Middle East Special Report: Arabian blights

Over the past five years, lawyers have been flooding into the Middle East, resulting in offices of City and US-based law firms cropping up like a rash throughout the six-country Gulf Cooperation Council region.

While Bahrain, Kuwait, Oman, Qatar and even Saudi Arabia have been targeted by the globals, it is the United Arab Emirates’ (UAE) Dubai that has been mostly in the spotlight. The welcoming attitude of the ­emirate’s leader, a buccaneering private ­sector – especially in real estate – and a tax-free environment have all combined to ­attract Western businesses and legal ­advisers to Dubai’s glow.

But is the shine wearing off in the legal sector or will the market continue to provide rich pickings through the downturn?

One recruitment consultant with years of experience in the region warns that the first quarter of this year could provide quite a shock for the global practices in the region, and especially those in Dubai. “We’ll see redundancies in the Dubai offices within the next few weeks,” he predicts.

Other recruitment agents are less ­dramatic but still much more cautious than they have been in recent years. One Dubai-based consultant says: “There’s a definite slowdown in recruitment and that’s a ­definite impact from the global economy. Is there enough work? At the moment, ­probably yes, but I don’t think people will be making the type of fees that they’ve been making in the past year.”

These cautious voices strike a discordant note in a region that until even the latter part of last year was the subject of unbridled enthusiasm. Now those at the law firms themselves are sounding warning bells.

Clifford Chance has nearly 100 lawyers in the UAE and Saudi Arabia. The world’s biggest law firm has been brutally transparent with its announcement that it is looking to shed up to 10 per cent of its ­London lawyers and has launched a staff consultation to that end. Will that process now seep over to the firm’s Gulf operations?

“A lot of our staff in Dubai are on ­secondment from London, so they fall under the process that’s being undertaken there,” explains Gulf regional managing partner Graham Lovett. “But I’m not ­expecting ­massive changes in headcount at the Gulf offices. We’ll deal with the issue through natural wastage – for example, one of our partners recently went to Simmons and
we won’t be replacing him. Likewise, we won’t replace people when some of the ­secondments come to an end.”

Lovett defends Clifford Chance’s historic strategy of growth in the region.

“We could have been a lot bigger than we are now. We’ve expanded very cautiously in anticipation that the market would one day reach ­capacity. So we made the conscious decision to keep growth under control so I don’t feel massively exposed at the moment.”

Indeed, Clifford Chance has been in the region for more than 35 years. Another long-term player is City-based Clyde & Co, which has a similar number of practitioners in offices in Dubai, Abu Dhabi and Doha.

Clydes is one of only two firms in the region (Trowers & Hamlins being the other) to base a permanent senior HR executive in the Gulf – head of Gulf HR Larry Archer.

“I expect all firms in the region will be reviewing their recruitment issues and some will definitely need to look at their resourcing strategies very seriously,” he says. “There’s a good chance there will be redundancies or at the very least firms will move staff around to offices outside Dubai. Qatar is still looking good.”

Archer maintains Clydes is “well-placed to weather this period because we have a wide-ranging practice with specialists across many fields. And there’s still work coming into the market, especially litigation.”

DLA Piper launched in Dubai only three years ago – and it didn’t stop there, spreading last year to outposts in Abu Dhabi, Kuwait, Oman, Qatar and Saudi. In a flash it has become one of the biggest firms in the region, with a lawyer team of around 140 spread across the offices.

That is a big outlay and commentators suggest DLA Piper will struggle to maintain profitability in the region. But Gulf managing partner David Church remains bullish. “Last year our turnover increased by three-and-a-half times in the region and we’re reckoning on doubling turnover for this year,” he says. “I don’t see any reason to revise those figures, although obviously some types of work are drying up: there are significantly less M&A deals than there was during the first three quarters of 2008. But there’s lots of other stuff. While some projects have been shelved or delayed, there’s still a significant amount going on.”

Particularly vulnerable in the Gulf are the US practices that have arrived ­relatively recently. Many have adopted a different model to their UK counterparts, effectively running representative offices that aim to gather instructions and then farm the work back to offices in the US.

“There’s been considerable change in the region over the past three years,” explains Church, “in that there’s a growing reluctance on the part of clients to accept work being ­gathered up by what’s effectively a rep office and scooped back elsewhere.”

Although it is still unclear exactly how many firms will make redundancies, one thing is certain – all the law firms in the region will be adversely affected by the ­global financial crisis.

Jonathan Ames is editor of Dubai-based The Brief