Over the last three to four years, the Middle East (Dubai in particular) has seen incredible growth in the legal market and the high-value transactions have become increasingly sophisticated. Local firms have expanded rapidly and international firms have arrived in their droves for a piece of the action. Some firms have grown to 150 lawyers - a large Middle Eastern practice - in the space of three years.
Whilst the Middle East had been largely insulated from the credit crunch that the Western world was suffering from post-Northern Rock, at the end of last year, following the demise of Lehmans, the Middle East started to feel the pinch. Stock markets in the region plummeted, the cost of inter-bank financing rose sharply and investors’ confidence fell. Projects were put on hold, governments were required to provide liquidity to the banking sector and property and oil prices fell sharply. M&A activity in MENA dropped by 66% in the first quarter of 2009 and many companies have posted substantial losses.
Having been on a steep upward trajectory in terms of growth for the last decade, the region has not previously had to deal with the problems it has faced over the last 9 months. Whilst it is still widely held that the region will suffer less than the western world, there has been a considerable impact on recruitment. Law firms and companies have made redundancies but the numbers have been far less than in the UK.
Law Firms
The Middle East legal market consists of UK, US and local firms. The days of two page vacancy lists and opportunistic hiring are over. Many firms have a recruitment freeze in place and those which don’t are adopting a very cautious approach to recruiting. There needs to be a real business case to justify any potential hire. A regular scenario is that firms will interview candidates but the role will then go on hold as they restructure internally, sourcing a candidate from another practice area or another office in the firm’s network.
The effects of the global credit crisis have been felt to varying degrees in different locations within the region. Dubai has suffered most: this was probably due to the fact that firms there expanded so rapidly and, for most of 2008 when the Middle East was still buoyant, they absorbed extra capacity from their London offices. Abu Dhabi and Qatar are still fairly bullish about the future and, we suspect, may be more sustainable long-term. Bahrain, being a predominantly finance driven market, is quietly confident about the future. There has still been a relatively high demand for lawyers in Saudi Arabia where large infrastructure projects continue to provide a steady flow of work. In this depressed market, where law firms tend to put on hold any plans for new offices, Eversheds and Clyde & Co both recently opened their doors in Riyadh. This is a key market to which to be connected and should prove resilient for the foreseeable future.
As is common in a recession, the demand for transactional lawyers has dropped whilst contentious lawyers are now highly sought after. Dispute resolution, a practice area still in its infancy for many international firms in the Middle East, has become a major focus. They are particularly interested in candidates with local experience and contentious construction experience. Disputes are arising out of the real estate sector, with sub-contractors suing main contractors, who in turn are pursuing clients for breach of contract. Some of the smaller Anglo Saxon firms and those with greater litigation experience in the region are benefitting more than their larger competitors who are heavily geared towards transactional work. Local firms continue to grow their litigation teams, particularly with bi-lingual litigators. UAE nationals, who can appear before the courts, are always in high demand. Locally qualified corporate/commercial lawyers are still in demand – firms are not just looking for Arabic speaking lawyers but have a need for locally admitted lawyers – LPA Legal Recruitment recently placed a Saudi-qualified lawyer into a law firm in Saudi Arabia and have just received an instruction for a Bahraini qualified lawyer for an international firm in Bahrain.
At partner level, whilst previously firms would recruit partners from the UK or Australia for their skill-set and ability to develop business, they are now only interested in partners who are on the ground with a credible business plan. It is likely there will be more partner movement than previously as partners who have been in the region for several years are now considering their options, particularly if they are performing well and their firm is doing less so. Firms which have recently entered the market with a small presence are interviewing partners who would previously have been difficult to attract. There are also several Anglo-Saxon firms seriously considering entering the market on the basis that they can get partners on the ground, some of whom have licenses to practice along with an existing practice and clients. This reduces the upfront cost of setting up from scratch in the region and provides a relatively low cost and lower risk method of entering the market.
In-House
The Middle East In-House market is similar to that of the Private Practice market. The demand for product-focused Western lawyers has been replaced by a need for Arabic speaking local lawyers with extensive Middle Eastern experience. Although the usual requirement from clients is for relatively general corporate/commercial experience, some of the local Arab banks require Islamic Finance transactions experience.
Saudi Arabia has seen positive growth despite the recent global economic climate. With many firms becoming established in the region, there has been a real need for Saudi qualified lawyers due to the ‘Saudization Laws’. The new laws are a recent development strategy aiming to replace foreign workers with Saudis in the Kingdom of Saudi Arabia meaning that currently all companies in Saudi Arabia must have a total of 30% Saudi employees. Obtaining Visas, even for candidates from other Middle Eastern countries, is much more onerous than previously, and with similar laws soon to be implemented in Qatar, Oman, Kuwait and the UAE, it appears there will be an even greater need for Arabic speaking local lawyers in the region. A number of major Western investment banks are closely eyeing the region for possible future expansion with Saudi Arabia of particular interest.
Conclusion
The general consensus seems to be that, although the region is going through a tough time, there is an air of optimism that once Ramadan has passed, there will be increased activity in the market, the knock-on effect of which will be that law firms and companies will reassess their recruitment needs. For lawyers currently living in the Middle East or planning to relocate there, one positive effect of the financial crisis has been that property rental prices have dropped; so the cost of living - which was rising out of control before the crisis - will be more balanced and hopefully their future growth will not be so steep. An interesting time lies ahead in seeing how this fascinating market develops.
Louise Carr is a Senior Consultant in LPA Legal Recruitment's Private Practice - Middle East division
Karen Horton is a Consultant in LPA Legal Recruitment's In-House and Banking - Middle East division
