The recent divorce between DLA Piper and its Saudi suitor, the Law Office of Abdulaziz Al-Fahad, just two years after vows were pronounced is an all-too-familiar – even predictable – tale in the tempestuous history of tie-ups between international and Saudi firms.
It is a classic tale of international law firm meets Saudi lawyer: before you know it they are getting all
doe-eyed and talking of their plans for the future together, only for reality to set in when both discover they want different things.
We have seen the mercurial rise and fall of such alliances before, for example with Trowers & Hamlins. It had been tied up with ex-White & Case lawyer Hassan Mahassni, but that alliance failed. It is now sponsored by Feras Al Shawaf, while Mahassni has a non-exclusive relationship with Ashurst, which in turn also works with two other firms: The Alliance of Abbas F Ghazzawi & Co and Hammad Al-Mehdar; and The Law Offices of Mujahid Al-Sawwaf.
Clifford Chance’s relationship with The Law Firm of Salah
Al-Hejailan was one of the more enduring, but came to an end in the late 1990s after a decade. One insider describes “strategic differences” as the reason for that particular break-up, which saw Clifford Chance temporarily relocate its Saudi operations to London.
It took some years before the magic circle leader was seen out and about with current affiliate The Law Firm of Yousef & Mohammed Al-Jadaan. Presumably it did not want to hurt Salah Al-Hejailan’s feelings. Al-Hejailan himself joined forces with Hogan & Hartson at the end of 2004 and more recently got close to Freshfields Bruckhaus Deringer. But in a further twist, Freshfields recently announced a formal association with none other than Al-Hejailan’s youngest son and UK graduate Fares.
John Xefos, managing partner at Baker & McKenzie’s Riyadh
office, puts this volatile picture of short-lived relationships down to a “mismatch of expectations.”
“Some foreign firms don’t want to commit to Saudi, which leads to a great degree of frustration,” he says. “Saudi [firms] are expecting additional resources that don’t materialise, or they get people who just aren’t suitable.”
Speaking of his own experience at Bakers, he says: “We sometimes find people who work very well outside [Saudi Arabia], but it’s almost as if they’ve landed on Mars [when they arrive in Saudi] – they don’t know how to apply their skill sets here.”
The reasons behind international law firms’ interest in Saudi are clear: the jurisdiction has the world’s largest proven oil reserves at a time when oil prices are pushing $140 (£71) a barrel, making the market awash with liquidity; it has a rocketing domestic birth rate, generating massive demand for investment in infrastructure; and the UK and US economies are slowing down.
However, Saudi law stipulates that a foreign firm wishing to practise in the country must have a sponsor who is both a Saudi national and a Saudi-qualified lawyer – the problem being that these are few and far between. Saudi law schools churn out few graduates. Subtract from that figure those who have transactional experience and speak fluent English, and the pool of available candidates starts looking extremely limited.
“There are very few Saudi law firms, and finding the right one is a challenge,” confirms Nick Eastwell, who manages the emerging Europe, Middle East and North Africa (EEMENA) group at Linklaters, which does not have a presence on the ground in Saudi. “We’re not yet ready to make that step,” he adds.
Eastwell runs the group from a virtual desk in London, manned with the assistance of Saudi associate Yousef Al-Joufi. Jonathan Inman and Andrew Roberts also cover the country from the United Arab Emirates (UAE).
That long-distance approach avoids some of the trials and tribulations involved with picking a local sponsor. But it can only work for so long, says Bakers’ Xefos, adding: “People sometimes [think] that what’s right for Abu Dhabi or Dubai is right here, but it’s often inappropriate.”
A source at DLA Piper claims that its relationship with Al-Fahad came to an end because the international firm “wanted to get somewhat more engagement”. To accomplish this it brought in Saudi national Abdulaziz Al-Bosaily, one of its Dubai-based banking lawyers, as its local sponsor.
Hooking up with a lawyer who has already spent time at DLA Piper has the advantage that the two should have similar approaches to business. However, Al-Bosaily is also relatively junior and may not carry the same weight in the local market as some of his longer-established counterparts.
Xefos believes connections are paramount. “When we’re asked to look at a transaction,” he says, “we need to understand the legal, commercial and political dimensions – who’s behind it or has the ability to influence it?”
If that is the case, then Herbert Smith might have scored a coup with its recent tie-up with Al Ghazzawi Professional Association. The firm is relatively large by Saudi standards, with 30 legal staff and offices in Jeddah, Dammam and the capital Riyadh. Set up in 1969, it is one of the longest-running Saudi firms and its chair, Talal Amin Al-Ghazzawi, sits on the boards of several Saudi companies and is also considered to have links to the Saudi royal family. As one Middle East recruiter focused on Saudi says, this “helps to get things done”.
But Herbert Smith Middle East head Neil Brimson, who is based out of the UAE, denies that connections were the primary reason for joining forces. “We were attracted by the fact that it’s a relatively large firm by Saudi standards, but still small by international standards,” he says. “The lawyers are able to provide clients with the quality and style of advice they’re accustomed to and it’s spread across three offices. If they’re well connected, so much the better.”
Connections may help, but sheer numbers on the ground is not necessarily an advantage in itself, as a regional managing partner at a rival firm points out. “How many are working on corporate deals? Twenty conveyancers in Jeddah can’t be all that useful,” he scoffs. But Brimson claims that its local partner has expertise in all the core areas his firm is targeting.
UK and US firms take different courses on their approaches to launching in Saudi and to integration between the foreign and local lawyers.
While Clifford Chance, Freshfields and Herbert Smith have chosen to join up with longer-established local firms, US firms tend to to train Saudi nationals internally and then send them over to Riyadh to become their sponsors.
Bakers has been in the country since 1979 and launched there at a time when foreign lawyers were licensed to practise, before regulations changed in the 1980s. Its current sponsor, Torki Al-Shubaiki, trained both externally and internally. Xefos says it aims to train as many locally qualified lawyers as possible and has a female Saudi trainee working in Riyadh at the moment.
“More firms are going to have to move towards this model – that’s how you root yourself locally and develop a trusted adviser relationship,” he insists. “If [the foreign law firm strategy is] opportunistic, you take a different view.”
White & Case also took the US path of training a Saudi lawyer, with the expectation that Mohammad Al-Sheikh would become a local sponsor. He now runs the Riyadh office. It is expected that Latham & Watkins, which currently has Gulf offices in the UAE and Qatar, will send Saudi national Salman Al-Sudairi out to the region from its New York office later this year with some responsibility for Saudi work.
But there is a suggestion that this US model could be spreading. Eastwell at Linklaters admits that setting up in association with current London-based lawyer Al-Joufi “could be an option” in the future.
Tellingly, this US approach is what transatlantic giant DLA Piper has now opted for.
The firm says the decision to shift sponsors is about “engagement”, which suggests that it is more about design than default.
If that is true, then this is evidence that DLA Piper’s global strategy is for once taking a leaf out of the Americans’ book.