The Strategic Guide to Litigation and Dispute Financing in the UAE
Whether a UAE claim can attract third-party funding is largely decided years earlier, by the jurisdiction clause, because costs recovery and enforcement differ sharply between the onshore courts, the free zone courts and arbitration.
A funder backs a claim only where the money can actually be collected, and in the UAE that turns on the forum. The DIFC and ADGM Courts order the loser to pay the winner's reasonable costs and regulate funding through a disclosure requirement; onshore, where fee recovery is typically nominal, the funder must earn its whole return out of the judgment sum. With the terms to settle before signature.
Reviewed by Mohamed Noureldin, Founder, Managing Partner & Senior Legal Consultant
Litigation funding answers a narrow question: who pays the legal costs of a claim that has merit but sits with a claimant who cannot or will not fund it. A third-party funder covers the costs of pursuing the claim and takes a share of what is recovered. If the claim fails, the funder loses its money and the claimant owes nothing. That trade is only worth making if the claim can be won and the judgment or award can actually be collected, which in the UAE depends heavily on where the claim is brought.
This guide sets out how the three main forums differ, where funding is recognised and on what conditions, and what a business should settle before it signs a funding agreement.
Related: Our litigation team in Dubai acts before the onshore courts and the common-law courts of the financial free zones.
Three forums, three different sets of rules
The onshore UAE courts apply civil law. Proceedings are conducted in Arabic, every document filed must be translated by a legally accredited translator, and there is no oral witness evidence or disclosure process of the kind common-law lawyers expect. Expert determination carries substantial weight: in commercial and accounting disputes the court commonly appoints an expert whose report shapes the outcome. A case runs through the Court of First Instance, the Court of Appeal and the Court of Cassation, and the appeal stages are a genuine rehearing rather than a narrow review.
The DIFC Courts and the ADGM Courts are common-law courts sitting inside the UAE. They operate in English, apply their own procedural rules, allow disclosure and cross-examination, and have judges drawn from common-law jurisdictions. They also apply a costs regime: the unsuccessful party is ordinarily ordered to pay the successful party's reasonable costs. That single difference changes the economics of funding, because a costs order is a recoverable asset the funder can count towards its return.
Related: See our DIFC Courts practice for how jurisdiction is established and how proceedings are run.
Arbitration is the third route. Onshore arbitration is governed by Federal Law No. 6 of 2018, as amended in 2023. Institutionally, the position changed materially: DIFC-LCIA was abolished by Dubai Decree No. 34 of 2021 and its caseload transferred to the Dubai International Arbitration Centre (DIAC), while ADCCAC in Abu Dhabi was restructured as arbitrateAD and has operated under that name since 2024. The DIFC remains available as a seat for arbitrations administered by other institutions, so a clause naming the DIFC as the seat is not in itself out of date. A clause naming DIFC-LCIA as the institution is.
Where funding is recognised, and on what terms
The DIFC Courts and the ADGM Courts both accept third-party funding and both regulate it through practice rules. The common requirement is disclosure: a funded party must tell the other side and the court that a funding agreement exists and identify the funder. The reason is practical. Once the funder is identified, the opposing party can apply for security for its costs against a claimant whose case is being paid for by someone with no exposure to a costs order.
Related: Our litigation and dispute financing practice reviews funding terms from the claimant's side before signature.
Onshore is different, and the difference is mostly economic rather than prohibitive. Funding agreements are not the subject of a dedicated onshore regime. The larger obstacle is that the onshore courts do not award full recovery of legal fees to a successful party; the contribution ordered is typically nominal. A funder pricing an onshore claim therefore has to recover its costs and its return entirely out of the principal judgment sum, which raises the percentage it needs and narrows the range of claims worth funding.
Enforcement is the other half of the calculation. A judgment of the DIFC or ADGM Courts is enforced against assets held elsewhere in the UAE through an execution process before the local courts, which brings its own requirements including translation. An arbitral award has to be recognised before it can be executed. None of this is unusual, but each step takes time, and a funder assesses the whole chain from filing to money received, not just the prospects of winning.
What a funding agreement actually decides
Funding terms are negotiable, and the detail determines how much of a win the claimant keeps. Anyone considering third-party funding for a UAE claim should settle the following before signature.
- The return. Usually expressed as a multiple of the funded amount, a percentage of recoveries, or the greater of the two, sometimes stepped by the stage at which the case resolves. Model the claimant's net position at a realistic settlement figure, not at the full pleaded claim.
- What the budget covers. Legal fees, court fees, expert fees, translation, security for costs, and adverse costs insurance are separate line items. Anything left out is paid by the claimant.
- Control of settlement. The claimant should retain the decision to settle. A funder may reasonably require consultation and a mechanism for resolving deadlock, but a funder holding a veto over settlement creates a conflict the court may be asked to examine.
- Termination. On what grounds can the funder stop paying, what happens to costs already incurred, and does the claimant have to find replacement funding mid-proceedings.
- Privilege and information flow. What case material goes to the funder, and on what basis privilege is preserved when it does.
Related: Employment claims are funded on a different basis again, because the entitlements are set by Federal Decree-Law No. 33 of 2021. See our employment law advisory practice.
Strategic considerations for UAE businesses
The forum is chosen years before the dispute, in the jurisdiction clause. If a contract may generate a high-value claim that the business would want funded, the clause should point at a forum where funding is recognised and where costs follow the event. Retrofitting that after a dispute arises is rarely possible.
Preserve the evidence that a funder will ask for. Funders underwrite on documents: the contract, the correspondence showing breach, the calculation of loss, and evidence that the defendant has assets worth pursuing. A claim with a good legal case and no proof of recoverable assets will not be funded.
Finally, treat funding as one option among several. Contingency arrangements with counsel, staged fee structures, and adverse costs insurance can address the same cash-flow problem at lower cost to the recovery. Funding earns its share where the claim is large, the costs are high and the claimant genuinely cannot carry them.
Related Services: Explore our Litigation and Dispute Financing and funded claims 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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