After the Arab Spring Dubai and Abu Dhabi are booming again, with infrastructure and energy work drawing in international law firms
In the wake of the Arab Spring the traffic has returned to Dubai. Where, for a few years the streets were relatively quiet and hotels and restaurants not booked out, amid the baking heat of Ramadan business life is returning to normal.
Among those coming into the United Arab Emirates’ (UAE) financial centre are a host of international law firms. In the past year a number of US and UK firms have opened offices in the UAE or expanded existing presences.
Morgan Lewis is taking a team from Vinson & Elkins for its launch, while White & Case has secured a licence for the Dubai International Financial Centre. Addleshaw Goddard is another recent entrant to the DIFC.
CMS gained a licence for the Dubai Multi Commodities Centre (DMCC) last year, and most recently Baker Botts significantly enlarged its regional offering by taking an eight-partner team from Norton Rose Fulbright in Dubai.
Meanwhile, Baker & McKenzie has gone for an alternative approach, sealing a merger with local firm Habib Al Mulla & Co in April. The merger gives the US firm a Dubai office as well as boosting its Abu Dhabi presence.
The appetite from international firms has come as little surprise to local lawyers, who report that in the past year or so the environment has shifted from one of recession to one of renewed growth.
“You generally judge how busy Dubai is by the traffic and how easy it is to get into a restaurant at the weekend,” says Al Tamimi & Company employment head Samir Kantaria. “Post-2008 you could walk into any restaurant, but now you’ve got to book and traffic is at pre-2008 levels.”
“The market in Dubai is picking up,” agrees Michael Kortbawi, a corporate partner at Bin Shabib & Associates. “We’re now back to doing what we were doing in 2008. Between 2008 and the end of June 2012 we weren’t doing anything related to acquisitions, new business incorporation or anything that requires investment. We’re now back in motion in these areas.”
The Arab Spring has helped this process. Kortbawi reports work for Bin Shabib’s litigation team off the back of the regional political turmoil, while Kantaria says the uncertainty in other countries has driven money to Dubai.
In Dubai, most international firms remain based in the DIFC, but not all. The ‘free zone’, which allows 100 per cent foreign ownership of any businesses set up there, has been hugely popular and is still arguably the easiest place to set up. Its establishment has put Dubai ahead of regional competitors as a business centre.
Morgan Lewis international managing partner Charles Engros says this is the principal reason the firm chose Dubai over other options such as Abu Dhabi to set up in the Middle East.
“The core underlying reason for us needing to be in the Middle East is our energy practice,” says Engros. “Many of the large global oil companies we do work with have a presence there, and for us to service them on transactions that are being run out of the Near East, we needed to be on the ground.
“We felt the best location for us, if we had the right team, would be Dubai because it has emerged as an international finance and commercial hub – it would not only give us the presence we needed whereby we could put people on the ground quickly in the Near East, but also give us the chance to have a more diverse practice base than may be possible in other locations.”
Engros adds that, for the firm’s initial office, Dubai was the best bet. Morgan Lewis has not yet secured its licence to launch in the city and is still deliberating between the DIFC and ‘onshore’ Dubai, although Engros indicates the DIFC is the most likely option.
CMS also looked at both Abu Dhabi and Dubai before launching its office last year. Partner Matthew Culver, who is based in Dubai, admits that many people pointed out that Abu Dhabi is the emirate with the most oil, but nevertheless the firm chose Dubai.
“From our perspective Abu Dhabi seemed to be slightly more bureaucratic – it’s more challenging getting the licence,” Culver says.
However, instead of opening in the DIFC, CMS moved into the DMCC.
“In the building we’re in we have around four major oil and gas companies, and no other law firms,” Culver adds.
Hogan Lovells is another firm that has plumped for Dubai over Abu Dhabi, deciding late last year to close its latter office.
Regional managing partner Patrick Sherrington says: “Firms coming into the region need to decide whether to focus on Dubai or Abu Dhabi, and that’s dependent on client relationships. The majority of international clients still focus on Dubai because it’s much easier to attract staff and the cost of living is considerably lower than in Abu Dhabi. Most international law firms will gravitate towards Dubai.
“Consolidating our UAE presence was simply the right thing to do. Our Dubai office has always served as a hub for the whole Middle East region and, with Abu Dhabi only an hour’s drive away, it just didn’t make good business sense to have two bases so close together, particularly given market conditions.”
Abu Dhabi days
But there is plenty going on in Abu Dhabi, says Bin Shabib Abu Dhabi managing partner Fouad Barbar. In particular, Barbar points to the imminent opening of Abu Dhabi’s own free zone, Al Maryah. The Abu Dhabi government has invested significant amounts in Al Maryah, an island off the coast, in a bid to create a similar business environment to the DIFC.
“Everyone is based in Dubai but no one raises money from Dubai – everyone raises money from Abu Dhabi,” says Barbar, arguing that Al Maryah could be the catalyst for future growth. “The biggest investors, the sovereign wealth funds, are based in Abu Dhabi. That’s where everyone is trying to target in terms of money generation.”
“This will drive a lot of interest from international banks, from private equity firms, even from hedge funds to set up their companies in Al Maryah,” he adds.
But even Barbar admits that Dubai still “sells a better way of life” and has the edge when it comes to hospitality. He also says that for international firms mainly doing advisory work, Dubai makes more sense.
In many ways, Baker & McKenzie’s initial move into the UAE with Abu Dhabi was a bit of an anomaly but Gulf managing partner Borys Dackiw says Dubai was always on the cards.
“Most of our global multinational clients’ regional headquarters are in Dubai,” Dackiw says, admitting that occasionally not being on the ground there has hampered Bakers’ local efforts. “Sometimes they just needed lawyers right down the hallway. That put a dampener on our ability to service our global client base.”
The firm accordingly started talking to local outfit Habib Al Mulla, led by the eponymous founder, who was also instrumental in developing the DIFC. The two firms had previously worked together on local law matters, particularly litigation, and Dackiw sees the April merger as fitting perfectly into the US firm’s global strategy.
“We don’t import lawyers from abroad,” Dackiw says. “The goal is to build deep roots in the local legal community.”
The merger is probably the most significant tie-up between an international firm and a local firm in the region in recent years. Rivals suggest it could lead to a drop-off in local referral work, but Dackiw refutes this, arguing that the litigation expertise in particular of Habib Al Mulla has not been lost in the merger process.
Although Dackiw says Abu Dhabi is a crowded marketplace and still has its challenges, he believes it is good for the firm to have a sizeable presence in the emirate due to the connections with government and, as Barbar says, its energy industry.
Outsiders looking in
Recent arrivals in the UAE are set to be joined by more international firms.
“Certainly, in the past year and a half we’ve seen a lot of new law firms looking to set up here,” says Kantaria. He adds that Al Tamimi is particularly aware of the incomers as it often gets asked to advise international firms on local regulations.
“We don’t really see it as a conflict or competition. Ultimately, whether we help them or not they’re going to do it,” he adds.
More generally, Kantaria thinks that the presence of international firms in the UAE is a good thing, despite the fact that there are a lot of lawyers in Dubai and Abu Dhabi now.
“For us, having international law firms here is fantastic and we work with a lot of them – employment is a good example; not a lot of international law firms have an employment practice,” Kantaria explains, although he hastens to add that some international outfits are beginning to do more local work in employment and other areas.
But locals issue a warning to their international counterparts, suggesting that learning from the example of those firms that opened before the recession and have since closed or slimmed down would be wise.
“If you look five years from now you’ll see a lot of international firms that have set up in Dubai in an unsustainable manner will have disappeared,” predicts Kortbawi.
“Some firms have recently come in on the back of specific projects and positioned themselves fairly well in the local legal market,” adds Kantaria.
The international firms are aware of the dangers.
“It may be the case that there’ll be too many English or American lawyers in Dubai, but with the people we have we’re confident that they’re well-connected and this, combined with demand from our existing client base, means we’ll be well-positioned,” says Morgan Lewis’s Engros.
Culver adds that CMS too has a single goal in mind – cracking the oil and gas sector.
“We’ve come here focused on what we want to do and who we want to work with,” he says.
Those firms already in the market are confident that things will remain busy.
As Hogan Lovells’ Sherrington says, “The UAE market has definitely picked up in the first half of the year. Dealflow and liquidity have increased and there’s a lot of talk again about the kind of mega-projects Dubai is famous for.”
While this may make driving through the streets a pain, it does mean that business for lawyers is once again great in the UAE.
Key figures: UAE
Annual inflation: 1.25%
Life expectancy at birth: 77
Source: World Bank, UAE National Bureau of Statistics