ADGM Courts issue litigation funding rules

The Courts are the first in the region to initiate and enact a comprehensive framework for third party financing of proceedings in the Middle East and Africa.

The Abu Dhabi Global Market Courts (“ADGM Courts”), has issued their Litigation Funding Rules in response to the growing interest in third party funding of parties to manage their litigation and arbitration proceedings. These Rules, the first of such in the Middle East and Africa region, are designed to provide parties and funders with greater certainty in relation to the enforceability of funding arrangements in proceedings for resolving disputes. ADGM Courts are the first in the region to initiate and enact a comprehensive framework for third party funding. The new Rules have immediate effect.

Litigation funding enables litigants to obtain financing to cover all or part of their legal costs from a private commercial litigation funder who has no direct interest in the proceedings. If the litigant is successful, the funder receives a pre-agreed share of the outcome of the claim, usually a percentage of the amount recovered. If the litigant is unsuccessful, the litigant pays nothing to the funder and the funder loses its money.

ADGM Courts drafted the Rules after an extensive review of the litigation funding framework in other jurisdictions, including Australia, Singapore, Hong Kong, England and Wales and the United States. Prior to their enactment, ADGM Courts issued a public consultation paper to ensure that they received the views of all parties interested in this financing so that the rules could not only achieve their purpose of ensuring certainty regarding the enforceability of these arrangements, but also respond to the needs of litigants and the business interests of private organisations in this sector. ADGM Courts received positive comments on the draft framework from numerous key stakeholders, including lawyers, funders and potential litigants. This demonstrates that there is a strong interest in and support for clarity about third party funding in the region, in response to which these Rules are being issued.

The Right Honourable Lord David Hope of Craighead KT, chief justice of ADGM Courts, said, “The issuing of our Courts’ Litigation Funding Rules signals our strong desire to strike a balance between litigants’ needs for 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. Litigation funding continues to grow across the world and has played a critical part in allowing the commencement of important actions in numerous jurisdictions. We aim to reflect and move with the changes that occur in international dispute resolution practice. These Rules are yet another example of how we respond to the expectations of business and the community as the highly regarded courts of a successful and dynamic international financial centre.”

The Rules provide for various matters, including: that the Funder’s principal business must be in funding proceedings to which the Funder is not a party; the Funder must have qualifying assets of not less than USD 5 million; the Litigation Funding Agreement must contain some minimum terms including to ensure there are no conflicts of interest; the Funder’s involvement in the settlement of proceedings; and the Funder’s obligations about dealings with lawyers.

For more details, please click on ADGM Courts Litigation Funding Rules.