How Proper Litigation and Dispute Financing Structuring Saves Millions

Two decisions determine what a dispute costs a business: where it is heard, and how it is paid for. Both are usually made in a hurry, by people focused on the merits. Getting them right at the outset is worth more than any amount of skill applied later, because a claim brought in the wrong forum or funded on the wrong terms can be won and still leave the claimant out of pocket.

Related: Our DIFC Courts litigation team advises on forum selection before proceedings are issued.

This article covers how the choice between the DIFC Courts, the ADGM Courts, onshore courts and arbitration changes the economics of a claim; what third-party funding does and does not do; and the terms in a funding agreement that decide how much of a recovery the funded party actually keeps.

Related: See our litigation and dispute financing practice for funding and cost-management work.

Forum choice drives the cost

The DIFC and ADGM Courts are common law courts working in English, with pleadings, disclosure, witness statements tested by cross-examination, and reasoned judgments that build a body of precedent. Onshore courts work in Arabic, on documents. Every exhibit needs legal translation, evidence is largely written, and much of the technical fact-finding is done by a court-appointed expert whose report tends to shape the outcome. Neither model is better; they cost differently and they reward different preparation.

Three points change the budget more than any others.

1. Recoverable costs. Ask early what proportion of legal fees the forum will award to a successful party. The answer differs substantially between the free zone courts and onshore courts, and it determines whether a funder can price adverse-costs risk at all.
2. Translation and expert evidence. Onshore proceedings carry a translation cost proportional to the size of the document set. Free zone proceedings carry a disclosure cost. Estimate whichever applies before committing to a forum.
3. Enforcement. A judgment is worth what it can be executed against. Establish where the defendant's assets are before choosing where to sue, and check the route from judgment to execution in that place. A free zone judgment enforced onshore, or an award enforced abroad, adds a stage that has its own timetable and its own cost.

Related: Most funded claims in the region are commercial disputes over contracts, shareholdings or unpaid sums.

Check the arbitration clause before relying on it

Arbitration in the UAE is governed by Federal Law No. 6 of 2018, as amended in 2023. Two institutional changes have left a large number of contracts pointing at bodies that no longer exist in the form named. DIFC-LCIA was abolished by Dubai Decree No. 34 of 2021 and its caseload transferred to the Dubai International Arbitration Centre. The Abu Dhabi Commercial Conciliation and Arbitration Centre was restructured as arbitrateAD, which has been operating since 2024.

Contracts signed before those changes, and templates copied from them since, still name the former institutions. That is not necessarily fatal, but it invites a jurisdictional challenge at the start of a reference, which is expensive and delays everything behind it. Audit the dispute resolution clauses in live contracts and correct them on renewal. Note that the DIFC remains available as a seat for arbitrations administered by other institutions, so a clause naming the DIFC as the seat is a different thing from a clause naming an abolished institution.

What third-party funding does

A funder pays some or all of the cost of pursuing a claim in exchange for a share of the proceeds. If the claim fails, the funder is not repaid. That transfers the downside and takes legal spend off the profit and loss account, which is why funding is used even by businesses that could afford to pay their own fees.

Related: Our dispute financing team reviews funding terms and runs competitive processes between funders.

Funders take claims that are legally strong, quantified, and enforceable against a solvent counterparty. All three are required. A well-drafted claim against a company with no reachable assets will not attract funding, and neither will a strong liability case with damages that cannot be evidenced. The diligence a funder runs is itself useful: if no funder will back a claim on any terms, that is information worth having before spending on it.

Funding is not free money. The funder's return comes out of the recovery, ahead of or alongside the client's share, and on a successful claim it is the largest single cost. The question is never whether funding is expensive but whether the alternative — self-funding the claim, or not bringing it — is worse.

The terms that decide what you keep

Funding agreements vary widely, and the differences are worth more than the headline rate. Before signing, get clear answers on the following.

• The waterfall. In what order is a recovery applied between the funder's capital, the funder's return, unpaid legal fees and the client? Two agreements with identical returns can produce very different net outcomes depending on the order of payment.
• How the return is calculated. A multiple of the money committed, a share of the proceeds, or the greater of the two — and whether the multiple steps up over time or by procedural stage.
• Adverse costs and security for costs. Who pays if the claim fails and the other side is awarded its costs? Whether insurance is bought, who pays the premium, and out of what.
• Budget and top-ups. What happens when the case costs more than the agreed budget. A funder with no obligation to fund beyond the budget can leave a claim stranded mid-proceedings.
• Control and settlement. Who decides whether to accept an offer, and what happens if the funder and the client disagree. Control of the litigation must remain with the client and its lawyers; a mechanism for resolving settlement disagreements should be written in.
• Termination. On what grounds the funder can withdraw, what notice is required, and what is owed on withdrawal.
• Disclosure and privilege. What information the funder receives and how privilege is protected when it is shared. Check whether the chosen forum's rules require the existence of funding, or the funder's identity, to be disclosed to the tribunal or the other side.

Practical steps for UAE businesses

Assess the claim before deciding how to pay for it. A written early case assessment covering merits, quantum, the likely forum, the enforcement route and a realistic cost budget is the document that makes every subsequent decision easier, and it is what a funder will ask for in any event.

Related: Our litigation funding advisers prepare the assessment packs funders expect to see.

Keep the lawyers and the funder aligned but separate. The funder is a counterparty, not a member of the team, and the funding agreement is a commercial contract that should be negotiated as one. Run a process across more than one funder where the claim is strong enough to justify it; terms move considerably under competition.

Finally, treat forum and funding as a single decision. The right forum for the merits may be the wrong one for costs recovery or enforcement, and a funder's pricing will reflect that. Working the two questions together, before proceedings are issued, is where the money is saved.

Related Services: Explore our litigation and dispute financing and funding structuring services for practical legal support in this area.

Disclaimer: The information provided in this article is for general informational purposes only and does not constitute legal advice. Readers should seek professional legal advice tailored to their specific circumstances before making any decisions or taking any action based on the content of this article.

Nour Attorneys Team

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