For any law firm with international ambitions, an office in the Middle East is a must. And for those regional outposts, learning to coexist while maintaining individuality is just as crucial.
Owing to the trend of firms moving to create more densely concentrated hubs in the major emirates of Dubai and Abu Dhabi, a generation gap is beginning to develop, with new markets opening up and fresh opportunities emerging.
The West has long benefited from Middle Eastern money investing in markets such as London, Paris and the US. Indeed, according to Savills, London’s real-estate market is thought to have benefited from Middle Eastern investment to the tune of £38bn in 2015.
It is vital to the key European and American firms that they channel this revenue stream into these markets. The World Bank shows that the region’s GDP peaked in 2013 at $3.5trn (£2.1trn). With a stream this vast, business here can be crucial to a firm’s aspirations.
Dubai has been becoming one of the world’s leading legal hubs for a while and, more recently, has become crucial for deals in Africa. Its importance has grown so much in the past 15 years that Jonathon Davidson, of Dubai-based Davidson & Co, says it now contains one of the highest concentration of British expat lawyers in the world, second only to Hong Kong.
Opportunities for investment and growth here are greater now than ever, particularly in IP and litigation. And this niche market, according to Al Tamimi managing partner Husam Hourani, is what gives smaller Middle Eastern firms an advantage. “We don’t do English law – we do local law,” he says. “That’s what international firms can’t offer. We’ve focused on areas where we have a competitive edge: litigation, for example, now makes up half our revenue. We’ve begun building our business around IP, employment, compliance, education, healthcare, sports and consumer protection. These are niche areas which requires a niche team with a niche understanding.”
Niche insight has certainly played well for smaller firms in the past, and will continue to do so. Al Tamimi is regarded by many as the strongest firm in the region – international firms speak highly of it and Hourani says they get a good deal from the magic circle, including Freshfields Bruckhaus Deringer, Linklaters and Slaughter and May. Al Tamimi also has a relationship with Norton Rose Fulbright to do some of its regional banking work, while US firm White & Case is happy to delegate to it most of its regional work.
Founded in 1989 by Essam Al Tamimi, the firm covers nine countries and 17 offices. He is an excellent example of how a new generation of Middle Eastern lawyers works and operates. After receiving his Master of Law from Harvard in 1984, Al Tamimi returned home to develop the firm that bears his name and at which he remains as the senior partner.
The firm’s reputation has been enhanced by advising on deals such as the exporting and financing of the Kuwait National Petroleum Company’s credit agency for the Clean Fuels Project, which was worth £4.8bn.
The region experienced a boom between 2002 and 2007, with big firms racing to plant their flags and vying for the biggest deals. Berwin Leighton Paisner announced its intentions to enter the area in 2005 and Norton Rose Fulbright won the mandate in 2006 to advise Etisalat, when it purchased 26 per cent in Pakistan Telecommunication Company for £1.4bn.
Boom and bust
When the recession hit, though, the Middle East wasn’t exempt. “The winter of 2007/08 saw the high-end investment market freeze and become a litigious market,” Jonathon Davidson explains. At this point, corporate and commercial work just didn’t exist. Suddenly, litigation firms became very busy acting for quasi-government interest. We happened on a huge stream of work, all connected to the government in some way, which meant it came down the chain, as all the big firms had acted for one side or the other.”
Davidson arrived in Dubai in 1999, while working as an associate with Clyde & Co. He set up his own firm in 2008 and says that, while it initially picked up plenty of the aforementioned litigation work, thanks to larger firms’ conflicts after representing branches of the government in one way or another, its mix is now a 60/40 split between non-contentious property work and corporate/commercial.
In the Robert Half 2016 Salary Guide, the three most in-demand legal positions were listed as 5-10 years’ PQE real-estate and corporate/commercial lawyers, particularly those trained in the West. However, those trained in the West want Western salaries. In 2015-16, salaries in the UAE rose across the board, with senior partners being paid $275,250 to $395,000 (£223,198 to £320,302) – a 1.1 per cent increase. It was more profitable still to work in-house, with a head of legal seeing their pay range from $269,750 to $416,750 – an increase of 1.8 per cent.
A younger generation and changing world brings with it new opportunities. Davidson says his firm has seen a steady increase in fintech and IP work, and that governments are always looking for ways to profit from new technologies. The issue is that, while this sector is growing, it isn’t the work the region needs. “At present, there isn’t the required level of complex, sophisticated deals,” Davidson says. “The Middle East is reassessing. There’s a lot of political risk, so high-level deals are happening elsewhere in the world. But political risk oscillates.”
It used to be viewed as a cultural faux pas for Emeratis to take their money out of the region. But the younger generation has one of the world’s most developed cities on its doorstep, procures the best education from the most prestigious international universities and is not as interested in the old markets as their seniors.
While many firms are closing their Middle East capabilities, the regional firms are thriving. As proof of Dubai’s significance, Al Tamimi has three bases there. “In the past 10 years, we’ve seen changes in both heads of government and in governmental departments,” says Hourani. “Younger people have taken over and this has led to changes in attitudes and expectations. This new generation has a very open-minded, Western-trained, technologically oriented mindset.”
Hadef & Partners managing partner Sadiq Jafar considers theirs a UAE firm – it has offices in Dubai and Abu Dhabi that employ more than 90 lawyers between them. Fichte & Co is present in the same locations as Hadef but has a considerably smaller headcount, at 15 lawyers and counsel. Hadef has a strong local litigation practice, whereas Fichte & Co is prominent in both litigation and the shipping market.
“There are many Middle Eastern countries in which only local firms operate or there are very few international firms,” says Jafar. “The UAE is an exception, followed by some other Gulf countries. Many don’t have any larger domestic firms – all are relatively small. Saudi Arabia has particular challenges, in that international firms operate in association with local concerns and the relationships change from time to time.”
Hadef advised the Abu Dhabi Ship Building (ADSB) public joint-stock company on its first public listing, selling almost 50 per cent of its shares. This led to the creation of the largest dockyard in the region, and the firm continues to work closely with ADSB on a portfolio worth around £840m.
A Middle Eastern Singapore
Data gathered in The Lawyer Global 200 2017 report shows that Dubai is overwhelmingly the international law firm’s home of choice. It has 249 partners based there, compared to second-placed Abu Dhabi, which has 82. Cairo is a distant third, with 47. According to Gowling WLG real estate partner Andrew Thomson, “Dubai’s becoming what it always wanted to be: the Singapore of the Middle East. It has a very international flavour, which is both good and bad. It isn’t representative of the Middle East as a whole.”
The Dubai International Finance Centre is one of the major reasons the emirate has become so dominant. Of course, the promise of zero per cent tax on income and profits for 50 years after being granted a commercial licence is going to be hugely appealing to any business, but it brings fierce competition and firms need an edge.
This year alone, Clifford Chance closed its operations in Qatar on the basis that “there was no longer the same need for a presence on the ground in Doha”, Weil, Gotshal & Manges left Dubai after launching in 2008 and King & Wood Mallesons closed in Riyadh just three years after launching. Herbert Smith Freehills also closed its Qatari offices after poor performance, choosing to consolidate instead in Dubai.
Tale of two cities
Dubai and Doha have both been experiencing an economic slowdown since 2014, but Qatar’s nosedive has been much more pronounced since then. Its gross domestic product per capita fell from $86,850 to $59,330 in 2016 – a decrease of 32 per cent. The UAE’s also dropped, but its decline has been more stable: its fall of $44,500 to $37,600 represents a 15 per cent decrease – less than half that of its close neighbour.
While, at £117bn, Qatar may lead the UAE when it comes to gross domestic product per capita, that is less than half of the UAE’s GDP, at £268bn. Compare these numbers and Dubai’s significance as an international legal and trading hub is undeniable. For smaller firms, niche knowledge and the chance to collaborate offer ways into emerging sectors outside the traditional sphere that can and should be capitalised on as Dubai’s strength grows.
Source : The Lawyers