White & Case shuts its Bahrain office as Dubai market hots up
14 October 2002
White & Case has withdrawn from Bahrain. The US firm's surprise exit comes just 32 months after it moved into the region and at a time when the rest of the international legal community is gearing up to exploit the Middle East's economic growth.
Norton Rose, for example, is considering setting up an office in Dubai, while reliable sources say US firm Sullivan & Cromwell has been looking at Qatar to launch its Middle East presence, although the firm itself denies that any such move is planned.
Alexander Kritzalis, the head of White & Case's Middle East practice group, said his firm plans to concentrate on developing its bases in Riyadh and Jeddah in Saudi Arabia.
"We're redeploying our assets and concentrating activities in Saudi Arabia rather than focusing on three offices. Saudi Arabia is where the real action is," said Kritzalis.
White & Case, which moved out of Bahrain on 29 September, had an association with Bahrain national firm Qays H Za'bi. Kritzalis was White & Case's managing partner and the office comprised one counsel and four associates.
Norton Rose, which has had a presence in Bahrain for 25 years (the office's managing partner John English is moving in early 2003 to head up the firm's Amsterdam office) has been driven to consider launching in Dubai by a growth in shipping, projects and commercial work.
Stephen Parish, Norton Rose's head of banking, said: "The Gulf is one of the few regions in the world that is moving forward with developments in investments and infrastructure. We'd be crazy not to be thinking of Dubai in this climate."
This view is supported by the experience of White & Case, which also reports a growth of instructions from Dubai (Kritzalis has visited the region 65 times in the last five years).
Nevertheless, Kritzalis said his firm is not considering opening an office there and Norton Rose is proceeding with caution, given that the international legal community - which includes Allen & Overy (A&O), Clifford Chance, Clyde & Co, Denton Wilde Sapte and Berrymans Lace Mawer - is already well established in Dubai.
Well-placed sources have said that Sullivan & Cromwell is looking to enter Qatar, a heavily restrictive jurisdiction for foreign lawyers. The firm's chairman Rodgin Cohen denied the speculation. Sources close to the firm, however, said the possible expansion followed on the back of its growing involvement in project finance in the energy sector.
The area's potential, though, is not in dispute. Qatar's gross domestic product, currently the highest in the Gulf, is expected to be the largest in the world come 2008. The massive Dolphin gas pipeline project is expected to grow beyond the United Arab Emirates into Kuwait and Bahrain, and from there may be extended to Pakistan.
International firms can only set up in association with a Qatari firm, and Richards Butler is the only international firm to have done so to date.
One of Clyde & Co's leading corporate partners David Salt has just joined pre-eminent Qatari firm Law Offices of Gebran Majdalany. Salt has replaced former A&O partner Richard Turner, who was one of three lawyers at the firm.
Salt, a former Slaughter and May and Bird & Bird lawyer, will retain informal ties with Clyde & Co while running Majdalany's English-speaking department, although he has stepped down from Clyde & Co's partnership. His specialist expertise is in corporate oil and gas, shipping and insurance transactions.
Meanwhile, UK firms are taking an increasing interest in Iran as work picks up in the region following two decades of extremism and war.
Clyde & Co has resisted seriously considering opening an office there, despite several of its Iran-based clients asking it to do so. John Whittaker, the firm's international trade partner, is interested in Iran but has not started on any preliminary discussions into launching an office.
Most firms report a recent upturn in work in Iran. Trowers & Hamlins is advising on the construction of a water pipeline between Iran and Kuwait, petrochemical investments from and into the region and large joint ventures.
Most international firms in the Middle East concur that work has blossomed since 11 September. This is attributed to a mix of growing project and financing work arising out of an accelerated privatisation programme, growth of investment by wealthy Arabs in the Middle East and an upsurge in Islamic financing. Norton Rose, for example, has just been appointed as international legal adviser by Aluminium Bahrain in its $1.7bn (£1.1bn) production of a power plant and aluminium production facilities. The firm claims the project has been given the largest injection of Islamic funding of any international project.
Ship work, on the other hand, according to Clyde & Co, has not changed much recently, although Clifford Chance's head of shipping and commodities Tony Vlasco reports significant growth in the chartering of vessels in the Middle East for the transportation of liquid natural gas.
Investment outside the Middle East that tradition-ally went to the US is increasingly going to West Europe, particularly the UK, and becoming more sophisticated in its nature.
Martin Amison, head of international projects at Trowers (which boasts the largest Middle East presence in terms of the number of offices of any international firm), said: "There's more sophistication in terms of investment [by the Arab community], not just into banks, big houses, stocks and shares, but also into taking over chunks of businesses in and outside the Middle East."
The reduced profitability - at least in the medium term - of private equity investments by Arab banks in the US has also brought profitable work to lawyers. The Bahrain International Bank, for instance, has just instructed Norton Rose as its international legal counsel, alongside Credit Suisse First Boston, to advise on an asset sale programme, the proceeds of which will be used to repay some $460m.
However, although work is on the upturn despite 11 September, the rise in oil prices and political turmoil, firms are still likely to think twice before setting up an office in the region because of difficulties getting work, unless they have had longterm ties with the region.
Amison at Trowers said: "For instance, it's very hard for a firm to get into Egypt [where Trowers has an office] if it has no experience of the region. We could do it because of our familiarity with Egyptian laws, as they're the basis of laws implemented in Gulf states." He added that Trowers was recently chosen by the National Bank of Oman when it set up in Egypt because of the firm's long-term relationship with the bank.
There is another problem. Several years ago, the regulation of laws in Oman transferred from the Ministry of Commerce to the Ministry of Justice. A similar process is now taking place in Saudi Arabia.
One impact of this transition is that international lawyers' practices are likely to be reviewed once new regulations are introduced by the Oman Ministry of Justice. They are due to come into effect at the end of December, three years after the original deadline for implementation.
Practitioners interviewed by The Lawyer were uncertain about the nature of the regulations, although they concurred that it is likely to force firms to enter partnerships.
This could cause difficulties, because Omani legal training is still in its infancy, and those practising non-criminal law have invariably been trained overseas. Other expected changes relate to rights of audience and nationality and qualification requirements to practise. Amison expects the regulations to be a "hurdle" rather than an "obstacle" to the development of Oman's business.
Whatever problems regulation might throw up, the Middle East offers a welcome tonic for the international legal community, which is struggling to maintain deal flows in Europe. All of which makes White & Case's decision to quit Bahrain after just 32 months even more surprising. Then again, Clifford Chance pursued a similar tactic a few years ago when it, too, pulled out of Bahrain, centralising its Middle East operation in Dubai.
It might not be so foolish to have your base as Saudi Arabia. While everyone is talking about Dubai, Saudi has also enjoyed rapid growth, but has a smaller international legal community and is, perhaps, the untold story of the Middle East.