Abu Dhabi Global Market Court Penalizes Law Firm for Citing fake, AI-Generated Authorities, Orders AED 282,508 in Wasted Costs
Introduction
In a landmark ruling underscoring professional accountability in the age of artificial intelligence, the Abu Dhabi Global Market Court has ordered a law firm to pay AED 282,508 in wasted costs after it cited non-existent legal authorities allegedly generated through AI-assisted research. The decision sends a clear warning to legal practitioners about the non-delegable duty to verify AI outputs before placing them before the court.
Background / Context
The ruling arose in Arabyads Holding Limited v Gulrez Alam Marghoob Alam, an employment-related dispute involving contractual obligations under an Employee Share Option Plan. While the substantive claims concerned alleged breaches of contract, the proceedings took a critical turn when the claimant challenged the authenticity of authorities cited in the defence pleadings.
Arabyads Holding Limited argued that the defence, prepared by MIO Legal Consultants LLP, relied on fabricated or inaccurately attributed case law, strongly suggesting improper and unverified use of AI tools in legal research.
Court’s Findings
The ADGM Court affirmed its jurisdiction to impose costs sanctions on legal representatives whose conduct disrupts or delays proceedings. Drawing on established English common law principles, including Myers v Elman and Harley v McDonald, the Court clarified that wasted costs orders serve a compensatory, not disciplinary, purpose.
The Court held that the firm’s conduct fell materially below the professional standards expected of practitioners appearing before it. As a result, it exercised its wasted costs jurisdiction and ordered MIO Legal Consultants LLP to pay AED 282,508 on an indemnity basis, one of the most serious forms of cost sanctions.
“… the question in this case is how the Court should respond to conduct by legal representatives … that has had the effect of disrupting or delaying resolution of a court proceeding.” (para 24)
“… the Court has a duty to supervise the conduct of its solicitors and visit with penalties any conduct … which is of such a nature as to tend to defeat justice … The jurisdiction is not merely punitive but compensatory.” (para 26)
Key Judicial Observations
The judgment emphasized that lawyers, as officers of the court, owe strict and non-delegable duties, including:
- Conducting diligent and competent legal research
- Ensuring that all cited authorities genuinely exist
- Avoiding reliance on speculative or unverified sources
The Court made it clear that the issue was not the mere presence of errors, but the failure to meet a baseline duty of verification. Submitting unverified AI-generated material that references non-existent authorities was found to undermine the integrity of judicial proceedings.
“… errors of judgment do not attract the exercise of the jurisdiction, but errors of a duty owed to the Court.” (para 28)
Although the firm acknowledged its mistakes, it failed to demonstrate that adequate verification had taken place after using AI tools. The Court characterized this failure as reckless and in breach of the applicable Rules of Conduct, even while stopping short of finding any intention to mislead.
“While I do not find MIO guilty of conduct that was intended to mislead the Court, the way in which it chose to research for and prepare the Defence was a deliberate choice. As a result, MIO filed a Defence which was both prolix and referred to authorities which either did not exist or did not stand for the proposition for which they had been cited. That conduct, in particular MIO’s failure to verify whatever legal research was undertaken through AI, was, I find, reckless, and amounted to a breach of the Rules of Conduct.” (Para 59)
Impact / Significance
This decision marks one of the clearest judicial warnings to date on the risks of unchecked AI use in legal practice. As AI tools become increasingly embedded in professional workflows, courts are making it clear that responsibility for accuracy remains firmly with human practitioners.
The ruling reinforces that AI may assist legal research, but it cannot replace professional judgment, scrutiny, and verification. Failure to observe these standards can result in severe financial and reputational consequences.
Outlook
As global courts grapple with the growing influence of AI in litigation, this case is likely to be cited as a benchmark for professional responsibility. Law firms adopting AI-driven research tools will need to implement robust verification protocols or risk similar sanctions.
