On the front line

As Iraq starts to rebuild its constitution as well as its cities, Brendan Malkin discovers how Western law firms in the Middle East have been affected by the war and asks what role lawyers will play in the reconstruction

Although law firms and chambers are not shouting from the rooftops about the post-Gulf War work they are trying to get their hands on, rest assured there is masses to go around.

Given that the impact of the first Gulf War continues to provide lawyers with a healthy workflow, it is unlikely that the second Gulf War will be any less lucrative.

In addition to the myriad of restructuring projects, lawyers will also assist in the establishment of a new body of law governing new institutions within a new constitution. Public international lawyers are already hosting seminars on issues such as what constitutes a state and how Iraq can formulate an identity in a way that satisfies both its population and the international community.

Even before the outbreak of hostilities, litigation stemming from disruption to trade hit the desks of shipping specialists, including Holman Fenwick & Willan and Watson Farley & Williams. These disputes centre on shipowners, or the parties that chartered their ships, seeking to recover losses suffered over the late or non-delivery of goods, most of which were bound for Iraq under its food-for-oil programme. Litigation is in its early stages, although shipping chambers such as 20 Essex Street and 4 Essex Court are likely to be instructed in the near future.

Liabilities are also on the cards, stemming from disruption to ships’ voyages during the conflict. The outcome will depend on the courts’ interpretation of the law of frustration, which releases parties from their obligations if “independent supervening circumstances have arisen” that make the performance of contracts either impossible or radically different from what was envisaged.

Such litigation will be fought in London courts and handled mainly by City insurance and shipping experts. Meanwhile in the Middle East,

all Western firms are drawing up strategies for getting hold of surface reconstruction work, such as restoring power and water supplies and reinstating transport and telecommunications to their pre-war levels. The feeling is that most of the related legal work will go to the in-house legal departments of US construction companies.

Law firms, in a bid to dispel the public’s perception of lawyers as money-grabbing ambulance-chasers, will also undertake some pro bono work. Opportunities include providing legal advice to a variety of bodies in Iraq, from the US Office for Recon-struction to aid agencies, and a host of public, international and constitutional lawyers will be engaged in advising the new regime on its constitution and new legal system.

Joint ventures with Iraqi companies will be key for Western firms seeking to capitalise their positions in the Middle East markets and tap into one of the richest regions in the world for agriculture, oil, gas and petrochemicals. Lawyers will be needed to guide their clients through the rough terrain of restrictions, bureaucracy and licensing requirements, and then bid for the work through local tendering bodies.

Clifford Chance, in association with Qays H Zu’bi, Bahrain
The firm’s Middle East offices are such a long way from any fighting that the hostilities did not put its employees at any serious risk. Warnings were issued for staff to be on low levels of alert. However, serious concerns arose in its Riyadh base following the murder of a Westerner, and consequently staff were told that they were free to relocate until tensions dropped.

Two Riyadh-based lawyers took up the offer by transferring temporarily to the firm’s Dubai office. One of the two heard about the dangers while planning his route home after a holiday and spent a day in Dubai. “The two lawyers felt they weren’t exactly sure how they felt about the Riyadh situation, so they went to Dubai to get their heads around what was happening,” said Tim Soutar, Clifford Chance’s head of regional finance and projects.

Clifford Chance’s management heads are now focusing on how to take advantage of the massive opportunities in Iraq stemming from the end of the Ba’ath regime. Several of its international clients have agreed in principle that investment and the setting up of joint ventures in the medium to long term is worth serious consideration. However, this will be dependent on a new constitution replacing the decades-old previous one barring such activity.

Meanwhile, the firm said any work in the region will require licenses issued by the UN (although Clyde & Co, when it sought to enter talks with Iraqi companies prior to the second Gulf War, approached the Department of Trade and Industry for its licence).

Short-term work includes clearing ports, reshaping telecoms, getting power back on line and re-establishing proper water supplies. Soutar said the associated legal work is likely to be handled by the in-house legal departments of US companies, such as Haliburton and Bechtell, which have won reconstruction contracts.

However, Clifford Chance sees opportunities in acting for clients engaged in getting oil production, transport and power up to the levels they were at before the Gulf War began.

In the interim, the firm could also assist in daily contractual issues relating to projects such as planning consent and insurance. Clifford Chance staff are also keen to engage in pro bono work, including providing assistance to aid agencies and the establishment of a government in Iraq that is recognised by the international community – a condition dependent on it receiving World Bank assistance.

White & Case, Riyadh, Jeddah
White & Case was the first Western firm into South Africa after Apartheid, the first Western firm into Saudi Arabia, and is now it striving to be the first into Baghdad following the end of the second Gulf War.

Veteran energy lawyer Sandy Kritzalis, head of the firm’s Middle East group, who spent a week touring Iraq in 1989, will soon be revisiting Baghdad with a team of lawyers to scour the land for opportunities. He also said it is likely that, in time, the firm will set up an office in Baghdad.

The firm will largely ignore the immediate post-war reconstruction work and advising on the establishment of a new regime. Instead it will focus on medium to long-term opportunities. These include negotiating on Iraq’s behalf in relation to its massive war reparations (which it has experience of in no less than 65 states, according to Kritzalis); advising on potential dispute resolution stemming from contracts entered into by Iraqi companies with foreign businesses during the Ba’ath regime; and advising the interim and permanent government on projects.

Other work will be in the banking and telecoms sectors, as well as oil, an area in which the firm has significant experience around the network, particularly in Indonesia, Moscow and Saudi Arabia.

Bryan Cave, Kuwait, Riyadh, Dubai, Abu Dhabi
Having four offices and 20 years of Middle East experience means Bryan Cave is well equipped to handle post-war work in Iraq.

The firm is currently providing “general counselling” for companies that have won contracts for reconstruction work in the country and is gearing up to act for clients looking to invest in Iraq in the medium term. They include oil field service companies, architects, construction companies and hotel chains.

Providing sanctions advice through its US and Middle East offices is also high on Bryan Cave’s agenda.

Meanwhile, it continues its work for Kuwaitis seeking compensation through the US Commission Compensation Fund for disruption caused by Iraqis during the first Gulf War. The firm is advising on a significant proportion of the country’s 100m claims.

Stephenson Harwood, in association with Al Sarraf & Al Ruwayeh, Kuwait
Stephenson Harwood moved into Kuwait in the aftermath of the first Gulf War by setting up an association with local firm Al Sarraf & Al Ruwayeh. Question marks remain over how clever a move this was as reconstruction work was not as forthcoming as its partners had envisaged.

Nevertheless, between the Gulf Wars, Kuwait advanced to have one of the world’s most advanced telecommunications capacities and lowest oil production costs. Andrew Sutch, senior partner at Stephenson Harwood, will now be focusing on the similar potential of Iraq, particularly in relation to power, crude and gas.

During the conflict plans were in place to evacuate its lawyers from Kuwait to Dubai and Southern Kuwait, although in the event this was not necessary.

Clyde & Co, Dubai, Abu Dhabi
The firm appears to be either downplaying its scope for work in post-war Iraq or has had something of a change of heart since late last year, when it sent a partner to talk to Iraqi companies about potential post-war collaborations.

John Whittaker, international head at the firm, said he would be “frankly surprised” if there was a lot of legal activity, although he highlighted the fact that work is urgently needed on the country’s water supplies, telecoms and hospitals. Only a few clients will be interested in taking advantage of commercial opportunities, he added.

However, the Middle East is of growing importance for the firm, reflected in its recent hiring of three lawyers from Eversheds, Halliwell Landau and Slaughter and May.

Furthermore, prior to the war, partners highlighted Iraq’s oil, gas, sulphur and agricultural industries as being ripe for consolidation. The firm has also recently hired an Iraqi and Lebanese-qualified lawyer, who is expected to be a useful conduit between Clyde & Co and Iraqi lawyers.

Several months ago a source at the firm told The Lawyer: “If there was a sanctions breakthrough or an improvement in the business climate, then we’d be looking to help guide Western companies wanting to work with Iraqi industrialists and assist them in drawing up contracts and so on.”

Trowers & Hamlins, Bahrain, United Arab Emirates, Oman
All of the firm’s lawyers and staff stayed in place during hostilities, despite its Bahrain office moving from security level one (business as usual, while keeping vigilant) to level four, which gave staff the option to leave if they wished.

Trowers, which has the most Middle East offices of all UK firms, now has big plans for Iraq’s post-war reconstruction and industrial consolidation, although its head of international Martin Amison is staying tight-lipped about most of them in case his competitors steal his ideas.

Meanwhile, the firm is liaising with contacts with knowledge of Iraq’s oil, gas and petrochemical capacities, so it will be well placed to bid for contracts on behalf of their UK and US clients.

Also, deals that were put on hold during the war (largely because of client aversion to travelling to the region) are now going through at pre-war speed. It is currently advising the developers of a water pipeline project between Iran and Kuwait as well as the government of Oman on a major oil-refining project.