Making the right connections is key to conquering Saudi legal market

THE GULF region is increasingly hailed by international law firms as a ­crucial part of their respective global growth strategies. Rich and growing markets boosted by ­massive hydrocarbon wealth at a time of near-record oil and gas prices; high birth rates; a rocketing standard of living creating demand for improved infrastructure married to a relatively small legal market all serve to highlight the region’s attractions.

The Saudi market is at the extreme end of this. While it pumps out a fifth of the world’s oil, cultural differences and the requirement that foreign lawyers have local sponsors means there is just a handful of global law firms operating in the kingdom. At the same time, Saudi clients are increasing the demands they make of their foreign-qualified advisers.

Mark Walters, Middle East recruiter at First Counsel in Dubai, which has placed lawyers both in-house and in private practice in Saudi, says: “The type of lawyer we’re having to source is ­becoming more sophisticated. Clients are making sure people are close to them.”

One Saudi lawyer puts it more succinctly: “If you don’t have a ­presence, [clients] won’t look at you.”

Odd one out

That must ring in the ears of Linklaters, the only magic circle firm not to have opened in Riyadh.

Nick Eastwell, London-based regional managing partner of the emerging Europe, Middle East and North Africa (EEMENA) group at Linklaters, does not believe that not having a Saudi office is a major disadvantage for the firm, adding that it won a major Saudi ­mandate recently.

But Eastwell admits this may not always be the case, adding that, sooner or later the firm may have to change tack. “I won’t be surprised if not having a presence becomes an issue eventually,” he says.

Panels

Another change to the Saudi legal sector is that clients are beginning to launch formal panels of the type used by entities in the UK and US.

Fares Al Hejailan, Freshfields Bruckhaus ;Deringer ;Saudi ­sponsor and co-head of its Riyadh office, says: “With the volume of deals you’re going to see the Saudi market change – [client] ­management will develop this ­concept.”

He points to client Al Rahji Bank, recently ranked in the Financial Times’ Global 500 list of the largest companies by market capitalisation, as one that is ­considering launching a panel. “They’ve been talking to us about that,” says Al Hejailan.

Aggressive firms

Firms are becoming increasingly aggressive as they seek to become top dog. The $15bn (£8.5bn) King Abdullah Economic City – a new city of two-million people on the western coast of Saudi Arabia – is being developed by Freshfields’ longstanding client, Dubai ­developer Emaar.

Allen & Overy (A&O) Riyadh partner Julian Johansen has also recently got in on the game through his advice to HSBC, Emaar’s ­financial adviser on the project.

One source told The Lawyer: “That’s a big coup for A&O because it’s a huge project. A&O, to all intents and ­purposes, is calling the shots.”

However Bob Charlton, Freshfields Riyadh co-managing partner, laughs off the suggestion that A&O is dominating the project. “I wouldn’t expect Emaar to take a backseat role,” he says.

Freshfields ;has ;grown ­significantly since relaunching in ­association with Fares, the son of the firm’s former trusted adviser Salah Al Hejailan, earlier this year. It has six lawyers on the ground, including US-trained Islamic finance specialist Dr Walid Hegazy. Senior associate Hegazy has recently advised Samba ­Financial Group on a number of general finance transactions, although the consensus is that Samba is still close to Clifford Chance and its local firm Al Jadaan.

The Clifford Chance tie-up is still one of the most successful in terms of deal volume, rivalled only by Baker & McKenzie (B&M), which has also been operating in the ­kingdom for quite some time.

Khalid Al Abdulkareem is one of the key rainmakers in the Clifford Chance relationship. This Saudi-qualified partner at Clifford Chance’s associate firm, The Law Office of Yousef & Mohammed Al Jadaan, has expertise across the corporate capital markets, ­litigation and projects sectors.

“He’s very connected with royals and the Saudi government. [He’s the] guy I’d suspect any foreign firm to snatch up,” says one recruiter to the Saudi market.

One of the major sources of work for the firm is chemicals and fertiliser manufacturer Saudi Basic Industries Corporation. The firm recently assisted it on a $10bn (£5.6bn) vertically integrated greenfield downstream petrochemicals complex.

The ;firm’s ;strength ;also ­stretches across the banking ­sector, with clients such as Arab National Bank, HSBC Saudi ­Arabia and Saudi Hollandi Bank under its belt.

Connections

However, according to one Saudi source, firms will be ­shooting themselves in the foot if they do not consider developing closer relationships with the Saudi political-economic elite. “Take a company such as Saudi bin Ladin. It has personal wealth ­intertwining with transport and other ­interests. It’s more than someone just sitting there with a pot of gold and a spreadsheet thinking, ‘Shall I put the money into a hedge fund?’”

B&M has something of a head start in this sector, although its reputation is also built on its strength in M&A work.

Head of the Riyadh office John Xefos is married to Lubna Olayan – heiress of an estimated $25bn (£14bn) ­fortune and CEO of the Olayan Financing Company.

“Having that as a base is the equivalent to having ranking members of the royal family close to them,” says the source.

Charlton at Freshfields says: “We take the view that we need to target the right type of business and the right type of client. And if there happens to be a connection, all the better.”

Opportunities may abound in Saudi, but it is not inconceiveable that this scenario could change, putting even more pressure on firms. It is not impossible – the eruption of political turmoil of the kind that saw law firms and ­foreign businesses exit Kuwait during the Gulf War, or Riyadh post-9/11, could be repeated. A massive fall in oil prices would also have a negative effect.

Such semi-apocalyptic events are already being discussed by partners with an interest in the region.

“The whole thing will come to a grinding halt for a reason no one knows,” says Jeffery Barratt, head of global projects at Norton Rose, which has offices in Bahrain, Dubai and Riyadh. The result, he says, will be a “flight to quality”.