Many international law firms have been drawn to the Middle East’s boomtown in the last 12 months as it cements its position on the global financial map.

Gazprom’s chief executive officer, Alexei Miller, undoubtedly had the market value of his company at the back of his mind when, in early June, he predicted that the world oil price would rise to US$250 a barrel in the foreseeable future.

 

With the price approaching US$150 at the time of writing, there is no doubt that the commodity is on its way towards Miller’s mark. Back in 2001, the price per barrel hovered around just US$25.

 

The oil price rise has brought oil-producing countries billions of dollars in profits and that money is looking for a home, mostly through sovereign wealth funds. Investment by these funds has exceeded that of hedge funds and conservative estimates indicate that sovereign wealth funds currently control almost US$2trn in assets worldwide.

 

The emirate of Dubai has quickly reinvented itself as the financial hub of the region, channelling funds into mega-projects at home and a range of strategic investments overseas.

 

This move has lured many foreign law firms to the emirate in the hope of providing advice on large transactions; many firms from the UK and US have opened there in the last 12 months.

 

 

There are many Australian and New Zealand M&A lawyers who have been attracted to Dubai by high salaries and low taxes, but so far no Australasian law firm has been tempted to set up an office there. Colin Biggers & Paisley is one of the few, if not the only, Australian law firms to have a partner permanently on the ground. A year ago, Alex Ostermayer moved to Dubai and is located in the office of associated local firm Lufti & Co. He is supported by partner Greg Skehan, who services clients on a fly-in fly-out basis.

 

The decision to expand to Dubai was made on the basis of client demand, said Skehan. “Some of our clients have developed operations in Dubai and they asked us if we wanted to set up there. We did six months of due diligence after which we decided it was a no-brainer,” he explained.

 

The firm advises on construction, infrastructure and insurance, and also provides advice to international corporates looking to open businesses in the UAE. Apart from their Australian clients, the firm also advises local Dubai companies. “There are many Australians in Dubai and some of the local companies have Australian employees. That’s the connection,” said the firm’s managing partner, Dunstan De Souza. He indicates that the Dubai operation is not profitable yet, but he expects it to be in the short term. “Like every start up venture, it needs some initial investment but we expect to be profitable sooner rather than later.”

 

He said that costs have been kept under control by operating from Lufti’s office. When the firm looked at basing somebody on the ground, it wanted to have an easy exit strategy, if needed. “The association with Lufti offered that strategy, but we certainly are not thinking of leaving now.”

 

 

De Souza is sceptical about Australian firms setting up offices in Dubai from scratch. “The reason why we are the only Australian firm in Dubai is because we have had the association with Lufti for 12 years,” he said.

 

It would be difficult to set up an office because of the high costs involved and the relatively high level of saturation of the Dubai legal market, he explains. “All the big UK firms are there; Australian firms would probably find better opportunities elsewhere,”

he continued.

 

Former Bell Gully M&A partner Andrew Abernethy joined UK firm Norton Rose’s Dubai office in June.

 

He agrees that it would be difficult for Australian and New Zealand firms to compete in the market.

 

“Australian and New Zealand firms would struggle in the Middle East, because they don’t have the proximity,” he said. An Asian expansion makes more sense, he added. “In Asia, they do have the advantage of proximity.”

 

It is an opinion shared by Robert Milliner, chief executive partner of Mallesons Stephen Jaques. “We keep an eye on it, but I think Dubai is a bit too far,” said Milliner. “Our emphasis, at the moment, is on building our capabilities in Mainland China, around Beijing and Shanghai, and to get to the same capabilities there as we have in Hong Kong.”

 

 

Abernethy made the decision to move to Dubai because he believed that is where the major M&A transactions will take place in the next 10 years. “The bottom line is that for an international M&A lawyer, you need to be where the international M&A work is,” he said.

 

This will be largely driven by the sovereign funds, he said. “The Gulf countries have one of the largest aggregations of sovereign wealth funds in the world; they have hundreds of billions of dollars of assets under management. It’s effectively a large pool of capital that’s looking for a home and for an opportunity,” he said.

 

Norton Rose has been in the Middle East for 30 years, having opened an office in Bahrain in 1979. The firm also has offices in Dubai and Riyadh, and is in the process of opening up a branch in Abu Dhabi. It has approximately 50 lawyers across the region. The firm has aggressive, but realistic, growth targets, said Abernethy. “Given the resources we need on the ground there, the [Middle East] offices will probably double in size within three years. And I think other firms will do the same.”

The rapid increase of lawyers per head of population is another reason for Australasian firms to hold off on establishing a presence in Dubai. “It’s not as if there is a shortage of firms,” summarised Milliner.