MENA focus: Middle Eastern dreams

‘Saudi Arabia is trying to put itself on the map and establish itself as a place where international businesses want to make significant inward investments,’ says Clyde & Co’s Susie Abdel-Nabi, of the busiest Middle Eastern legal market today.

Abdel-Nabi, who is based in Dubai, leads the international firm’s dispute resolution group across the Middle East, where she has been based since 2002.

Clydes was an early mover in Saudi – gaining a presence in the market in 2009 through an association with local firm Abdulaziz Al-Bosaily Law Office, the only option at that time for international firms operating in the Kingdom.

New rules, introduced in 2023, mean affiliations are no longer enough to win work in the Kingdom. Instead, international firms must obtain foreign law licences to practise, either by setting up their own stand-alone offices in Saudi or by forming a joint venture with a local firm, in which the local firm must make up at least 25% of the partnership.

On top of this, the Regional Headquarters (RHQ) Programme means that since the start of 2024, eligible multinational corporates, including a handful of law firms, have been able to shift their Middle Eastern HQ to Saudi in order to secure an RHQ licence that enables them to bid for the most lucrative work from key government agencies, as well as to secure various other perks.

‘Saudi Arabia is trying to put itself on the map and establish itself as a place where international businesses want to make significant inward investments.’
Susie Abdel-Nabi, Clyde & Co

Both new regulations have triggered a wave of expansion in the Kingdom by international firms as they seek to win lucrative mandates from the sweeping social and economic reforms and investment set out in Saudi’s Vision 2030 strategy, which sets out ambitious plans to diversify the economy away from hydrocarbons.

So far, at least 15 firms have already secured foreign law licences, with a similar number thought to have applied but not yet completed the process. Some have ended long-term partnerships with local firms to set up alone, while others are establishing a presence in Saudi Arabia for the first time.

Several have also taken advantage of the RHQ, which is intended to support organisations’ growth plans in the country, as long as they meet various criteria, including hiring at least 15 employees, three of which are at C-Suite level and all of whom reside in Saudi Arabia, and performing certain mandatory operations such as formulating and monitoring regional strategy and having operations in at least two other Middle East countries.

While the biggest advantage to the RHQ licence is that, as of January this year the Saudi government has refused to contract directly with any foreign company without a licence, other benefits include tax relief, unrestricted visas and a ten-year exemption from Saudisation requirements, which obligate companies operating in Saudi Arabia to meet a specified quota of Saudi national employees.

With Saudi home to some of the wealthiest public bodies, institutions and sovereign wealth funds in the world, this would prohibit non-complying multinationals from accessing premium work and business streams directly from government agencies – although they could still work for other parties involved.

Firms securing RHQ licences so far include Clyde & Co, Latham & Watkins, Kirkland & Ellis, White & Case, and most recently Greenberg Traurig, which obtained its licence in February 2024.

In Abdel-Nabi’s view, the decision to take advantage of the RHQ licence was essential to the firm’s growth strategy in the Kingdom: ‘In order to work with the PIF (Public Investment Fund) and government-backed entities, it is mandated that you have your regional headquarters in Saudi Arabia. Securing our Regional Headquarters licence further cemented our dedication to our clients, specifically public bodies and government agencies that we have worked with for a very long time in the Kingdom.’

While the new regulations bring with them definite benefits, there are strict rules of compliance for international firms that may be harder for some firms to meet.

For Clifford Chance (CC), which does not have an RHQ licence but says it can still bid for projects work via its local association, these restrictions have not been an issue: ‘For a firm like ours, our offering in Saudi has scale and maturity and it is simpler for us to comply with the latest regulations,’ says CC regional managing partner Mohammed Al-Shukairy. ‘The bulk of our Saudi work is done in Saudi with the support of our global network to bring the best of both worlds to our clients.’

This sentiment is shared by Abdel-Nabi, who argues that Clydes’ long-term presence in the Kingdom makes it well-positioned to meet the conditions: ‘One of our strong points is going into challenging, emerging markets and establishing ourselves before others, and that’s given us a headstart. We have a full-service offering, and I think a lot of firms will try and play catch up.’

However, both Al-Shukairy and Abdel-Nabi think the restrictions may pose issues for firms without a longstanding history and presence in the jurisdiction. ‘I think problems may arise for law firms with a far smaller presence in Riyadh if they need to export a lot of the work outside the Kingdom, as that is an area of focus for the regulators,’ says Al-Shukairy. He further adds that many clients value firms engaging with and handling work on the ground in the Kingdom. ‘Saudi clients also want to see skin in the game with a strong presence on the ground and be true partners to our clients. This enhances one’s ability to organically build and strengthen these client relationships. That’s really our mantra at Clifford Chance in Saudi.’

Abdel-Nabi adds: ‘It will be interesting to see how new entrants into the Saudi market – who have traditionally had a fly-in, fly-out approach – are able to balance their work and comply with the regulations.’

With numerous new market entrants to Saudi, some question how they will all navigate an increasingly competitive legal landscape. The Saudi Ministry of Justice announced in October 2023 that it had granted 15 licences to foreign law firms, and this number increased further when Gibson, Dunn & Crutcher and Norton Rose Fulbright both received licences at the end of last year, while Quinn Emanuel Urquhart & Sullivan and Simmons & Simmons secured their presence in 2024.

‘The reality is, there are not enough people to meet the in-country native lawyer requirements in Saudi, so there has been a push for training to catch up.’
Sara Khoja, Clyde & Co

Lateral recruitment

This competition is creating a battle for talent as firms endeavour to comply not only with the quota for Saudi nationals set out in the foreign law licence stipulations but also with client demand for local expertise.

As Abdel-Nabi stresses: ‘Based on our experience, having been in the Kingdom for over 15 years, Abdulaziz Al-Bosaily, our managing partner, has been instrumental in our growth. He’s a Saudi national plugged into what’s happening in the market and has the experience and credibility clients want to see. If a client has a Saudi dispute, they want a Saudi partner and want to know their counsel know what they’re doing. If you’ve got a credible, established name, it opens doors and delivers positive results.’

As a result lateral partner recruitment is booming, with frequent changes between firms.

For example in 2023, Addleshaw Goddard bolstered its Riyadh presence with a flurry of hires, including Ibrahim Siddiki (formerly at Bracewell) and Homam Khoshaim and Amar N Meher from Latham & Watkins. The firm also hired Christian Both, formerly of AS&H Clifford Chance, who subsequently left in June this year to join local independent leader Khoshaim & Associates.

Kirkland’s newly established Saudi offering features seasoned Saudi lawyers Noor Al-Fawzan, previously of Latham & Watkins, and Manal Al-Musharaf, a former White & Case local partner, who offer M&A and capital markets expertise respectively.

Gibson Dunn, meanwhile, hired a team of seven local partners from White & Case and its former associated firm in 2023, including Megren Al-Shaalan, the managing partner of White & Case’s former associated Saudi law firm. This came as part of a wider regional play by the US powerhouse which has added 14 new partners and 19 new associates to its Gulf offices over the past 18 months.

Highlighting the extent of the war for local talent in the market, when Herbert Smith Freehills (HSF) became one of the first international firms to receive a foreign law licence, having previously practised in the Kingdom under an association with The Law Office of Mohammed Altammami (LOMAT), Norton Rose Fulbright formed its own association with LOMAT, acquiring all but one of its lawyers for the new partnership. This left HSF’s Riyadh office with just Saudi partner Joza Al-Rasheed, who continues to lead the office today.

In December 2023, Norton Rose Fulbright received its foreign law licence and dissolved its association with LOMAT but retained the lawyers, who are now part of Norton Rose Fulbright, with Altammami currently serving as head of Saudi Arabia.

Sara Khoja, head of the MEA employment group at Clydes, comments: ‘The reality is, there are not enough people to meet the in-country native lawyer requirements, so there has been a push for training to catch up. We’re seeing a lot of entrants into the market starting from day one with this policy and agenda. Some firms even have scholarship programmes, where they send candidates to the US or Europe to get qualified and gain experience before bringing them back to the Kingdom. There’s a lot of investment.’

Local firms are also having to navigate an ever-changing legal landscape. Addressing the increased presence of international firms in the Kingdom, Rima Mrad, a corporate and M&A partner at BSA Ahmad Bin Hezeem & Associates (BSA), a firm with offices in Saudi Arabia, the UAE, Iraq, Lebanon and Oman, says: ‘There’s a lot of competition in the legal field. The presence of Magic Circle and international law firms is pushing the expertise in the Saudi legal market to another level and is elevating the quality of legal services provided.’

BSA’s head of banking and finance Arsalan Tariq also notes that while new regulations attract new players, they also generate substantial work. ‘When laws are issued, there is a need to interpret them for companies and multinationals practising or intending to practise in the Kingdom. This means as of now there is a huge demand for lawyers in the jurisdiction. So, while more firms make it more competitive, the piece of the pie is also increasing because of the activity taking place.’

Some local firms have capitalised on the increased movement and investment in Saudi Arabia and the opportunities this brings. Khoshaim & Associates, which has offices in Riyadh and Jeddah, was associated with legacy Allen & Overy (A&O) from 2012 until they mutually parted ways in 2020. Khoshaim managing partner Zeyad Khoshaim emphasised that Vision 2030 and the need for independence to effectively and comprehensively advise multinationals investing in the Kingdom were key reasons for the decision to split from A&O in 2020 in press articles at the time.

‘When laws are issued, there is a need to interpret them for companies and multinationals practising or intending to practise in the Kingdom.’
Arsalan Tariq, BSA Ahmad Bin Hezeem & Associates

Boom times for tech and construction

As regulations increase and more multinationals enter the Kingdom, firms are taking on more diverse mandates. Mrad notes that BSA’s work has significantly broadened over the past four years, moving beyond litigation and corporate work for Saudi and international clients. Now, the firm caters to a wider range of clients, including many new investors and multinationals active in emergent sectors. ‘We are working a lot with companies who were historically active in the region but did not have a direct presence because of the previous restrictions. The newcomers include businesses active in various sectors, but mainly e-commerce and technology,’ says Mrad.

The Saudi state is targeting markets such as China and Silicon Valley for potential investment, with a particular focus on big technology companies and start-ups, with press reports suggesting they are being encouraged to set up in Saudi in return for investment. Alongside Silicon Valley, Shenzhen is considered crucial for the Kingdom to develop its emerging AI industry.

Mrad describes how technology start-ups have become a feature of the Saudi market and BSA’s work: ‘There are various new technology start-ups considering the region as a base. They are coming from the US and Europe and mainly looking to start developing their products in countries like KSA or UAE, benefiting from the various sandboxes and initiatives from the government. Such initiatives include facilities and different types of support for legal, practical and operational needs.’

The technology piece is especially important to Saudi due to the scale and complexity of the giga-projects currently under development. The need for skill and technology is essential for Saudi Arabia to achieve its Vision 2030. Clyde & Co’s Khoja comments: ‘A lot of these projects are government-led, and there is a need to have more private sector involvement for there to be a transition away from a state economy. This is why there’s such a focus on start-ups and trying to get people to set up companies.’

The infrastructure focus of Vision 2030 and desert city Neom means construction work is also keeping firms busy in the Kingdom. As Abdel-Nabi comments: ‘We have been active on mega projects from their inception, and clients continually return to us throughout the project lifecycle.’

‘Although equity capital markets have slightly softened compared to debt capital markets, there are still some very interesting opportunities, and we continue to act on a number of IPOs in the UAE.’
Mohammed Al-Shukairy, Clifford Chance

Where next?

With so many firms already active in Riyadh, many are already moving to expand elsewhere in the Kingdom. Clydes, for example, joined the likes of Dentons and Ashurst when it established a Jeddah office in May 2024.

BSA also considers Jeddah as an area with real opportunity. ‘We actively work outside of Riyadh for two major work streams: M&A involving companies present across Saudi, particularly in the energy sector, TMT, and litigation,’ says Mrad. ‘We have our internal arrangements to manage this from our Riyadh office, but in our long-term plans we have an interest to set up an office in Jeddah because of the active commercial scene and the fact we have various clients, particularly those involved in the pharmaceutical and education space, based in Jeddah.’

UAE

Saudi Arabia’s ambitious Vision 2030 strategy, combined with the ramifications of the RHQ programme, effectively pits the Kingdom against Dubai and the UAE. Partners stress though that while the Kingdom is winning many of the headlines right now, the UAE remains active.

‘Dubai has something of a halo effect on a global scale and has boomed over recent years,’ says Addleshaw Goddard’s Middle East head Robin Hickman. ‘Riyadh has its RHQ programme to ensure businesses are moving their operations to the Kingdom and this has helped the Kingdom achieve its ambitious plans, but Dubai still thrives. It’s in the best position it’s ever been in and is a real hub for the region.’

The region moved earlier than Saudi to introduce sweeping regulatory reform to facilitate the growth and appetite of multinationals operating in the jurisdiction, and in the past year the government has made significant amendments to a number of federal laws.

As Mrad comments: ‘The government is constantly hearing the challenges facing investors and addressing these. The legal amendments are issued to enhance and create more appetite for international investors and to provide more clarity on the stability for foreign investments in the jurisdiction.’

Law firms report growth across all practice areas in the UAE, with M&A and private equity particularly thriving. Al-Shukairy comments: ‘Our M&A and private equity focus not only reflects the presence of some very active financial investors in the UAE, particularly in Abu Dhabi, but also strategic players in the UAE who are looking to expand their business operations and get exposure to markets outside the Middle East.’

With asset managers and hedge funds setting up headquarters in the jurisdiction, the fund space remains a core area of activity for firms. In 2023, Addleshaws and White & Case were among the many firms making a play to further enhance their fund formation and management offering in the UAE, with the former hiring Philip Dowsett from Dechert and the latter Phillip Sacks, also from Dechert. Both individuals now head their respective practices.

Banking and finance has also been a strong performer, across both acquisition finance and capital markets. ‘We’re seeing a lot of strong issuers taking advantage of capital markets,’ says Al-Shukairy. ‘Although equity capital markets have slightly softened compared to debt capital markets, there are still some very interesting opportunities, and we continue to act on a number of IPOs in the UAE.’

Meanwhile, real estate and hospitality disputes remain prominent in firms’ work in the UAE. Abdel-Nabi explains that hospitality disputes are cyclical, typically emerging when hotel owners seek new operators every few years, often leading to conflicts. ‘At the moment we have some really interesting cases brewing for some significant hotel sites,’ explains Abdel-Nabi.

Mrad adds that BSA is seeing a similar trend, with a growing focus on real estate and bankruptcy issues. Its bankruptcy practice is expanding due to the UAE’s updated laws, which are expected to drive more restructuring work. Insurance disputes have also increased, partly due to severe weather events causing supply chain, landlord-tenant, and various industrial issues.

Employment practices are also busy, reflecting the jurisdiction’s increasing sophistication and regulatory changes. Khoja notes that for many employers, there is a careful balance between the global integration of best practice and complying with the ever-changing local landscape: ‘You have multinationals who want best practices and consistency across all their global offices, whether that be contracts, policies or benefits. Very often, the advice they seek is how to achieve this whilst still complying with the rules and protecting the company from a legal perspective.’

There is also rising demand for lawyers with tech and digital expertise, with Abdel-Nabi pointing out ‘we’re seeing a lot of exciting and interesting activity around crypto and fintech’.

Addleshaws’ Hickman adds: ‘Dubai is a very smart and entrepreneurial city, and the opportunity to move into the digital space is not being missed either here or in the wider region. We’ve made big investments in fintech, finreg and data and are building out our partnership in this space.’

Qatar

If things are positive in the UAE and Saudi, Qatar has proven to be a difficult market for some law firms. In 2023, Simmons & Simmons became the latest international to withdraw from Doha, following in the footsteps of firms such as Squire Patton Boggs, HSF, CC, Latham, Hogan Lovells and Baker Botts in previous years.

Those remaining include White & Case, Dentons, Clydes, Eversheds, DLA Piper, Pinsent Masons and Addleshaw Goddard. Addleshaws’ Hickman expands: ‘There aren’t many international firms still on the ground in Qatar, as a lot of firms that opened in the jurisdiction subsequently left. It’s a small country with only a few million people, and whilst it’s an extremely wealthy state on a per capita basis, it’s not a big legal market by any means. It’s challenging for many firms to have strong offerings there.’

‘There’s a real opportunity for us to be the go-to firm in Qatar for complex work particularly given the lack of competition.’
Robin Hickman, Addleshaw Goddard

Squire Patton Boggs said that its Doha office closure was part of a strategy to ‘invest in growth elsewhere on the Arabian Peninsula’, while HSF stated it could ‘continue to provide the quality and breadth of service to clients in Qatar’ from other offices.

Khoja observes that while exits have been a trend in Qatar over the past decade and work streams fluctuate, the jurisdiction remains active. ‘We have seen a few international law firms exit the market, but at the same time, there’s a fair bit going on. Admittedly, after the World Cup in 2022, many were wondering what was coming next, but there’s still a big stimulus in the gas industry, and many energy companies are upping production and bringing new people in.’

Hickman adds that Addleshaws has a specific strategy for Qatar and is looking to capitalise on favourable opportunities in the country. ‘We’re not looking to be completely full service, and instead are looking to double down on corporate, finance and construction work. Those are the core areas we intend to build out, and we see that there’s a real opportunity for us to be the go-to firm in Qatar for complex work particularly given the lack of competition.’

Oman

In Oman, there is a big government push to increase tourism, as Tariq comments: ‘Oman is growing towards achieving its Vision 2040 and looking at pivoting away from the oil business, much like Saudi Arabia. The sectors they are looking for investment [in] are logistics, marine and tourism.’

Tariq describes substantial real estate activity, with the government aiming to develop a new Muscat Downtown that will feature a number of luxury properties and hotels, as well as high-rise buildings. ‘The laws in Oman have changed as they look to allow foreign investors to come and deliver in the jurisdiction. As a result, many Dubai developers are expected to turn their attention to Oman. Omani companies in the construction space may not have the experience delivering high-rise buildings; the largest structure in Oman today is only 13 floors and was constructed a long time ago.’

Elsewhere, BSA also has offices in Lebanon and Iraq which, according to Mrad, are specifically tailored to service the firm’s longstanding clients still active in the respective jurisdictions. ‘In Lebanon, most of our clients are international energy clients who started operations in the country, and some are quite active, especially after the new government assignments in this field. Other than that, it’s litigation, M&A involving entities with presence in Lebanon, and retainer services to some international airlines that act in the jurisdiction.’

Mrad continues: ‘In Erbil, our operations before the political turmoil were much more active than today. At that point in time, we handled a lot of real estate, energy, and infrastructure projects for various US and European oil companies. However, since then, our practice in Erbil has changed drastically. Private sector operations dropped tremendously, and at the same time our oil and gas clients limited their presence to a streamlined team essential to their work and largely moved to other places in the region. We service these teams, as well as regional clients if they happen to have work in the jurisdiction.’

Türkiye

Türkiye retains close connections and synergies with the Gulf and deal and capital flow has steadily increased over recent years. Turkish industrial players are active in the region, especially in the context of infrastructure and projects in Saudi Arabia and the UAE, and Turkish banks are very interested in funding and financing operations, both inland and in the marine space.

2023 was of course a disrupted year for Turkish businesses as the country grappled with the impact of the country’s devastating earthquakes last February, as well as uncertainty around the presidential and parliamentary elections in May. However, the new government has implemented a robust economic strategy to address past macroeconomic imbalances, particularly high inflation.

Despite the unstable market conditions, Türkiye’s pro-foreign investment regime has enabled M&A and PE activity to remain fairly steady. Chinese and Russian companies continue to have an appetite to invest in the country, and start-ups have done particularly well. Emerging sectors such as software development and gaming have witnessed a steady increase in M&A activity, requiring corporate and IP teams to work closely together, with digital banking and fintech also areas of promise. LB