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: 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




