From the Editor's Desk

The Abu Dhabi Global Market (ADGM) Court has ordered MIO Legal Consultants LLP to pay AED 282,508 (over ₹63 lakh) in costs after finding that the firm filed pleadings containing fabricated, mis-cited and misapplied legal authorities—errors the court linked to the improper use of artificial intelligence (AI) tools without adequate verification.

The costs were awarded on an indemnity basis to Arabyads Holding Limited, the opposing party in a commercial dispute. The decision was delivered by Justice Paul Heath KC of the ADGM Court of First Instance on December 18, 2025.

Also Read: UAE: Eight Convicted for Online Sexual Exploitation of Children via Gaming, Social Media

In the ruling, Justice Heath stressed that while AI tools may have a legitimate place in modern legal practice, they carry known risks—especially the possibility of producing false or misleading outputs. The court made it clear that using technology does not dilute professional responsibility.

The judge warned that any authorities generated through AI-assisted research must be approached with skepticism and rigorously verified before being presented to the court. That duty, he said, rests squarely with the lawyer.

According to the order, the problem was not isolated: hundreds of pages of defense documents were found to contain unreliable citations and references. The court also dismissed explanations such as time pressure, lack of resources, or fee disputes as insufficient justification for filing pleadings that could mislead the court.

The cost penalty arose from a commercial dispute filed by Arabyads Holding Limited, an ADGM-incorporated company, against its former employee Gulrez Alam Marghoob Alam. Arabyads alleged breaches related to an employee share option plan and grant agreement, seeking damages and declarations connected to share transfers.

The equity value in question was reported to exceed USD 11.2 million. MIO Legal Consultants LLP represented the former employee and filed the defense that triggered the court’s scrutiny.

Also Read: UAE Establishes Federal Bankruptcy Court: A Milestone in Financial Justice Reform

The ruling is being seen as a sharp warning to law firms about the risks of deploying AI in legal drafting and research without robust controls. Legal observers expect judgments of this kind to accelerate adoption of internal AI-use policies, mandatory verification checklists, and stricter review standards—especially where courts are concerned.

Because the parties involved are private entities in a specific jurisdiction, there is no direct public market impact to track. No recent regulatory filings specifically tied to this judgment or broader UAE-wide AI mandates for law firms were identified within the scope referenced. However, the order itself is likely to function as a strong compliance signal within the ADGM legal ecosystem.