Litigation Funding in Dubai: Legal Framework, Disclosure and Risk Management

Litigation funding in Dubai operates across several distinct legal and procedural frameworks. A funding arrangement connected with proceedings before the Dubai International Financial Centre Courts is subject to express disclosure rules. Funding in arbitration administered by the Dubai International Arbitration Centre is addressed by Article 22 of the DIAC Arbitration Rules 2022. By contrast, litigation funding connected with proceedings before the onshore Dubai Courts is not governed by a single, dedicated third-party funding statute.

The practical result is not a uniform Dubai funding regime, but a forum-specific legal architecture. Parties must determine which court supervises the dispute, which procedural rules apply, what must be disclosed, how legal costs may be allocated, and whether the funding agreement preserves the claimant’s authority over counsel and settlement.

This distinction matters commercially as well as legally. Litigation funding is not merely a means of paying legal fees. In appropriate cases, it may permit a claimant to transfer part of the financial risk of pursuing a dispute to an external capital provider. However, legal merits alone do not make a claim fundable. Funders ordinarily assess damages, budget proportionality, duration, respondent solvency, enforcement prospects and the terms on which capital can be deployed.

What Is Third-Party Litigation Funding?

Third-party litigation funding involves an independent funder providing capital to finance some or all of the costs of litigation or arbitration. In return, the funder receives an agreed financial return if the claim produces a recovery.

The funding is generally structured on a non-recourse basis. This means that the funder’s entitlement is ordinarily contingent on a successful judgment, award or settlement, subject to the terms of the litigation funding agreement. If the claim fails, the funder will usually lose the capital deployed, although the claimant may remain responsible for liabilities that the agreement does not cover.

A litigation funding agreement may finance:

• lawyers’ fees;
• court or arbitration costs;
• expert and technical evidence;
• translation and document-management expenses;
• enforcement and asset-tracing work; and
• potential adverse-cost exposure, where expressly agreed.

Litigation funding must be distinguished from a lawyer’s contingency or success fee. A litigation funder is an external capital provider. A contingency fee concerns the remuneration payable by a client to its legal representative. The two arrangements may coexist, but they engage different legal, ethical and commercial considerations.

Dubai’s Forum-Specific Funding Architecture

A proper analysis of litigation funding in Dubai should distinguish three principal settings.

The first is onshore litigation before the Dubai Courts, which forms part of the UAE’s federal and local civil-law system. The second is litigation before the DIFC Courts, an English-language common-law court system operating within the Dubai International Financial Centre. The third is arbitration, including proceedings administered under the DIAC Arbitration Rules 2022.

The governing rules depend on the forum and, in arbitration, the seat. The institution administering an arbitration and the juridical seat are separate concepts. DIAC may administer an arbitration seated in the DIFC, onshore Dubai or another jurisdiction, depending on the parties’ agreement and the operation of the applicable rules.

This distinction affects supervisory jurisdiction, applications for interim relief, annulment proceedings, confidentiality, costs and enforcement.

Litigation Funding in the DIFC Courts

The DIFC Courts expressly address third-party funding through Practice Direction No. 2 of 2017 on Third Party Funding in the DIFC Courts.[1]

The Practice Direction applies to funded parties involved in DIFC Court proceedings and defines funding broadly as financial assistance that may confer an economic benefit on the funder linked to the outcome of the proceedings. It therefore focuses on the substance of the arrangement rather than a particular financing label.

Disclosure of the Funding Arrangement

A funded party must notify every other party that it has entered into a litigation funding agreement. The notice must disclose the identity of the funder.[1]

The obligation does not ordinarily require production of the funding agreement or disclosure of its commercial terms. The DIFC Courts may, however, order disclosure where appropriate.

For Part 7 claims, notice is generally given in the Case Management Information Sheet before the case management conference. Where the agreement is entered into after that conference, written notice must be served on the other parties and the Registry within seven days.

For other types of claim, notice must be given as soon as practicable after proceedings commence or, where funding is obtained during the proceedings, within seven days of the agreement.[1]

The distinction between disclosing the existence and identity of funding and disclosing the complete agreement is important. Identification of the funder assists the Court and the parties in detecting conflicts. Routine production of the agreement could expose confidential information about litigation budgets, termination rights, settlement procedures and the claimant’s assessment of risk.

Security for Costs

The existence of third-party funding may be relevant to an application for security for costs, but it is not determinative by itself. Practice Direction No. 2 of 2017 expressly provides that the DIFC Courts may consider funding when deciding a security application while cautioning against treating funding alone as sufficient.[1]

The DIFC Court of Appeal reinforced this approach in LXT Real Estate Broker LLC v SIR Real Estate LLC. The Court explained that the relevant analysis may include the substance of the arrangement, the funder’s financial capacity and the extent of any commitment to meet adverse costs. A presumption that funded litigation automatically warrants security would be inconsistent with the Court’s discretionary assessment.[2]

For funded parties, this makes the drafting of adverse-cost provisions commercially significant. The claimant should understand whether the funder will provide an indemnity, obtain after-the-event insurance, support a bank guarantee or leave the claimant responsible for security and adverse costs.

Potential Costs Exposure of Funders

Practice Direction No. 2 of 2017 states that the DIFC Courts have inherent jurisdiction to make costs orders against third parties, including funders, where appropriate.[1]

The precise jurisdictional basis and circumstances in which a non-party order may be made should not be overstated. In Bank of Baroda (DIFC Branch) v Neopharma LLC and Others, the Court observed that a practice direction could not itself create a legislative source of jurisdiction and left the wider question for determination in a case involving fully developed argument.[3]

Accordingly, funder exposure should be assessed by reference to the Court’s applicable jurisdiction, the funder’s conduct, the degree of control exercised and any contractual commitment to meet costs. It should not be described as automatic.

Duties of DIFC Legal Practitioners

The DIFC Courts’ Mandatory Code of Conduct protects the independence of practitioners acting for funded clients.

A practitioner must not allow the interests or instructions of a funder to displace the practitioner’s duties to the client unless the client has authorised the practitioner in writing to accept instructions from the funder. Practitioners must also advise clients about the effect of a funding agreement on responsibility for legal costs and expenses.[4]

The Code further requires transparency concerning referral benefits. A practitioner must not receive a referral fee or benefit from a funder without written disclosure to the client, and any recommendation of a particular funding provider must be considered to be in the client’s best interests.[4]

These requirements support a central principle of responsible litigation funding: the funded party remains the client, counsel owes professional duties to that client, and the funder’s economic interest does not confer unrestricted authority over the proceedings.

Third-Party Funding Under the DIAC Arbitration Rules 2022

Dubai Decree No. 34 of 2021 reorganised Dubai’s institutional arbitration framework. It abolished the Emirates Maritime Arbitration Centre and the DIFC Arbitration Institute, transferring their rights and obligations to DIAC.[5]

The DIAC Arbitration Rules 2022 took effect on 21 March 2022 and introduced an express provision on third-party funding in Article 22.[6]

Mandatory Disclosure Under Article 22

Before constitution of the tribunal, a party that has entered into a third-party funding arrangement must promptly disclose:

• the existence of the arrangement;
• the identity of the funder; and
• whether the funder has committed to an adverse-cost liability.

The disclosure must be made to the other parties and DIAC.[6]

After constitution of the tribunal, a party must not enter into a funding arrangement if the arrangement will or may create a conflict of interest between the funder and a tribunal member. Any permissible post-constitution arrangement must be disclosed to the parties, DIAC and the tribunal.[6]

Article 22 does not state that the complete funding agreement must routinely be produced. Its express disclosure requirements concern the arrangement, the funder’s identity and the existence of an adverse-cost commitment.

Why Funder Identity Matters

Disclosure of the funder’s identity primarily supports conflict checking. A funder may have commercial, financial or professional relationships with an arbitrator, counsel, expert or corporate group involved in the case.

Where funding is secured after the tribunal is constituted, conflict analysis becomes particularly important. A late arrangement that creates a relationship between a funder and a tribunal member may result in a challenge, delay or replacement of the arbitrator.

This does not mean that every undisclosed funding arrangement will invalidate an award. The legal consequences depend on the applicable arbitration law, the materiality of the relationship, the timing of disclosure and whether the circumstances establish a legally relevant conflict or procedural unfairness.

Adverse Costs and Security for Costs

Article 22 requires disclosure of whether the funder has committed to adverse-cost liability. It also permits the tribunal to consider the existence of a third-party adverse-cost commitment when allocating arbitration costs.[6]

The rule does not provide that funding alone proves insolvency or inability to pay. Tribunals generally need to examine the claimant’s financial position, the terms and reliability of any funding commitment, the timing of the security application, proportionality and whether an order would improperly prevent pursuit of a genuine claim.

A funding agreement should therefore address the practical consequences of a security application. It should identify who decides whether security will be provided, which instruments may be used, whether the expenditure falls within the approved budget and what happens if the funder declines to provide further capital.

The Seat of DIAC Arbitration

Article 20 of the DIAC Arbitration Rules permits parties to agree on the seat. Where the parties have agreed only on a location or venue, that location is generally deemed to be the seat unless they agree otherwise.

In the absence of an agreed seat or venue, the initial seat is the DIFC. The tribunal retains authority, once constituted, to determine the seat finally after considering the parties’ observations and other relevant circumstances.[6]

It is therefore inaccurate to state without qualification that every DIAC arbitration is governed by DIFC arbitration law. The applicable curial law depends on the seat ultimately determined for the arbitration.

Litigation Funding Before the Onshore Dubai Courts

Unlike the DIFC Courts and DIAC arbitration, onshore UAE law does not contain a single dedicated statute establishing a comprehensive litigation funding regime.

A funding agreement connected with onshore proceedings must instead be assessed through the UAE’s general rules on contracts, public order, professional conduct, procedural law, confidentiality and the assignment or distribution of recoveries.

The UAE’s new Civil Transactions Law, issued in 2025 and effective from 1 June 2026, now forms part of the relevant contractual framework.[7] Its application to a particular funding arrangement will depend on the agreement’s terms, governing law, date, parties and connection with the UAE.

The absence of a dedicated prohibition should not be treated as conclusive proof that every funding structure is enforceable. Provisions concerning control, termination, proceeds, conflicts, confidentiality, interest, uncertainty and public order require case-specific legal analysis.

Disclosure in Onshore Proceedings

There is no generally applicable onshore rule equivalent to DIFC Practice Direction No. 2 of 2017 or Article 22 of the DIAC Rules requiring routine disclosure of the existence and identity of a litigation funder.

Disclosure may nevertheless become relevant where ordered by a court, required by another applicable law, connected to the standing or authority of a party, or necessary to resolve a dispute concerning costs, assignment, conflicts or the distribution of proceeds.

Parties should therefore avoid assuming that the absence of an express general notice rule guarantees permanent confidentiality.

Litigation Funding and Lawyer Success Fees Are Different

Federal Decree-Law No. 34 of 2022 Regulating the Legal Profession and Legal Consultation Profession permits a lawyer-client agreement under which fees are calculated as a percentage of the amount awarded, subject to a maximum of 25%.[8]

That statutory limit governs the relevant lawyer-client fee arrangement. It should not automatically be applied to an independent third-party funder’s return.

Equally, the absence of an express statutory percentage cap for funders does not mean that every proposed return is enforceable. The overall agreement remains subject to applicable contract law, public-order considerations and the facts of the transaction.

A hybrid structure may combine a discounted or success-based legal fee with external funding for disbursements, experts, arbitration costs or enforcement. Such arrangements require careful separation of roles so that counsel remains professionally independent and the funder does not acquire impermissible control.

Confidentiality, Privilege and Funding Due Diligence

Funding applications typically require disclosure of sensitive material, including pleadings, legal opinions, expert reports, damages calculations, budgets and enforcement assessments.

The legal protection available to that material depends on the forum and the nature of the document. Parties should not assume that a confidentiality agreement automatically creates legal professional privilege, or that sharing privileged material with a prospective funder is risk-free in every jurisdiction.

A prudent diligence process may include:

• a confidentiality agreement signed before substantive disclosure;
• controlled access to a secure data room;
• staged disclosure, beginning with non-privileged factual material;
• review by counsel of the privilege implications of each disclosure;
• restrictions on copying and onward disclosure;
• procedures for returning or deleting documents; and
• compliance with applicable data-protection requirements.

Common-interest language may assist in demonstrating the purpose and confidentiality of the exchange, but its effectiveness depends on the applicable law. It should not be presented as creating a universally recognised privilege.

Key Terms in a Dubai Litigation Funding Agreement

A funding agreement should allocate legal and commercial risk clearly.

Control of the Claim

The claimant should retain authority over the conduct of the proceedings and instructions to counsel. The agreement may provide consultation or information rights to the funder, but those rights should not undermine the claimant’s legal ownership of the claim or counsel’s professional independence.

Budget and Funding Commitments

The agreement should identify committed capital, approved expenditure, reserve requirements and the procedure for budget increases. Unclear funding commitments can create serious difficulties if proceedings become more expensive or prolonged than anticipated.

Termination

Termination provisions should specify when the funder may cease funding and what happens to accrued liabilities. A broadly drafted right to withdraw may leave a claimant exposed in the middle of proceedings.

Settlement

The claimant should retain the legal authority to accept or reject a settlement. The agreement may establish a consultation process or independent mechanism for resolving a disagreement about whether an offer is commercially reasonable.

Distribution of Recoveries

The agreement should define the order in which recovered proceeds are distributed, including repayment of deployed capital, payment of the funder’s return, unpaid legal costs and the claimant’s residual recovery.

No particular return multiple or percentage should be described as standard without reliable and current market evidence. Pricing is transaction-specific and depends on risk, duration, budget, recoverability and competition between capital providers.

Adverse Costs and Security

The agreement should state expressly whether the funder covers adverse costs, security for costs, insurance premiums and enforcement costs. Disclosure that a funder exists is not the same as a binding commitment by that funder to satisfy those liabilities.

Enforcement Is Central to Commercial Fundability

A legally strong claim may still be commercially unsuitable for funding if the respondent lacks recoverable assets or those assets are located in jurisdictions where enforcement is uncertain.

For arbitration, the UAE is a party to the 1958 New York Convention, which provides an international framework for recognition and enforcement of foreign arbitral awards, subject to limited grounds for refusal.[9]

Awards seated in the UAE are also subject to the UAE Federal Arbitration Law and the jurisdiction of the competent supervisory and enforcement courts.[10] The availability of enforcement must still be assessed by reference to the respondent, asset location, sovereign or public-policy issues, limitation periods and the procedural requirements of the enforcing jurisdiction.

Funding due diligence should therefore consider enforcement from the outset rather than treating it as a matter to be addressed only after an award or judgment is obtained.

Practical Implications for Claimants and Counsel

Parties considering litigation funding in Dubai should identify the forum before negotiating material funding terms.

For DIFC Court litigation, the parties should prepare for disclosure of the arrangement and the funder’s identity, consider security and non-party cost risks, and ensure compliance with practitioner duties.

For DIAC arbitration, the parties should make the disclosures required by Article 22, conduct conflict checks and establish whether the funder has assumed adverse-cost liability.

For onshore litigation, the parties should obtain specific UAE advice on the contractual structure, public-order considerations, professional rules, confidentiality and the treatment of recoveries.

Across all forums, the claimant should test whether the proposed funding remains economically rational after legal fees, funder returns, adverse-cost protection, taxes and enforcement expenditure are taken into account.

Risks and Unresolved Issues

Dubai’s principal dispute-resolution frameworks provide greater visibility for third-party funding than in the past, but important issues remain dependent on judicial or tribunal discretion.

These include the circumstances in which a funding agreement may be ordered to be produced, the scope of non-party cost jurisdiction, the weight given to funding in security applications, the treatment of privileged diligence material and the enforceability of particular termination or control provisions.

The absence of a single UAE-wide funding statute also means that analysis must remain forum-specific. DIFC rules should not be imported into onshore proceedings, and DIAC rules should not be assumed to govern arbitrations administered by other institutions.

Forward-Looking Legal Assessment

The existing framework suggests that future development is more likely to occur through court decisions, institutional rules, professional standards and transactional practice than through the immediate creation of one uniform Dubai funding code.

Disclosure is likely to remain focused on conflicts and cost protection rather than routine publication of complete commercial agreements. Courts and tribunals may also continue to examine the substance of a funder’s role, including its financial capacity, conduct and degree of control, rather than treating all funding arrangements identically.

Any further reform should balance access to dispute-resolution capital with party autonomy, confidentiality, counsel independence and procedural equality.

Conclusion

Litigation funding in Dubai is legally and procedurally viable in several dispute-resolution settings, but it is not governed by one uniform regime.

The DIFC Courts impose express notice and funder-identity requirements. The DIAC Arbitration Rules require disclosure of the arrangement, the funder and any adverse-cost commitment. Onshore litigation funding remains primarily dependent on general contractual, procedural and professional principles rather than a dedicated funding statute.

A properly structured arrangement must do more than finance a legally credible claim. It must preserve claimant control, protect counsel’s independence, address security and adverse costs, manage confidential information and provide a realistic route to enforcement. Those factors determine not only legal compliance but also whether litigation funding in Dubai is commercially sustainable.

FAQs

Is third-party litigation funding legal in Dubai?

There is no single answer applicable to every Dubai forum. Funding is expressly contemplated in the DIFC Courts and under the DIAC Arbitration Rules. Onshore arrangements require case-specific analysis under applicable contract, procedural, professional and public-order rules.

Must a funded party disclose the entire funding agreement?

Not ordinarily under DIFC Practice Direction No. 2 of 2017 or Article 22 of the DIAC Rules. The DIFC framework requires disclosure of the existence of the agreement and the funder’s identity, while DIAC additionally requires disclosure of whether the funder has committed to adverse-cost liability. A court or tribunal may order further disclosure where legally justified.

Does third-party funding automatically justify security for costs?

No. The existence of funding may be relevant, but it is not automatically determinative. The court or tribunal may examine financial capacity, the terms of the funding commitment, proportionality and whether security would improperly obstruct a genuine claim.

Can a litigation funder control settlement?

A funder may have contractual consultation rights, but the claimant should retain legal authority over settlement and instructions to counsel. The agreement may establish an independent mechanism for resolving settlement disagreements.

Is the 25% lawyer-fee cap also a cap on a funder’s return?

Not necessarily. The statutory 25% limit concerns the relevant lawyer-client fee arrangement under Federal Decree-Law No. 34 of 2022. A third-party funder’s return is a separate contractual issue, although it remains subject to applicable law and public-order considerations.

What makes a Dubai dispute commercially fundable?

Funders generally consider merits, realistic damages, proportionality of the budget, duration, legal and procedural risk, respondent solvency, asset location and enforceability. A claim may have strong legal merits but remain commercially unsuitable if recovery is uncertain or the likely proceeds are insufficient relative to cost and risk.

References

[1] DIFC Courts, “Practice Direction No. 2 of 2017 on Third Party Funding in the DIFC Courts”, 14 March 2017: https://www.difccourts.ae/rules-decisions/practice-directions/practice-direction-no-2-of-2017-on-third-party-funding-in-the-difc-courts

[2] DIFC Court of Appeal, LXT Real Estate Broker LLC v SIR Real Estate LLC, CA 005/2025: https://www.difccourts.ae/rules-decisions/judgments-orders/court-appeal/ca-0052025-lxt-real-estate-broker-llc-v-sir-real-estate-llc-1

[3] DIFC Court of First Instance, Bank of Baroda (DIFC Branch) v Neopharma LLC and Others, CFI 043/2020: https://www.difccourts.ae/rules-decisions/judgments-orders/court-first-instance/cfi-0432020-bank-baroda-difc-branch-v-1-neopharma-llc-2-nmc-healthcare-llc-3-new-medical-centre-llc-4-bavaguthu-raghuram-shetty-18

[4] DIFC Courts, “Mandatory Code of Conduct for Legal Practitioners in the DIFC Courts”, DIFC Courts Order No. 4 of 2019: https://www.difccourts.ae/download_file/1882/0

[5] Government of Dubai, Decree No. 34 of 2021 Concerning the Dubai International Arbitration Centre, 14 September 2021: https://dlp.dubai.gov.ae/Legislation%20Reference/2021/Decree%20No.%20%2834%29%20of%202021.pdf

[6] Dubai International Arbitration Centre, “DIAC Arbitration Rules 2022”, Articles 20 and 22, effective 21 March 2022: https://www.diac.com/wp-content/uploads/2024/12/0.1-DIAC-Casework-2022-Arbitration-Rules.pdf

[7] UAE Government, Federal Decree-Law Promulgating the Civil Transactions Law, issued 1 October 2025 and effective 1 June 2026: https://uaelegislation.gov.ae/en/legislations/4011

[8] UAE Government, Federal Decree-Law No. 34 of 2022 Regulating the Legal Profession and Legal Consultation Profession: https://uaelegislation.gov.ae/en/legislations/1566

[9] United Nations, Convention on the Recognition and Enforcement of Foreign Arbitral Awards, New York, 1958: https://www.newyorkconvention.org/english

[10] UAE Government, Federal Law No. 6 of 2018 Concerning Arbitration: https://uaelegislation.gov.ae/en/legislations/1069

About WinJustice

WinJustice is a UAE-based litigation funding company providing funding solutions for eligible commercial disputes, litigation, and arbitration claims.

Through legal, financial, and enforcement assessment, WinJustice seeks to support meritorious claims while helping claimants manage the cost and financial risk of pursuing legal proceedings.

For more information about litigation funding or to submit a claim for preliminary assessment, visit WinJustice.

This article is provided for general informational purposes only and does not constitute legal, financial, tax, Sharia, or investment advice. The legality, availability, and terms of litigation funding depend on the applicable jurisdiction, forum, governing law, and circumstances of each dispute. Funding remains subject to legal, financial, and enforcement assessment.