In an exclusive interview with Arabian Business, Milton Cheng, the global chair of international law firm Baker McKenzie, provides insightful perspectives on the wide-ranging forces reshaping the geopolitical and regulatory landscape for multinational businesses.
As one of the largest law firms in the world with more than 70 global offices and over 6,500 lawyers, Baker McKenzie and its clients have a front-row seat to witness the complex challenges arising from shifting trade flows, accelerated technological change, and increasing geopolitical uncertainties. Through it all, Cheng sees the UAE playing a pivotal bridging role due to its strategic location and open economic model.
“I would certainly agree with the statement about the UAE being a bridge or a hub,” Cheng remarks. “Whichever way you want to describe it, it’s not just about the physical location where it is between Europe and Asia, but also the entire country’s setup from free trade zones, the open economy, to the whole regime that encourages not just people from within the region, but expatriates from everywhere around the world to come and live here.”
These qualities have helped define the UAE’s development since its founding and, according to Cheng, will remain vital in navigating an increasingly interconnected yet fractured global order. Multinational corporations relying on Baker McKenzie’s worldwide expertise have greatly benefited from the UAE’s role as a stable entry point to the Gulf and wider MENA region.
However, Cheng warns that the complexity corporations face is deepening rapidly. “Areas like sanctions compliance, foreign investment restrictions, cybersecurity, anti-money laundering …. [these regulations] are becoming more and more complex,” he explains.
“It’s a complex world that is getting more complex, and local knowledge combined with a global outlook is even more critical than it’s been for a while,” Cheng summarises.
No longer can companies focus solely on complying with the letter of legal codes. As rules develop differently across jurisdictions, nuanced guidance navigating both regulation and local cultural contexts has grown indispensable. This was evident earlier in 2022 when the UAE implemented a modest corporate tax framework.
On the introduction of tax, Cheng referred to it as “responsible,” noting that “like any other regulation, once the direction is clear, then people can plan around it.”
Adapting to emerging realities
Artificial intelligence is transforming industries and workplaces at unprecedented speed.
“The feedback I’m hearing from the clients that I meet it is across all sectors, everyone that I’ve spoken to, anticipates that just like with the word processor, just like with the smartphone, and more, [AI] is going to be something that will very rapidly mature in terms of its usability in terms of its reliability, and so on,” Cheng says.
“It’s not something that’s a fad and will be just a one- or two-year thing that will go away. It has the potential to radically increase efficiencies, and in, for instance our sector, radically improve accuracy … You’ve got to get on board or you’ll be left behind.”
However, responsible adoption poses complex challenges. At Baker McKenzie, AI applications are being explored carefully. “We’ve had an eye on this for years now, since the beginning of 2012,” Cheng notes.
“We’re sort of in the mode where we want to test it and we have been testing it on some use cases, but not at the stage where we’re making it open and usable to everybody for a number of things,” he adds.
Part of the calculus involves managing emerging risks. As Cheng explains, “some of our clients have told us they’re not comfortable with us using AI in any advice we give them yet.”
Regulatory unpreparedness for issues ranging from data privacy to algorithmic accountability demands prudence.
In an era of rapid technological change, leadership will be defined by nuanced, multilateral solutions balancing opportunities and responsibilities in partnership. For disruptive forces like AI, an open, thoughtful approach guided by inclusive principles maintains hope of maximising humanity’s shared progress.
Speaking of global currents, Cheng characterise China’s economic role in the region as “important for the long term” due to its self-identification as one of the world’s two major economies. Initiatives like the Belt and Road demonstrate this perspective, though presently domestic concerns are understandably prioritised given challenges, he explains, although when asked whether he sees the Asian giant flexing its economic muscles, Cheng says,
“That’s a tricky question.”
“Belt and Road is going a little bit slower right now. It remains to be seen whether that will reflect a new long-term policy. I think when all of this is going to be balanced with domestic and so on. But in the long-term, China does see its role as one of the two biggest economies in the world and wants to build relations with all regions,” he says.
More broadly, Cheng sees clients adjusting to a “new form of globalisation” centred on diverse trade linkages rather than singular dominance as interconnectivity increases. For regional hubs poised at strategic crossroads with open business models, there are opportunities in facilitating such exchanges.
Guiding progress in uncertain times
The UAE appeared well-positioned in this regard given its pragmatic, inclusive approach to international business and culture. However, continued adaptation will remain crucial. Just as firms faced restructuring from Covid-19’s impacts, last year Baker McKenzie’s own public separation from Habib Al Mulla, required carefully managing organisational changes. On this, Cheng says that the split with Al Mulla has not left the firm with any less capability.
“The circumstances of the separation is something that we needed to make sure we were clear on from a firm core value standpoint, and that we made a decision very quickly and decisively. But at that same time, we also needed to decide and there was also a very easy decision, how we show our commitment to the region,” he comments.
Going forward, a sustained focus on transactional expertise with local market acumen leveraged globally will define Baker McKenzie’s value proposition, according to Cheng. As disruption accelerates across geopolitics, technology and regulation, multinationals will increasingly rely on advisors able to provide clear guidance spanning diverse regulatory and cultural contexts.
In this dynamic landscape, Cheng believes the UAE’s role as a bridge between East and West positions it well for the opportunities ahead – so long as it stays open to emerging realities.
“What’s on our client’s minds and therefore on our minds is digital transformation, sustainability, the ESG regulatory environment, both the complexity of how to navigate it but also the recognition that all organisations, particularly global organisations need to look at stakeholders across the spectrum,” Cheng explains on the future.
“People are also looking at impact of geopolitics, energy security, trade flow changes, and all this kind of volatility and instability is a concern for clients … As advisors, if clients need guidance to help make decisions or keep within the rules or sanctions regulations then we’re here to help them.”
On the current geopolitical climate, when asked if he thought these dynamics had been exacerbated, Cheng answers that he sees the world on a “10-year tension cycle.”
“I think, just like everybody else, we are just doing our best to adjust and hoping it passes through without too much trouble.”
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