Gold-paved streets and tough times back home: Recipe for market overcrowding?

The arrival of new firms in the Gulf and the expansion of existing ones is no secret. Nevertheless, the numbers of firms, offices and lawyers tabulated on pages 59 and 64 prove the amplitude of the expansion of the profession here. The question now becomes whether the headlong rush from London and the US has produced an over-lawyered market – in Dubai at least. “There’s a sense that if you flock here there’ll be work,” says Sean Korney of energy specialists Baker Botts in Dubai. “That’s not true, and nor can you get it by aggressive price discounting.” Korney is one of many lawyers who stress the
importance, and time-consuming nature, of establishing relationships with local client organisations in the Gulf, and says the big, well-established firms (one thinks of Norton Rose, Clyde & Co, Trowers, and Korney’s old firm Denton Wilde Sapte) will have to capitalise on existing relationships to avoid having
their market share eroded by the newer faces in town. “The quality’s going up,” he says. “In the past there were instances here you would have got work just because you were here, but that’s not going to be the case going forward.” Meanwhile, the new entrants will have to strategise carefully, he warns. “Those that are interested in the [Gulf] only because there’s no growth elsewhere won’t survive… You have to find awinning strategy here.” (In the case of his own firm, Baker Botts, that means “selling what you’re good at” [energy] and “building out from that” [diversifying into areas such as environmental work
and real estate].) The grip of the long-established players on sizeable chunks of the market seems, for the time being, quite firm. Denton Wilde Sapte, for whom the Middle East is home to around 140 fee earners out of a global total of perhaps 800, has been growing its infrastructure and energy-focused
practice in Dubai since 1969 and enjoys a strong  reputation and long track record in the region. In the last 18 months the firm has doubled its lawyer numbers by opening four new offices, making seven for the region. “Having roots in the region is critical,” says chairman James Dallas, adding that his firm’s long list of offices is another big marketing and executional advantage. Colleague Neil Nicholson
confirms, however, that the firm is being  undercut by new firms on some deals. “There is lowballing
– you’ve just got to confront it,” he says. “For our existing clients it’s not a threat, but when it comes to new clients you’re going to lose some deals.” The similarly large-in-numbers Trowers & Hamlins  (offices in Dubai, Abu Dhabi, Bahrain, Cairo and Muscat) has been in the region for as long as 40 years and has approximately a quarter of its lawyers worldwide – about 150 – in the Middle East. With more of a historical focus on commercial property, real estate and construction, the firm has recently diversified into corporate and finance work. “We’re regarded as stalwarts or pioneers of the Middle East,” says Bahrain-based partner Neale Downes. “In the UK we’d be compared to Addleshaw Goddard or Pinsent
Masons, but here we’re considered on the same level as the Magic or Silver Circle firms and the whiteshoe New York firms. We work on the biggest deals, but we tend to act for the sponsors or  developers whereas the banks prefer a name like Clifford Chance.” Downes, too, has seen a lot of
aggressive pricing by firms desperate to win work. “I’ve heard about preposterously low fees being quoted, where firms must be losing money.  It’s getting tougher. The question is whether if the gravy train stops rolling, are these firms going to tough it out or run back to wherever they are from,” he says.
Some very large and very international firms have until recently been conspicuous by their absence in
the Gulf. Lovells, for example, arrived only in May 2007, albeit with a headstart in the form of a ready-made team of three partners from DWS.  Supplementing them with two London partners, Lovells opened for business with five partners and capability in finance and corporate work. The need to service, among others, major firm client Standard Chartered in the Middle East was an impetus for the move, which produced a busy and profitable office very quickly. "Some of our international clients were setting up panels on an international basis, and we didn't want to miss out on those panels by lacking a Middle East operation," says partner Shibeer Ahmed, who takes a sober view of the current market. "The amount of transactional work is going down and the amount of competition is going up. You've got a lot of US firms flocking towards the sovereign wealth funds... Those are the guys you've got to have a long relationship with, so many of those firms may take a long time to build up their practices," he says. (His own firm has plans to create dispute resolution and real estate practices in the near future.) 
Herbert Smith, meanwhile, also opened as recently as March 2007 in Dubai and June 2008 in Abu Dhabi. Following a deliberate strategy to bulk up and have a credible practice, the firm has gone from five to 40 lawyers, which, according to partner Craig Shepherd, is "better than expected". He expects the Abu Dhabi office to grow faster than the Dubai office from here on in, and reports plenty of work, even at partner rates that are "very respectable" with regard to other offices.

From ALB's discussions with lawyers around the region it seems clear that fee competition is commonplace. Equally clear is that work is not exactly hard to come by, other than in the areas most closely affected by the credit crisis. Some newer firms will find survival, or at least growth, difficult. Some older firms may lose market share. Most, though, are confident they will find their niche and prosper as long as nothing (eg property) goes too seriously wrong in the region.

Continued: Qatar: Like Dubai 10 years ago?

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