It is no surprise that law firms are pulling out of the Abu Dhabi market and consolidating in Dubai – Hogan Lovells, Baker Botts, Latham & Watkins, Simmons & Simmons and most recently Vinson & Elkins have all pulled out or announced that they will be closing their Abu Dhabi offices – we predict the trend to continue.
Law firm withdrawal from the Abu Dhabi market can be broadly explained in three points.
1. There is simply not enough Abu Dhabi legal work for all the law firms with a presence there. In other words, Abu Dhabi is ‘over-lawyered’. The recently built business and legal hub in Abu Dhabi is a venue called Sowwah Square – the majority of international (US and UK) law firms are based there. 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. All this expense for an office in a small market is, in many cases, unjustified. Unless law firms represent and work for large Abu Dhabi based clients (e.g. ADNOC, ADNIC, ADWEA, Mubadala, other “Abu Dhabi Inc” companies, etc.) then it will be incredibly tough to justify a presence there and turn a profit. The larger US and Magic Circle firms (e.g. White & Case, Shearman & Sterling, Clifford Chance, Allen & Overy, etc.) have the lion’s share of the Abu Dhabi legal work.
2. It is difficult to build a regional practice from Abu Dhabi (or in other words, it is easier to build a regional practice in Dubai than Abu Dhabi). Dubai is the more established and preferred location to build a regional Middle East practice. It is easier to access other nearby markets from Dubai than Abu Dhabi. It is also easier to recruit lawyers in Dubai than Abu Dhabi. Dubai has more amenities, schools and services to offer. Many lawyers (at partner or senior level) live in Dubai and commute to Abu Dhabi and some split their time between offices. All this means Dubai is the more established market and there are more opportunities for lawyers in Dubai than Abu Dhabi. Law firms are now realising that one office in the UAE is sufficient to service the region.
Interestingly, well established Abu Dhabi based US law firms such as White & Case and Shearman & Sterling have both recently launched offices in Dubai (almost simultaneously). This is partly due to the slowdown in new energy deals/projects in Abu Dhabi (thanks to reduced oil prices and the economic climate). We think this speaks volumes about the level of work in Abu Dhabi. Even the heavyweights need to find new sources of work and diversify their practice offering.
3. Global law firm consolidation. 2016 is forecasted to be a tough year for law firms. Transactional practices such as Corporate and Banking & Finance are not anticipated to be as busy as previous years. Reduced oil prices and the diminishing effect on the volume of legal work across sectors such as Energy & Projects means that law firms have to focus on their bottom line. It comes as little surprise that law firms are pulling the plug on non-profitable centres as they strive to remain as profitable as possible.
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