UNITED ARAB EMRITES Law and Practice Contributed by: Ali Dakhlallah, Karen Seif, Matthew Page and William Prasifka, Habib Al Mulla & Partners
5.4 Insurance Insurance coverage for litigation, arbitration, and ADR is available in the UAE, but remains limited and underdeveloped, particularly in onshore jurisdictions. In onshore UAE, there is no dedicated regime for legal expenses insurance. Coverage is typically indirect, arising through policies such as professional indemni- ty insurance, directors’ and officers’ (D&O) insurance, or limited legal expenses add-ons in commercial or motor policies. These generally cover defence costs, rather than funding a claim. Coverage for arbitration or ADR depends on the wording of the policy, and there is no established market for after-the-event (ATE) insur- ance. As a result, parties usually rely on self-funding, with insurance playing only a supplementary role. The DIFC and the ADGM adopt common law frame- works and are more receptive to litigation risk insur- ance. Legal expenses insurance and ATE insurance are recognised in principle and may be relevant in matters such as security for costs or cost recov- ery. However, even in these jurisdictions, the market remains developing rather than mature. 5.5 Costs Dispute resolution costs can be recovered in the UAE, but the extent of recovery varies significantly between onshore courts, the DIFC and the ADGM. In onshore UAE courts (Dubai Courts/Dubai Court of Cassation – DCC), cost recovery is limited. The suc- cessful party may recover court fees, expert fees and certain disbursements, but legal fees are typically awarded only on a nominal basis. UAE courts do not generally follow a full cost-shifting regime, and actual legal expenses are rarely recoverable unless there is a clear and enforceable contractual fee-shifting clause, supported by strong evidence. As a result, parties often bear the bulk of their own legal costs. In contrast, arbitration and litigation in the DIFC and ADGM apply different approaches to costs. In arbitra- tion, as well as in the offshore jurisdictions, the gen- eral rule is that “costs follow the event”, meaning the unsuccessful party is ordered to pay a substantial por- tion of the successful party’s costs. However, offshore courts assess recovery based on reasonableness, proportionality and the conduct of the parties, and
tions. Concerns may arise where the funder’s return is excessively speculative or where the arrangement resembles an assignment of claims. As a result, TPF is rare in court litigation, though it is increasingly used in high-value arbitrations, often structured cautiously. In arbitration, TPF triggers disclosure obligations. The DIFC and the ADGM both expressly permit TPF under common law frameworks. In the DIFC, Prac- tice Direction No 2 of 2017 requires disclosure of the funding arrangement and the identity of the funder, particularly to address conflicts of interest and secu- rity for costs. The ADGM adopts a similarly liberal approach aligned with English law. 5.3 Contingency Fee Arrangement Contingency fee arrangements are addressed in the UAE, but their permissibility depends on the forum, and they are subject to important regulatory and ethi- cal limits. In onshore UAE, pure contingency fee arrangements (ie, “no win, no fee”) are generally not permitted under professional conduct rules governing advocates. The UAE Advocates Law (Federal Law No 34 of 1991) requires that legal fees be agreed in advance and remain consistent with professional ethics. Arrange- ments that make a lawyer’s remuneration entirely dependent on the outcome of the case are viewed as contrary to public policy and the dignity of the pro- fession. However, conditional or hybrid fee structures are commonly accepted in practice. These typically involve a fixed or hourly base fee combined with a success fee uplift, provided the arrangement is rea- sonable, transparent and not excessive. Courts retain supervisory jurisdiction and may reduce fees that vio- late good faith (Article 246, UAE Civil Code) or consti- tute an abuse of rights. In contrast, the DIFC and the ADGM adopt common law approaches and are more permissive. Both juris- dictions allow conditional fee arrangements and, in some cases, damages-based agreements, subject to regulatory safeguards, disclosure and court over- sight. In practice, contingency-style arrangements are restricted onshore but more flexible in the DIFC and ADGM, where they align with international dispute resolution norms.
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