Third Party Litigation Funding Dubai: Mechanics and Eligibility

Third-party litigation funding in Dubai allows a non-party to finance a claimant's legal costs in exchange for a share of any proceeds, governed primarily by the UAE Federal Decree-Law No. 42 of 2022 on Civil Procedure, which applies to courts in Dubai and the wider UAE.

Related Services: Explore our Litigation & Dispute Financing and Commercial Litigation services for practical legal support in this area.

HOW DOES THIRD-PARTY LITIGATION FUNDING WORK IN DUBAI?

A funder provides capital to cover attorney fees, court fees, expert costs and other disbursements; in return, the funder receives a pre-agreed percentage of the settlement or award if the case succeeds, and typically receives nothing if the claim fails. This arrangement is permissible under the UAE Civil Procedure Law, which does not prohibit third-party financing of litigation, provided the funding agreement does not interfere with the lawyer's independence or the court's process (see UAE Federal Decree-Law No. 42 of 2022, Article 10).

The process begins with a due-diligence review by the funder, who assesses the merits of the claim, the quantum of damages, and the likelihood of success. If satisfied, the funder and claimant sign a litigation funding agreement that outlines the amount advanced, the repayment trigger (usually a successful settlement or judgment), the funder's share (commonly ranging from 20 % to 40 % of the recovery), and any caps on the funder's exposure. The claimant's lawyer continues to conduct the case independently; the funder has no right to direct litigation strategy or to communicate directly with the court. Monies are transferred to the claimant's legal representative, who invoices the funder as costs are incurred. Upon conclusion, the funder is reimbursed from the proceeds before the claimant receives the net amount.

WHO IS ELIGIBLE TO OBTAIN LITIGATION FUNDING IN DUBAI?

Eligibility extends to any natural or juridical person with a viable cause of action before Dubai courts, including individuals, companies, and insolvent estates, provided the claim is not prohibited by law (such as certain criminal matters) and the funding agreement complies with professional conduct rules. The UAE Civil Procedure Law does not impose a statutory bar on who may seek funding; rather, eligibility is determined by the funder's risk assessment and the lawyer's ethical obligations under the UAE Advocacy Law (Federal Law No. 23 of 1991, as amended).

Typically, funders look for claims with clear liability, quantifiable damages, and a reasonable prospect of settlement or judgment within a defined period-often 12 to 36 months. Claims arising from commercial contracts, construction disputes, intellectual property infringement, and certain employment matters are common candidates. Conversely, funders may decline matters where the claimant lacks standing, where the claim is speculative, or where the potential recovery is insufficient to cover the funder's expected return after costs. Lawyers must also ensure that accepting funding does not create a conflict of interest or compromise their duty to act solely in the client's interest, as required by the UAE Advocacy Law's code of conduct.

WHAT COST-SHARING MODELS ARE USED IN THIRD-PARTY LITIGATION FUNDING DUBAI?

The most prevalent models are the "pure success-fee" model, where the funder receives a percentage of the recovery only if the claim succeeds, and the "hybrid" model, which combines a modest upfront fee (to cover initial disbursements) with a success-fee on the net proceeds. Some funders also offer a "capped" success-fee, limiting their share to a pre-determined maximum amount regardless of the recovery size. These structures are contractual and not prescribed by statute; they must be clearly set out in the litigation funding agreement to avoid ambiguity.

Under the pure success-fee model, the funder advances 100 % of the budgeted costs and receives, for example, 30 % of any settlement or award. If the claim fails, the funder writes off the advance and the claimant owes nothing. In the hybrid model, the funder might advance 80 % of costs and charge a 5 % upfront fee on the total budget, then take 25 % of the net recovery. The capped model could specify that the funder's share will not exceed AED 5 million, even if the recovery is larger. All models require transparency: the agreement must state the exact percentage, any caps, the definition of "net proceeds" (usually gross recovery minus deductible costs), and the timing of payments. The UAE Civil Procedure Law does not regulate these percentages, but the agreement must not violate public policy or the lawyer's duty of independence.

WHEN SHOULD PLAINTIFFS AND LAW FIRMS CONSIDER USING LITIGATION FUNDING IN DUBAI?

Litigation funding is advantageous when the claimant lacks the financial resources to pursue a meritorious case, when the litigation budget would otherwise strain business operations, or when the claimant wishes to mitigate risk by transferring cost exposure to a third party. It is also useful for law firms seeking to accept contingency-based matters without bearing the full financial burden, thereby expanding their practice portfolio.

Strategic considerations include the estimated duration of the case, the likelihood of settlement versus trial, and the potential impact of the funder's share on the client's net recovery. Claimants should compare the cost of funding against alternative financing options (such as bank loans or internal reserves) and assess whether the funder's involvement could affect settlement negotiations-some defendants may view a funded claimant as more resolute, while others may perceive the funder as a sophisticated party capable of sustaining prolonged litigation. Law firms must conduct conflict checks and ensure that the funding agreement does not impede their ability to advise the client independently. Ultimately, funding should be pursued only after a thorough merits analysis and when the anticipated net benefit to the claimant, after the funder's share, outweighs the costs of proceeding without external financing.

FREQUENTLY ASKED QUESTIONS

What law governs third-party litigation funding in Dubai?
The primary governing instrument is the UAE Federal Decree-Law No. 42 of 2022 on Civil Procedure, which sets out the procedural framework for civil claims in Dubai courts. The law does not expressly prohibit third-party financing, and any funding agreement must comply with the lawyer's independence obligations under the UAE Advocacy Law (Federal Law No. 23 of 1991, as amended). The Arabic text of UAE legislation as published in the Official Gazette prevails over any translation.

Can a funder dictate litigation strategy or communicate directly with the court?
No. The funder's role is strictly financial; it may not instruct the lawyer on case tactics, nor may it file pleadings or appear before the court. Such involvement would breach the advocate's duty of independence and could be deemed contempt of court under the UAE Civil Procedure Law.

What happens if the claim is unsuccessful?
Under a pure success-fee arrangement, the funder receives no repayment and bears the loss of the advanced costs. The claimant owes nothing to the funder for the financing provided. The litigation funding agreement should expressly state that the funder's recovery is contingent on success.

Are there any limits on the percentage a funder may take?
UAE law does not prescribe a cap on the funder's share; the percentage is a matter of contract between the parties. However, the agreement must not be deemed unconscionable or contrary to public policy, and it must allow the client to receive a meaningful net recovery.

Is litigation funding available for criminal matters in Dubai?
Generally, third-party funding is not permitted for criminal prosecutions or defenses, as the UAE Criminal Procedure Law (Federal Law No. 35 of 1992) requires that legal representation be funded by the accused or state-appointed counsel, and any arrangement that could influence prosecutorial discretion is prohibited.

How are costs recovered from the funder at the end of the case?
The claimant's legal representative submits invoices for incurred costs to the funder throughout the litigation. Upon settlement or judgment, the funder is reimbursed from the gross proceeds before the client receives the net amount, according to the agreed percentage or formula in the funding agreement.

Contact Nour Attorneys for a consultation.

If your matter involves third party litigation funding in the United Arab Emirates, you are welcome to request a consultation with Nour Attorneys. Our team can assess your position under the law currently in force and outline the options available to you. Request a consultation

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