Western firms make themselves at home in booming Saudi Arabia

Saudi Arabia is a frontier jurisdiction of the Middle East. It is also a place where multibillion-dollar project finance deals are regular occurrences, making it a region that UK and US firms are placing increasing emphasis on.

In the first few weeks of this year, there were some major partner and associate moves between firms. This hunt for top-level lawyers belies how crucial the West views the jurisdiction.

Trowers & Hamlins has taken the bold move of cutting its affiliation firm loose, confident that it will be able to forge its own path as a standalone operation. The firm has allowed its relationship with Hassan Mahassni to expire, and as Trowers Dubai head of project finance Leroy Levy says: “We now have control of our own destiny.”

The decision must have been made with great anguish, though. Mahassni, a lawyer with more than 40 years’ experience in Saudi Arabia, is now expected to look for the security of another Western law firm to link up with, although he will continue to work with Trowers on an informal referral basis.

Trowers, meanwhile, likes to portray itself as a young, ambitious, go-getting pup. It has certainly made the most of its opportunities, landing roles advising the consortia on two of the kingdom’s biggest projects to date – the Shuaibah and Shuqaiq independent water and power projects.

Trowers’ role on the Shuaibah deal, the first such project of its kind in Saudi, saw it supported by Allen & Overy (A&O), which advised the consortium on financial issues. It is a measure of Trowers’ progress that on the $2bn (£1.02bn) Shuqaiq project, which saw the concession agreement signed last week, the firm handled all aspects for the consortium, including the financing.

White & Case, like several US firms, has its sole Middle East presence in Saudi and has done since 1989. But its affiliation with Mohammed Al-Sheikh, a former New York associate of the firm, has been under threat recently with rivals offering large wads of cash to lure him away.

White & Case, along with Herbert Smith, advised Saudi Aramco and Sumitomo Chemicals on the $9.9bn (£5.05bn) Rabigh petrochemical project in 2006. Al-Sheikh shares the title of co-head of Islamic finance at the firm with London’s Craig Nethercott and has since been doing his own work with Saudi Aramco, the firm’s biggest client in the region.

White & Case’s Europe, the Middle East and Africa project and infrastructure finance head Philip Stopford tells The Lawyer: “For as long as [Al-Sheikh] is a lawyer, we’ll work with him in some form or another.” The firm is also expected to launch a second Middle East presence this year, its first outside Saudi, although a decision on where has not yet been taken.

In January Clifford Chance‘s affiliated Saudi firm, The Law Firm of Yousef & Mohammed Al-Jadaan, suffered the departure of a key partner to DLA Piper‘s Dubai office. The loss of project finance specialist Oliver Agha is a blow, but it is one that Clifford Chance remains bullish about.

Clifford Chance Dubai office managing partner Graham Lovett says: “Our relationship is stronger than ever with the Al-Jadaan law firm and we continue to have a number of our lawyers on secondment with them. They have more than 20 lawyers, which is massive by Saudi standards.”

The hire sees DLA Piper gain local project finance expertise, albeit based in Dubai (at least for the time being), and a look-in on the Saudi market through Agha, who is renowned for his ability to charm clients.

But questions remain over whether the firm has the Islamic finance capability to back up Agha’s skills on project finance.

A&O has made its play for a share of the Saudi market by welcoming back a former lawyer of the firm who has developed serious Saudi credentials. Through a bit of sheer good fortune the firm has recruited the general counsel of Dubai Investment Group (DIG) Julian Johansen, to front its Saudi practice.

Johansen is a rarity among Western lawyers: he read Arabic at Oxford before he studied law and is fluent in the language. Johansen also trained in London with A&O before spending nearly three years working on the ground in Riyadh with a local Saudi firm. He then spent a year as general counsel at DIG, the financial investment subsidiary of Dubai Holding, before A&O tempted him back in January.

“There are two main advantages to having the language ability,” says Johansen. “One, it gets clients comfortable at ‘meet and greets’ and allows you to be a bit more sociable without any awkwardness. Second, it makes you feel a lot more comfortable working in the region in situations where you need a language skill just in your everyday dealings with people.

“It also allows me, on the occasions where I need to, to pick up a document in Arabic and go to work on it without having to wait for a translation.”

The opportunities in Saudi are passing other UK firms by. This includes Ashurst, Herbert Smith and Lovells, which are in the process of launching or bedding down their operations in Dubai.

Norton Rose, which has been besieged with troubles in its Middle East practice, is struggling even further to capitalise in Saudi without Dubai head Graeme Muir at the helm. Muir is understood to have taken a sabbatical following a raft of departures from the firm, but his secretary confirms: “He does drop by from time to time and I believe he’s collecting emails.”

Dubai may be firmly ensconced as the financial and business hub of the Middle East, but there are certainly plenty of opportunities outside it. Saudi has a massive need for basic power, water and infrastructure developments to supplement the country’s extraordinary growth.

Of the Kingdom’s of Saudi Arabia’s population of 27 million, an estimated 60 per cent are under the age of 21. Coupled with the oil price boom that provides the kingdom with an annual revenue of some $100bn (£51bn), the country’s government has a massive amount of funds to invest in infrastructure.

It is undoubtedly a market on the verge of a boom.