Civil litigation can be a costly and time-consuming process, and many individuals and businesses may not have the financial resources to pursue a legal claim. This is where legal funding comes in, providing financial support to litigants in exchange for a share of any potential settlement or judgment.
In the United Arab Emirates (UAE), the legal framework for third-party funding of cases is still in its early stages. While there is currently no legislation or regulation for third-party funding of cases in the onshore UAE courts, the Dubai International Financial Centre (DIFC) and the Abu Dhabi Global Market (ADGM) have both introduced regulations allowing for third-party funding of cases within their jurisdictions. These regulations provide a framework for third-party funders and litigants to enter into funding agreements and can help to level the playing field for those who may not have the financial resources to pursue a legal claim.
Despite the regulatory developments in the DIFC and ADGM, the use of legal funding in the UAE is still relatively uncommon. However, as awareness of legal funding grows and more litigants seek to take advantage of the benefits it can offer, it is likely that we will see an increase in the use of legal funding in civil cases in the UAE.
Overview of Legal Funding
Legal funding, also known as litigation funding or third-party funding, is a mechanism that allows a party involved in a civil case to obtain financial support from an unrelated third party to cover the costs of litigation. This type of funding is particularly useful for plaintiffs who may not have the financial means to pursue their case, as it can help cover legal fees, expert witness fees, and other expenses associated with the litigation process.
In the United Arab Emirates, legal funding is becoming increasingly popular as a means of financing litigation. While the practice is not yet as common as it is in other countries, such as the United States and the United Kingdom, it is gaining traction as more companies and individuals seek to pursue legal action without incurring significant financial risk.
Legal funding can take many forms, including direct funding, where the funder pays the legal fees and expenses directly, and non-recourse funding, where the funder provides financing in exchange for a share of any settlement or judgment obtained in the case. In the UAE, non-recourse funding is more common, as it allows plaintiffs to pursue their case without the risk of having to pay back the funder if they lose.
Legal funding is typically provided by specialized litigation finance companies, which evaluate the merits of a case and the likelihood of success before agreeing to provide funding. The terms of the funding agreement, including the amount of funding provided and the percentage of any settlement or judgment that the funder will receive, are negotiated between the parties and set out in a formal contract.
Types of Legal Funding
Legal funding in UAE can be classified into three broad categories:
- Traditional Legal Funding: This type of funding involves the plaintiff paying for their legal fees out of their own pocket. This includes any expenses incurred during the case, such as court fees, expert witness fees, and other costs. Traditional legal funding is the most common type of funding for civil cases in the UAE.
- Third-Party Funding: This type of funding involves a third-party funder providing financial support to the plaintiff in exchange for a share of any settlement or award. Third-party funding is becoming increasingly popular in the UAE, especially for larger and more complex cases.
- Conditional Fee Agreements: This type of funding involves the plaintiff and their lawyer agreeing to a fee structure that is based on the outcome of the case. If the plaintiff wins, the lawyer receives a percentage of the settlement or award. If the plaintiff loses, the lawyer receives nothing. Conditional fee agreements are not yet widely used in the UAE, but they are becoming more common.
It is important to note that third-party funding is not yet regulated in the UAE. However, the DIFC Court Practice Direction on Third Party Funding and the ADGM Courts, Civil Evidence Judgments, Enforcement and Judicial Appointments Regulations 2015 provide some guidance on the issue.
When considering legal funding options, it is important for plaintiffs to carefully weigh the pros and cons of each type of funding. Traditional legal funding may be the simplest and most straightforward option, but it can also be expensive and may limit a plaintiff’s ability to pursue a case. Third-party funding and conditional fee agreements may offer more flexibility and financial support, but they also come with their own risks and challenges.
Legal Funding Process in UAE
Legal funding or third-party litigation funding is a relatively new concept in the UAE. It is a process where a third-party funder provides financial support to a party involved in a legal dispute. The funder is usually not a party to the dispute, but they provide funds to cover the legal costs and expenses of the party they are supporting. The funder will receive a percentage of the award or settlement if the case is successful.
The legal funding process in the UAE is governed by the Dubai International Financial Centre (DIFC) Courts. The DIFC Courts have a specific set of rules and regulations that govern third-party funding in legal disputes. The DIFC Courts have recognized the importance of third-party funding in promoting access to justice and have provided a clear framework for the process.
Before a funder can provide funding, they must conduct a thorough due diligence process to assess the merits of the case. The funder will assess the strength of the case, the potential damages or settlement, and the likelihood of success. The funder will also assess the legal costs and expenses that will be incurred during the case.
Once the due diligence process is complete, the funder will provide the funds to cover the legal costs and expenses of the party they are supporting. The funder will typically charge a fee for their services, which is usually a percentage of the award or settlement. The fee charged by the funder will depend on the risk involved in the case and the amount of funding required.
Legal funding can be a valuable resource for parties involved in legal disputes in the UAE. It can provide access to justice for parties who may not have the financial resources to cover the high costs of legal proceedings. However, parties should be aware of the risks involved in legal funding and should carefully consider the terms and conditions of any funding agreement before entering into it.
Advantages and Disadvantages of Legal Funding
Legal funding, also known as litigation financing or third-party funding, can provide several benefits to plaintiffs who are unable to afford the cost of litigation. However, there are also some disadvantages that should be considered before pursuing legal funding. Here are some of the advantages and disadvantages of legal funding in civil cases in the UAE:
Advantages
- Access to Justice: Legal funding can provide access to justice for plaintiffs who cannot afford the high costs of litigation. It allows them to pursue their case without the financial burden and risk of losing their case and having to pay for the costs of litigation.
- No Risk: Legal funding is non-recourse, which means that if the plaintiff loses the case, they are not required to repay the funding company. This eliminates the risk of losing money and being unable to pay back the funding.
- Less Stress: Legal funding can reduce the stress of litigation by providing financial support for living expenses and other costs associated with the case. This can help plaintiffs focus on their case and not worry about financial difficulties.
- Higher Settlements: Legal funding can help plaintiffs negotiate higher settlements as they are not under pressure to accept a low settlement offer due to financial constraints.
Disadvantages
- Higher Costs: Legal funding companies charge high interest rates and fees, which can add up quickly and reduce the amount of any settlement or award. It is important to carefully review the terms and conditions of any legal funding agreement before accepting it.
- Limited Availability: Legal funding is not available to everyone and is generally only offered to plaintiffs with strong cases. This can limit access to justice for those with weaker cases or limited financial resources.
- Loss of Control: Legal funding companies may have a say in the handling of the case and may require the plaintiff to follow certain strategies or tactics. This can result in a loss of control over the case and may not align with the plaintiff’s goals or interests.
- Unregulated Industry: Legal funding is an unregulated industry in the UAE, which means that there are no clear guidelines or regulations governing the industry. This can result in some legal funding companies engaging in unethical practices or taking advantage of vulnerable plaintiffs.
Legal Funding Providers in UAE
Legal financing is a relatively new concept in the United Arab Emirates (UAE). As a result, there are only a few legal funding providers in the region. However, the number of providers is expected to increase in the coming years as demand for legal funding continues to grow.
One of the most well-known legal funding providers in the UAE is Burford Capital. They provide capital to companies to offload the cost and risk of pursuing meritorious litigation. Burford Capital has a strong presence in the Middle East and has helped fund several high-profile cases in the region.
Another legal funding provider in the UAE is Vannin Capital. They provide funding for a range of disputes, including commercial litigation, arbitration, and investor-state disputes. Vannin Capital has a strong track record of providing funding to clients in the Middle East and is known for its innovative funding solutions.
Third-party funding is also available through law firms in the UAE. For example, BSA Ahmad Bin Hezeem & Associates LLP provides legal funding to clients in a variety of industries, including construction, real estate, and healthcare. They offer a range of funding solutions, including contingency fees and success fees.
It is important to note that legal funding providers in the UAE are subject to regulation by the Dubai Financial Services Authority (DFSA). The DFSA regulates financial services in the Dubai International Financial Centre (DIFC) and has established rules and regulations for legal funding providers operating in the region.
Overall, while the legal funding industry in the UAE is still in its early stages, there are several reputable providers available to clients seeking funding for their legal disputes. As demand for legal funding continues to grow in the region, it is likely that more providers will enter the market, providing clients with more options and innovative funding solutions.
Conclusion
Legal funding in civil cases is a growing trend in the UAE, and it is becoming increasingly popular among litigants who are unable to finance their cases. Funding can be obtained from various sources, including banks, private investors, and litigation funders.
While litigation funding can be a useful tool for litigants, it is important to be aware of the risks involved. Funding agreements can be complex, and it is important to seek legal advice before entering into any agreement.
Moreover, the UAE has a civil law system, and an inquisitorial approach, which means that the judge plays an active role in the proceedings. Litigants should be aware of the procedural rules and requirements, as well as the local customs and practices, which can vary from emirate to emirate.
Finally, it is important to note that litigation funding is not a substitute for sound legal advice and representation. Litigants should always seek the advice of a competent lawyer before embarking on any legal action, and should be prepared to invest the time and resources necessary to achieve a successful outcome.