Big and tough
25 July 2011
Lawyers agree that Saudi Arabia is a major blip on their radars, but its culture means it remains a difficult legal market to navigate. Dale McEwan reports
The next five years are all going to be about Saudi Arabia,” said one lawyer during the research for this special report. But for Western lawyers looking to relocate and have a slice of the action, it is often difficult to see beyond the oppressive nature of Saudi.
It is no surprise, therefore, that recruitment continues to be a challenge for law firms operating in the country.
“Saudi isn’t the easiest place to persuade Western lawyers to go,” says Martin Amison, international head at Trowers & Hamlins. “Quite a lot of our competitors have run their numbers down in the past few months. There aren’t a lot of Western lawyers left in Saudi.”
Indeed, Trowers closed its Jeddah office in May 2011, less than a year after its launch.
Baker & McKenzie partner George Sayen agrees. “Recruitment’s probably the biggest single challenge of an international firm operating in Saudi,” he says. “But Saudi’s not nearly as bad as it’s cracked up to be. Professional opportunities are very good. Someone coming here can have a fair amount of responsibility at an early stage.
“The educational system’s starting to produce more Saudi lawyers, but not yet enough to allow a firm to fill an office with Saudis. These people are highly sought after and are difficult to retain.”
You need unis
One way of jumping the recruitment hurdle is to establish strong relationships with local universities in the country. Clyde & Co has found this to be very beneficial, according to Dubai-based partner Philip O’Riordan.
“The ideal state is to have a good balance between Saudi and Western lawyers. We focus on trying to recruit young, bright Saudi lawyers. This is extremely important to our strategy.”
As part of a pilot programme, Clydes has hooked up with the law department at the college for women within Prince Sultan University to offer internships to students.
The firm is currently training two undergraduate students in corporate and commercial legal practice as part of ongoing development of the Saudi legal profession.
Participation in the seven-month training programme is by invitation only from the university, with participation open to government entities, banks and financial services firms as well as some of the most prominent law firms in Riyadh.
“So far it’s proved very successful,” says O’Riordan. “We’ll carry on in the scheme and hopefully employ some people out of it.”
O’Riordan agrees that finding Western lawyers is hard. He says the firm is trying to learn from the mistakes that other outfits in the region have made, such as overpaying Western lawyers who relocate to Saudi.
“You have to be the right kind of person to work in the region,” he says. “It’s a challenge everyone faces: how do you find the magic formula to staff an office in Saudi?”
These sentiments are echoed by Eversheds’ Chris Jobson, the firm’s Middle East managing partner. “Saudi is, and continues to be, a challenging place to recruit,” he states. “It’s fair to say that firms prefer local experience, then regional experience, then experience from further afield. We’re actively recruiting in both Saudi and UAE [the United Arab Emirates] in corporate and commercial work.”
Khalid Al-Thebity, the managing partner at Dewey & LeBoeuf’s affiliated office in Riyadh, agrees that it is difficult to recruit trained Western lawyers, but adds that he has managed to hire three new lawyers this year for his office.
In terms of the wider issue of employment in Saudi, the country is currently undergoing a more intense phase of ’Saudi-sation’, which has been an ongoing theme for a number of years now.
Under the new Nitaqat employment rules, which begin in September this year, private businesses will be classified into green, yellow and red categories according to how many locals they employ.
Companies with high Saudi-sation rates will come under the green category, while those that fail to achieve the required rates or refuse to employ Saudis will be included in the yellow and red categories respectively.
Different sectors have different quotas. Saudi’s Labour Ministry has fixed the minimum level for Saudi employees at 49 per cent of the workforce for banks that employ 500 or more people. The media sector will have a 19 per cent quota, meaning 19 out of 100 employees must be Saudis. Commercial establishments, insurance companies and public schools will also have 19 per cent quotas.
The Nitaqat system is part of a wider trend across the Middle East to ensure an adequate amount of nationals are in employment.
“Saudi-sation is an interesting attempt to take a more scientific view of the market and look closer at it,” explains Sayen. ”Anything like that’s a little uncertain and it’s unknown how it will affect the market.”
Robert Jordan, the partner in charge at Baker Botts’ Middle East practice, agrees that it is a little early to reach conclusions, but says it is important to the Saudi economy that the government finds ways to give more jobs to locals.
“There’ll be some disruptions where expatriates have been in the region and may be required to leave,” says Jordan. “There may be a cost to businesses.”
O’Riordan says the recruitment of Saudis is going to be a big theme in the country.
“It might make things difficult where predominantly clients relied on expats, especially if there isn’t a skill set there among locals,” he says.
“It will be a much bigger issue for clients rather than law firms,” Trowers’ Amison concurs. “For clients there’ll be massive pressure. They’ll need to comply with large requirements. On large-scale construction projects it will be difficult to bring in Asian workers.”
Firms seem to be in agreement that the Arab Spring will spur on future investment in the country.
“The next five years are all going to be about Saudi,” insists O’Riordan.
“It’s emerged from the economic crisis very strongly. There’ll be government investment, with lots of plans to spend on infrastructure. The Arab Spring’s given emphasis to that. Most law firms will be looking to Saudi, if they haven’t done so already.”
“What you’ll see is a great amount of money spent on infrastructure, for example affordable housing,” comments Amison. “Tension in the region’s caused a premium in the oil price - therefore the country does have the funds to fund these projects. So the additional wealth may defuse the situation.”
Hesham Al Homoud, a senior associate at Al Tamimi & Company’s Riyadh office, says his firm plans to open an arm in Jeddah within the next three years. “There’s a lot of work in construction in the Kingdom,” he relates. “Now the health industry’s building up more and more. Every month a new hospital’s opening.”
Amison says interest in Saudi is centred on large-scale projects. “What excites me about Saudi Arabia are big, independent water and power projects,” he reveals.
They’re massively lawyer-intensive. We’re expecting to see at least one of these deals coming through every nine months. There are other big infrastructure projects, for example airports.
“Firms like ours, we can’t ignore Saudi. It’s five times the size of other Gulf economies, but it’s the most difficult one.”
Saudi Arabia can indeed be challenging for law firms.
“It’s an increasingly competitive environment,” says O’Riordan. “Over the past five years there’ve been a lot of new entrants into the market. It’s relationship-driven and it takes time.”
Tim Field, Middle East regional head at Simmons & Simmons, says his firm is keen to expand within Saudi, although he acknowledges the obstacles this can present.
“It takes a while to get brand awareness,” he muses. “Those who’ve been there longer have worked better with the economic situation rather than those who arrived
a bit later. Those latecomers suffered more.
“Riyadh’s an opaque market. Firms have to take time to learn and listen. We found the Jeddah market very profitable and there are a lot of very interesting projects to work on there.”
“Saudi continues to be the most interesting market due to the size of the economy,” Sayen comments. “Right now things seem to be robust. There is quite a lot of M&A going on and banking work too. I’m encouraged. Right now the work looks good and the economy seems to be moving.”
Al Homoud at Al Tamimi acknowledges the popularity of capital markets work in Saudi - a popularity that faded when the country’s stock market took a blow. He says his firm is now trying to secure as much work as possible from the construction sector.
But Jordan at Baker Botts predicts a revival in capital markets work. “We’ll be focusing on capital markets,” he insists. “We’ll be looking at this in Saudi and the UAE. I think there’ll be an increase in IPOs.
“We’ll also focus on power, particularly in Saudi; also real estate opportunities both in Saudi and elsewhere; we’re also active in national security and defence.”
Meanwhile, Dewey’s Al-Thebity says his firm will continue to focus on advising the Saudi government. “Our strategy’s to continue to represent the government and to focus on representing major Saudi corporations,” he says. “We work closely with international corporations entering the market.”
Over at Eversheds, Jobson says interest since the merger with Middle East law consortium KSLG has been “staggering”.
In May this year the merger trebled the firm’s size in the region and, among other cities in the region, gifted Eversheds an office in Riyadh.
For all law firms, it seems as if Saudi is still very much the place to be.
“If you do it properly,” says Simmons’ Field, “it’s the region to be in.”