In just eight years in the region, DLA Piper has peaked, plummeted and, according to its Middle East and North Africa boss, is now peaking again. It has certainly been a rollercoaster ride for the law firm, which, internationally, is one of the largest in the world.
“We were strongly hit by the GFC [global financial crisis] specifically because a large part of our client base was development companies who then stopped many of their projects. A lot of our lawyers were involved in a lot of these projects that were stopped,” says Aziz Abdullah Al Yaqout, the man put in charge of saving the company’s regional operations in 2009 and then restoring it to today’s level of 150 lawyers.
A Kuwaiti-German, Al Yaqout was one of, if not the first, Arab to sit on the board of an international law firm, which he did for three years. As well as his success leading DLA Piper’s German operations, Al Yaqout’s nationality was key to his MENA appointment.
“My remit was that as a Kuwaiti and a GCC national I would probably have a better hand at understanding what clients required in the region because I speak the language, because I come from there, because I grew up in Kuwait.
“The beginning here, from my perspective, was quite difficult because it began with restructuring the business, really redefining who we are here in the region and what we wanted to achieve.”
DLA Piper shed scores of lawyers following the crisis, including many who had signed up to start but were axed before their first day.
But a few years later, the numbers have climbed again and surpassed the previous level of 120. And this time there’s more of a focus on hiring Arab lawyers, with the percentage of total staff rising from fifteen percent in 2009 to 45 percent.
Al Yaqout’s goal is 50 percent. “Arabic-speaking lawyers understand the culture, what’s happening,” he says.
Women also are featuring more heavily in the company’s regional operations.
“For example, in Saudi Arabia, 50 percent of our lawyers are [Saudi] women, which I’m personally extremely proud of,” Al Yaqout says. “These are excellent and committed lawyers.”
But the firm has been hampered in hiring local lawyers because of rules in several countries, including the UAE, that ban them from representing a client in the courts if they’re a member of an international firm.
Al Yaqout says this forces DLA Piper to work in collaboration with a local company, doubling costs and often causing a breakdown in communication, affecting the quality of representation.
“We have to have a much more efficient delivery of justice in the local court system,” Al Yaqout says. “This goes for across the GCC. I’d advocate... opening up these markets for international law firms.
“[If] I have a UAE-qualified lawyer working for me, I’d like them to be able to have the ability to go to the courts, be heard and to represent a client directly. He can only do that if hired by a local firm.
“They’re protecting the local market. I’m advocating the opening up of the market because I think we can bring in more best practice, we can bring in more competition, which is good for business and ultimately it’s good for the client and therefore it is good for justice.
“It’s not only about making the money - it is also about raising the quality and the bar with regard to the delivery of justice across the GCC.”
While DLA Piper has managed to recover from the fallout of the credit crunch and most of the region appears also to be rebounding economically, Al Yaqout says there are several areas of law still in need of an overhaul based on the lessons learned during the crisis.
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A priority is bankruptcy legislation, which presently only exists in Kuwait but has never been enforced there. The majority of the public sector backs a mechanism that would make it possible for failed businesses to be shut down in a structured manner, which arguably means creditors and shareholders are more likely to recoup some of their lost investment.
“Some countries don’t even have proper, robust bankruptcy laws and most that do actually don’t apply them,” Al Yaqout says. “Part of the reason for that is a cultural stigma around bankruptcy, namely that if you go bankrupt with your business then you must have done something wrong and that is shameful.
“The GFC has shown it’s not always the responsibility of the owner or the manager for things having gone wrong, there are also effects from outside and we have to shake off that stigma and that thinking. Bankruptcy law and the proper application of a bankruptcy law is part of business life.
“Sometimes [businesses] die and that has to be taken care of in the best interest of trying to save value for the creditors of this bankrupt company, for the employees... and maybe shareholders.
“I’ve seen so many situations in the last three to four years where there’s been so much frustration and also, arising out of that, a loss of trust in the business community here, especially from foreign banks, because of the experiences they’ve gone through and that’s something that really has to change.
“Governments have seen that and I think we’re going to see modern structures, modern rules being rolled out across the GCC.
“The GFC was not a small crisis... and I think it caught everyone off guard. Maybe the western world has gone through crises in the past and they’ve learned from these experiences but for us and for this generation it was the first one, the first real big one and I think it took time for us to learn how to cope with it.”
Al Yaqout says the business community and governments have learned what went wrong and what went right and now they have to do something about it.
“I’m very hopeful and I would encourage anyone in a position of decision-making to see that we do get strong bankruptcy laws in place.”
Improving protection for foreign investors also is hugely important given the number of people whose money was either effectively frozen by stalled projects or lost in failed developments, Al Yaqout says.
“The protection of investors in any country is a cornerstone of the proper promotion of foreign direct investment. It’s not only the question of tax breaks and giving them the utilities [for a development] it’s really a cornerstone of any foreign direct investment promotion approach.”
Kuwait, which desperately needs to diversify its oil-reliant economy, recently passed its first FDI protection law, establishing an authority to promote foreign investment and oversee new safeguards.
“The cornerstone of that will be, very importantly, investment protection,” says Al Yaqout, who has been closely watching the development of the legislation. “Now the teeth will be in the executive regulations.”
FDI protection is working well in Saudi Arabia, Al Yaqout says. But the UAE has been slower to implement changes.
Kuwait, the only democracy in the Gulf, also is leading the way in upgrading corporate legislation. DLA Piper played a key advisory role in writing the new law and Al Yaqout says similar updates are needed in other parts of the region. Qatar has drafted a new law and changes in the UAE are due to come into effect within months.
“Many of these laws require reform because they’re still based on concepts which are quite old; the world has changed, the global community is much tighter knit,” Al Yaqout says. “New concepts have come in, which need to be replicated. We have very sophisticated tools and products being offered in capital markets today which don’t have a legal basis in many of these countries and more work has to go into that.”
Al Yaqout is confident corporate litigation will be a key aspect of DLA Piper’s workload in the short-term future.
“I personally predict we’re going to be seeing more capital markets activity across the region in the next few years, specifically looking at IPOs [initial public offerings] in the region but also IPOs of entities outside of the region; we’re seeing more and more of that and I think that’s something we’re going to be looking at capitalising on,” he says.
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Middle Eastern companies are gradually re-entertaining the idea of going public and many are looking to stock exchanges in London, Singapore and Johannesburg rather than locally, Al Yaqout says. DLA Piper is well placed to assist such moves, with offices in more than 30 countries.
Construction arbitration is also intensifying in the region and DLA Piper has several “very high-profile, high-value construction arbitration cases”, Al Yaqout says, declining to provide details.
“I think we’re still going to see quite a pipeline of work in that field because this is the fallout that we’ve seen from the GFC and the construction boom that we saw a few years ago and as we see that pipeline still continuing to grow over the next few years and that’s clearly for us a very, very successful practice,” Al Yaqout says.
There are two aspects to the construction litigation: cases related to completed developments, such as arguments over quality or lack of contract payment, and when projects are stalled or cancelled, leaving investors out of pocket.
“More robust rules around that would be important,” Al Yaqout says. “For me, it falls under the same arguments as advocating for a proper bankruptcy law; there has to be a transparent process that is known to everyone involved. Not necessarily the outcome is known but you know this is the process you have to go through to secure your rights.
“There has been a clear identification so that should we ever go through a financial crisis again we will not have the same [experience] in regard to the problems we have today. It’s part of the learning process.”
DLA Piper’s MENA workload has significantly picked up since the 2009-2010 downturn, ironically with much of it following GFC-related disputes. Business has grown fifteen percent on average each year.
“We’re back to profitability,” Al Yaqout says. “Our problem back in 2008 was 35 percent of our revenues came from one client and then when that client [Dubai-owned developer Nakheel] stopped spending money on legal services that became a big problem for us.
“We cut down 40 percent of our workforce; it was not easy, it was a very painful process. A process I think we learned a lot from.
“However what’s important is that we’re here, we’re back again, we’re growing again and we’re successful again. I think that’s the message. A few of our competitors have left the region and will not come back very [soon]. I think we’ve shown resilience and I think we’ve shown that we’re very committed to the region.
“The first thing the firm did was send an Arab over here, what more do you want? That’s true commitment, and I had a very good practice in Germany.”
Having recovered, Al Yaqout sees significant growth for the firm in the region, particularly in the Gulf, Iraq — “a place where I see a lot of business opportunity” — and Libya, which he describes as “obviously promising”.
The most exponential growth is likely to be in Saudi Arabia.
“Australia has 22 million [residents] and we have 400 lawyers. Saudi has 27-29 million, depending on which figures you use, and we have eighteen lawyers. So you see the huge opportunity that is available,” Al Yaqout says.
But he claims size is not the priority.
“[DLA Piper’s goal] was not necessarily to be the largest law firm but the firm with the most influence in where it is based,” Al Yaqout says. “A lawyer is quite an integral part of the business community. We’re often asked for advice and guidance and where businesses show growth and how they’re to do their business and that means you also have to understand the culture in which you’re working, you have to understand the business community in which you’re working in, and be a part of that business community.
“I think over the last two years we’ve made ourselves a name in the market.”
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