The Intersection of Arbitration and Litigation Funding in the GCC

PostedJuly 29, 2026

UpdatedJuly 29, 2026

Regulatory Evolution, Institutional Rules and the UAE’s Emerging Leadership

Third-party funding is becoming an increasingly important component of commercial dispute resolution in the Gulf Cooperation Council.

Under a conventional third-party funding arrangement, an external funder finances some or all of a party’s legal fees and dispute-related expenses in return for an agreed share of the proceeds if the claim succeeds. The funding is generally non-recourse: when the funded claim is unsuccessful, the funder ordinarily loses the capital it deployed, subject to the specific terms of the agreement.

Although third-party funding was once approached cautiously in many jurisdictions, it is gradually becoming integrated into the region’s arbitration framework. Modern arbitral institutions increasingly recognise the existence of funding and impose rules concerning disclosure, conflicts of interest and procedural transparency.

The United Arab Emirates has emerged as a particularly significant jurisdiction in this development. Its distinctive combination of onshore civil-law courts, the common-law systems of the Dubai International Financial Centre and Abu Dhabi Global Market, and internationally oriented arbitration institutions has created several possible frameworks for funded disputes.

The result is not one unified funding regime, but an evolving legal environment in which the validity, disclosure requirements and contractual safeguards applicable to funding depend heavily on the jurisdiction, arbitral rules and dispute-resolution mechanism selected by the parties.

Why arbitration funding is gaining relevance in the GCC

Commercial arbitration can be expensive.

Large disputes in construction, infrastructure, energy, real estate and cross-border trade may continue for several years. They frequently require specialist legal counsel, technical experts, forensic accountants, document-management platforms and enforcement strategies covering more than one jurisdiction.

A company may possess a strong contractual or commercial claim but still be reluctant to allocate substantial working capital to a lengthy arbitration with an uncertain outcome.

Third-party funding can address this challenge by transferring part of the financial risk to an external capital provider.

For businesses, the attraction is not limited to financial distress. A solvent company may use funding to preserve cash, reduce the effect of legal expenditure on its operating budget and continue investing in its core business.

Funding may therefore be used as:

A means of obtaining access to arbitration.
A method of transferring litigation risk.
A tool for preserving corporate liquidity.
A mechanism for monetising contingent legal claims.
A form of portfolio risk management for companies and law firms managing several disputes.

This evolution is changing the way corporate parties view legal claims. Rather than treating every dispute exclusively as a cost centre, a company may assess whether a strong claim can be financed, shared or monetised as a contingent asset.

The publication of the Chartered Institute of Arbitrators’ Guideline on Third-Party Funding in September 2025 reflects the growing international acceptance of this development. The Guideline was designed to provide practitioners with a clearer understanding of the funding process and addresses issues including disclosure, conflicts, privilege, control, termination and costs.[1]

The UAE’s three-part legal environment

The UAE presents a distinctive legal structure for third-party funding.

It includes:

The onshore civil-law court system.
The common-law courts of the Dubai International Financial Centre.
The common-law courts of the Abu Dhabi Global Market.

The treatment of funding differs significantly across these systems.

This distinction matters because parties cannot assume that a funding arrangement structured for one UAE forum will automatically satisfy the requirements of another.

Third-party funding in onshore UAE disputes

There is no single dedicated federal statute comprehensively regulating third-party funding before the onshore UAE courts or in every onshore-seated arbitration.

The absence of a specialised funding law does not necessarily mean that funding is prohibited. Funding arrangements must instead be evaluated under the UAE’s general contractual framework, applicable public-policy principles, professional obligations and the rules of the institution administering the arbitration.

The UAE Federal Arbitration Law does not establish a comprehensive third-party funding regime. As a result, the parties must consider the governing law of the funding agreement, the arbitral rules selected in the underlying contract and any issues relating to confidentiality, conflicts and the independence of legal counsel.

The regulation of lawyers’ fees must also be distinguished from external litigation funding.

Federal Decree-Law No. 34 of 2022 regulates the legal profession, while Cabinet Resolution No. 8 of 2025 provides its Executive Regulations. Article 31 of the Executive Regulations permits a lawyer’s fees to be calculated as a percentage of the claimed right, provided that the percentage does not exceed 25% and the specified statutory conditions are satisfied.[2]

A lawyer’s percentage-based fee arrangement is not identical to third-party funding. In the former, the legal representative assumes an element of fee risk. In the latter, an independent capital provider ordinarily finances legal and related expenses in return for a contingent economic return.

Nevertheless, the clearer treatment of percentage-based lawyers’ fees may support the development of hybrid dispute-financing structures, provided that every component complies with applicable professional, contractual and public-policy requirements.

Third-party funding in the DIFC Courts

The DIFC Courts were among the first courts in the region to establish an express framework for third-party funding.

Practice Direction No. 2 of 2017 applies to funded proceedings before the DIFC Courts. It requires the funded party to notify every other party and the DIFC Courts Registry that a litigation funding agreement exists and to disclose the funder’s identity.[3]

The commercial terms of the funding agreement do not ordinarily have to be disclosed unless the Court orders otherwise.

This framework adopts a comparatively light-touch approach. It does not create an extensive licensing regime for funders or prescribe every term that must appear in a funding agreement. Instead, it focuses on procedural transparency and the Court’s ability to manage matters such as conflicts and costs.

The DIFC Courts’ Mandatory Code of Conduct for Legal Practitioners reinforces the independence of counsel. A practitioner must not allow a funder’s interests or instructions to displace the practitioner’s professional duties to the client, unless the client has provided appropriate written authorisation.[4]

The DIFC framework therefore rests on several central principles:

Disclosure of the existence of funding.
Disclosure of the funder’s identity.
Preservation of the funded party’s legal representation.
Protection against conflicts of interest.
Potential judicial scrutiny of the funder’s role and liability for costs.

The DIFC Courts have also affirmed in recent decisions that the existence and identity of a funder must be disclosed, while the underlying agreement remains private unless disclosure is ordered.[5]

The more prescriptive ADGM framework

The ADGM has adopted a more detailed statutory approach.

The ADGM Litigation Funding Rules 2019 regulate litigation funding agreements within the ADGM framework. The Rules were subsequently amended in 2023 and remain part of the ADGM Courts’ published legislative framework.[6]

An ADGM-compliant litigation funding agreement must be in writing and address specified matters, including:

The scope and amount of funding.
The timing and method of providing funds.
The funder’s recovery.
Responsibility for adverse costs.
The treatment of any related insurance.
The funder’s involvement in settlement.
The circumstances in which the agreement may be terminated.
Confidentiality and legal privilege.

The funder must also take reasonable steps to ensure that the funded party has received independent legal advice concerning the agreement.

The ADGM framework is designed to prevent a funding agreement from undermining the professional independence of the funded party’s lawyers or transferring improper control of the dispute to the funder.

This is a critical distinction.

A funder may monitor its investment, receive case updates and participate in consultations contemplated by the agreement. It should not, however, replace the client as the ultimate decision-maker or pressure lawyers to act contrary to their professional obligations.

The difference between the DIFC and ADGM approaches illustrates why jurisdictional planning is essential. The DIFC focuses principally on disclosure and professional conduct, while ADGM rules regulate the funding agreement itself in greater detail.

Funding under the DIAC Arbitration Rules

The Dubai International Arbitration Centre expressly addresses third-party funding in its 2022 Arbitration Rules.

Article 22 requires a party benefiting from third-party funding to disclose promptly the existence of the arrangement and the identity of the funder to the Centre and the other parties.[7]

The disclosure obligation allows the proposed or appointed arbitrators to conduct appropriate conflict checks. This is essential because an arbitrator may have a professional, financial or other relationship with the funder even where no conflict exists between the arbitrator and the named parties.

The DIAC Rules also restrict parties from entering into a funding arrangement after the constitution of the tribunal when that arrangement would create a conflict of interest involving a tribunal member.

These requirements demonstrate that disclosure is not intended to expose the commercial pricing of the agreement. Its central purpose is to preserve the integrity of the tribunal and protect the enforceability of the eventual award.

Parties seeking funding in a DIAC arbitration should therefore consider disclosure from the beginning of the process. Waiting until the funding arrangement has already affected tribunal composition or procedural strategy may create avoidable complications.

The arbitrateAD framework

The Abu Dhabi International Arbitration Centre, known as arbitrateAD, introduced its Arbitration Rules with effect from 1 February 2024.

Article 48 of the Rules addresses third-party funding and imposes transparency requirements concerning the existence of a funding arrangement and the identity of the funder.[8]

Where funding exists before the arbitration begins, the relevant information should be provided at the commencement of proceedings. Where a party enters into funding later, disclosure should be made promptly.

The arbitrateAD approach reflects the broader international trend toward early disclosure. It allows the institution and tribunal to evaluate conflicts before they affect appointments or the validity of the process.

The Centre’s rules are particularly important for Abu Dhabi’s continuing development as a regional arbitration hub. They complement the ADGM’s more detailed litigation-funding regime while remaining institutionally distinct from the ADGM Courts.

Third-party funding under the SCCA Rules

Saudi Arabia has also incorporated funding transparency into its institutional arbitration framework.

The Saudi Center for Commercial Arbitration’s 2023 Arbitration Rules require parties to disclose the identity of any non-party that has an economic interest in the outcome of the arbitration. This language is broad enough to capture third-party funders.[9]

The disclosure obligation is directed to the SCCA, the other parties and the arbitrators. Its principal function is to facilitate conflict checks and preserve the independence of the tribunal.

The SCCA approach is significant because it reflects the wider modernisation of commercial dispute resolution in Saudi Arabia. It also demonstrates that third-party funding is no longer exclusively associated with established funding markets such as England, Australia or the United States.

Within the GCC, institutional rules are increasingly treating funding as a procedural reality that should be disclosed and managed rather than ignored.

Disclosure does not normally mean disclosure of all commercial terms

One of the most important distinctions in funded arbitration is the difference between disclosing the existence of funding and disclosing the entire agreement.

Many modern institutional frameworks require disclosure of:

The fact that third-party funding exists.
The legal or corporate identity of the funder.
Changes in the funding arrangement that may affect conflicts.

They do not automatically require disclosure of:

The funder’s return.
The funding budget.
Internal case valuations.
Settlement thresholds.
Legal advice included in the funding documentation.
The funder’s due-diligence analysis.

However, a tribunal or court may order broader disclosure when the agreement becomes relevant to a specific issue, such as:

Security for costs.
Conflicts of interest.
Responsibility for adverse costs.
Control of the proceedings.
The validity of the funding arrangement.
An application alleging abuse of process.

Parties should therefore avoid assuming that the agreement will remain entirely beyond judicial or arbitral scrutiny.

Confidentiality and legal privilege

Obtaining funding normally requires the claimant to provide the funder with substantial information about the dispute.

The material may include:

Legal opinions.
Contracts and correspondence.
Witness statements.
Expert reports.
Damages calculations.
Enforcement analysis.
Procedural strategies.
Information concerning settlement.

Sharing such material without appropriate safeguards may create confidentiality and privilege risks.

Before disclosing sensitive information, the claimant and funder should execute a carefully drafted non-disclosure agreement. The parties should also consider the governing law of privilege and whether disclosure to a prospective funder could be treated as a waiver in the relevant jurisdiction.

The final funding agreement should contain detailed confidentiality obligations, restrictions on further disclosure, cybersecurity standards and procedures for returning or destroying information when funding is declined or terminated.

These protections are particularly important in GCC arbitrations involving state-related entities, major infrastructure projects, commercially sensitive technology or confidential government contracts.

Funder control and the independence of the claimant

A central concern in third-party funding is whether the funder will influence the conduct of the arbitration.

A professional funder has a legitimate interest in monitoring material developments. It may require regular reporting, budget oversight and consultation before major strategic decisions.

However, the claimant must remain the owner of the claim, and its legal counsel must continue to act independently in the claimant’s best interests.

A well-drafted agreement should distinguish between consultation and control.

It should address:

Who instructs legal counsel.
Who decides whether to accept a settlement.
How disputes between the claimant and funder will be resolved.
Whether an independent opinion will be obtained when settlement views differ.
The circumstances permitting the funder to terminate.
Whether the funder may transfer its interest.
How confidential information will be protected.

The CIArb Guideline emphasises that funding should not compromise party autonomy or counsel’s professional independence.[1]

These protections are fundamental not only to ethics but also to the legitimacy of the arbitration itself.

Security for costs and adverse-cost exposure

The existence of third-party funding may become relevant when a respondent seeks security for costs.

A respondent may argue that the claimant’s need for external finance demonstrates an inability to satisfy an eventual costs order. A claimant may respond that using funding is a commercial risk-management choice and does not establish insolvency.

Modern arbitral practice generally resists treating the mere existence of funding as automatic proof that security should be ordered. Tribunals typically examine the full circumstances, including:

The claimant’s financial condition.
The reasons funding was obtained.
The merits and procedural history of the claim.
The funder’s commitment concerning adverse costs.
The availability of after-the-event insurance.
Whether the application is being used tactically to obstruct a legitimate claim.

Funding agreements should deal expressly with adverse costs and any security-for-costs obligations. Uncertainty over responsibility for these liabilities can jeopardise the arbitration at a critical stage.

Is litigation funding compatible with Sharia principles?

The compatibility of litigation funding with Islamic legal principles is an important question in the GCC.

Concerns are sometimes raised in relation to riba, which prohibits certain interest-based financial arrangements, and gharar, which addresses excessive uncertainty in contracts.

Conventional non-recourse litigation funding is not structured as an ordinary interest-bearing loan. The funder has no guaranteed right to repayment. Its return depends on the successful outcome of the claim, and it may lose the entire investment if the case fails.

This risk-sharing characteristic distinguishes funding from conventional debt.

Legal scholarship has argued that properly structured third-party funding can be compatible with Islamic commercial principles, particularly where the arrangement is transparent, the underlying claim is legitimate, the funder conducts meaningful due diligence and the agreement avoids excessive uncertainty or improper control.[10]

However, Sharia compatibility should not be assumed solely because the arrangement is non-recourse. The agreement’s actual terms, governing law, return structure and allocation of rights must be reviewed carefully.

Why early funding preparation matters

A strong legal claim is not automatically a fundable claim.

Funders generally examine:

The legal merits.
The realistic value of the claim.
The expected arbitration budget.
The likely duration.
The defendant’s financial position.
The location of enforceable assets.
The relevant jurisdiction and arbitral rules.
The experience of the legal team.
The risks of counterclaims.
The claimant’s credibility and cooperation.
The proposed funding economics.

Claimants seeking funding should therefore prepare the case as an investment proposition without reducing it to a purely financial product.

A professional funding application should explain:

What happened.
Why the respondent is legally liable.
What evidence supports the claim.
How damages have been calculated.
How much the arbitration is expected to cost.
Where a successful award can be enforced.
What procedural or jurisdictional obstacles may arise.

Approaching funders before the case is adequately developed can result in rejection, even where the underlying claim may eventually prove strong.

Portfolio funding and corporate risk management

The next stage of regional development may involve greater use of portfolio funding.

Instead of financing a single dispute, a funder may provide capital against several claims held by a company or managed by a law firm. The performance of the portfolio is assessed collectively, allowing the funder to diversify risk.

For companies, portfolio funding may:

Provide a larger and more predictable legal budget.
Support several disputes across different jurisdictions.
Reduce dependence on the outcome of one claim.
Monetise part of the expected value of legal assets.
Improve the management of external legal expenditure.

For law firms, portfolio structures may support matters handled under conditional or success-linked fee arrangements.

Such arrangements are more complex than single-case funding and require careful analysis of cross-collateralisation, termination, client consent, privilege, conflicts and the allocation of recoveries among different claims.

The GCC’s developing funding framework

Third-party funding across the GCC is not governed by one regional law.

Its development is occurring through a combination of:

National legislation.
Financial-free-zone rules.
Arbitration-institution rules.
Professional-conduct requirements.
Contractual practice.
International guidelines and soft law.

This fragmented structure creates both opportunity and risk.

It allows jurisdictions and institutions to innovate, but it also requires funded parties and their advisers to identify the correct rules for each dispute. A disclosure requirement under one institution may differ from the obligations imposed by another. A funding agreement acceptable in one forum may need substantial revision for use elsewhere.

The UAE currently offers the region’s most developed combination of express court rules, institutional arbitration provisions and commercial funding activity. Saudi Arabia and other GCC jurisdictions are also moving toward greater procedural recognition of funding.

The direction of travel is increasingly clear: third-party funding is becoming part of mainstream commercial dispute planning.

Conclusion

The intersection of arbitration and litigation funding is reshaping dispute resolution in the GCC.

For claimants, funding may provide the resources necessary to pursue complex claims without sacrificing operational liquidity. For solvent corporations, it may serve as a sophisticated form of risk transfer and balance-sheet management. For law firms, it may support alternative fee arrangements and the management of dispute portfolios.

The opportunity is substantial, but funding must be structured carefully.

The parties must identify the applicable legal framework, comply with disclosure requirements, protect privilege and confidentiality, preserve the independence of counsel and define responsibility for settlement, security for costs and adverse costs.

The UAE’s onshore system, DIFC Courts, ADGM Courts, DIAC and arbitrateAD do not provide identical regimes. That difference makes early jurisdictional planning essential.

As institutional rules continue to develop, the most successful funding arrangements will be those that combine capital with transparency, procedural discipline and legal independence.

Third-party funding should not determine the merits of a dispute.

Its legitimate role is to ensure that a meritorious claim is not abandoned merely because the financial cost of arbitration is greater than the claimant can—or strategically wishes to—carry alone.

References

[1] Chartered Institute of Arbitrators, Guideline on Third-Party Funding, launched on 11 September 2025. The Guideline addresses the funding process, disclosure, conflicts, privilege, control, termination and costs.

[2] UAE Cabinet Resolution No. 8 of 2025, Executive Regulations of Federal Decree-Law No. 34 of 2022 Regulating the Legal Profession and Legal Consultation Profession, Article 31. The provision permits percentage-based lawyers’ fees subject to a maximum of 25% and other statutory conditions.

[3] DIFC Courts, Practice Direction No. 2 of 2017 on Third Party Funding in the DIFC Courts.

[4] DIFC Courts, Order No. 4 of 2019: Mandatory Code of Conduct for Legal Practitioners in the DIFC Courts.

[5] DIFC Courts, LXT Real Estate Broker L.L.C. v SIR Real Estate L.L.C., CA 005/2025, discussing disclosure of the existence of funding and the funder’s identity under Practice Direction No. 2 of 2017.

[6] Abu Dhabi Global Market, Litigation Funding Rules 2019, as amended in 2023, and ADGM Courts’ official legislation and procedures.

[7] Dubai International Arbitration Centre, DIAC Arbitration Rules 2022, Article 22.

[8] Abu Dhabi International Arbitration Centre, arbitrateAD Arbitration Rules, effective 1 February 2024, Article 48 concerning third-party funding.

[9] Saudi Center for Commercial Arbitration, SCCA Arbitration Rules 2023, including the disclosure requirement applicable to non-parties with an economic interest in the outcome.

[10] Susan D. Franck, Third-Party Arbitration Funding and Islamic Shari’a: Friends Not Foes, Journal of Dispute Resolution, University of Missouri School of Law.

About WinJustice

WinJustice is a UAE-based litigation-funding company supporting access to justice through funding solutions for eligible commercial claims and disputes. Through legal, financial and commercial assessment, WinJustice seeks to enable meritorious claims to proceed without allowing the cost of litigation or arbitration alone to determine the outcome.

This article is provided for general informational purposes only. It does not constitute legal, financial, Sharia or investment advice. The legality, availability and terms of third-party funding depend on the applicable jurisdiction, institutional rules, governing law and circumstances of each dispute.