Building sand castles

Following the success of the Law Society's meeting with Libyan delegates in march, Jeremy Fleming looks at the opportunities for UK firms and the concerns of the US once UN sanctions are lifted

In late March, a delegation of powerful figures from the Libyan legal system arrived at the Law Society in London for a meeting with members of law firms and Chancery Lane officials.

The meeting was well timed.

After many years of isolation as a pariah state, Libya is showing signs of liberalising - both internally and towards the international community.

Diplomatic relations were severed in 1984 following the shooting of a British policewoman outside the Libyan People's Bureau in London.

Four years later, the Lockerbie bombing exacerbated the problem and was swiftly followed by the imposition of US and United Nations (UN) sanctions.

The UN Secretary-General Kofi Annan said last month - following Libya's co-operation over the trial of the Lockerbie suspects - that the UN is prepared to meet with Libya's UN ambassador to move towards a full lifting of UN sanctions against the country.

The US continues to blackball Libya, though some observers believe that it is only a matter of time before Washington too reaches an accommodation with Colonel Gaddafi.

In July 2000, the Law Society, in conjunction with the Arab Lawyers Union, won EU funding to carry out a four-year training project for lawyers in Morocco, Tunisia, Algeria, Syria, Egypt, the Palestinian Authority, Lebanon, and Jordan.

So through this, the Society has developed links with lawyers from Libya.

In May 2002, Society officials met the president of the Libyan Lawyers Union in Damascus.

Five months later, a group of ten Libyan lawyers attended a conference organised through the project in Cairo.

And following the visit to Chancery Lane in March - which included Dr Omar Mohamed Brebish, the legal head of the Libyan foreign office - Law Society officials have been invited for a return trip to Libya in the autumn.

Roger Ede, who project-manages the Law Society/ALU initiative, says: 'This is an opportunity we've been looking at for some time.

Over the past two years we've been making contacts with the Libyan bar and lawyers and now, with the visit to Tripoli planned, it's coming to fruition.'

But what would English lawyers want to do with north Africa in general and Libya specifically?

For City firm Denton Wilde Sapte, north Africa is considered a key territory - a reflection of the firm's Middle Eastern and African focus.

Paul Holland, a partner in the banking and asset finance department, says: 'We are interested primarily in oil and gas work, but also in other areas such as power, water and infrastructure.'

Algeria and Egypt are certainly the biggest north African countries in terms of population - both of them are also rich in oil and gas.

Andrew Gamble, head of international banking at City firm Lovells, says that notwithstanding Algeria's independence war with the French, France - along with the US - has dominated foreign commercial activity there.

He says: 'There is always an interest in Algeria, because of the oil.'

Mr Holland adds that a hydrocarbons law - which would have created a fairer system of tendering for all international entrants to the market - was almost implemented in Algeria last year, and caused a flurry of interest.

This law has now been shelved but regardless of this setback Mr Holland says Algeria is still seen by many European companies as a good potential market.

He adds: 'It is a sophisticated country and an active participant in the conference on European-Mediterranean co-operation.

Problems there are chiefly problems of perception.

Fundamentalist violence in Algeria and some continuing sporadic violence lead some to characterise Algeria as an extremely violent place.

But - although I wouldn't recommend walking through Algiers late at night - I didn't feel threatened when I was there, although you must respect travel advice.'

Tunisia is not blessed with natural resources like some of its neighbours.

Its economy is more reliant on soft commodities such as textiles and tourism.

Mr Holland says: 'For a firm like ours, we would expect there to be more opportunities in a country like Algeria.'

Morocco, with a greater population and infrastructure than Tunisia, but fewer natural resources than Algeria generates greater interest, Mr Holland says.

Though the recent terrorist bombings in Casablanca may change that.

However, a week after the attacks, top French firm Gide Loyrette Nouel announced that it was opening an office in Casablanca, to add to its existing office in Tunis.

It will also be establishing a base in Algiers in the near future.

Trowers & Hamlins and Dentons both have offices in Cairo, but otherwise, no City firm has an office in the region.

Mr Holland says: ''Egypt is a large developed country, but the aspirations of the late 90s have not really materialised and it has had a tough time economically over recent years - but it is a useful base from which to tackle contracts in the north African region.'

Cairo's potential as a hub is likely to increase if plans to connect the whole of north Africa through a rail link over the next decade are successful, Mr Holland says.

Lovells approaches north Africa more from the slant of a firm acting for the financial institutions.

From this point of view, Egypt is probably 'the most sophisticated of the north African countries', and is the focus for many oil-related finance deals, according to Mr Gamble.

But Libya is certainly the country with the spotlight on it following the news that the UN is considering lifting sanctions.

Mr Holland says: 'If you listen to the drumbeats, you hear that the US may be close to lifting sanctions against Libya.

'For years, Libya has been out of play for most major oil companies and added to that potential, there is scope for tourism development work in the region.'

John McHugo, a partner in City firm Trowers & Hamlins' international department, says: 'Things are changing in Libya and the country is now encouraging private initiatives.

There are opportunities for railways, airports and other infrastructure projects, and we are actively looking into these.'

Even if Libya now opens up, it will not all be plain sailing, Mr Holland says.

In Iran, which has recently been opening up to western energy companies, the form of contracts is not always ideal.

He says: 'The north African and Middle Eastern countries are keen to maintain strict sovereignty over their resources.

For example, in Iran contracts are often given on a "buy-back basis".

That means that the return available to foreign companies is capped by the state.'

If Libya does open up, there is of course no guarantee that work will come the way of European energy companies and their UK-based lawyers.

'If the US lifts sanctions then US oil companies will be ready to leap in and - as a rule - they would tend to use US advisers.

Nonetheless there will always be opportunities for UK firms to work on some of the underlying structured finance deals,' Mr Holland says.

But in the meantime the US firms are out of the picture.

Mr Gamble says US oil companies have been keen for the US to take Libya off its sanctions list.

'There is some concern in the US that Libya may decide to hand US oil concessions in Libya - which are not exploited properly as a result of US sanctions - to UK, French and Italian companies.'

He says European companies such as Elf Aquitaine, TotalFina and BP would have no qualms about sealing deals to the exclusion of the US, 'which is causing some angst'.

Lawyers from a large US practice in the region confirm - anonymously - that the prospect of losing work to European rivals is not pleasant.

They suffer from these embargoes just like any other US business, they say.

For David Greene, a litigation partner at London firm Edwin Coe, sub-Saharan experience comes more naturally than work in the north African countries.

He says: 'A small group of firms have the north African market tied up, but we regard Libya - and Iraq - as markets that have opportunities.'

Edwin Coe has worked on justice reform and institutional development work in Africa.

Mr Greene has assisted in establishing a commercial court in Kampala, the Ugandan capital, and in law reform initiatives in Uganda, Kenya and Ethiopia.

For Edwin Coe then, the pull to Libya would be mainly in the field of consulting and restructuring rather than energy work.

Mr Greene points out that there might be some competition in this field from Italian firms as Italy is the former colonial ruler of Libya.

He says: 'There will be many areas where Libya can benefit from the UK and other countries if it wishes to reintegrate into the world community, such as human rights and insolvency law.'

Mr Greene adds that Libya already has a sophisticated and well-developed Sharia legal system on which to build new regulation.

Many lawyers might think that the hot countries of north Africa, with such remote cultures from the UK, are not the most fertile ground for practitioners.

Mr Holland says it is a territory that fits with Dentons' reputation as an African specialist firm, and he adds: 'It is distinguished by the fact that we are prepared to go into countries that other firms may consider harsh and inhospitable.

This is something we intend to continue doing.'

Mr Greene says the cultural considerations that need to be taken into account when working in north Africa are largely the same as those required in other foreign jurisdictions.

'The trick is not to be seen as being in competition with them.

You must seem to add value and to be prepared to learn as much from the lawyers on the ground as you are able to teach them - it's a two-way thing.'

As far as time frames go, Mr Gamble says tenders for work might start to appear in the next year.

'Now is the time that people will be tapping their client contacts - not when the skies have already broken,' he says.

So lawyers keen to book a place on the ship before it moves off, should perhaps try to reserve a seat on the Law Society's return trip to Libya this autumn.