Historically seen as a beacon of stability and prosperity in the Middle East, does Dubai still appeal to international law firms looking to gain a foothold in this potentially lucrative market? Contributor Erin Page, Research Principal – Wilbury Stratton.
The city’s fast-paced glamour and rapid growth has been undermined in recent years by a sluggish economy. While the future is looking brighter for law firms who have stayed in the region a carefully considered hiring strategy is required, moving forward.
Dubai earned its reputation as a business-friendly location in the 1990s and early 2000s, and since then has served as a popular Middle Eastern base for multinationals. With this wave of investment came a raft of law firms hoping to stake a claim to this important emerging market from a newly opened Dubai office. Most major international firms now have an outpost in the city and practices including construction, real estate, disputes, projects and energy have gained particular traction.
Following the 2008 financial crisis, Dubai’s fortunes began to turn. High-end tourism, a mainstay of Dubai’s economy, has been in decline for over a decade and the city is facing a significant real estate slump. Falling oil prices have also impacted Dubai-based companies with connections to oil-rich neighbouring states. This bleaker economic picture has diminished international investment; Barclays and Deutsche Bank this year announced job cuts at their Dubai offices. International law firms have been no exception to this trend. Top US firm Weil, Gotshal & Manges closed its Dubai office completely in 2017, while Simmons & Simmons has significantly scaled back its presence. There have also been numerous office closures for international firms in nearby locations such as Qatar and Abu Dhabi.
Our recent work in the Dubai legal market has also uncovered another concerning trend for international law firms: falling fees. Senior market sources explained to us that local firms with lower rates are becoming more sophisticated and therefore a greater threat to internationals. Moreover, the sheer abundance of firms operating in Dubai has led to intense competition. This environment, combined with a decline in so-called “mega-projects” in the construction, real estate and energy & infrastructure sectors has depressed fees. Firms are competing for increasingly small mandates, making it difficult to cover high overheads and turn a profit.
However, our research in the market demonstrates that it is possible for shrewd firms to capitalise on the opportunities offered by Dubai’s changing economic landscape. In response to declining oil prices, a burgeoning renewable energy sector has emerged in the Middle East, providing plenty of opportunity for astute lawyers in projects, infrastructure & energy. Neighbouring states Oman and Saudi Arabia were also highlighted as major sources of work as these countries embark on ambitious social and economic development programmes. Furthermore, Dubai’s strategic location means it continues to be a base for legal work from emerging economies in Africa and the Far East.
Dubai, less conservative and more accessible to ex-pats than other Middle Eastern locations, is still seen by many law firms as a major hub from which to serve regional clients. In the last 18 months, several major firms including Ashurst, CMS and DLA Piper have expanded their presence by adding partners in Dubai. Firms ought to develop a careful strategy for growing here, however. Partners and hiring professionals we spoke with cautioned against expanding too quickly or adding too many lawyers, pointing to a tendency for firms in the region to expand at an unsustainable pace.
Firms should also be selective about the practices they choose to expand, prioritising growth areas such as renewables over sectors more likely to be damaged by changing economic headwinds. Additionally, it is worth noting that reputation counts in a legal market as competitive as Dubai. Firms should therefore be careful to focus expansion plans on areas in which they can trade on an established track record. Finally, numerous market sources noted that a well-developed Middle East network enhances credibility and aids expansion in Dubai as clients in neighbouring states often expect to see in-country resource.
In summary, our work in Dubai shows that this long-standing Middle Eastern hub continues to offer abundant opportunities for law firms with a refined and thoughtful growth strategy.