Middle Eastern resilience

JLegal’s Richard McLerie discusses the region’s legal market.

Over the past 12 months, the region has endured a period punctuated by numerous challenges, principle among which is arguably the depression in oil prices and the ongoing danger posed by militant groups destabilising significant areas of the region. The wider ramifications of these factors cannot be covered exhaustively here. However, of notable importance in the context of the legal market is how some of the more stable jurisdictions, notably that of the UAE, which continues to stand out as the hub from which firms operate their regional offering, have benefited from the migration of wealth into the more stable, internationally-underpinned markets from wider areas of the Middle East deemed, at least for the time being, unacceptably risky locations in which to invest.

The UAE’s resilience and preparedness for leaner conditions is further illustrated by its position against the global drop in oil prices. The lower prices have and will continue to hurt a number of states in the region; however, the UAE has repeatedly been singled out for its production cost efficiency and diversified economy, allowing it to continue to grow. Notwithstanding this, the oil price in particular has proved to be significant in restricting much recruitment in the energy and closely-related spaces to replacement strategies, rather than those aimed at expansion.

The Middle East continues to hold significant appeal for lawyers from a number of perspectives. Many positions offer a strong career choice for associates, considering the relatively compact teams and consequently higher levels of exposure to pioneering and complex instructions. This has proven to be particularly attractive for junior lawyers who find themselves benefiting from both the quality of work and, of course, the financial advantages stemming from a tax-free salary.

While the market continues to mature, and many new entrants and established firms alike are faced in a positive direction, recruitment decisions are palpably more considered and market-sensitive than in recent years. Although this does represent a slight threat to hiring statistics, it is indicative of a more measured approach to serving a market still very much in its formative years when considered on a macro scale. This instils a strong sense of resilience and longevity in the region and, under strong state-level leadership such as that seen in the UAE, paints a positive picture for the continued growth and overall competitiveness of the legal market.

‘Junior lawyers find themselves benefiting from both the quality of work and, of course, the tax-free salary.’
Richard McLerie, JLegal

Corporate, construction, banking and wider finance markets could all safely be described as healthy, albeit somewhat sporadic. The aforementioned cautious approach to recruitment in a number of areas, combined with competitive salary packages being driven as much by internal market competition as international guidelines set by head office, leaves us with a discerning market largely populated by high-quality expatriate lawyers. Combined with a creeping sense that the most desirable and active markets, that is principally Dubai and Abu Dhabi, are become less transient in nature, overall competition for places is as strong as ever, and the days of the once frontier markets acting as de facto overflow for London and elsewhere are arguably over in many respects.

On the in-house side, the UAE remains the primary focus for candidates entering the Middle East market, with its excellent infrastructure and established, tolerant expat community. However, employers here continue to favour candidates already on the ground and, with there being fewer roles due to the aforementioned challenges, it is becoming increasingly difficult for non-Cooperation Council for the Arab States of the Gulf (GCC)-based candidates to enter the market in an in-house role.

With large-scale redundancies having been made at the large oilfield services companies and banking sector, we are optimistic that if the oil price makes a recovery, there should be opportunities in this sector.

In relation to the region’s biggest market, Saudi Arabia, experts are predicting their government is expected to spend $30bn on construction projects in 2016 and the same amount again in 2017, despite the global oil price slump. However, that is 20% lower than last year’s budget, reflecting the 65% collapse in the price of Brent crude since its summer 2014 highs of around $115 per barrel.

It is rumoured that the kingdom’s lower budget of $229bn for this year will result in ‘a large number of projects either being scaled down and revised or put on hold indefinitely’. With more than 30% of the country’s workforce employed in the infrastructure and construction sectors, this may have a knock-on effect if the oil price remains volatile.

Following last year’s landmark nuclear deal, Iran is looking to get back to the table and, as such, many of the firms in the region are exploring tie-ups in Tehran or at least a desk to cover what could potentially be a huge expansion of the Middle East market. CMS became the first international law firm to open its doors in the country. However, political tension between Saudi Arabia (and its GCC allies) and Tehran, and the fact that Iran doesn’t have access to American financial markets and the US dollar, have meant that the predicted rush to set up in Iran has stalled for now.

Should you be interested in hearing more about the region or you are considering your next move, we are always keen to discuss options with lawyers seeking to move to the market or within it.