Middle East layoffs suggest there’s no place like homeLast week The Lawyer broke the news of the first legal job cuts in the Middle East. Seven Trowers & Hamlins employees lost their jobs in Dubai, Muscat and Riyadh, six of them associates and most from project finance (23 February).

Trowers is one of a host of firms, among them Allen & Overy, Denton Wilde Sapte and Pinsent Masons, that have used their Middle East networks to cushion against the downturn in more mature markets. Others bulked up with local lawyers. Any significant dip in Dubai would be expected to have major implications for those expanded teams.

The fact that Trowers has decided to cut lawyers in the Middle East, regardless of the fact that the actual numbers are relatively small, is hugely symbolic. After all, Trowers takes an otherwise conservative approach to cutting jobs, it has grown organically in the Gulf over a period of 30 years and is not exposed to high-end debt-driven corporate work or short-term structured finance deals. But if Trowers is making cuts, will not firms such as Dewey & LeBoeuf, Latham & Watkins and Lovells, all of which have opened in the region over the past two years, be looking at doing the same? And what about the magic circle firms, which have large structured finance practices in the region?

The brash confidence of the boom years has been severely dented in Dubai. With no hydrocarbon reserves to speak of, the debt-fuelled construction boom of the past decade has been hit by the ­liquidity squeeze. Since the autumn developers have put up to 25 per cent of projects on hold.

While Dubai has Abu Dhabi, with the world’s largest sovereign wealth fund, to fall back on, and with the United Arab Emirates central government injecting $10bn (£6.93bn) to ease Dubai’s debt repayment schedule, its stock market nevertheless continued to tumble last week.

Trowers may have been the first firm to make layoffs, but local sources say some firms are working at negligible utilisation rates. Those in the capital markets department at one top 10 UK firm are said to be operating at 20 per cent, billing between five and 10 hours per week. One Dubai office head at another top 10 firm says his staff have been offered the “attractive opportunity to take extra [unpaid] holiday” as an alternative to redundancy

Despite the unease, some firms are so confident about their potential to keep generating business that they are still sending partners to the region.
LG, for example, has sent a corporate partner to its small Dubai office, with Tim Casben joining the other LG ­resident partners James Foster ­(construction and projects), Andrew Young (private capital) and a host of floating partners and associates.

LG believes the move is justified because of the large amount of corporate work being generated by its super-rich clients. London-based head of corporate Christopher Tite says: “Our offering is significantly helped by private capital. It’s not so debt dependent. Clients are cash-rich and able to take advantage of market opportunities. Those we’re acting for are long-term investors.”

The other crucial element is that LG’s Dubai office, and its corporate practice, has always been focused strongly on investment to and from India and South East Asia. These regions account for around 60 per cent of the Dubai office’s corporate practice.

There is another element to the Asia-Dubai axis, with India and Pakistan helping feed Dubai-based firms’ ­insatiable thirst for recruits over the past two to three years.

Regardless of where the lawyers have come from, for those facing the prospect of redundancy the outlook is bleak, given that UK protections will not normally apply in Gulf jurisdictions.

When it comes to discrimination claims, the process can be lengthy; and even if an individual operating under the jurisdiction of the Dubai ­International Financial Centre (where most firms are licensed) is successful, they cannot recoup their costs.

Those being made redundant in the UK may be shocked at the limited
protections available, but the situation in Dubai suggests that in the downturn it might actually be better to stick closer to home.