Islamic finance presents firms with new opportunity to make their mark

DP World's groundbreaking sukuk; Gordon Brown's announcement that he wants London to become the global Islamic finance centre; Lloyds TSB's decision to launch sharia-compliant mortgages.

Wherever you look, Islamic finance is in the news. It is one of the fastest-growing areas of international banking and is set to get even bigger, driven by decisions by investments banks such as Merrill Lynch and Goldman Sachs to set up Islamic finance groups.

This activity by the banks and the Government has had an impact in the legal market. Firms with established Islamic finance practices are gearing up to win an increasing share of the business, while newcomers are looking to break in to the sector.

Norton Rose is at the top of just about everybody's list. Finance partner Neil Miller is the head of Norton Rose's Islamic finance practice and is a real grandaddy of the market. "Norton Rose is the one firm everybody talks about," says one rival.

Miller started working on Islamic finance deals 12 years ago when he was in the firm's Bahrain office and has steadily built up the practice since then, developing contacts with banks and scholars. Miller is keen to point out that there is unlikely to be anybody else in the market who advises on the same range of products that Norton Rose can offer, including project finance, funds, real estate, sukuks (Islamic bonds), corporate and litigation.

Norton Rose's Islamic finance client list is exceptionally strong. Miller and his team act for the likes of Calyon, Citigroup, Eurohypo, BNP Paribas, Deutsche Bank and Merrill Lynch. The firm now has 40 lawyers working on Islamic finance deals across its network, with 17 of those devoting their time to the practice full time. The list includes London partner John Inglis, Bahrain senior associate Dominic Harvey and Dubai partner Nadim Khan.

Allen & Overy (A&O) also has a strong offering in the Middle East and its name constantly cropped up during our research. Mike Duncan is responsible for banking in the Islamic finance practice and, although he admits the firm does not have a dedicated Islamic finance group, there are still lawyers in the key areas who are familiar with this work.

Sources at other firms claim that A&O's Islamic finance offering is limited to project finance, but Duncan rejects this argument. "We do more on the sukuk side than anybody else," he claims. The firm is close to Abu Dhabi Islamic Bank, Citibank and HSBC, to name a few, and recent deals include advising Emirates on its $550m (£298.99m) sukuk and the Islamic Republic of Pakistan's debut bond.

Denton Wilde Sapte (DWS) is also a strong competitor. It scored a coup when it acted for Barclays Capital and Dubai Islamic Bank (DIB) on DP World's $3.5bn (£1.9bn) sukuk, which broke ground in a number of new areas. It was the first publicly issued sharia-compliant convertible sukuk and the largest sukuk in the market to date.

Norton Rose's Miller claims that his firm was brought in originally by Deutsche Bank to advise on the deal before the target was known. Much to the frustration of Miller and his team, P&O is an important client for Norton Rose, so they had to wave goodbye to the biggest deal of the year. However, other sources say DWS's relationship with DIB would have secured the firm the instruction in any case.

Although DWS boasts endlessly about how long it has been in the Middle East, its Islamic finance practice, kick-started by the hire of global practice head Rahail Ali, is a more recent phenomenon. In London partners Farmida Bi and Matthew Sapte make up the trio of partners working in this area.

Despite its relative youth, last year DWS's practice worked on deals with an aggregate value of $9bn (£4.89bn) and its long service in the Middle East means it has plenty of clients that its can leverage off, including Barclays Capital, Deutsche Bank, DIB and HSBC.

Clifford Chance was one of the first firms in the Middle East. Its Dubai office recently celebrated its 30th anniversary. The magic circle firm has been involved in Islamic finance deals for a long time, covering everything from acquisition finance to trade finance, but has only recently been positioning itself as an Islamic finance specialist. Partner Robin Abraham in Dubai, along with London-based partners Tim Plews and Habib Motani, are some of the key figures in this team.

Linklaters is a late arrival to the Islamic finance arena: it launched its Dubai office in February and subsequently poached highly rated Islamic finance specialist Luma Saqqaf from A&O to head its team.

Saqqaf is bullish about Linklaters' capabilities, despite the fact that it is playing catch-up with its rivals. "We think we're one step ahead of our competitors. They're either strong in conventional markets or strong in Islamic financing. Linklaters is strong in both these areas," she claims.

Saqqaf's experience includes derivatives, sukuks and loans. The firm has also allowed her to set up an Islamic finance group of four lawyers, which is independent to all other practice areas, including finance.

King & Spalding is another firm that saw the potential of Islamic finance early on, setting up its team back in 1995. But until four years ago, when it opened in London, the firm did most of its work from the US. New York partner Isam Salah leads the practice, while partner Jawad Ali transferred to London in 2002 to head the London operation.

Funds work provides a large chunk of its business, acting mainly for borrower clients. HSBC Amanah, the global Islamic finance division of HSBC Bank, is also a key client.

Then there are the newcomers such as White & Case and Dechert.

Last year Dechert launched an Islamic finance practice headed by former King & Spalding partner Michael McMillen, while White & Case launched its Islamic finance practice at the start of the year.

McMillen is well known in the market, but the practice has been up and running for less than a year. Rivals say McMillen has a good knowledge of the market, but question his ability to bring in deals. But the firm has been quick off the mark to recruit other specialists in the market, taking on former Norton Rose senior associate Abradat Kamalpour as a partner in London and, more recently, Clifford Chance private equity partner Andreas Junius for New York.

The latest entrants to the Islamic finance market have not caused concern among the old hands. However, with King & Spalding already boasting strong ties with Merrill Lynch, Dresdner Kleinwort Wasserstein, Guld Finance House, HDG Mansur Investment Services (as fund manager of the HSBC Amanah Global Income Properties Fund) and DCD Capital, they might want to watch their backs.