Oasis of work

Jeremy Fleming goes on a whistle-stop tour of the Middle East and discovers how law firms are slowly adapting to a society where islamic constraints present tough working conditions

Behind the headlines - 'Rubber dinghy sinks US warship' and 'Bomb in British Yemeni embassy' - and the conflict in Israel, an underlying stability and movement towards liberalisation is gradually transforming the Middle East.City firms Denton Wilde Sapte (DWS) and Trowers & Hamlins have recently let it be known that they are eyeing up opportunities in Libya (see [2000] Gazette, 23 November, 6).

This sea-change in relations with Colonel Gadaffi's former pariah state is emblematic of a growing awareness of the potential across the region for projects, energy, infrastructure and telecommunications work in what remains an enigmatic and under-exploited market.Dubai is the hub of British legal activity in the Middle East.

Richards Butler, Allen & Overy, Berrymans Lace Mawer, Clifford Chance, Clyde & Co, DWS, Hill Taylor Dickinson, Simmons & Simmons, and Trowers all have a presence in the city.

The most liberal of the United Arab Emirates, Dubai has established itself as the main commercial centre of the region, making use of a laissez-faire regime to encourage commercial activity.

Martin Amison, head of Middle Eastern business at Trowers, says the firm's Middle Eastern network emerged as satellites from the Dubai office.

Trowers has offices in Abu Dhabi, Dubai, Bahrain and Cairo.

But its practice began in the 1960s in Bahrain, where the firm worked closely on many of the contracts and projects that helped to establish the archipelago as a flourishing banking centre servicing the oil-rich Gulf states.City firm Norton Rose opened an office in Bahrain in 1979.

Stephen Parish, head of banking and Middle Eastern business based in the London office, explains why: 'At the time Beirut was losing its standing as the banking centre for that time-zone because of the civil war in Lebanon.

Bahrain replaced it as the region's banking headquarters, and as we are pre-eminently a financial services firm, it was to the banking centre rather than the corporate centre of Dubai that we moved.' The regulatory regime of Bahrain was strongly supported by the Bank of England, further consolidating its development.

Among the 70 or so active banks in Bahrain, Norton Rose numbers the Arab Banking Corporation and the Gulf International Bank as clients.But the region's development means that changes are afoot.

Mr Parish says that the soaring price of oil in the past two years has given surplus revenues, which are now being translated by Middle Eastern countries for infrastructure projects.

Norton Rose recently acted for banks involved in billion-dollar projects for the provision of the Taweelah power station in Abu Dhabi and the liquefaction of natural gas in Oman.

Following the current spate of infrastructure projects, Mr Parish predicts there will be a growth in merger and acquisition work as those ventures created by the investment come under corporate scrutiny.With this prognosis in mind, Norton Rose has in the past fortnight replaced its Bahrain managing partner Neil Miller with project finance partner John Inglis.

It is also looking to exploit the new market for Islamic finance, which involves advising banks in relation to leasing structures rather than loans, which breach Islamic law.Two recruits have been hired for the office in the past week - Abdullah Matali from Linklaters and Nadine Khan from Clifford Chance, whose dedication to the region's culture and corporate finance backgrounds at City firms, the firm hopes, will enhance its designs on the projects and Islamic finance markets.Mr Parish explains: 'Even western banks located in Bahrain are moving in on the Islamic finance market; Norton Rose clients HSBC, Standard Chartered, and ANZ Banking Group are among them.'Clearly the move to projects work will require more access to mainland Middle Eastern markets, and Mr Parish confirms that at some stage Norton Rose will be looking to open up other offices, probably starting with Dubai.Saudi Arabia is also regarded as a prime target for firms.

Traditionally, the stalwart state which preserves the balance of peace and oil prices in the region, Saudi's strict Islamic code and customary good relations with US law firms have made it difficult territory for English firms.

Clifford Chance has never recovered the office that pre-merger Clifford Turner once owned there.

This problem may soon recede, according to Mr Parish, especially as the investment in Saudi infrastructure has been prodigious.Norton Rose is also keeping an eye on developments in Iraq, which - before the upheavals of Saddam Hussein's invasion of Kuwait - was a traditionally pro-British market.

When it reopens, the 'potential for infrastructure projects will be extremely good', says Mr Parish.Whether Saddam Hussein is about to throw open the doors to Iraq seems uncertain in light of his leadership manner and recent attempts to tamper with world oil prices.

But other usually awkward markets are showing the first signs of renaissance.Trowers, with its widely flung network in the Middle East, is attuned to these.

Mr Amison explains that the firm has recently been working on a project with the British Libyan Finance and Industry Forum.

It is, he says, 'a significant oil and projects market of great interest'.

Iran is of even greater interest at the moment, with its liberalising regime, he adds.Egypt is also consolidating its position as a reformist Middle Eastern state with great opportunities for British firms.

Current changes there show the way the future may lie for surrounding states.Four years ago, DWS took over Fox & Gibbons, one of the old-time players in the region.

The acquisition gave DWS a network of offices established in Oman, the United Arab Emirates, Bahrain, Istanbul and Cairo.

Fox & Gibbons' association with Egypt dates back to the building of the Aswan dam.Bridget McKinney McKardle has worked in the region for 11 years.

She is a member of the Egyptian British Business Council and the board of governors at the American Chamber of Commerce.

Starting out with Fox & Gibbons in Oman, she moved to its Cairo office in 1995 - now DWS's office.

'Egypt is still battling with hearts and minds over the privatisation issue,' she says, adding: 'But undoubtedly there have been some major changes for the better in the past couple of years.'Much of DWS's Cairo work is projects-based, so bidding for tenders is critical.

Up to five years ago the method of bidding was unreliable.

'The government was well-intentioned but unfair to foreign bidders,' says Ms McKinney McKardle.This process, she explains, used to involve five bidders negotiating for the deal, with one of the tender parties usually going into secret negotiations with the government at a certain point.

'Now, it's a two-envelope, sealed-bid process with an arbitration procedure available if a party has a grievance,' she says.Since 1994, international arbitration decisions conforming with the UNCITRAL (United Nations Commission on International Trade Law) model have been enforceable in Egypt.

This is now bedding down according to Ms McKinney McKardle, who late last year successfully used the procedure against an Egyptian company to freeze all of its Egyptian bank assets.

'They were shocked,' she says, but now Egypt is getting accustomed to the new regime.Another feature in the transformation of the corporate atmosphere in Egypt is the appointment in 1997 of Youssef Boutros-Ghali (the nephew of former UN secretary-general Boutros Boutros-Ghali) as minister of economy and foreign trade.

He recognised the need to attract more foreign investment into Egypt following that year's Luxor massacre, when tourism - Egypt's third largest revenue source - plummeted.One of the tenets of Egypt's command economy was a prohibition on transfers from Egypt of hard currency sums exceeding $20,000 (14,000).

This was lifted in July this year.

A new Ministry of Communications and Information Technology has been created - and the minister in charge, Dr Ahmed Nazief, has a corporate background.

Reform of the telecommunications regulatory regime is currently under active consideration, and a 'media city' based on a similar one in Dubai is planned.Ms McKinney McKardle says infrastructure projects are now back on the cards, including the billion-dollar venture of Dubai-based Sheik Zahid, which aims to irrigate a large space using water from the Aswan system.Ms McKinney McKardle believes that Chomesa - a consortium of 20 states in Africa, including Egypt, which have recently formed a free-trade zone - is another factor making Egypt more attractive to foreign investment.As one of the more advanced countries in the region, Israel is an attractive market, especially when it comes to hi-tech work.

However, Allen Cohen, partner and head of the Israeli desk at City firm Fladgate Fielder, says far more money is coming out of Israel than going in.

Fladgate Fielder was the only law firm to feature in the recent British-Israel Chamber of Commerce annual trade awards, winning recognition for its outstanding contribution to the development of bilateral trade between the two countries.Several Israeli hi-tech companies are now listed on the UK's Alternative Investment Market, others are breaking into Europe - requiring distribution agreements and the like - while there are many Israeli property investors.

Mr Cohen says the ongoing unrest in the Middle East actually accelerates this process.

'It convinces those thinking of investing outside the country to do it,' he says.

'It depresses inward investment.

When something like this happens, money looks to migrate.' The kind of work for firms in Israel is infrastructure projects and some fund investment in small hi-tech businesses, he says.Mr Cohen adds that acting for Israeli companies does not necessarily deter Arab clients.

'We do have Arab clients and it's never been a problem on either side,' he says.

'Business transcends politics.

It is the best peacekeeper going.'But there is more to UK lawyers' involvement in the Middle East than commercial law firms opening offices.

The Law Society has begun a major four-year Arab lawyers' training programme, funded by a 1.2 million grant from the European Commission.

The project is a huge expansion on a pilot held in 1998 and takes in Morocco, Algeria, Tunisia, Egypt, Lebanon, Jordan, Syria and the Palestinian Authority.

The programmes are for 100 lawyers in each country who are either responsible for training other lawyers or are involved in networks where they can disseminate the information they gather.

Topics covered include international trade law, international practice, cross-border transactions, international legal skills, international standards for practitioners and human rights issues.Law firms taking part include City firms DWS, Trowers, Lovells, Watson Farley & Williams, Freshfields Bruckhaus Deringer and Birmingham firm Wragge & Co.

A small number of European lawyers are also involved as a condition of European funding.Roger Ede, the international projects group leader, says that one of the purposes of the scheme is 'to promote solicitors in England and Wales and give them access to those markets'.

He notes that the north African countries rarely see English lawyers, who view it as French territory.

'But they are developing trade with Britain.' And across the whole region, 'there is a big interest in English language', he adds.The programme, which only began in July, has already been such a success that the Society is arranging for the presidents of both the Tunisian and Algerian Bar associations to spend some time in London early next year on placements with City law firms.Another incentive for English firms is the agreement between the EU and 12 Mediterranean countries to set up a free-trade area by the year 2010.

The countries involved are: Algeria, Cyprus, Egypt, Jordon, Israel, the Lebanon, Malta, Morocco, Syria, Tunisia, Turkey and the Palestinian Authority.If UK firms are to successfully exploit this fast-changing region, they will need lawyers prepared to work in an environment very different from home.

But, as Mr Amison points out, the media interest in the Arab/Israeli dispute has no direct impact on, say, Bahrain and Oman.Despite Egypt's traffic, pollution, masses of people and the bureaucracy facing lawyers in Cairo, Ms McKinney McKardle says: 'Egyptians are genuinely warm, friendly and helpful.

This is a safe country; property is not in danger.'Whether a new breed of lawyers head out to Libya, Iran, or even Iraq in the next two years - and whether their experience of those countries will reflect that of Ms McKinney McKardle's Egypt - remains to be seen.

But black gold is very alluring.