ADGM issues new rules permitting litigation funding
The Abu Dhabi Global Market (“ADGM”) Courts have recently issued legislation which expressly allows for third-party litigation funding in what they describe as a “first” in the Middle East and North Africa (“MENA”) region. The introduction of the “Litigation Funding Rules 2019” follows a public consultation and review of existing frameworks in jurisdictions such as the United States, England and Wales, and Hong Kong.
Litigation Funding is a process which enables third parties to bear the costs of litigation in exchange for an agreed proportion of the eventual recovered sum. Litigation Funding Agreements (“LFA”) share certain similarities with Conditional Fee Agreements (“CFA”) or ‘no-win-no-fee’ arrangements. Both an LFA and CFA ensure that the Litigant does not bear certain upfront and/or ongoing costs in respect of the litigation, in exchange for the Litigant agreeing to part with a sum or percentage of their final payout. The main difference between a CFA and LFA is that under an LFA, a third party to the litigation (the Funder) covers the agreed upfront costs and/or ongoing costs.
The Chief Justice of the ADGM Courts commented that the legislation aims “to strike a balance between litigants’ needs for the financing of their proceedings to ensure access to justice, the legitimate commercial interests of Funders, and promoting transparency of the Funder’s role for the benefit of consumers of these resources.” The new rules do so by providing for the minimum terms to be included in an LFA such as liability to pay insurance premiums, the amount of funding and its scope, and timings with regards to the advance of tranches. The legislation contains provisions which also regulate settlement of funds, LFA termination procedures and provide that the ADGM is the correct forum and jurisdiction for disputes arising from AGDM LFAs.
The new framework is yet another progression in the UAE legal sector, following the DIFC Courts’ Practice Direction No. 2 of 2017 which established a framework for funding claims in the DIFC Courts, and the long-awaited amendment to DIAC Arbitration Rules, which will acknowledge third party funding.
For further information in relation to the ADGM or the new rules permitting litigation funding, please contact email@example.com