How Smart Funding Is Changing the Way We Settle Disputes

There comes a point in every sizeable commercial dispute where the discussion stops being about the contract and becomes about the stamina and grit to withstand litigation. Any person or entity which has handled arbitrations involving UAE parties is familiar with this moment of truth. With good counsel, the legal questions are mostly manageable, but the financial burden of taking a matter through a full arbitration can give jitters to even the most confident CEOs and general counsels. It is this barrier and reality, more than theory, that has pushed cost and funding into everyday discussions for litigations.

Alternate dispute mechanisms like arbitration have become the go to route for many high value cross-border matters involving companies in the UAE. Parties value the fact that hearings are private and awards can travel. But like anywhere in the world, arbitration is no longer the relatively lean process that many still imagine. A dispute or litigation of even a moderate size can at times require technical experts, forensic accountants, foreign law advice and teams that spread across different time zones and continents. Costs increase slowly at first and then all at once, hitting your email box week after week. Even businesses and conglomerates that are otherwise well oiled machines often find the outlay hard to justify.

What has changed in recent years is that the UAE, particularly free zones, have made it easier for parties to consider outside funding for litigation matters. The leaders of freezones, i.e. DIFC and ADGM have both taken the view that third-party funding is permissible and needed, and they have prescribed limited disclosure so that tribunals could deal with conflict checks properly and, ensure the process is structured, avoiding bad actors. This forward-looking route, has helped funders who prefer anonymity and privacy and who previously would not have looked at the region now take it seriously. This is also giving a lifeline to parties who might have pulled out too early, to at least stop and ask whether there is a financing route that keeps the claim alive.

The onshore courts have taken a more gradual path due to the multiple issues they have to deal with due to their wider jurisdictions. While accepted, there is no clear guideline prescribed for funding in civil or commercial disputes, and no comprehensive guidance yet on how tribunals seated in the mainland should approach the issue. Even so, industry experts are encountering more funded claims in UAE-seated arbitrations as parties grow comfortable with tools available under international institutional rules. Market behaviour in the free zones has begun to influence expectations more widely.

For the end users i.e. the clients, these regulatory aspects matter only because they affect real decisions. For instance, imagine a company trading in the GCC area, finds itself with a large unpaid claim against a foreign counterparty. The contract points to arbitration, the facts and merits support them, fairness and enforcement is not the worry. The main impediment is the 2 year timeline of the case. The CFO has other priorities, the board is unsure of cross border litigations, and the shareholders want the dispute resolved without draining reserves and move on to the next big thing. In the recent past, many such cases were written off for no reason other than cost but now, with the advent of litigation funding, at least, the company can speak with funders or insurers to understand whether some part of the financial risk can be shifted. Litigation funding also ensures that the wrong doers do not have a one sided advantage and the commercial terms of the arrangements are respected. By taking legitimate claims to experts such as WinJustice’s Mr Obaid Bin Mes’har who has led organizations in the UAE and is well qualified in both law and finance gives claimants a fair chance for a winning strategy as he sees dispute resolution from an inside man’s perspective.

Litigation funding does not magically make disputes cheap, nor does it take control away from parties in any manner. It simply alters how the cost is carried and risk divided. There are genuine questions that come with it, and tribunals in the region are still working out how best to handle them. Most seem satisfied with knowing only the identity of the funder so they can check for conflicts. Beyond that, courts and tribunals rarely intervene in how the funding arrangement is structured, leaving that to the parties. The fear that funders will steer strategy has, in practice, been overstated.

A point often overlooked in legal and financial circles is that litigation funding brings discipline and a new perspective. Reputable funders spend considerable time examining the strength of a potential claim, by putting in their own resources and mind to it. They look closely at the evidence and at the chances of enforcement. If the numbers do not add, they decline the case. This early scrutiny, though sometimes frustrating for claimants, can save them from committing to disputes that would otherwise become expensive distractions for them. Litigation funding companies are like elders of the family, who provide wisdom to navigate complex situations and at times, a reality check of the merits of your case.

Alongside international funders in the western world, the UAE now has a small but growing set of advisors who understand the commercial pressures faced by claimants. Some, including regional outfits such as WinJustice, focus on helping parties understand whether their disputes are suited to funding at all. They play a filtering role as much as a facilitating one, which many clients find helpful before committing to expensive steps.

As the UAE strengthens its position as an arbitration hub, parties will increasingly treat funding as part of their initial strategy rather than an afterthought. The businesses that take the time to think about both the legal and financial sides of a dispute at the very beginning usually make clearer, steadier decisions. In the world of cross-border disputes, this sort of clarity early on often matters as much as the merits themselves.