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'Why Some Firms Are Quitting On Abu Dhabi': Georgina El Mountassir in Law360

Posted by: Laurence Simons 21/03/16

Why Some Firms Are Quitting On Abu Dhabi

By Natalie Rodriguez

Law360, New York (March 9, 2016, 2:55 PM ET) -- Over the last year, a handful of BigLaw firms have closed up their offices in Abu Dhabi, driven out by a number of economic factors ranging from high rents to tough competition, according to experts.

Last month, Vinson & Elkins LLP revealed it would be boarding up its office in the Emirati city and relocating personnel to the firm's spaces in Dubai, United Arab Emirates, and Riyadh, Saudi Arabia. That marked just the latest BigLaw firm to pull up stakes from Abu Dhabi, following Simmons & Simmons earlier this year and Latham & Watkins LLP, Baker Botts LLP and Herbert Smith Freehills LLP in 2015.

Many of the firms had put down their stakes in the city not that long ago, hungry to expand on successes in nearby Dubai. But after encountering entrenched competition, rising office rents and the recent energy downturn that has burdened the local economy, many have backed off of their Abu Dhabi plans and more are likely to follow, according to experts.

”There is simply not enough Abu Dhabi legal work for all the law firms with a presence there," said Omar Kabbani, a director at Fox Rodney Search Ltd.

Part of the issue is that despite their similarities, Abu Dhabi and Dubai are very different places when it comes to the kinds of work that lawyers will find, according to Georgina El Mountassir, senior research consultant at Laurence Simons Global Legal Recruitment. While Dubai is a hub of high-end commercial activity and international business, Abu Dhabi’s big-ticket work is driven more by government and federal entities.

What commercial business there is tends to be highly relationship-driven and to go to law firms with long-standing ties to prominent local families, according to some experts.

“The law firms that have established relationships with these businesses work very hard to maintain these connections and have done so for a number of years,” El Mountassir said. “It is therefore extremely difficult for newcomers to the market to break into it, and they may end up finding that there is not enough work to go around.”

And most Western law firms have not put enough time into integrating with the local culture by investing in local or regional talent, according to Ahmad Bin Hezeem, a senior partner at local law firm BSA Ahmad Bin Hezeem & Associates LLP and former head of the Dubai Courts.

“We feel that some of the Western firms expected governmental work to be easier to win than it is in practice — while relationships are important everywhere, they are especially important here, and a deep understanding of the local culture is essential,” Bin Hezeem said.

For Western firms, it has gotten even harder to win work in Abu Dhabi recently with the downturn of the area’s energy, oil and gas sector, which was one of the few industries that had a larger presence in Abu Dhabi than in Dubai, according to some experts.

“With the slowdown in the pace of the economy and contracts awarded, we have seen a retraction of firms to Dubai, which is seen as the regional hub for the Middle East region,” said Matthew Dadd, a partner at global real estate consultancy Knight Frank LLP.

Adding to the momentum is the fact that the cost of renting office space in Abu Dhabi is higher than in Dubai, particularly in the high-profile business and legal center Abu Dhabi Global Market, formerly known as Sowwah Square, which firms are feeling increasingly pressured to be a part of, experts noted.

“Firstly, the cost of rent is very high. Secondly, regulations stipulate that a law firm must staff its office with a minimum of five people,” Kabbani said. “All this expense for an office in a small market is, in many cases, unjustified.”

And with local legal practices increasing their office presence across the region, office real estate prices haven’t dipped, even in the face of the Western law firm closures in Abu Dhabi, Dadd noted. Bin Hezeem said that his firm has grown 126 percent in the past year and that so far only Western firms are pulling out.

Western firms, looking to balance the desire to have a presence in the region while maintaining costs, are increasingly turning their sights back to Dubai, realizing that one office in the UAE is likely sufficient to service the region, according to Kabbani.

“Many law firms consolidating their position in Dubai find that they are able adequately to service the needs of their midmarket Abu Dhabi clients from Dubai, with lawyers taking time when needed to travel the short distance to Abu Dhabi,” El Mountassir said.

Indeed, some of those lawyers had already been living in Dubai and commuting to Abu Dhabi for work, as Dubai can offer greater amenities, schools and services, according to experts.

Even some of the more established BigLaw firms in Abu Dhabi, such as White & Case LLP and Shearman & Sterling LLP, have recently set up shop in Dubai for the first time.

"This is partly due to the slowdown in new energy deals/projects in Abu Dhabi ... [And] I think this speaks volumes about the level of work in Abu Dhabi,” Kabbani said. “Even the heavyweights need to find new sources of work and diversify their practice offering.”

--Editing by Jeremy Barker and Edrienne Su.