A number of international law firms have recently closed representative offices in Abu Dhabi, only a few years after opening them, after expected opportunities in the emirate failed to materialise. Vinson & Elkins and Simmons & Simmons have both closed their Abu Dhabi offices this year, following on from Latham & Watkins, Herbert Smith Freehills, and Baker Botts in 2015.

New entrants into the city did put pressure on existing firms, but those who have been established in the city for ten or more years have been able – on the whole – to retain their market share, Leroy Levy, a partner in King & Spalding’s Dubai office told IJGlobal. 

“The issue is one of expectations,” Levy said. “Too many law firms went in expecting too much.” Ultimately this led to overcrowding as companies piled in.

“The reality is that there were too many companies chasing too few mandates,” a source at one of the firms to pack up their Abu Dhabi offices commented. “The mandates were inevitably Abu Dhabi Government-related entities who expect heavily discounted rates, which put pressure on fees.”

The total value of active deals in the wider MENA region has plummeted in recent years, from close to $86 billion in 2010 to around $41 billion today, according to IJGlobal data. In 2010 the UAE was the third largest market for active deals in the region, with a number of power and downstream oil and gas projects in development, most of which were in the UAE. Today the UAE has slipped down to the sixth biggest market for active projects in MENA, according to IJGlobal pipeline data, and just one major energy project is in procurement in the emirate - Hassyan coal-fired which is located in Dubai.

A stifled deal flow, higher rents in Abu Dhabi and economies of scale from having lawyers operating out of a single office have all been contributing factors to law firms retreat back to Dubai. Other firms could follow suit and leave the city in the near future, according to the source. 

The outlook might soon begin to look rosier however for legal advisers in the region however, given pressures on the balance sheets of companies with exposure to the oil & gas sector. A boost in the number of restructurings could help keep some firms busy, the source said. 

Lower oil prices may be deterring governments to back major new greenfield developments, but it also means there are more privatisation deals in the market. Saudi Arabia announced in November 2015 that it would privatise its airports and has already taken steps to privatise utilities at its King Khaled airport..

Lower government revenues are likewise encouraging different methods of procurement. A number of the GCC countries are turning to PPPs to procure energy and infrastructure, so as to avoid additional on-balance sheet costs.

Dubai passed its PPP law in 2015, while Qatar and Oman have appointed legal, financial and technical advisers to develop PPP legislation. Oman intends to launch three pilot PPP projects in the coming months, IJGlobal revealed this week, with a first draft of the law to follow soon afterwards.

Law firms may benefit from positioning themselves to make the most of these new opportunities in the near future. A banker at a large international lender told IJGlobal that the slowdown in larger energy deals could last for two to three years.