The experience of the international law firm Shearman & Sterling in the Middle East has a clear lesson for many countries in the region as they seek to rebuild after the tumultuous events set in train by the Arab Spring.
In 1965, not many American law firms would have seen a business opportunity in Algeria. The country had just emerged from an eight-year war against France that had destroyed much of its infrastructure and left it a pariah in global business terms.
The country’s new revolutionary government wanted to take control of its oil industry from the French colonisers who still dominated this vital source of foreign revenue. The government called in Shearman & Sterling (S&S) to take charge of the delicate negotiations on behalf of Algeria.
According to the official history of S&S, Algeria wanted to “create the legal framework for Algeria’s oil and gas concessions”, and the firm did that so successfully that when, a few years later, the new government of the UAE based in Abu Dhabi also wanted a new legal structure for its energy industry, S&S seemed the natural place to go.
“It was the start of our involvement with the UAE, which has been long and mutually profitable,” says Marwan Elaraby, the Egyptian-born managing partner of the firm’s Middle East business. With fellow managing partner James Comyn, who heads the Abu Dhabi office, he runs a firm that has worked its way into the heart of the UAE’s business establishment.
That early contract in 1971 led to the creation of the Abu Dhabi National Oil Company (Adnoc), a cornerstone of the nation’s economic growth over more than four decades.
It also persuaded S&S to set up permanently in the capital. “The first office was above a souq because that was one of the few places that had phone lines back then,” says Mr Comyn.
Now S&S has a floor in the prestigious Etihad Towers office building with sweeping views out over the Arabian Gulf and Emirates Palace. It is a sign of how far the firm has come in 40 years in Abu Dhabi.
The clients that S&S advises and the transactions it has been involved in read like a timeline of the capital’s corporate history: Mubadala’s development of Dolphin Energy, as well as other significant investments in South East Asia and Brazil; work with Masdar and the International Petroleum Investment Company; advice on investment in the space venture Virgin Galactic; and a key role in the deal that brought the English football club Manchester City under Abu Dhabi’s ownership.
More recently, S&S has been working on two projects integral to Abu Dhabi’s development over the next four decades: the renewal of the Adnoc oil concessions and the creation of the Abu Dhabi Global Market (ADGM) to make the capital an international financial centre.
“The Adnoc renewal is the most significant deal I’ve ever been involved in, and I’m really impressed by the Adnoc team,” says Mr Comyn. “It’s a complex set of arrangements with many different scenarios to work through.”
He declines to put a deadline on the negotiations, which could result in a significantly increased Asian involvement in the UAE energy business amid historically low oil prices.
“They [Adnoc] are taking a long-term view. They want to get the right outcome, with high recovery levels and proper productivity, not just short-term considerations,” Mr Comyn says.
ADGM is also at a crucial stage. S&S helped the market to draw up its rules and regulations, which are under public consultation ahead of a planned launch this year. “It’s very much work in progress,” he says.
Mr Comyn confesses to a newfound interest in English football too now that Abu Dhabi owns Manchester City. “It was a fascinating job, with the firm involved in negotiating footballers’ contracts and property deals. Will it ever pay off financially? Well, financial returns are not the only things that matter in football,” he says, like a true City fan.
Abu Dhabi has become S&S’s centre for business across the Middle East and North Africa, a region in which Mr Elaraby feels particularly comfortable. He has worked for investment banking and private equity firms in his native Egypt and is now in charge of S&S’s capital markets business in the wider region.
Egypt is at the top of his list of priorities at the moment. “The market there was shot down to capital market issuance for a couple of years, but there have been four IPOs in the past two years and we’ve been involved in three of them. They’ve all been 10 times oversubscribed, with a lot of interest from international investors, so that’s a sign that the market is back,” he says.
Abu Dhabi clients of S&S have been involved in the recent surge of investment into Egypt, especially in the field of alternative energy, which the emirate has made a speciality. And that trend looks set to continue as interest peaks with the impending opening of the Suez Canal expansion. “Egypt is looking to create a series of special economic zones along the canal as part of the expansion project, and the UAE has a lot of experience in that area,” says Mr Elaraby.
The UAE capital is also the centre for S&S work in other parts of the region. “Our lawyers have participated in virtually every power and water project in the Mena region, making us an undisputed leader in this field,” says Mr Comyn. He also highlights the firm’s work in commercial disputes resolution in the Middle East.
“Other firms chose to have Dubai as their regional hub, we chose Abu Dhabi. I think that decision has paid off,” he says.
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