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Litigation Funding in the UAE

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Ayushi Rai

Published on January 2, 2024, 09:05:02


Litigation funding refers legal financing system third party usually

Litigation funding refers to a legal financing system where a third party, usually an individual investor or a funding organization or company, provides monetary support to other parties engaged in a legal dispute for an agreed return. Initially, the market for litigation funding in the UAE was not as prosperous as in the UK, Australia, or the USA.

However, with the new laws to enhance the legal framework in various regions and the advancement of free zone systems namely Dubai International Financial Centre (DIFC) and Abu Dhabi Global Market (ADGM)), litigation funding is gaining attention and momentum.

 The UAE has a mix of legal systems and jurisdictions that cover the civil law “onshore” court system and the common law “offshore” court system, each having a different litigation funding treatment. For example, a party seeking funding to go through a legal process would get financial aid through onshore funding if the support is from a company or individual within the UAE.

It is essential for the parties involved to ensure that their agreement does not, in any way, defy the Sharia law principles that may apply.  Under offshore funding, the party can get financial support from a company or individual beyond the borders of the UAE, like the UK.

It is imperative to understand that these free zones are special areas within the UAE that have their own rules. Think of them as a separate legal neighborhood within the UAE. If a party is seeking monetary aid from DIFC, it would be considered offshore funding even though it's within the boundaries of Dubai.

Litigation Funding or Third Party Funding is a necessary tool in today's world as it can help people pursue claims they might not have been able to afford. However, it can also pose a risk for clients because litigation funding would imply disclosure of sensitive and confidential data to funders. If we talk about the risk-benefit analysis from the point of view of funders, the benefits entail a good amount of return leading to huge profits.

Further, the uncertainty in the duration of the case and its outcome could be problematic for funders.  This risk and benefit analysis is applicable for both onshore and offshore funding in the UAE. To counter the risk of leaking confidential information to funders, parties will be required to enter into a confidentiality agreement.

The UAE’s litigation funding landscape has developed and evolved with the rise of free zones like DIFC and ADGM. The commendable legal improvements attract funders to navigate a plethora of funders to the onshore and offshore systems. As the UAE continues to position itself as a global business hub, the system of litigation funding in the region has the potential for further growth.

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