Funding Disputes in the United Arab Emirates

At HFW we recognise that financing litigation and arbitration is a significant consideration for purchasers when deciding whether or not to convey an motion or resist a declare, regardless of the scale of the organisation, or deserves of the declare. We’ve due to this fact created an inside Funding Committee to advise on the most effective approaches to funding and be sure that we’re in a position to supply a seamless and environment friendly service by way of the established relationships we’ve got with each brokers and funders.

Using funding will allow you to convey or defend claims by:

1. Managing and decreasing the monetary legal responsibility in your prices and people of your opponents.

2. Enhancing liquidity thereby liberating up capital to be used within the operating of your corporation. 

This Consumer Information issues the place within the United Arab Emirates; nevertheless our attorneys and Funding Committee even have appreciable expertise in efficiently guiding purchasers on how greatest to construction the financing of their declare globally and have effectively developed relationships with the principle funders and brokers. We’re comfortable to advise you on the most effective strategy so that you can take and invite you to debate your choices with us, please contact our Funding Committee or your traditional HFW contact.

On the outset, it is very important spotlight that using funding is usually permitted within the UAE, together with within the Dubai Worldwide Monetary Centre (DIFC) and the Abu Dhabi International Market (ADGM) freezones. Nonetheless, the exception is contingency agreements equivalent to Damages Primarily based Agreements (see beneath). 

Advantages of all 4 choices embody:

1. Elevated safety in your prices and from these of your opponents.

2. Readability and larger certainty over your monetary danger.

3. Potential discount to prices publicity.

4. Improved monetary liquidity

Funding and insurance coverage choices: a better look

1. TPF (third social gathering funding)

What’s it?

TPF is a financing association by which the funder agrees to pay the social gathering’s authorized charges, often together with consultants, exterior counsel, and different disbursements, in accordance with an agreed finances. Whereas it’s generally known as ‘litigation funding’, funding is now additionally extensively used globally in arbitration. 

Components to think about:

• TPF is lawful within the UAE. Within the DIFC/ADGM Courts (and usually), the funder should not train management over the operating of the matter, which might render the funding unlawful and open to allegations of ‘champerty’ and ‘upkeep’.
• • The important thing challenge for purchasers to notice is that the funding made by the funder will not be a mortgage. The impression of the funding will depend on whether or not the declare is profitable or not, and phrases can be pre-agreed:

– Unsuccessful: the consumer won’t need to pay something, and the funder loses the cash it has invested within the case.

– Profitable: the funder can be entitled to a return on its funding from the damages which can be finally recovered by the claimant.

• • The prospects of success have to be excessive (typically not less than 60-70%). 
• If secured, as a 3rd social gathering has successfully “backed” your declare, TPF can promote settlement or negotiations. Opponents usually assessment their place after they know that funders are supporting the declare. 
• It could take a very long time to place in place TPF, because the funder will undertake its personal due diligence course of, assessment the deserves and acquire their very own recommendation. Working with HFW can assist attributable to our sturdy monitor file and relationships with funders. 
• The prices of funding is probably not recoverable within the UAE. 
• Within the occasion that the proceedings are in DIFC/ADGM Courts or in arbitration, the funder would require that the consumer has ATE insurance coverage to cowl the chance of antagonistic prices orders. This isn’t a priority in UAE onshore litigation as a result of antagonistic prices orders should not sometimes issued by these courts or solely nominal in nature.

2. CFA (conditional charge association)

What’s it?

A CFA is an settlement between the solicitor, and sometimes the barrister (if required), and the consumer the place the consumer’s charges are depending on the result of the case:

• Unsuccessful: the consumer pays the solicitor’s charges at a lowered charge – lower than normal charges. 
• Profitable: the consumer pays the solicitor’s charges at normal charges plus an uplift often known as successful charge for as much as 100% of the prices, expressed as a share uplift on the quantity that will be payable if there was no CFA.

Components to think about:

• • CFAs are authorized within the UAE, and permitted within the onshore, ADGM, and DIFC Courts and in arbitration proceedings seated onshore and within the freezones. 
• Authorized prices are recoverable within the DIFC and ADGM Courts and in arbitration, however the uplift is probably going not recoverable. Solely nominal authorized prices are recoverable within the onshore UAE Courts, so the uplift wouldn’t be. 
• CFAs should not be structured to allow attorneys to be rewarded by reference to the share of the proceeds on success. That is typically not permitted within the UAE. Subsequently, CFAs are typically structured by reference to the charges really incurred.

3. DBA (damages primarily based settlement)

What’s it?

A DBA is an settlement whereby authorized charges are contingent on the success of the case and are decided as a share of the overall award recovered by the consumer. They’re also referred to as contingency charge agreements and no-win no-fee agreements.

Components to think about:

• DBAs are typically not permitted within the UAE, aside from the ADGM. 
• The DIFC Finest Follow Code expressly prohibits contingency charge agreements, and we contemplate that this can seemingly cowl DBAs as effectively. Nonetheless, latest case legislation means that the place within the DIFC will probably evolve sooner or later. 
• The price of funding in DBAs wouldn’t be recoverable in any proceedings within the UAE. 

4. Prices Insurance coverage 

What’s it? 

There are two primary kinds of prices insurance coverage:

• BTE Insurance coverage (earlier than the occasion): this refers to any authorized prices insurance coverage the consumer already has in place earlier than the dispute arose. If the declare arises within the consumer’s capability as a company officer or director, then administrators and officers’ insurance coverage (D&O insurance coverage) could also be accessible. 
• ATE Insurance coverage (after the occasion): that is typically taken out after a dispute has arisen to fulfill a number of the authorized prices and bills of the case. 

Components to think about

• This type of insurance coverage will not be extensively accessible within the UAE, and usually restricted to proceedings within the DIFC and ADGM Courts, the place the chance of an antagonistic prices orders typically arises. 
• Within the onshore courts, prices should not awarded aside from in a nominal quantity. The necessity for ATE insurance coverage due to this fact is proscribed. 
• Usually, insurers won’t present litigation insurance coverage to cowl the events’ personal prices and disbursements of their entirety. Typically, it’s doable for some portion of a celebration’s personal prices to be coated (eg. exterior counsel’s prices or skilled prices). 
• There aren’t any laws stopping using such insurance coverage cowl within the UAE, though the involvement of native insurers is usually required.