UNITED ARAB EMRITES Law and Practice Contributed by: Ali Dakhlallah, Karen Seif, Matthew Page and William Prasifka, Habib Al Mulla & Partners
5. Costs, Fees and Funding 5.1 Legal Fees
costs are significantly lower than multi-year court or arbitral proceedings. Unless otherwise agreed, ADR costs are usually shared equally between the parties. However, parties are free to allocate costs differently in their media- tion agreement or final settlement. There is substantial flexibility in the structuring of cost allocation. Unlike litigation, courts do not generally intervene in ADR cost distribution. Mediators do not impose costs awards, and there are no adverse cost consequences for failing to settle. This neutrality reduces financial risk and encourages participation. ADR cost structures therefore reinforce its attractive- ness as an early-stage resolution mechanism. The predictability and proportionality of ADR costs are key drivers behind its growing use in UAE commer- cial disputes. 4.7 Courts and ADR UAE courts adopt a strongly supportive and facilita- tive attitude towards ADR. While courts respect party autonomy and do not compel ADR in most cases, they actively encourage amicable settlement where appropriate. This approach aligns with broader nation- al policy aimed at efficiency and judicial economy. Judges frequently recommend mediation during pro- ceedings, stay the proceedings to allow settlement discussions or enforce mediated settlement agree- ments. Recent legislative developments have further rein- forced the role of ADR within the judicial system. Court-annexed mediation centres and statutory rec- ognition of ADR outcomes demonstrate institutional commitment. It should also be noted that courts do not view ADR as inferior to adjudication; instead, it is treated as a legiti- mate and effective dispute resolution pathway. This positive judicial attitude has significantly increased confidence in ADR among commercial parties oper- ating in the UAE.
Legal fees in the UAE are not subject to a fixed statu- tory tariff and are primarily governed by contractual agreement. In onshore UAE (including Dubai Courts), the regula- tion of legal fees is based on the UAE Advocates Law (Federal Law No 34 of 2022) and general principles of the UAE Civil Code (Federal Law No 5 of 1985). Lawyers and clients are expected to agree fees in advance, typically through engagement letters. In the absence of agreement, courts may determine reason- able fees based on factors such as effort, complex- ity and outcome. Fees must comply with good faith (Article 246) and must not be excessive or abusive. Pure contingency fee arrangements are generally not permitted, although hybrid or success-based compo- nents may be acceptable if reasonable. Courts retain discretion to reduce or disregard excessive fees, and cost recovery from the opposing party is usually lim- ited to nominal amounts. In contrast, the DIFC and the ADGM follow common law approaches, where legal fees are also contractual but subject to reasonableness and proportionality in cost recovery. These jurisdictions permit more flexible fee arrangements, including conditional or success- based fees, and allow greater recovery of actual legal costs. Overall, legal fees in the UAE are contract-driven but regulated by principles of fairness, professional ethics and judicial supervision. 5.2 Third-Party Funding Third-party funding (TPF) is available in the UAE, but its regulation varies significantly between onshore courts and the financial free zones. In onshore UAE, there is no specific statutory frame- work governing TPF. While it is not expressly prohibit- ed, its contours remain uncertain and largely untested. Any funding arrangement must comply with general principles of UAE law, including good faith (Article 246 of the Civil Code) and public policy considera-
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