Articles

In-depth articles on litigation funding, historical insights, and legal finance strategies in the UAE and globally.

Articles, Corporate & Commercial Insights

Litigation Funding vs Bank Financing: Which Better Supports a Commercial Claim?

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A company with a valuable commercial claim may still face a difficult capital-allocation decision. Pursuing litigation or arbitration can require substantial expenditure on lawyers, experts, tribunal fees, evidence, translation, asset tracing, and enforcement. Those costs may arise years before any recovery. Two potential sources of capital are litigation funding and conventional bank financing. Both can provide liquidity, but they allocate legal, credit, recovery, and balance-sheet risk in materially different ways. A bank generally lends against the borrower’s creditworthiness, cash flow, assets, guarantees, and repayment capacity. The debt ordinarily remains payable whether the underlying dispute succeeds or fails. A litigation funder, by contrast, usually finances a specific claim or portfolio of claims on a non-recourse basis. Its return is contingent on a successful recovery, and it ordinarily loses its deployed capital if the funded matter fails. The practical distinction is therefore not simply one of price. It concerns recourse, security, repayment timing, risk transfer, control, accounting treatment, disclosure, and the commercial value assigned to the claim. In the UAE, the analysis must also distinguish between onshore litigation, DIFC Courts proceedings, ADGM Courts proceedings, and arbitration. Third-party funding is expressly addressed in some of those frameworks but not through one uniform federal regime. Bank lending, meanwhile, operates within a separate legal and regulatory structure governing commercial loans, financial institutions, security, and insolvency. What Is Litigation Funding? Litigation funding, also called third-party funding or legal finance, is an arrangement under which an independent funder pays some or all of the costs of pursuing a legal claim in exchange for an agreed return from any successful recovery. The funding may cover: Commercial litigation funding is commonly non-recourse. If the claim fails, the claimant ordinarily does not repay the funding from its unrelated business assets, subject to the terms of the agreement and any breach, warranty, or termination provisions. A funder’s return may be calculated as a multiple of deployed capital, a percentage of recoveries, or a combination of both. The return may also vary according to the duration of the proceedings or the stage at which the dispute resolves. The funder does not become the claimant’s lawyer. Counsel remains responsible for legal advice and representation, while the claimant should retain appropriate authority over strategy and settlement. The funding agreement will usually regulate information rights, consultation, confidentiality, termination, priority of payments, and the treatment of settlement proposals. What Is Bank Financing? Bank financing ordinarily involves a lender advancing money to a company under a loan, revolving credit facility, overdraft, or other credit arrangement. The bank’s primary concern is not whether a particular legal claim will succeed. It assesses the borrower’s ability to repay through its wider business, financial position, cash flow, assets, guarantees, and existing indebtedness. Depending on the transaction, a bank may require: Under the UAE Commercial Transactions Law, commercial lending is recognised as an interest-bearing transaction, subject to the applicable contractual and statutory framework.[1] The precise terms of any facility will depend on the lender, borrower, governing law, security package, and regulatory requirements. A company may use general corporate borrowing to pay legal expenses. However, unless the bank expressly agrees otherwise, the litigation outcome does not determine the repayment obligation. The borrower remains liable even if the claim is dismissed, the award is annulled, the defendant becomes insolvent, or enforcement proves unsuccessful. Litigation Funding vs Bank Financing: The Central Difference The principal distinction is the source of repayment. A bank expects repayment from the borrower. A litigation funder expects payment from the proceeds of the funded claim. That distinction affects nearly every commercial feature of the transaction. With bank financing, the company generally retains the downside risk of the litigation and adds a debt obligation. With non-recourse litigation funding, part of the claim risk is transferred to the funder, although the claimant gives up an agreed portion of any successful recovery. Litigation funding is therefore closer to risk-sharing capital than conventional debt. Bank financing is normally cheaper in nominal terms where the borrower has strong credit and adequate security, but it does not usually transfer the risk that the claim may fail. Recourse and Repayment Risk Bank financing is ordinarily recourse debt A bank loan generally has to be repaid according to its terms regardless of the litigation outcome. If a company borrows AED 10 million to finance an arbitration and loses the case, it may still owe: The failed claim may also leave the company exposed to an adverse-cost award, creating a second liability in addition to the bank debt. The bank’s recourse may extend to secured assets, guarantors, accounts, receivables, or other parts of the borrower’s business, depending on the finance documents. Litigation funding is usually non-recourse Under a conventional non-recourse funding arrangement, the funder receives its agreed return only if the claim generates a sufficient recovery. If the matter fails, the funder ordinarily bears the loss of the capital it deployed. The claimant does not repay that amount from unrelated operating assets merely because the case was unsuccessful. That risk transfer is one of the defining commercial features of litigation funding. It is also a principal reason why a funder’s potential return can be materially higher than the interest charged on senior bank debt. Non-recourse does not mean the funding agreement has no obligations. A claimant may remain liable for consequences arising from fraud, material non-disclosure, breach of warranty, misuse of funds, or other defined contractual defaults. The agreement must therefore be reviewed carefully rather than treated as an unconditional transfer of all risk. Security and Collateral Banks usually lend against credit and assets A bank ordinarily evaluates the borrower’s overall financial strength. For material corporate facilities, it may require security or guarantees that are independent of the legal claim. This can create an opportunity cost. Assets pledged to finance litigation may no longer be available to support working-capital facilities, acquisitions, expansion, or emergency liquidity. Bank covenants may also limit: A borrower with substantial assets may still decide that using those assets to secure a speculative or long-duration claim

Articles

Litigation Funding vs Contingency Fees: Why the Distinction Matters in the UAE

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Litigation funding and contingency fees are frequently grouped together because both may link payment to the outcome of a legal claim. Legally and commercially, however, they are fundamentally different arrangements. Under a litigation funding agreement, an independent third-party funder provides capital to a claimant, usually on a non-recourse basis, in exchange for an agreed return if the claim succeeds. Under a contingency or success-fee arrangement, the claimant’s lawyer agrees that some or all of the lawyer’s remuneration will depend on the result of the case. The distinction is not merely terminological. It determines who supplies the capital, who owes professional duties to the claimant, how conflicts are managed, what must be disclosed, who bears the risk of an unsuccessful claim, and which regulatory framework applies. In the UAE, these questions cannot be answered by treating all courts and arbitral proceedings as part of a single funding regime. UAE onshore courts, the DIFC Courts, the ADGM Courts, and institutional arbitration each operate under distinct legal and procedural frameworks. The applicable forum, professional rules, governing law, and terms of the particular arrangement must therefore be examined separately. What Is Litigation Funding? Litigation funding, also known as third-party funding or legal finance, is an arrangement under which a person who is not a party to the dispute finances some or all of the costs associated with pursuing the claim. The funded costs may include: Commercial litigation funding is commonly structured on a non-recourse basis. This means that the funder’s entitlement to repayment and return generally depends on a successful judgment, award, settlement, or recovery. If the claim fails, the funder ordinarily loses the deployed capital, subject to the precise terms of the funding agreement. The funder is not the claimant’s lawyer. It does not plead the case, provide legal representation, or assume counsel’s professional obligations. Its role is primarily financial, although a sophisticated funder will normally conduct detailed legal, financial, quantum, and enforcement due diligence before committing capital. The DIFC Courts’ Practice Direction No. 2 of 2017 illustrates this structure. It defines a funder as a person or entity independent from both the funded party and the associated law firm, and defines funding as financial assistance that may confer an economic benefit linked to the outcome of the proceedings.[1] What Is a Contingency Fee? A contingency fee is a remuneration arrangement between a client and the client’s lawyer. Under a conventional contingency-fee model, the lawyer receives an agreed percentage of the client’s recovery if the claim succeeds and may receive no professional fee, or a reduced fee, if it fails. Related models include conditional fees, success fees, uplift fees, and hybrid arrangements combining discounted hourly rates with an outcome-dependent premium. The essential feature is that the lawyer’s remuneration, rather than an external funder’s investment return, depends on the outcome. This distinction matters because lawyers are subject to professional, fiduciary, ethical, confidentiality, and independence obligations that do not ordinarily apply to a commercial funder in the same form. A lawyer cannot treat the claim simply as an investment asset. Counsel must continue to act in the client’s interests, exercise independent professional judgment, comply with applicable conduct rules, and avoid conflicts between the lawyer’s financial interest and the client’s legal interests. The expression “contingency fee” should also be used cautiously in the UAE. The legality and permitted structure of outcome-related legal fees depend on the jurisdiction, the lawyer’s licensing status, the applicable professional regime, and the precise drafting of the fee agreement. A model permitted in one forum should not be assumed to be valid in another. Litigation Funding vs Contingency Fees: The Core Legal Differences The contracting parties are different A litigation funding agreement is generally entered into between the claimant and an independent funder. The claimant will normally have a separate engagement agreement with its lawyers. A contingency-fee agreement is entered into between the claimant and the lawyer or law firm providing legal services. This produces two distinct contractual relationships in funded litigation: Maintaining this separation is central to preserving counsel’s independence and ensuring that the claimant, rather than the funder, remains the client. The economic function is different Litigation funding provides external capital. It can finance not only legal fees but also experts, tribunal fees, adverse-cost protection, enforcement, and other dispute-related expenses. A contingency fee changes how the lawyer is paid. It does not necessarily provide the claimant with working capital or meet third-party expenses. A law firm may defer or place its own fees at risk, but it may not be willing or financially able to fund the wider costs of a complex commercial dispute. Litigation funding can therefore address a broader financing requirement than a lawyer’s fee arrangement. The risk assumed is different A litigation funder assumes investment risk. Its capital may be lost if the claim fails or produces an inadequate recovery. A lawyer acting under a contingency or conditional arrangement assumes remuneration risk. The lawyer may invest substantial professional time without receiving the expected fee, but that does not automatically mean the lawyer is funding expert costs, institutional fees, enforcement expenses, or an adverse-cost exposure. The risks can overlap, but they are not identical. The return is calculated differently A funder’s return may be calculated as: A lawyer’s outcome-related fee is governed by the legal-services agreement and the professional rules applicable to the lawyer. It may involve a success premium, an uplift, or another permitted result-dependent formula. The fact that both structures may refer to a percentage of recovery does not make them legally equivalent. Professional duties attach differently The lawyer owes professional duties directly to the client. These include duties concerning competence, confidentiality, loyalty, conflicts, independence, and the proper conduct of proceedings. A litigation funder’s obligations arise principally from the funding agreement and any applicable court, arbitration, regulatory, or industry rules. A funder should not direct legal strategy in a manner that compromises counsel’s independence or displaces the claimant’s authority over the claim. Well-drafted funding agreements normally address decision-making, settlement consultation, termination, conflicts, confidentiality, information sharing,

Articles, UAE Litigation Funding

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

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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: 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

Articles, UAE Litigation Funding

Litigation Funding in Dubai: How WinJustice Supports International Arbitration Claims

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Introduction: Litigation Funding and the Cost of Justice in Dubai Dispute resolution in Dubai has become increasingly sophisticated. Commercial parties rely on litigation, arbitration, mediation, and other dispute resolution mechanisms to resolve complex matters involving contracts, construction projects, real estate, finance, technology, shareholder relationships, and cross-border transactions. However, legal proceedings can be expensive. A party with a strong claim may still face significant financial barriers, including lawyers’ fees, court or arbitration fees, expert fees, translation costs, document management costs, hearing costs, and enforcement expenses. In high-value disputes, these costs may continue for months or years. This is where litigation funding becomes essential. At WinJustice, we provide litigation funding solutions for individuals and businesses involved in legal proceedings. As the first UAE-based litigation funding firm dedicated exclusively to dispute finance, we help claimants pursue meritorious claims without bearing the full financial burden of litigation or arbitration from the outset. Our role is simple: we fund suitable legal claims so that claimants can pursue justice, preserve liquidity, and manage legal cost risk in a structured and commercially responsible way. What Is Litigation Funding? Litigation funding, also known as third-party funding or dispute finance, is an arrangement where an independent funder pays some or all of a party’s legal costs in exchange for a success-based return. In practical terms, the funder finances the case. If the case succeeds, the funder receives an agreed return from the amount recovered. If the case fails, the funder usually loses its investment, provided the funding is structured on a non-recourse basis. Litigation funding may be used in court litigation, arbitration, enforcement proceedings, commercial claims, construction disputes, shareholder disputes, insolvency-related claims, and other high-value legal matters. Litigation funding is not the same as a bank loan. A loan usually requires repayment regardless of the outcome. Litigation funding is generally outcome-based. The funder’s return depends on the success of the case, the recovery obtained, and the terms of the funding agreement. What Is Arbitration Funding? Arbitration funding is a form of litigation funding used specifically for arbitration proceedings. International arbitration can be costly because parties may need to pay lawyers’ fees, arbitration institution fees, arbitrator fees, expert witness fees, hearing costs, translation costs, and enforcement-related expenses. Arbitration funding allows a claimant to pursue an arbitration claim with financial support from a third-party funder. In return, the funder receives an agreed return if the claim succeeds through an arbitral award, settlement, or other recovery. This is particularly relevant in Dubai because many commercial and cross-border contracts contain arbitration clauses. These clauses may refer disputes to institutions such as the Dubai International Arbitration Centre, known as DIAC, or to other international arbitration institutions depending on the contract. How Litigation Funding Works in Dubai Litigation funding in Dubai usually follows a structured process. First, the claimant or its lawyer presents the dispute to us. This includes the facts of the case, the legal basis of the claim, the amount claimed, available evidence, the identity of the respondent, and information about whether the respondent has assets that may be used to satisfy a judgment or arbitral award. Second, we assess the legal and commercial strength of the claim. This includes reviewing whether the case has good prospects of success, whether the damages are substantial enough, whether the expected legal costs are proportionate, and whether any final judgment or arbitral award can realistically be enforced. Third, if the case is suitable, we may offer funding terms. These terms explain what costs may be funded, how our return will be calculated, what happens if the claim settles, what happens if the claim fails, and what information must be shared during the case. Fourth, once the funding agreement is signed, we fund the agreed costs in accordance with the funding arrangement. The case then proceeds through litigation, arbitration, settlement discussions, or enforcement. Finally, if the claim succeeds, we receive our agreed return from the recovered amount. If the claim fails, the claimant generally does not repay us under a non-recourse funding structure, unless the funding agreement provides otherwise. Why WinJustice Is Important in the UAE Litigation Funding Market WinJustice is the first UAE-based litigation funding firm dedicated exclusively to dispute finance. This matters because litigation funding is still developing in the Middle East and North Africa. Many businesses in the region are familiar with litigation and arbitration, but less familiar with third-party dispute finance. As a UAE-based funder, we help bridge that gap by offering funding solutions connected to the local legal, commercial, and enforcement environment. Our work is especially relevant for claimants who have strong legal claims but do not want to use operational cash flow to finance lengthy proceedings. This may include individuals, SMEs, financially distressed companies, investors, and corporations involved in commercial or international disputes. By providing capital for suitable claims, we help transform legal claims from immediate financial burdens into managed legal assets. What Costs Can WinJustice Fund? The exact scope of funding depends on the case and the funding agreement. In suitable matters, litigation or arbitration funding may cover several categories of cost. Cost Category Possible Coverage Legal fees Lawyers’ fees for preparing and conducting the claim Court or arbitration fees Filing fees, administrative fees, and institutional charges Arbitrator fees Fees payable to arbitral tribunals in arbitration proceedings Expert fees Technical, financial, valuation, construction, forensic, or legal expert costs Procedural costs Translation, document management, hearing preparation, travel, and logistics Enforcement costs Costs of enforcing a judgment or arbitral award Adverse costs exposure In some cases, the funding structure may address the risk of paying the opponent’s costs This allows the claimant to focus on the merits of the dispute while the financial burden is managed through a funding arrangement. Litigation Funding and Non-Recourse Funding One of the most important features of litigation funding is that it is often provided on a non-recourse basis. Non-recourse funding means that if the funded claim fails, the claimant usually does not repay the funder. The funder accepts the risk of losing the money invested

Articles, Thought Leadership

Mediation and Litigation Funding: The New Chemistry of Settlement

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The contemporary civil justice system is currently traversing a period of profound transition, moving away from a strictly adversarial adjudicative model toward a more pluralistic framework of dispute resolution. This shift is punctuated by two dominant and increasingly intersecting forces: the professionalization of mediation as a sophisticated psychological and legal discipline, and the rapid expansion of third-party litigation funding (TPF). While mediation seeks to restore party autonomy and foster collaborative outcomes through the manipulation of dialogue and perspective, litigation funding introduces an external economic variable that recalibrates the strategic incentives, risk tolerances, and ethical boundaries of the participants. This report examines the fundamental principles, stylistic methodologies, and tactical techniques of mediation, subsequently analyzing how the infusion of external capital fundamentally alters the “chemistry” of settlement and the systemic integrity of the legal process. Theoretical Foundations and the Evolutionary Path of Mediation Mediation, defined as an assisted negotiation facilitated by a neutral third party, is predicated on the fundamental rejection of the binary win-loss outcomes inherent in traditional litigation.1 The process emerged prominently in the United States during the 1980s, largely following Frank Sander’s proposal of the “multi-door courthouse” initiative, which sought to reduce overburdened court dockets by providing a menu of resolution mechanisms tailored to the nature of the dispute. Early models were heavily influenced by community-based mediation, emphasizing communication, trust, and the preservation of relationships—a framework that was particularly suited to unrepresented parties or those seeking long-term relational repair. As mediation was adopted for large-scale and complex commercial disputes, the primary objectives shifted toward efficiency, cost reduction, and the finality of settlement. This evolution led to the crystallization of diverse stylistic approaches, each operating under a different philosophical understanding of conflict. The facilitative style remains the foundation of modern practice, focusing on the identification of underlying interests rather than legal positions. In contrast, the evaluative style, which gained prominence as a mirror of judicial settlement conferences, involves the mediator providing direct assessments of the merits of a case. Newer methodologies, such as transformative and narrative mediation, seek to address the deeper psychological and linguistic constructions of conflict, moving beyond the mere resolution of the immediate problem to address the interactional breakdown between the parties. The Core Principles of the Mediation Process The effectiveness of mediation is grounded in several fundamental principles that distinguish it from adjudicative processes such as arbitration or litigation. These principles ensure that the process remains flexible, confidential, and—most importantly—controlled by the disputing parties themselves. 1. Party Autonomy In mediation, the parties retain full authority to determine the outcome of their dispute. Unlike court judgments, which impose decisions from an external authority, mediation empowers the participants to craft their own resolution. This ensures that agreements are voluntary and tailored to the specific needs and interests of the parties involved. 2. Neutrality The mediator must remain completely impartial, holding no personal interest in the outcome and demonstrating no bias toward any party. This neutrality is essential for building the level of trust necessary for parties to openly discuss their concerns, interests, and confidential information during the process. 3. Confidentiality Communications that occur during mediation are generally confidential and inadmissible in court. This protection encourages participants to engage in honest and candid dialogue, allowing them to explore creative settlement options without fear that their statements will later be used against them in litigation. 4. Voluntariness Participation in mediation is voluntary, and parties cannot be forced to reach an agreement. Each participant maintains the right to withdraw from the process at any time. This principle preserves the integrity of mediation as a consensual dispute resolution mechanism rather than an imposed solution. These principles are not merely ethical guidelines; they function as the operational foundation that allows mediation to succeed where adversarial litigation may fail. By removing the threat of a binding decision imposed by a judge or arbitrator, mediation creates a “cooling-off” environment in which parties can move away from emotional reactions and toward rational, collaborative problem-solving. Methodological Paradigms: Facilitative and Evaluative Mediation The tension between the facilitative and evaluative styles defines much of the professional discourse in the mediation field. While some practitioners view these as mutually exclusive philosophies, modern experts increasingly treat them as a continuum of techniques to be deployed strategically based on the evolving dynamics of the case. Facilitative Mediation: The Architecture of Interest-Based Negotiation The facilitative approach is characterized by the mediator acting as a guide rather than an expert or judge.Originating in the 1960s, this style assumes that the parties possess the inherent capacity to resolve their own disputes if the obstacles to communication are removed.4 The facilitative mediator utilizes open-ended questioning and active listening to help parties move from “positions” (what they say they want) to “interests” (why they want it). The facilitative process typically follows a highly structured six-step framework designed to build momentum toward agreement : This approach is most valuable when communication has broken down but a relationship must be preserved, such as in business partnerships, employment disputes, or family conflicts.By focusing on the “why” behind the conflict, facilitative mediation can uncover solutions—such as future business deals or public apologies—that are unavailable through legal adjudication. Evaluative Mediation: Reality Testing and Adjudicative Risk In contrast to the facilitative style, evaluative mediation involves a more directive role for the neutral third party. Evaluative mediators are often selected for their deep legal or subject-matter expertise, which they use to help parties “reality test” their positions.3 This style is heavily influenced by attorney involvement and is primarily focused on the legal realities of the case. The primary tool of the evaluative mediator is the critical assessment of the parties’ legal arguments and the prediction of likely outcomes at trial. This often involves asking the parties to evaluate their probability of prevailing if the dispute were to proceed through formal adjudication.3 This can be represented through a mathematical framework of expected value: In this equation, represents the expected value of the claim, is the probability of success, is the potential award, and represents

Articles, UAE Litigation Funding

Litigation Funding in the UAE: How It Works, Where It’s Permitted, and Where It’s Headed (2026 Outlook)

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Litigation (and arbitration) in the UAE can be fast-moving, commercially significant, and expensive—especially for cross-border disputes, shareholder conflicts, construction claims, and high-value commercial matters. Against that backdrop, litigation funding (often called third-party funding or “TPF”) has become an increasingly practical tool: it allows a claimant (or sometimes a respondent) to pursue or defend a case without paying legal costs upfront, in exchange for sharing a portion of the proceeds if the case succeeds. In the UAE, the most developed funding frameworks sit within the common-law financial free zones—DIFC (Dubai International Financial Centre) and ADGM (Abu Dhabi Global Market)—and in institutional arbitration, notably under the DIAC Arbitration Rules 2022. This article explains what litigation funding is, how it works in practice, the UAE’s current legal positioning (DIFC, ADGM, arbitration, and “onshore” UAE), and what trends and reforms may shape the market next. 1) What is litigation funding? Litigation funding is a financing arrangement where an independent funder pays some or all of a party’s dispute costs—typically legal fees, tribunal/court fees, experts, and sometimes adverse costs cover—in return for a success-based return (usually a percentage of recoveries or a multiple of the invested capital). A typical funded party uses funding to: Funding is non-recourse in many structures: if the case fails, the funded party usually owes nothing back to the funder (except as agreed for specific items), and the funder absorbs the loss. 2) How litigation funding works in practice Although funding terms vary, most arrangements follow a familiar lifecycle: A. Case screening and due diligence Funders generally assess: B. Funding documentation A funding relationship is usually documented through a Litigation Funding Agreement (LFA) (or “funding agreement”), sometimes complemented by: C. Ongoing case management Funders typically do not run the case day-to-day, but they often negotiate: D. Resolution and return If the case succeeds, the funder’s return is taken from proceeds. If it fails, the funder’s capital is typically lost (subject to specific contract carve-outs). 3) The UAE legal landscape: three “tracks” you must distinguish When people say “litigation funding in the UAE,” they often mix three distinct settings: Each track has a different level of explicit regulation and predictability. 4) DIFC Courts: explicit practice direction and disclosure expectations The DIFC Courts issued Practice Direction No. 2 of 2017 on Third Party Funding, which sets out requirements for funded parties in DIFC Court proceedings. Key takeaways commonly highlighted in DIFC practice include: Why this matters: DIFC’s approach is designed to balance (a) access to justice and commercial financing with (b) transparency and conflict management in proceedings—especially where a funder’s economic interest could intersect with costs or settlement decisions. 5) ADGM: a structured statutory basis and dedicated Litigation Funding Rules ADGM has one of the clearest funding frameworks in the region. It anchors enforceability in ADGM Courts regulations and supplements it with detailed rules. A. Statutory recognition (Article 225 concept) ADGM’s rulebook expressly contemplates that a litigation funding agreement is not unenforceable merely because it is a funding agreement, provided relevant conditions are met. B. ADGM Courts Litigation Funding Rules 2019 ADGM Courts issued Litigation Funding Rules 2019, providing a comprehensive framework for LFAs, including obligations and court-facing consequences. A notable feature is how ADGM ties funding to costs jurisdiction: the rules require the LFA to state that the funder submits to ADGM Courts’ jurisdiction for disputes relating to costs between the funded party and other parties (in funded proceedings). C. Costs in action: security for costs in ADGM proceedings Cost-risk management (including security for costs) is a practical theme in funded disputes. ADGM’s published judgments show how the court approaches security for costs applications in appropriate circumstances. Why this matters: ADGM’s framework is often seen as “investor-friendly” because it provides clearer rules on enforceability, disclosure expectations, and cost-related court powers—reducing uncertainty for funders and funded parties. 6) Arbitration in the UAE: DIAC’s disclosure rule and the federal backdrop A. DIAC Arbitration Rules 2022 (Dubai’s main institution) The DIAC Arbitration Rules 2022 include a specific provision on third-party funding arrangements: Why this matters: In arbitration, disclosure is often driven by conflict management (ensuring an arbitrator is not conflicted with a funder) and by fairness in cost proceedings. B. Federal arbitration law: not a dedicated funding statute The UAE’s Federal Arbitration Law (Federal Law No. 6 of 2018) provides the general arbitration framework, but market commentary widely notes it does not specifically codify third-party funding. Practically, this means arbitration funding often relies on: 7) Onshore UAE courts: permitted in practice, but less explicitly regulated Outside the DIFC/ADGM court systems, onshore UAE court litigation funding is not governed by a single, dedicated funding code. Reputable practice guides generally describe onshore funding as “not expressly regulated,” with enforceability turning on general contract and professional regulation considerations. A key constraint: lawyer fee regulation (success fees vs contingency) Funding structures must be designed around professional rules on lawyers’ fees and independence. The UAE has updated its legal profession framework via Federal Decree-Law No. (34) of 2022 and related executive regulations. Even where funding is separate from a law firm’s fee arrangement, funders and counsel typically ensure: 8) Typical deal terms (and the “hot spots” UAE parties focus on) Whether the forum is DIFC, ADGM, or arbitration, the same commercial/ethical pressure points appear repeatedly: 9) Examples and “case reference” signals Because funding is often confidential, public “funding disputes” are less common than funding effects—for example, in cost/security applications. 10) What’s next: trends and possible reforms (2026–2028) The direction of travel in the UAE is broadly toward more clarity, more disclosure discipline, and deeper institutionalization—but not necessarily a single federal “litigation funding law” in the near term. Trend 1: Growth in arbitration funding and portfolio financing As DIAC’s 2022 rules normalize disclosure and conflict management, funding becomes easier to operationalize.Expect: Impact Trend 2: Stronger transparency norms (without full agreement disclosure) DIFC and DIAC already prioritize early notice and identity disclosure, while still allowing confidentiality around the LFA’s commercial terms unless ordered.Expect convergence around: Trend 3: Continued dominance of DIFC/ADGM

Arbitration & Cross-Border Funding, Articles, Corporate & Commercial Insights, Thought Leadership

How Litigation Funding Is Reshaping ADR Strategy in the MENA Region

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Alternative Dispute Resolution has long been promoted as a more efficient and commercially sensible alternative to court litigation. Arbitration and mediation, in particular, have been central to this promise, offering confidentiality, procedural flexibility, and cross-border enforceability. In practice, however, modern ADR—especially international commercial arbitration—has evolved into a highly capital-intensive process. Tribunal fees, institutional costs, expert evidence, legal representation, and enforcement planning have collectively transformed arbitration into a sophisticated financial undertaking. As a result, access to ADR in high-value disputes is increasingly determined not only by legal merit, but by financial capacity. This shift has placed litigation funding at the centre of modern ADR strategy across the MENA region. Litigation funding, when applied to ADR, operates as a risk-allocation mechanism rather than a mere source of financing. Funders provide capital on a non-recourse basis, absorbing the downside risk of failure in exchange for a share of successful recoveries. This structure fundamentally alters how arbitration and mediation are approached. Claims are no longer pursued solely because they are legally sound; they are pursued because they are commercially viable when assessed through lenses of duration, enforceability, and recovery probability. As a result, litigation funding has begun to influence not only who can access ADR, but how disputes are selected, structured, and resolved. In arbitration, the influence of litigation funding is particularly pronounced. Before committing capital, funders conduct extensive due diligence that often exceeds the depth of analysis undertaken by claimants themselves. This process typically examines the applicable arbitration rules, the seat of arbitration, the enforceability of potential awards, the solvency and asset profile of the respondent, and the likely duration of proceedings. By introducing this external discipline, funding reshapes arbitration strategy from the outset. Weak or speculative claims are filtered out early, while viable disputes are structured with enforcement and settlement dynamics in mind. In many cases, the presence of funding also acts as a market signal, indicating that an independent financial actor has assessed the dispute as commercially credible, which can materially influence negotiation and settlement behaviour. Mediation, although traditionally less expensive than arbitration, is also increasingly affected by funding dynamics in the MENA region. In complex, multi-party, or high-value disputes, even mediation can impose significant costs and strategic risk. Funded mediation allows parties to engage in settlement discussions without the pressure of sunk costs or liquidity constraints. More recently, innovative funding models have emerged that support the resolution process itself rather than one adversarial position. These structures are designed to align incentives toward early settlement, reduce escalation, and preserve long-term commercial relationships—an outcome particularly relevant in construction, infrastructure, and joint-venture disputes that dominate regional caseloads. The impact of litigation funding on ADR strategy is especially visible in the Gulf region, where institutional frameworks have matured rapidly. The UAE, in particular, has positioned itself as a regional hub for arbitration funding through the regulatory clarity offered by the Dubai International Financial Centre and the Abu Dhabi Global Market. Both jurisdictions expressly recognise and regulate third-party funding arrangements, imposing disclosure obligations and safeguards designed to preserve tribunal independence and procedural integrity. This clarity has fostered confidence among funders, parties, and tribunals alike, making funded arbitration a predictable and accepted feature of dispute resolution within these frameworks. By contrast, other jurisdictions in the region have adopted a more incremental approach. In Saudi Arabia, litigation funding is not comprehensively regulated, but is increasingly assessed through principles of contract law and arbitration practice. While this has not prevented funding activity, it places greater emphasis on careful drafting, Sharia considerations, and enforcement planning. The divergence between structured and evolving regulatory environments has had a strategic effect on ADR planning, with parties increasingly selecting seats and institutional frameworks that provide certainty not only in procedure, but in the treatment of funding arrangements. Beyond access to capital, the integration of litigation funding into ADR has broader systemic implications. It encourages early realism by forcing parties to confront enforcement risk and duration uncertainty at the outset of a dispute. It shifts focus away from nominal claim value toward economically recoverable outcomes. It also contributes to efficiency by discouraging claims that lack commercial substance, thereby reducing congestion and strategic misuse of arbitration mechanisms. In this sense, funding does not distort ADR; it reinforces its original purpose by aligning dispute resolution with rational economic behaviour. At the same time, the growing role of litigation funding raises important governance and ethical considerations. Transparency, conflicts of interest, and tribunal independence remain central concerns, particularly in arbitration. The regulatory approaches adopted in jurisdictions such as the DIFC and ADGM reflect a recognition that funding must be integrated into ADR frameworks in a way that preserves fairness and legitimacy. Properly regulated, funding strengthens confidence in ADR rather than undermining it, ensuring that disputes are pursued with discipline, accountability, and strategic coherence. Looking ahead, the relationship between ADR and litigation funding in the MENA region is likely to deepen. As disputes become more complex, capital-intensive, and cross-border in nature, parties will continue to evaluate arbitration and mediation through financial and risk-management lenses. In this environment, litigation funding is no longer a peripheral consideration. It is actively reshaping how ADR is used, how disputes are priced, and how outcomes are pursued. In the MENA region, where institutional frameworks are evolving and enforcement certainty remains paramount, litigation funding is not merely supporting ADR—it is redefining its strategic role within modern dispute resolution. Selected Resources

Arbitration & Cross-Border Funding, Articles

Litigation Funding and Arbitration in 2026

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Global and MENA Perspectives Overview Litigation funding—where a third party finances legal proceedings in exchange for a share of any recovery—has moved from the periphery of dispute resolution to a mainstream financing tool. In 2026, the combination of large infrastructure projects, regulatory reform and macro‑economic stress made the Middle East and North Africa (MENA) one of the most active regions for both litigation finance and arbitration. Elsewhere, geopolitical tensions, energy‑transition disputes and technology continue to shape the global arbitration landscape. This report summarises major trends and regulatory developments affecting litigation funding and arbitration in 2026. 1. Global arbitration themes in 2026 International arbitration remained a vital tool for resolving trans‑border disputes and protecting investments. Major themes driving disputes and arbitral practice in 2026 include: 2. The Middle East and North Africa in 2026 2.1 Drivers of growth The MENA region’s legal finance boom is grounded in several structural factors: 2.2 Regulatory landscape by jurisdiction The legal treatment of third‑party funding (TPF) varies across MENA. A summary of key jurisdictions appears below. Jurisdiction TPF status Disclosure requirements Institutional framework UAE – Onshore TPF is permitted but unregulated; it must not violate public policy or professional ethics. There are no statutory limits on funding amounts. No mandatory disclosure regime; practice is still developing. Onshore courts apply civil law; there is no specific legislative framework for TPF. Arbitrations seated onshore often rely on institutional rules (e.g., DIAC) that require disclosure. UAE – DIFC The Dubai International Financial Centre (DIFC) is a common‑law jurisdiction. Practice Direction No. 2 of 2017 requires funded parties to notify all parties and file a notice with the court. The notice must disclose the funder’s identity but not the agreement. Funders may be liable for adverse costs orders. Mandatory notice under PD 2/2017; the court considers the existence of funding when deciding security for costs. The DIFC courts and DIFC‑LCIA arbitration rules accept TPF and have issued practitioner guidelines. UAE – ADGM The Abu Dhabi Global Market (ADGM) regulates TPF through Article 225 of its Civil Evidence and Judicial Appointments Regulations and the Litigation Funding Rules 2019. Funding agreements must be in writing and parties must notify both the court and other parties of any funding arrangement. Funders must meet liquidity requirements and ensure the litigant receives independent advice. Mandatory disclosure to the ADGM court and other parties. ADGM rules provide detailed requirements for funding agreements (scope, funding amounts, liability for adverse costs) and confidentiality obligations. Saudi Arabia Third‑party funding is permitted. The Chambers guide notes there are no restrictions on the types of lawsuits that a third party may finance, and funding can be arranged for either plaintiff or defendant. There is no statutory limit on funding amounts. Institutional rules drive disclosure. The Saudi Centre for Commercial Arbitration’s 2023 rules require a party to disclose the existence of funding and the funder’s identity to the institution, other parties and the tribunal. Saudi Arabia has modernised its legal framework through the 2023 Civil Transactions Regulation, which codified core Sharia principles and confirms that agreements charging interest are void while allowing damages for lost income. A draft arbitration law (2025) aligns with global best practices and emphasises the law of the seat. Qatar The Qatar International Center for Conciliation and Arbitration (QICCA) introduced new rules effective 1 January 2025, expanding from 38 to 78 articles and allowing consolidation, joinder, bifurcation and expedited procedures. While Qatari law does not yet regulate TPF, the new rules encourage electronic submissions and greater transparency in arbitrator appointments and award publication. Institutional rules (QICCA 2025) require disclosure of TPF arrangements; this mirrors global practice. Qatar does not have a statutory TPF regime. Practice depends on institutional rules and evolving jurisprudence. Bahrain The Bahrain Chamber for Dispute Resolution (BCDR) 2022 rules require funded parties to notify the institution of any funding arrangement and the funder’s identity. The rules allow the tribunal to assess whether any relationship between funder and arbitrator threatens independence. Mandatory disclosure under BCDR rules. Bahrain has not enacted specific TPF legislation; reliance is on BCDR rules and court practice. Lebanon Lebanese law does not address third‑party litigation funding. The Chambers authors are unaware of any lawsuits in Lebanon involving TPF. Contingency fees are permitted, and lawyers may agree a fee supplemented by a success bonus. Not applicable, since TPF is unregulated and unused. Lebanon’s arbitration framework is undergoing modernisation; the Lebanese Arbitration and Mediation Center adopted new rules in July 2024 emphasising consolidation and emergency arbitrations. 2.3 Institutional reforms and disclosure MENA arbitral institutions increasingly mirror global rules requiring disclosure of funding. The Dubai International Arbitration Centre (DIAC) 2022 rules, Saudi SCCA 2023 rules and Bahrain BCDR 2022 rules all require parties to promptly inform other parties and the tribunal of any funding arrangement. DIAC even restricts parties from entering funding agreements after the tribunal is constituted if the agreement would create a conflict. These reforms aim to avoid conflicts of interest and enhance transparency, bringing GCC practice in line with institutions like the ICC and HKIAC. 2.4 Onshore vs. offshore in the UAE Onshore UAE remains a civil‑law jurisdiction with no explicit TPF regime. Local experts agree that TPF conforms to Sharia principles and is allowed, but parties must craft agreements carefully to avoid elements of excessive uncertainty or speculation. In contrast, the offshore jurisdictions (DIFC and ADGM) operate under common law and have adopted comprehensive TPF rules. The DIFC’s PD 2/2017 requires notice and confers discretion to order costs against funders, whereas ADGM’s rules prescribe liquidity standards for funders and ensure that litigants receive independent legal advice. This bifurcated system allows claimants to choose an arbitration seat with clearer funding rules and enforceability. 2.5 Saudi Arabia’s funding revolution Saudi Arabia’s legal system has undergone rapid transformation. The Civil Transactions Regulation 2023 codifies 41 Sharia principles and clarifies long‑uncertain areas of contract and damages law; it confirms that charging interest is void and permits damages for loss of anticipated income. As a result, funders can model claims with more certainty. The Chambers guide notes that there are no restrictions on third‑party funding, no limits on

Articles, Corporate & Commercial Insights

Litigation Funding in AI Disputes: Why It Will Become Essential by 2026

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The rapid commercialization of artificial intelligence has triggered a new and highly complex wave of legal disputes, particularly around intellectual property rights and the use of protected data to train AI models. What began as a technical and ethical debate has now evolved into a full-scale legal battleground—one that is expected to reach a decisive phase by 2026. At the center of this transformation, litigation funding is emerging not as a secondary support mechanism, but as a strategic necessity in AI-related disputes. Why AI Litigation Is Fundamentally Different AI litigation—especially cases involving model training—differs sharply from traditional intellectual property disputes in several critical ways. 1. Exceptionally High Economic Stakes These cases are not about marginal damages. They concern: The outcome of a single case can redefine the economic structure of the AI ecosystem. 2. Extreme Legal and Technical Complexity AI disputes sit at the intersection of: Litigation often requires expert evidence on how models are trained, what data is retained, and whether outputs are “transformative”—making these cases exceptionally costly to litigate. 3. Lack of Clear Judicial Precedent Courts around the world are still grappling with foundational questions: This uncertainty increases both risk and cost, amplifying the importance of external funding. Landmark AI Cases Shaping the Legal Landscape Several high-profile disputes are already signaling where the law may be heading: These disputes are not merely bilateral conflicts; they will shape global standards for AI training practices. Why Litigation Funding Will Surge in AI Disputes 1. Structural Imbalance Between Parties Most AI disputes involve: Without litigation funding, many claimants simply cannot sustain multi-year, high-cost litigation—regardless of the merits of their case. 2. Prohibitive Cost of AI Litigation AI cases require: These costs frequently exceed what startups or mid-sized enterprises can reasonably absorb. 3. AI Disputes Are Attractive to Funders From a funder’s perspective, AI litigation has rare investment characteristics: In effect, these cases are legal assets with scalable upside, rather than speculative claims. Litigation Funding as an Innovation Enabler Contrary to common assumptions, litigation funding in AI disputes does not stifle innovation. Instead, it: Without funding, legal outcomes risk being determined by financial endurance rather than legal merit. Why 2026 Will Be the Turning Point Most legal analysts converge on the same timeline: By 2026, courts are expected to: At that stage, litigation funding will determine who is able to shape the law—and who is excluded from the process. Conclusion AI litigation is no longer a niche legal issue. It is a defining struggle over data ownership, innovation boundaries, and economic power in the digital age. In this environment, litigation funding is not optional. It is: a structural mechanism that enables access to justice, balances power asymmetries, and ensures that AI development remains legally accountable. Any serious conversation about the future of artificial intelligence must therefore include a clear understanding of the role litigation funding will play in shaping that future.

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