Projects still rule in the Middle East, but the transactional and disputes sectors are becoming more sophisticated, making for an interesting and rewarding life for junior lawyers.
Western law firms have been flocking to the Gulf states for decades, attracted by the region’s natural resources, sovereign wealth funds and global ambitions.
Of the seven states, the nations to attract most attention and investment are the United Arab Emirates (UAE) and Saudi Arabia. The former has long courted the West while the latter is the world’s largest producer of oil and has attracted significant investment since the start of the reign of King Abdullah, seen as a reformer. He has implemented numerous changes in policy since 2005 and has focused on foreign investment.
The two nations take two of the top four spots on the sovereign wealth fund index, with both fortunes built on oil.
For junior lawyers sent on secondment to the Middle East during training contracts or upon qualification, the region offers multiple opportunities. Due to smaller offices, junior lawyers often have more influence and responsibility while learning about a vastly different market to the City.
“The whole team is more entrepreneurial at every level,” says Shearman & Sterling Europe managing partner and London office head Nick Buckworth. “Trainees in our Middle East offices are very involved in all aspects of client work and are afforded a significant amount of responsibility at an early stage.”
His words are echoed by Allen & Overy (A&O) Abu Dhabi partner Ian Bevan, who relocated to the Middle East six years ago.
“A number of our seconded trainees have said their level of responsibility and experience was far greater than they expected,” he says. “They’ve also mentioned that they haven’t found it as difficult to adapt as they envisaged when they stepped off the plane.
“I’d advise trainees to be sensitive to local business culture, as in any jurisdiction that’s new to them. But at the same time it’s worth noting that cultural differences are sometimes overplayed and the region has been open to international investors and businesses for as long as we’ve been here.”
A key feature of business culture which differs from that of London is the value placed on face-to-face meetings and relationships. “There is no doubt that it is a market that puts a premium on personal relationships,” says Buckworth. “But it is also a very sophisticated market which expects the highest level of commitment and quality from its advisors. There is no substitute for great training and excellent focus on the job at hand.”
The classic sector associated with the Middle East is that of project finance due to buildings such as Dubai’s Burj Khalifa, the world’s tallest structure at nearly 1km high.
“Projects, construction and real estate are some of the most active sectors here,” says Bevan. “I’m part of our international real estate team and am often involved in multibillion-dollar developments including entire new cities, sometimes described as ‘megaprojects’.”
While the projects market is incredibly active it has seen some slowdown of late, according to Buckworth. “The price of oil and associated inhibitors have definitely slowed it down,” he says. “It is still an incredibly vibrant region but it’s phenomenally competitive too.”
As the market develops, so do law firms’ work streams. Disputes, once shied away from in the region, are becoming more sophisticated, mirroring the increasingly sophisticated transactional work.
Qasim Aslam has headed up Dentons’ Islamic finance practice in Dubai since 2012. In addition to the projects market and his own sector he names technology, media and telecoms, and hospitality as sectors that keep the firm’s corporate team busy.
The vast majority of Western law firms choose to establish a base in the UAE before looking to other countries such as Bahrain, Qatar or Saudi Arabia.
The outward-looking UAE, comprised of seven emirates, is the easiest of the Gulf states to enter and firms tend to establish offices in Abu Dhabi or Dubai, with many choosing to inhabit both cities.
Abu Dhabi is the emirates’ capital and the site of its government departments and state-owned entities such as the Abu Dhabi National Energy Company.
Dubai, meanwhile, serves as a global financial centre and a gateway to the rest of the region. Since it established its financial free zone, the Dubai International Financial Centre (DIFC), a decade ago, international companies have flocked to it. This move is now being copied – not before time – by Abu Dhabi, which is in the process of establishing its own financial free zone, the Abu Dhabi Global Market (ADGM).
Like the DIFC, the ADGM will be exempt from city legislation. It will self-govern, using a framework designed to tie in with international financial regulations. Also similar are its rules on 100 per cent foreign ownership, zero tax and customs duty exemption.
Shearman & Sterling set up an office in Abu Dhabi 40 years ago, based on its relationships with the region’s oil companies.
“It’s been a highly active market in its own right for a long time and we have strong relationships,” says Buckworth. “The city has developed over that time and is continuing to evolve. First, investment was local, then companies in the city started investing into Europe and the US, and now we are starting to see more investment in the Middle East region.
“We’re seeing more regional private equity streams than ever.”
Islamic finance and the UAE
Islamic finance is a broad term that encapsulates an area of financial services undertaken in accordance with Shari’a law.
Unlike national laws, Shari’a is not a codified body of law that is reflected in statutes or a civil code. Instead, it is derived from a number of sources including the Quran, the sayings of the Prophet Mohammed and teachings (sunnah). These sources are then subject to the interpretation of individual Shari’a scholars. These scholars are tasked with applying the sources of Shari’a to often complex financial transactions and differences of opinion on interpretation are common.
The most notable prohibition in Islamic finance is that charging interest on a loan is forbidden. However, Shari’a does not prevent parties from conducting business and making profits so long as those activities provide that profits are derived from real assets, ie. not just money itself, and there is a sharing of risk and reward between the finance provider and the entity seeking finance.
So what types of companies or financial institutions use Islamic finance?
There are a number of answers to this question. Islamic finance is used by entities or financial institutions established purely to transact in accordance with Shari’a, such as an Islamic bank or investment fund. To the extent that these institutions wish to raise financing they have to do so in a manner that complies with Shari’a. Alternatively, entities such as real estate developers may seek to attract financing from Islamic banks or investment funds to increase their capital.
The corporate world
Applying the principles of Shari’a to the world of corporate and project finance is obviously challenging and so lawyers and financial advisers work closely with Shari’a scholars to develop a structure and appropriate documentation for an Islamic finance transaction. The growth in Islamic finance outside Malaysia really kick-started in 2005 and has continued to grow despite the global recession, with global Sukuk issuance – the Shari’a equivalent of a bond – in 2014 exceeding $100bn.
Islamic finance has, and continues to propel growth in economies in the Middle East, from property development in Dubai to oil and oil-related products in Saudi Arabia.
Shearman & Sterling has been at the forefront of a number of these transactions including the $2bn Sukuk issued by Sadara to fund the joint venture between Saudi Aramco and The Dow Chemical Company in Saudi Arabia.
Middle East jurisdictions are also keen to promote Islamic finance by implementing legislation to help develop Islamic finance. Shearman & Sterling is advising the Abu Dhabi Global Market (ADGM) on the development of the regulatory framework for Islamic finance in the ADGM to place it at the forefront of the industry.
Barry Cosgrave is a senior associate at Shearman & Sterling
Trainee about town
Name: Charlotte Hawkins
Firm: Shearman & Sterling
University: University of Exeter
Where are you from? London.
Did you have connections to the Middle East before your secondment?
I’d been to Dubai and Abu Dhabi on holiday a couple of times and I had a few friends who lived there. I really enjoyed visiting the region so I was keen to spend more time there.
What’s the most exciting matter you’ve worked on in Abu Dhabi and why?
All the work the team does is fairly complex and high-end, but I did work on an Omani independent power project which I found particularly interesting because I learnt about how Omani power deals are structured.
I got exposure to both the project and finance aspects of the transaction, working closely with the partner and it was a very fast-paced deal.
What time do you usually leave the office?
Around 7pm. I’ve had a few late nights but that’s to be expected when you’re working for a big international law firm.
Whereabouts do you live in the city and what’s the area like?
I live in Etihad Towers which is a great location with an amazing view. It’s a major landmark which is extremely sought after by Abu Dhabi residents. There are lots of restaurants and shops on my doorstep and the office is conveniently located in one of the five towers.
How much do you spend a month in the city, and what on?
On average I’d say I spend around £1,200 a month but it varies according to my weekend activities.
There are many great restaurants, spas, waterparks and beach clubs to try out in the city so I spend a fair amount on those and I’ve also travelled to Jordan, Oman and local spots in the UAE.
Other highlights include a skydive over the Palm and driving an F3000 racing car on the Yas Marina F1 track.
What’s your favourite place in Abu Dhabi and why?
Saadiyat Beach Club – the beach, pool and spa are amazing, they have incredible seafood there and there’s always a chilled-out vibe. Watching the sunset on the beach is a great way to end the day.
What’s your top tip for enjoying a secondment to the Middle East?
Make sure you take advantage of the opportunity to gain exposure to Middle Eastern clients as they all have different cultural business practices.
The more experience you can get of cross-border transactions the better – particularly when the clients are on your doorstep!
Sponsor’s comment: extraordinary opportunities
With 50 years of history in the Middle East, including a 40-year presence in Abu Dhabi and our recent expansion into Dubai and Saudi Arabia, we have unrivalled history and experience in the region. Shearman & Sterling offers fantastic opportunities for trainees interested in experiencing this exciting, fast-moving and incredibly dynamic market.
Our UK trainees are given the chance to gain exposure to life and work in the UAE, as our UK training contract includes the opportunity for overseas secondments to our Abu Dhabi office. Trainees gain experience in many practice areas including project development and finance, arbitration, M&A and, increasingly, our global regulatory practice as the Middle East emerges as a vibrant commercial and financial centre.
As a trainee in our offices in the Middle East you are afforded significant responsibility from day one. The smaller office size means that the whole team gets involved in projects from business development, pitching, drafting, and negotiating to closing celebration dinners.
Trainees are based in Abu Dhabi, an increasingly important city on the world stage. The Abu Dhabi office is friendly and a mentor scheme helps trainees settle in, with support.
Working on Middle Eastern deals isn’t limited to lawyers based in the region. As an international firm with a seamless network of 20 offices our London-based trainees are also closely involved in projects in the region, meaning trainees quickly develop an international network of colleagues. One example is Shearman & Sterling’s role in advising a consortium of lenders to the first private sector solar project in Dubai – Dewa Solar. London-based trainees worked on this pioneering project with teams in Singapore, Abu Dhabi and London.
The Middle East is a truly exciting place to be and work in right now and we’re delighted to be able to offer trainees the opportunity to join us and become part of a team which works on ground-breaking deals in this unique region.
Mei Lian, Shearman & Sterling