There is no prohibition against third party funding of disputes in the United Arab Emirates (UAE) or the wider Middle East although its development is still in its embryonic stage.
Several international arbitral institutions used by parties in the Middle East, have recognised the use of third party funding in arbitration proceedings and are responding to it positively. For example, the ICC sets out guidance to tribunals on recoverability of costs by a funded party and issues regarding security of costs and disclosure of information on the funding provided. It is important to remember that the underlying seat of arbitration must not have any prohibitions or restrictions on funding.
In the Dubai International Financial Centre (DIFC), the DIFC Courts has issued Practice Direction No. 2 of 2017 on Third Party Funding (PD) which sets out the requirements to be observed by parties who have entered into funding agreements with third party funders.
A funded party needs to disclose they are funded by a third party as well as the identity of the funder. The court can also order that the funded party disclose the terms of the funding agreement in extreme circumstances.
The PD seeks to place some degree of regulation on funding arrangements in the jurisdiction without fettering the determination of the claim or the arrangement in place between claimant, funder and lawyer.
There are no obligations imposed on third party funders, but the PD does reiterate the DIFC Courts’ existing power to make costs orders against non-parties, which includes funders, where deemed appropriate given the circumstances of the case.
These developments are a clear and positive demonstration of the DIFC Courts’ recognition of funding as a feature of modern commercial litigation that is rising in prominence.
In Abu Dhabi, the newly established Abu Dhabi General Market (ADGM) has its own court with jurisdiction over civil disputes. The ADGM Courts’ own Procedural Rules reflect much of those in England and Wales. Article 225 of the ADGM Courts, Civil, Evidence, Judgment, Enforcement and Judicial Appointments Regulations 2015 stipulates that funding agreements may be used subject to certain requirements set out in Regulations.
The use of funding in the region has not progressed as quickly compared to other jurisdictions. This may partly be explained by the fact funders historically have been less comfortable with the legal landscape of the region but developments over the past decade, particularly in arbitration, enforcement and the offshore ‘common law’ free zones, have increased their interest in the region. For example, the UAE ratified active enforcement of foreign arbitral awards under the New York Convention in 2006. Then there are also developments related to third party funding in the region, with the DIFC formally adopting a Practice Direction on litigation funding in 2017, which may encourage an increase in the use of funding.