When the Dubai government requested a standstill on the $22bn (£13.5bn) owed by its wholly owned subsidiary Dubai World questions were raised about the impact on international firms operating in the Gulf emirate.
One month later and the noteholders of a $3.52bn bond issued by Dubai World subsidiary Nakheel have been paid off and a steering committee of major creditors established, with the expectation that a debt standstill agreement will be signed by the end of this month.
The noteholder outcome was an immediate success for adviser Ashurst, although some debated the merits of taking such a prominent stand against the Dubai government given the
high degree of public control of, and intervention in, business activity.
As a result of these developments “a lot of the heat has disappeared”, as Linklaters Dubai-based capital markets partner James Martin puts it.
Nevertheless, the legal market is already being divided into winners and losers. Linklaters has not had such a central role in the aftermath of the Dubai crisis as it did acting for administrators in the UK. Like other firms it advised a number of clients on their exposure when things initially kicked off, but this has been on a more “generic” basis, according to Martin.
It is Allen & Overy (A&O) and Clifford Chance that have dominated the headlines with their ongoing strategic roles, advising the major banks and Dubai World respectively. Neither of these names are a huge surprise.
A&O drafted the debt and Clifford Chance is a long-term adviser to Dubai World.
Less predictable are the key roles played by Latham & Watkins and Taylor Wessing. These two are counsel to the Dubai Department of Finance. Sources claim that Latham reportedly went head-to-head with another top City firm for the international advisory role.
Lead partner at Latham and regional head Bryant Edwards declined to comment for this piece, but one source with knowledge of the matter claimed that “the firm is extremely busy, it has over 100 per cent utilisation, it’s what’s reversed its fortunes”.
Latham’s Middle East practice has faced the challenge of bedding down a management reshuffle, which saw Edwards replace previous regional head Rindala Beydoun at the end of 2008 during a tough time for the market. Even considering Edwards’ seniority, that is not an easy task. Crucially, for the firm’s long-term position in the emirate, Edwards is thought to have a hotline straight into none other than Dubai Prime Minister Sheikh Maktoum.
Taylor Wessing is the unreported and more surprising addition to the roster. The firm is a relative newbie to Dubai, having opened in 2007, although legacy firm Key & Dixon has been there since 1996. However, it has a key asset in the form of former Key & Dixon partner Osama Hassan. This Sudanese-trained corporate and commercial partner has a longstanding relationship with the Department of Finance.
“Were we expecting to be called in to the setting up of the [Dubai financial] support fund [which was set up to manage a $20bn bond programme]? Yes, I was expecting that,” Hassan chimes confidently.
Around 70 per cent of the firm’s advice to the Dubai government is on local law matters. And it is the local connections (Hassan has been in Dubai since 1988) that have become the firm’s unique selling point in this relationship. Most UK and US firms focus on the international dimension. Hassan’s credentials include involvement in reviewing and drafting legislation.
Perhaps he could use this combination of knowledge and contacts to help make the case for the introduction of restructuring and insolvency legislation. The lack of any such legislation has become a moot point among international investors. A royal decree established a tribunal filled with preeminent QCs from the offshore Dubai International Financial Centre to deal with matters related to any potential Dubai World restructuring, adopting some elements reminiscent of US Chapter 11 legislation.
“I know from contacts within the government that the intention is to be more transparent and improve on the [existing] laws,” comments Hassan. “Initially the reaction was, ‘Is the government trying to circumvent onshore bankruptcy laws [as laid out in the Commercial Transactions Code]?’” Ultimately, he stays loyal to his client. “It was about boosting investor confidence and improving whatever already exists,” he adds.
“The lack of insolvency legislation is not unique to Dubai, it’s common to the rest of the region,” pitches in DLA Piper regional managing partner Abdul Aziz Al-Yaqout. “People see [bankruptcy] as something shameful rather than something that’s necessary. [But] companies go bust – it’s what happens.”
Hassan is optimistic that recent events could spell a coming of age for Dubai. “Things are changing: people don’t see the benefit of applying and making use of local bankruptcy laws,” he states. “Events are leading to maturity in the business environment in Dubai.”
Lawyers in kuwait
The Dubai crisis may be leading to the invention of the lawyer in Kuwait, says Denton Wilde Sapte office managing partner David Pfeiffer. “In the past major projects would have no lawyers on them. The parties defaulted to the civil code, [rather than] contracts, to resolve their problems.
They’d say, ‘Why do we need lawyers?’ But if you took that position in Dubai things wouldn’t look that good for you now. These are things that resonate [with the Kuwaiti business class] when they meet in their diwaniya [tent] at night to exchange information and discuss the issues of the day. Suddenly having a lawyer looks more attractive.”