Along Dubai’s Sheikh Zayed Road, construction cranes seem almost as plentiful as sand. Hotels and office buildings are going up by the dozen, and already some of the world’s most recognizable corporate names-CNN, Cisco Systems, and Microsoft-dot the landscape.
There’s a billboard advertising “the most prestigious kilometer on the planet,” an extravagant new downtown project that will include the tallest tower on earth. Another announces the world’s largest shopping mall, which won’t be far from the soon-to-be largest theme park, the future home of Dubai’s second indoor snow skiing slope.
Welcome to Dubai, a city-state on development-enhancing drugs. With minimal taxes, a strategic location (Moscow and Delhi are only three to five hours away), and a genius for marketing itself, this city, one of seven semiautonomous sheikdoms that comprise the United Arab Emirates, has become a magnet for corporations and, increasingly, their lawyers.
In the last three years, ten Global 100 law firms, including DLA Piper, Vinson & Elkins, and Akin Gump Strauss Hauer & Feld, have opened offices here. Magic Circle firms, which already dominate the region, are expanding their presence. And among lawyers, Dubai has generated a mountain of get-rich-quick buzz. “If you can’t make money in Dubai,” says Linklaters partner Ewan Cameron, “you should give up.”
It’s easy to understand Cameron’s enthusiasm. Dubai hopes to become a Hong Kong on the Persian Gulf-a Middle Eastern hub for high finance, big deals, and corporate offices. Two years ago, the government launched the Dubai International Financial Centre, a district where banks can offer a full range of services and take all of their profits back home tax-free. More than a dozen of the world’s largest banks, including Morgan Stanley, Deutsche Bank AG, and The Goldman Sachs Group, Inc., have received licenses to operate there. The DIFC’s centerpiece is a brand-new stock exchange, the Dubai International Financial Exchange. Its goal is grandiose: to create a market on a par with London and New York. “Dubai is a business, okay,” explains Declan Hegarty, an investment banker at HSBC Holdings plc. “It’s Dubai Inc. It’s just a question of what division of Dubai you’re dealing with.”
But there’s room for skepticism about Dubai. The stock market has been slow to take off, and the Middle East, while awash in oil money (an International Monetary Fund economist estimates that the ten major oil-exporting countries in the region may bring in more than $500 billion in oil receipts this year), is one of the world’s least active transactional markets. Many firms have been attracted to Dubai as a hub to serve a red-hot market for energy and infrastructure projects, but the pace of such work is unlikely to continue for long. And Am Law 200 firms looking to make their mark will face stiff competition from the British. On top of that, Dubai real estate is some of the most expensive in the world, with the cost per square foot for office space in prime areas topping the going rate in New York; and experienced legal talent is hard to find. New entrants have a lot stacked against them. “You have to be willing to bleed,” says Stephen Matthews, a partner at Baker Botts, who has worked in the Middle East for ten years. “You can’t do it to pursue an opportunity that has a three-to-five-year horizon. You have to invest for three to five years so you can be in the game ten to 20 years hence.”
So far, Dubai’s potential-as a Western-friendly financial center in the heart of the Middle East-has been its biggest selling point. And it’s probably a mistake to underestimate a place that can import skiing to the desert. For lawyers, however, the question is whether this is a legal market poised for takeoff, or a money-losing mirage.