Islamic expertise and a local presence is key for Middle East
13 November 2006
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Opening an office in Dubai marks the next step in Herbert Smith's international expansion and is a further sign of the significant opportunities that now exist for UK international law firms in developing legal markets.
Energy and international projects are the principal drivers behind Herbert Smith's move into the Middle East. Current and planned levels of investment in the region, both in energy-related projects and general infrastructure, are simply enormous. The number of vast projects, such as the $10bn (£5.27bn) Rabigh refinery and petrochemical plant in Saudi Arabia, on which we were advising Sumitomo, is set to increase.
The fit extends to other practices. Expansion of our finance practice is a strategic priority, and there is little doubt that Islamic finance will play an increasingly important part in deals, both in the Middle East and elsewhere. Partners Andrew Newbery and Nadim Khan will form the nucleus of the team seeking to capitalise on this growing appetite. Private equity and acquisition finance are also taking off, in part to finance the rapid development of the region's energy and transport infrastructures.
Many multinationals from around the world - notably from Japan, China and India - are now investing in the region and increasingly looking to appoint law firms with a presence there. There is growing outward investment from the Middle East, too - the consortium bid by Qatar Investment Authority and UBS Infrastructure Funds Management for RWE Thames Water being just one recent example.
Dubai is becoming a centre for investment management in the Gulf States, providing private equity infrastructure and other vehicles through which the vast surplus oil wealth of the region can be invested. We will seek to combine our fund-structuring experience with Zubair Mir's Islamic expertise in the launch and marketing of such funds. Using our knowledge of sharia law, our plan is to launch products for the Islamic market in the UK, Europe and worldwide.
A combination of wealthy individuals and families, and their tendency to invest excess wealth outside the region, means the Middle East is also an important jurisdiction for international trusts practices. In addition, private banks have been rushing to set up presences in the Middle East, predominantly in Dubai, and lawyers have been busy drafting sharia-compliant trust documents for them. Clearly a Dubai presence will help our trusts practice as it looks to strengthen relations with clients based in the region.
Although at the outset we will concentrate on projects, finance, funds and corporate work, it is also our intention to build a disputes practice that will operate throughout the Middle East.
We have identified both arbitration and litigation opportunities, notably in the energy and construction fields, which will be more readily available to us if we have a Middle East presence. Many commercial disputes arising out of the region are currently litigated in London or Paris. In May 2005, the value of ongoing construction projects in the United Arab Emirates topped $30bn (£15.82bn). By the end of 2004 claims by contractors exceeded $4bn (£2.11bn). We believe that this trend is set to continue.
We know that, for Asian businesses that invest in the region, having their international legal advisers commit to a local presence is important, particularly if problems arise. Accordingly, once the Dubai office is open, we will aim to establish a disputes capability there quickly.
Herbert Smith is not the first and won't be the last international law firm to open in Dubai. Perhaps the more engaging issue now is the extent to which firms will develop broader office networks across the region. This development is currently hampered by regulatory restrictions. If and when these restrictions are lifted, and assuming the region's current development continues, it will be interesting to see how and whether firms take the opportunity to build pan-regional presences.