisions in the LFA, as contemplated by the ADGM rules framework.

• Enforcement risk: A strong award may still under-recover without assets or cross-border reach; build enforcement planning and budgeting into case economics from day one.

Bottom line. With transparent disclosure, client-led control, disciplined budgeting and early enforcement planning, parties in the UAE can capture TPF’s upside while actively managing its principal risks.

How to Negotiate / Structure a Litigation Funding Agreement

Start with the rulebook. In the UAE, the most concrete drafting signals come from ADGM’s Litigation Funding Rules 2019 and DIFC Courts’ Practice Direction No. 2 of 2017. Read them first; many “must-haves” flow straight into your LFA checklists (disclosure, confidentiality, termination, and funder submissions for costs).

Commercial architecture (headline economics). Agree on the funding amount, deployment tranches, and a return formula (percentage of recoveries and/or a multiple of deployed capital). In non-recourse models (market standard), the funder’s capital is at risk and is only repaid upon success; recourse/loan-style products are uncommon in sophisticated financial forums. Price escalators for time or milestones should be explicit.

Key contract clauses to lock down.

1. Uplift/return mechanics (waterfall, order of payments, caps/floors, treatment of settlements vs awards).
2. Budget, costs & disbursements (approved budget, who pays overruns, expert/tribunal fees, security-for-costs strategy). DIAC 2022 lets tribunals consider funder adverse-costs commitments when apportioning costs—reflect this in drafting.
3. Withdrawal/termination rights (objective “merits deterioration,” adverse counsel advice; cure periods). ADGM rules require that the LFA state the circumstances in which a funder may terminate—don’t leave this vague.
4. Confidentiality, privilege & information sharing (common-interest wording; funder access to case materials consistent with ADGM confidentiality obligations).
5. Control & strategy (client retains conduct; funder has consultation and consent rights for significant steps—e.g., settlement thresholds—without directing proceedings, in line with free-zone guidance).
6. Adverse costs / ATE (who carries the risk; whether ATE insurance is procured; disclosure of any adverse-costs commitment per DIAC Art. 22).
7. Jurisdiction & enforcement (seat/forum for LFA disputes; for ADGM matters, the LFA must state that the funder submits to the jurisdiction of ADGM Courts for costs disputes).
8. No referral fees to lawyers (ADGM prohibits lawyer referral commissions tied to TPF—reflect compliance language).

Due diligence on the funder (don’t skip).

1. Financial strength/proof of funds (ability to meet call notices, adverse-costs orders). ADGM’s regime is built around cost-related protections; a weak balance sheet undermines them.
2. Track record & recoveries (experience with UAE/DIFC/ADGM and DIAC enforcement finance).
3. Conflicts (shareholders, related parties, opposing counsel). DIAC and ADGM disclosure frameworks aim to surface conflicts early—mirror this in questionnaires.
4. Governance & decision process (IC memos, re-underwriting stages, who signs off on budgets/settlements). Market commentary stresses staged approvals to curb moral hazard and manage overruns.

Process & timeline tips. Run a dual-track: (1) negotiate headline terms (term sheet) while (2) aligning procedure-driven obligations (who will file DIFC/ADGM or DIAC disclosures, when, and what is said). DIFC PD 2/2017 requires funded parties to disclose the existence and identity of the funder; DIAC Art. 22 requires disclosure to all parties, the Centre and the tribunal, and clarifying any adverse-costs liability of the funder. Build these steps into your LFA and case timetable.

Here’s Section 5. If this works, say “next” and I’ll move to Comparative Jurisdiction Analysis (300–350 words).

Disclosure & Court / Arbitration Obligations

DIFC Courts (offshore, common-law). A funded party must notify all other parties and the Registry that it has entered into an LFA and identify the funder (timing depends on claim type; typically at/around the CMC or within 7 days of the LFA). The DIFC Courts may take funding into account on security-for-costs applications (not determinative) and note their inherent jurisdiction to make costs orders against funders in appropriate cases. Non-compliance risks adverse case management or costly consequences.

ADGM Courts (offshore, common-law). The Litigation Funding Rules 2019 impose LFA content requirements (scope, amount, funder return, termination, conflicts) and require the LFA to state whether the funder accepts adverse-costs liability and that the funder submits to the ADGM Courts’ jurisdiction for costs disputes. While the Rules primarily regulate the funder–client contract, they also embed confidentiality/privilege safeguards, as well as conflict-check duties; failure to adhere can have procedural/costs implications.

Arbitration — DIAC (onshore seat unless otherwise agreed). Article 22 (2022 Rules) requires prompt disclosure (before tribunal constitution) of (i) the fact of third-party funding, (ii) the funder’s identity, and (iii) whether the funder has committed to adverse-costs liability; disclosure must be made to all parties and the Centre. After the constitution, new TPF arrangements must be promptly disclosed to the tribunal as well.

Onshore UAE state courts (civil-law). There is no detailed statutory TPF framework, and security-for-costs is generally not recognised; disclosure is therefore driven by institutional rules (e.g., DIAC) or by tribunal/court case-management orders, rather than being codified in onshore court rules.

How courts/tribunals have treated (non-)disclosure. In the DIFC, funding status can be considered on a security-for-costs basis, but being funded is not, by itself, decisive; the court’s PD also underscores the ability to make third-party costs orders—a backdrop that encourages compliance. Publicly reported UAE cases specifically sanctioning non-disclosure are limited; practitioners therefore treat timely, complete disclosure as best practice to avoid conflict-of-interest challenges and costs risks.

Comparative Jurisdiction Analysis

United Kingdom. The UK has a long-standing, court-supervised funding market. Still, it has hit turbulence after the Supreme Court’s PACCAR (2023) ruling, which held that LFAs paying funders a percentage of damages are deemed to be damages-based agreements (DBAs) and risk unenforceability unless they comply with the DBA Regulations 2013. This forced many funders to pivot to multiple-of-capital returns or re-paper deals. In 2025, the Civil Justice Council urged the government to reverse PACCAR and introduce light-touch regulation to preserve access to justice; ministers indicated they’re considering next steps. Key takeaway for UAE users: avoid UK-style DBA pitfalls by drafting percentage/multiple hybrids that are clearly permissible under local rules (DIFC/ADGM) and by stress-testing enforceability of the LFA return metric.

Singapore: Singapore legalised TPF for international commercial arbitration in 2017 (Civil Law (Amendment) Act and TPF Regulations 2017), defining “qualifying third-party funders” (including a minimum assets threshold) and requiring disclosures; the framework has since expanded to other “prescribed proceedings,” and the 2025 SIAC Rules integrate explicit TPF touchpoints. Lessons: Clear eligibility criteria, disclosure, and institutional rule alignment build market confidence—principles mirrored in ADGM/DIFC and helpful for DIAC-seated arbitrations.

Australia: Australia’s class-action ecosystem is mature but volatile around funder remuneration mechanics. After Brewster curtailed pre-trial common fund orders (CFOs), courts experimented with alternatives (e.g., funding equalisation orders), and the High Court in 2025 further clarified when CFOs can be made. The policy arc shows active judicial management of funder commissions and class member protections. UAE parties can borrow two ideas: (i) court/tribunal scrutiny of returns to guard against conflicts; and (ii) portfolio structures that diversify risk and reduce pressure to seek broad CFO-style relief.

How the UAE compares

 The DIFC PD 2/2017 and ADGM Litigation Funding Rules 2019 already incorporate many global best practices, including mandatory disclosure, attention to conflicts and control, and (in ADGM) explicit LFA content, as well as the funder’s submission to court jurisdiction for costs disputes. Unlike the UK post-PACCAR, the UAE free-zone regimes don’t re-characterize percentage-based returns as DBAs; instead, they focus on transparency and case-management discretion (e.g., security-for-costs). For DIAC arbitrations, the 2022 Rules require funding disclosure (including whether the funder accepts adverse-costs liability), aligning with Singapore-style transparency.

Bottom line. The UAE’s free-zone model is broadly pro-funding and rules-based, with fewer structural uncertainties than the UK’s current DBA debate and governance features comparable to Singapore’s, while remaining attentive, like Australia, to cost and conflict safeguards.

Here’s Section 7. If this fits, say “next” and I’ll draft Checklist for Parties .

Emerging Trends & Future Outlook

More capital, more players: The UAE’s disputes market continues to deepen, with ADGM reporting sharp year-on-year growth in active companies and funds/AUM. This ecosystem effect typically fuels larger TPF war-chests and portfolio deals. Global funders are visibly present (e.g., Burford’s Dubai office; Omni Bridgeway in DIFC), signalling sustained regional deployment.

Arbitration pipeline expanding. DIAC’s 2023 Annual Report: shows rising registrations and multi-billion-dirham claim values, while its 2022 Rules (Art. 22) hard-wire TPF disclosure and adverse-costs signalling—factors that reduce diligence friction for funders and in-house teams. Expect continued uptake in UAE-seated arbitrations and related enforcement finance.

Products maturing: Beyond single-case non-recourse funding, the UAE is witnessing an increase in portfolio facilities, award monetisation, and asset-recovery finance, leveraging Dubai’s expertise in cross-border enforcement. These products shorten time-to-cash and spread risk across claims.

Governance & transparency. DIFC PD 2/2017 and ADGM Litigation Funding Rules 2019 keep disclosure, conflicts and funder submissions to court at the Centre of market practice. Anticipate tighter cost-management wording in LFAs (budget caps, re-underwriting triggers) and more routine use of ATE insurance to address adverse-costs/security applications.

ESG & thematic claims: Globally, ESG-related disputes are evolving (with shifting investor sentiment and regulatory attention). While the UAE market is pragmatic, funders are tracking greenwashing and governance exposures within MENA portfolios, applying stricter merits and enforcement filters.

Data and reporting: Practitioners still note the limited availability of public statistics on UAE TPF volumes, but commentary suggests continued growth, aided by institutional rules and clarity in free zones. Expect gradual normalisation of data as more reported awards and court orders reference funders.

What to watch (2025–26).

1. Institutional investment into regional dispute funds and co-investment vehicles.
2. Rule-driven refinements (practice directions and institutional guidance) rather than wholesale legislation.
3. Tech-enabled diligence (claims analytics, enforcement mapping) embedded into funder IC processes, accelerating timelines on strong UAE/DIAC matters. (Inference from global funder practice aligned to local frameworks.)

Checklist for Parties

If you are thinking of TPF, here are the steps to take

1. Map the claim: causes of action, damages model, seat/forum, and enforceability route; draft a memo your funder can underwrite quickly.
2. Assemble evidence early: key contracts, correspondence, expert scoping, and a budget with phases and assumptions.
3. Select counsel with experience in funding; align fee terms (including discounts and success uplifts) to complement the LFA.
4. Shortlist funders that are capitalised, reputable, and active in UAE forums; request proof of funds and references.
5. Conflicts are checked across funders, portfolio matters, opponents, and experts.
6. Negotiate headline economics: funding amount, deployment tranches, return (multiple/percentage), caps/floors, and timing escalators.
7. Lock control and strategy: client instructs counsel; funder has information and consultation rights, not conduct.
8. Define budgets and overruns: Who pays for extras, what triggers reforecasting, and what approval gates are in place?
9. Address adverse costs: ATE insurance or contractual allocation; plan for security-for-costs applications.
10. Set termination mechanics: objective deterioration tests, cure periods, and handover of work product.
11. Build disclosure workflow: when and how to notify DIFC/ADGM courts or a DIAC tribunal, including funder identity and any adverse-costs commitment.
12. Protect privilege and confidentiality with common-interest wording and secure data rooms.
13. Document enforcement planning from day one, including asset tracing and realistic recovery timelines.

Conclusion

Third-party funding (TPF) has matured into a practical, rule-aware option for claimants in the UAE—especially in DIFC/ADGM litigation and DIAC-seated arbitration. Used effectively, it converts legal spend into outcome-linked finance, widens access to top counsel, and de-risks cash flow, while maintaining the conduct of the case with the client and its lawyers. The strongest results come when parties prepare early: map merits and enforcement, build a disciplined budget, choose an experienced team, and negotiate LFAs with clear economics, disclosure workflows, termination triggers, and confidentiality protections. With transparent processes in the DIFC/ADGM and disclosure under DIAC Rules, the market is poised for steady growth across single-case, portfolio, and enforcement finance—provided parties remain rigorous in managing conflicts, costs, and asset-recovery feasibility.

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