James Foster, Head of International Arbitration, Augusta Ventures, reflects on topics discussed at Dubai Arbitration Week. First published on Business Chief MEA.
Recently I attended the annual Dubai Arbitration Week. Having spent 12 years working in the region as a senior lawyer, I’ve joined this and similar events over many years. But this was my first visit to the event in the role of litigation funder. This new perspective opened my eyes to the potential for funding in the UAE, particularly around disputes in the construction industry.
Dubai Arbitration Week convenes lawyers, experts and academics from around the world who have an interest in dispute resolution through the non-court route of arbitration. Such processes, if properly managed, can be less costly and progress more quickly than full-blown litigation. Settling disputes through such mechanisms is increasingly popular, particularly in the construction sector, where margins are tight and willingness to spend on legal fees can be restrained.
One of the trends I picked up on during the week was the increasing awareness of litigation funding as an option for claimants. When I last visited the region earlier this year, most of the conversations I had centred on explaining what such funding is. I would talk through the basics, including that we will pay all the legal and expert fees for a case on a non-recourse basis. This means that if the case is lost, we bear the cost. And if the case is decided in our clients’ favour, we then take a proportional share of the winnings.
What was striking to me is that many of the contractors I met with last week now see litigation funding as their preferred option for managing the high cost of disputes. With current margins tight across many construction businesses, and concern about the future post the Expo 2020 boom, most contractors are actively seeking to minimise spend outside core options. Funding offers a good option to manage risk and minimise cash outflow. And contractors are increasingly being pointed in this direction by Claims Consultants.
Typically, when contractors find themselves in dispute in the Gulf, they first approach Claims Consultants before talking to lawyers. Such consultants offer an impartial view of the dispute and can helpfully point contractors to the most appropriate lawyer for their case. This not only keeps costs down but also ensures the right lawyers are retained. Such consultants are now also increasingly familiar with funding, and many of those I met indicated that they would make introductions for their clients to funders where needed.
The role of claims consultants will become increasingly important in coming years as the dual headwinds of falling property prices and reducing demand impact. With such potential instability on the horizon, contractors should be looking to keep costs under control across their operations. And while outstanding legal claims can be seen as an area for cuts, they can also be turned into assets if handled correctly, especially if the cost and risk can be borne by a third party.
The transfer of the liability for legal costs from the contractor to the funder also means that those costs are not added to the project account, a major boost for commercial directors and project managers who may otherwise be struggling to get their project home on budget. And if the claim results in a recovery then the contractor’s net share can be booked to the project account as a gain, potentially transforming a loss-making project to a profit contributor.
As well as the time I spent with claims consultant and contractors I also spoke at two events hosted by prominent law firms in the region which focused on the opportunities for litigation funding in the Middle East. The lawyers who spoke at the events were uniformly positive about the legitimacy of third-party funding in the UAE and pointed to its increasing recognition and regulation both in the DIFC in Dubai and the ADGM in Abu Dhabi.
As the region’s development continues apace, and as the environment for the funding of legal claims develops, my sense from those I met during Dubai Arbitration Week is that the opportunities for speedy and cost-effective dispute resolution will continue to grow. I look forward to working with the contractors, consultants and lawyers I met in the region over the coming months and years.
First published on Business Chief MEA: https://middleeast.businesschief.com/leadership/2644/Reflections-on-Dubai-Arbitration-Week