UAE
With the UAE’s focus on innovation and technology, IP disputes (including trademark, patent, and copyright cases) are set to increase over the next few years. Alongside this, Dubai’s dynamic real estate market continues to see disputes related to property transactions, lease agreements, and construction contracts increase.
As businesses expand in the UAE, contractual and commercial disputes are becoming much more common and often involve breach of contract, payment issues, and performance-related conflicts. Coupled to the increase in these areas, the UAE’s encouragement of parties to engage in alternative dispute resolution has seen arbitration and mediation gaining prominence, particularly in multi-jurisdictional, cross-border disputes.
The UAE’s financial sector continues to be buoyant and we anticipate an increase in loan, debt recovery, and regulatory compliance litigation. Similarly, construction and infrastructure disputes are expected to gain traction as the UAE’s rapidly developing landscape sees challenges arise from project delays, defects, and payment issues.
Continuing from the fall-out of the pandemic as well as ongoing economic challenges, insolvency, restructuring, liquidation and bankruptcy disputes continue to keep the legal market busy.
1. Is third party funding permissible for disputes?
Yes, third-party funding is permissible for disputes in the United Arab Emirates (UAE). The courts of the Dubai International Financial Centre (DIFC) and the Abu Dhabi Global Market (ADGM) have recognized and regulated the use of third-party funding for litigation in their courts.
The DIFC Court Practice Direction on Third Party Funding was issued in 2017 and the ADGM Courts, Civil Evidence Judgments, Enforcement and Judicial Appointments Regulations 2015 deal with issues like disclosure to the other parties of the fact of funding and the identity of the funder.
However, there is currently no legislation or regulation for third-party funding of cases in the onshore UAE courts.
2. Are lawyers able to work on a contingent basis in the jurisdiction and are there any restrictions?
The use of contingency fees is prohibited in the UAE. However, it is important to note that new legislation has been recently passed on litigation funding, which allows third-party funding in the country.
The new legislation does not specifically address contingency fees, but it does provide a framework for third-party funding of litigation. The law requires that third-party funders be licensed by the UAE’s Ministry of Justice and that they comply with certain regulations. The law also requires that the funder’s interest in the litigation be disclosed to the court and to the other parties involved in the litigation.
3. Can the court or tribunal order one party to pay the other’s legal costs?
Yes, the court or tribunals in the UAE can order one party to pay the other party’s legal costs, but the specifics can vary depending on the type of proceeding and the rules governing it.
In court proceedings, UAE courts have the discretion to order the losing party to pay the winning party’s legal costs. This is typically done at the conclusion of the case, and the amount awarded can cover a portion or all of the legal expenses incurred.
In arbitration, the situation is a more complex. The ability of an arbitral tribunal to award legal costs depends on the rules of the arbitration institution and the agreement between the parties. For example:
- The Dubai International Arbitration Centre (DIAC) rules do not explicitly include legal fees in the definition of arbitration costs, leading to disputes over whether tribunals can award these costs.
- In both the Abu Dhabi Global Market (ADGM) and the Dubai International Financial Centre (DIFC), courts have the discretion to order one party to pay the other party’s legal costs. The court has considerable discretion in making cost orders, which can include the entire or a significant portion of the legal costs. In some cases, the court may order a party to provide security for costs, ensuring that funds are available to cover the other party’s legal expenses if they lose.
4. Is insurance available to protect against adverse outcomes for funded litigation?
Whilst insurance is available to protect against adverse outcomes for funded litigation in the United Arab Emirates (UAE), it is not widely available in the UAE, and generally limited to proceedings in the Dubai International Financial Centre (DIFC) and Abu Dhabi Global Market (ADGM) courts where the risk of an adverse costs orders generally arises.
However, with the progressive development of the free zone systems in Dubai and Abu Dhabi (i.e.) as well as the introduction of new laws in the UAE that improve the legal landscape within the region, third-party funding is becoming more widespread as funders grow in confidence in the market.
Contact
Rebecca Copley Partner
Shalagh Massingham Partner
Adriaan Hoeben Legal Director
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