Middle East 2023: Emerging Trends, Laws, Energy Hub, Visions, and Players

In this article, we will delve into five crucial topics that hold significant relevance for the Middle East region. These subjects are particularly valuable for those who I haven't had the opportunity to consult on the market or for those who are considering relocating to the Middle East from outside the region. The following are the five main topics that we will outline in detail:

1.    Current Trends and Predictions for 2023 in the Middle East

In 2023, the Middle Eastern market is anticipated to be dominated by crypto and the ESG (Environmental, Social, and Governance) agenda, following the region's active IPO market in 2022. While other parts of the world may face regulatory challenges, the Middle East is expected to maintain its focus on sustainable finance, with many jurisdictions opting for a voluntary approach to ESG, including high-level nationally determined contributions (NDCs).

2.    Latest Laws in Saudi Arabia Related to Operating Structures and New Firms

We will delve into the latest laws in Saudi Arabia that pertain to operating structures and new firms, providing insights into the regulatory landscape and its impact on businesses in the country.

3.    Is Abu Dhabi the New Energy Hub?

We will explore whether Abu Dhabi is positioning itself as the new energy hub with its hosting of COP27 and COP28, and the potential implications for the Middle East's energy sector and its role in global climate action.

4.    Visions for 2030, 2050, and 2060

We will discuss the visions for the future, specifically for 2030, 2050, and 2060, in the Middle East, including the ambitious goals and strategies set by various countries in the region to shape their economic and social landscape.

5.    New Entrants in the UAE and the Most Prominent Practice Areas

Lastly, we will examine the emerging players in the UAE market and the most prominent practice areas that are gaining traction, providing insights into the changing dynamics of the legal and economic landscape in the country.

The Current trends and predictions for 2023 in the Middle East 

As a professional in a field that demands a comprehensive understanding of the legal and economic changes, as well as market predictions, it is crucial to gain insights into these trends. The Middle East is known for its forward-thinking and innovative approach, particularly in areas such as crypto and ESG sectors. Stay tuned as we delve into these significant topics and provide valuable insights into the Middle Eastern market landscape in 2023 and beyond.

Anticipated trends for 2023 in the Middle Eastern market highlight the increasing dominance of crypto and the growing importance of the ESG (Environmental, Social, and Governance) agenda, following a highly active IPO market in 2022. While regulatory challenges may arise in other regions, the Middle East is expected to maintain its focus on sustainable finance, with many jurisdictions adopting a voluntary approach to ESG, including high-level nationally determined contributions (NDCs).

Renewed attention on sustainable finance in the Middle East has been driven by events such as COP27 and COP28, both hosted in the region. The UAE has reaffirmed its commitment to achieving net-zero emissions by 2050 and has announced a National Net-Zero by 2050 Pathway, while Saudi Arabia has set a target of 2060 for net-zero emissions. Notably, large companies in Saudi Arabia, such as Saudi Aramco and the Public Investment Fund (PIF), have also committed to reaching net-zero emissions by 2050, a significant step considering Saudi Arabia's role as a major oil-producing country.

Sustainability is a key driving force in the Middle East, with a focus on advancements in materials for consumer products, construction, synthetic fuels, carbon capture and sequestration, and solar cell design efficiency.

The energy market in the Middle East is experiencing rapid growth, given the region's significant share of global oil and natural gas resources, with around 57% of global oil reserves and 41% of natural gas resources located in the MENA region.

After conducting thorough market analysis and attending key meetings, I have identified the primary practice areas that are currently experiencing high demand and are expected to have a significant impact in the Middle East in the coming quarters. 

These practice areas include:

1.    Corporate M&A: The market activity in the Middle East is being driven by foreign direct investment and sovereign wealth investment, leading to an increased demand for legal services in handling mergers and acquisitions.

2.    Litigation and International Arbitration: There is a noticeable rise in demand for legal representation in litigation and international arbitration cases, indicating a growing trend in dispute resolution in the Middle East.

3.    Projects, Energy, and Finance: The push towards renewable energy and mega-gigaprojects in the UAE and Saudi Arabia is creating recruitment opportunities in these specific areas, attracting lawyers with expertise in projects, energy, and finance.

4.    Data Privacy: With the introduction of data regulations in many countries, including the Middle East, there is a growing demand for legal expertise in data privacy and protection, as nearly 71% of countries now have privacy laws

Is Abu Dhabi the new Energy Hub?

Abu Dhabi has emerged as a prominent energy hub in the legal field. The Emirate of Abu Dhabi, which is part of the United Arab Emirates (UAE), has been actively developing its energy sector and has established itself as a global center for energy-related activities. Abu Dhabi is home to major oil and gas companies, national and international energy companies, and leading industry players, which has led to a growing demand for legal services in the energy sector.

Many law firms have recognised the increasing importance of Abu Dhabi as an energy hub and have established offices or expanded their presence in the region to cater to the legal needs of the energy industry. These law firms such as Allen & Overy, Gibson Dunn, Morgan Lewis and White & Case to name a few offer a wide range of legal services, including advising on energy-related transactions, project development, regulatory matters, dispute resolution, and other legal aspects relevant to the energy sector.

Abu Dhabi's strategic location, favourable business environment, and strong commitment to the development of its energy industry have positioned it as a significant hub for legal services in the energy sector, attracting both local and international law firms to establish their presence in the region. As a result, Abu Dhabi has become a key destination for legal professionals seeking opportunities in the energy field, with numerous law firms actively involved in providing legal support to the energy industry in the region.

Globally, despite uncertainties such as rising interest rates, geopolitical disruptions, and inflationary pressures, certain practice areas such as Energy and Infrastructure, M&A, and Capital Markets in the Middle East are showing strength. This may be attributed to the region's openness to foreign investment and to the energy crisis.

The Middle East has witnessed a robust market for M&A and IPO activity, particularly in the energy sector, with sovereign wealth funds capitalizing on higher oil and gas revenues and targeting foreign assets. The large-scale gigaprojects in Saudi Arabia, such as NEOM, are creating significant investment opportunities as the oil-producing states diversify their economies away from fossil fuels, generating interest among lawyers to work in the Middle East.

The shift of focus in the legal industry from Russia has had a global impact, including the Middle East, where Saudi Arabia has emerged as a prominent destination due to its growing legal landscape, developments, and vision to diversify its economy away from fossil fuels as part of COP28 and Vision 2030.

The UAE and Saudi Arabia is experiencing significant growth, with several new entrants from the US expected to be announced soon. The UAE, known for its cosmopolitan environment and as home to top clients for law firms, is witnessing a growing demand for legal services in the region. This is evident with law firms like Akin Gump moving to larger spaces in prestigious buildings such as the ICD Brookfield Place, and other US firms engaging in bulk hiring.

While GDP alone may not always accurately reflect a nation's true economic potential, countries with modest GDPs can still offer lucrative opportunities. For example, Saudi Arabia, despite not being in the top 10 of global GDP rankings, is home to globally dominant enterprises like Saudi Aramco, the world's second-largest company by market cap. This makes the kingdom an ideal location for international law firms with extensive expertise to handle global deals and charge higher rates than local firms.

In the Middle East, Al Tamimi has long been a prominent regional player in the legal industry. However, recent expansions by firms such as Clyde & Co, Allen & Overy, and White & Case have been gaining a significant share of the work, thanks to their strong presence and established roots in Dubai and Abu Dhabi.

Riyadh, the capital of Saudi Arabia, has seen a remarkable surge in M&A and Capital Markets work, making it an attractive market not only for law firms but also for various sectors. This is due to the innovative "Giga" projects in progress aimed at diversifying the economy and creating new opportunities for investment and growth.

Latest laws in Saudi Arabia related to operating structures and new firms

One of the most intriguing discussions recently revolves around the latest laws in Saudi Arabia, specifically the amendments to the Saudi Code of Law Practice that require law firms operating through associations in the Kingdom of Saudi Arabia (KSA) to change their business operations. In the previous year, a royal decree was issued, outlining proposals for how foreign law firms can practice in KSA.

In the last quarter, renowned firms such as Herbert Smith Freehills, Linklaters, Latham & Watkins, Greenberg Traurig (a new firm in the Middle East), Dentons, and Clifford Chance have either established their Riyadh bases or solidified their existing presence through alternative arrangements.

The new law intends to:

? Encourage law firms to establish a presence in KSA, so that legal work is conducted within the country rather than outside of it.

? Facilitate high-profile deals to remain within Saudi Arabia instead of being taken abroad.

? Increase opportunities for KSA lawyers and promote Saudization.

Currently, the Saudi legal market operates through associations, but these will no longer be permitted, including the system of alliances or partnerships that are currently in place. Going forward, firms have two options to structure their operations, which are outlined below:

1.    Establishing a professional company in joint venture with registered KSA lawyer(s) as co-shareholder(s) (limited liability company).

·      The KSA partner must hold at least 25% of the company.

·      KSA law advice may be provided through KSA lawyers.

2.    Establishing a branch office of a foreign law firm.

·      The branch office may be wholly owned by the parent entity.

·      Saudi law advice may not be provided.

These new changes mean that foreign law firms will need to wind up their current arrangements and establish new structures, as billing the client will be contingent upon generating at least 70% of the income from the Saudi office. 

New Entrants and Movement in the UAE

Over the past two weeks, I have been engaged in 60 meetings with partners on the ground and US partners who are looking to establish a presence in either the UAE or Saudi Arabia. The legal landscape in the UAE has been undergoing significant changes, with reputable law firms such as Gibson Dunn making a remarkable impact in the corporate, capital markets, and energy sectors in Dubai and Abu Dhabi. The prominence of dominant law firms like Morgan Lewis, known globally for their funds practice and for their pro bono work, have also been instrumental in deepening their roots in the region. Morgan Lewis is particularly notable for its investment funds, finance, arbitration and corporate practice as well as their strong commitment to assisting economically disadvantaged individuals and families in their communities, as well as its partnerships with non-profit organizations serving vulnerable populations. This dedication is ingrained in the firm's culture and enhances not only their credibility but also their appeal to lawyers seeking international opportunities, given their established presence in both Dubai and Abu Dhabi.

Another notable player in the UAE legal market is Clifford Chance, which recently won the title of International Law Firm in the Middle East. Their recognition stems from their innovative and impactful cross-border deals, coupled with their collaborative and seamless service approach led them to win at the IFLR awards.

Overall, the Middle East legal market exudes an aura of excitement, with its innovative spirit and dynamic nature. The changes that have taken place since my last visit are a testament to the region's forward-thinking mindset. It offers a perfect hub for lawyers, whether junior or senior, to gain a substantial share of high-end work, thanks to its diverse cultures and the quality of work available. In my experience, working in the Middle East entails not just a professional shift in mindset but also an opportunity to thrive in a dynamic and rewarding environment.

For those whom I have not yet had the pleasure of meeting or reconnecting with, I encourage you to reach out. I am delighted to exchange market knowledge and insights. Alternatively, I hope this article has been informative and helpful for those currently in the Middle East or those considering a transition to this incredibly vibrant region.