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With billions of dollars of reconstruction work to be done and the world’s second-largest oil reserves underground, Iraq beckons as a tantalizing — and treacherous — new market for businesses and their law firms. Last week’s attack on the United Nations headquarters in Baghdad underscores how volatile the country remains. Still, law firms with strong international, government contracts, and energy practices are patiently positioning themselves for eventual work in the war-torn but resource-rich nation. “I think everyone senses the opportunities,” says Nicholas Coward, a partner in the D.C. office of international giant Baker & McKenzie. “It’s just a matter of when to make a move.” Firms with strong energy practices, such as Haynes and Boone and Dorsey & Whitney, are vying for potential Iraq oil and gas work, while many others are eager to assist clients with reconstruction contracts awarded by the U.S. Agency for International Development, the Army Corps of Engineers, and the State Department. Although lawyers recognize that it will be some time before substantial private investment — and lucrative work for law firms — materializes, they remain enthusiastic about the long-term prospects in Iraq. “You don’t often get the chance to set the table,” says S. Douglas Stinemetz, a Haynes and Boone partner in Houston and co-chair of the firm’s Iraq practice group. “It’s a once- or twice-in-the-century opportunity.” Kenneth Reisenfeld, the practice co-chair and a D.C. partner in the Houston-based energy firm, says Haynes and Boone is fielding many inquiries about Iraq from its oil and gas clients. Firm lawyers have spent much time learning about the possibilities for oil and gas work in Iraq to answer clients’ questions, Reisenfeld says, but to date, they haven’t been able to take much action. “We’ve been providing a lot of advice and a lot of hand-holding,” he says. If the country becomes more stable and hospitable to foreign investment, however, there is money to be made in its rebuilding. The Council on Foreign Relations estimates that it could cost between $100 billion and $500 billion over the next five to 10 years to rebuild Iraq and provide humanitarian relief to its people. The United States alone has appropriated 2.5 billion federal dollars in fiscal year 2003 for Iraq reconstruction. A DAUNTING MISSION One of the biggest postwar contracts to date has gone to consultants BearingPoint (formerly KPMG Consulting). The company has tapped Cleveland’s Squire, Sanders & Dempsey to help them carry out a USAID contract that focuses on building a new Iraqi economy. It’s a daunting mission that could include privatizing former government-held industries, structuring government economic and regulatory agencies, and developing a tax structure — all of which is likely to require significant legal work. Joseph Markoski, a Squire Sanders D.C. partner who is supervising the firm’s work with BearingPoint, says the broad scope of the contract (a $9 million initial award with the possibility of increasing to $79.6 million in one year) will challenge the firm and keep lawyers there busy. In the firm’s proposal for the USAID contract, Squire Sanders said 25 of their American lawyers, five Iraqi lawyers, and two Arab lawyers from the firm’s Kuwaiti affiliate would be available for the Iraq work, but Markoski says that doesn’t necessarily mean all 32 will be needed. Although Squire Sanders lawyers will soon be doing work on the ground in Iraq, Markoski says that the firm only plans to send people in as needed and on a temporary basis. For example, when the firm is working on telecommunications matters, a team of telecom lawyers might be deployed. “I don’t contemplate at this point to bring someone in and have them reside in Baghdad,” he says. Instead, to accomplish much of the work that has to be done in Iraq, the firm recruited the five Iraqi lawyers to work for the firm on a contract basis. Some had worked with lawyers at the firm’s Kuwaiti affiliate, while others were found by a scout for the firm. Cleveland-based Squire Sanders partner Dale Stephenson traveled to Iraq to meet with the local lawyers, and he says his experience illustrates the difficulty of working in postwar Iraq. Frequent power outages, currency exchange problems, and poor telephone and Internet service were among the obstacles of doing business, he says — never mind the personal security concerns. Overall, USAID has awarded nine major contracts and four grants since January. Recipients include the construction giant Bechtel Corp. and Halliburton subsidiary Kellogg Brown & Root. Several other contracts are still in the bidding process. Patton Boggs has managed to get some of this work, says managing partner Stuart Pape, representing companies with energy and infrastructure contracts. Upping its presence in the region, the firm is opening an office in Iraq’s neighbor Qatar in October. Patton Boggs, which is best known for its lobbying practice, has been the longtime counsel to the Qatari government and becomes the first American law firm licensed to practice in the country. Pape says the firm will draw on resources from the Qatar office, to be headed by partner Susan Bastress, to assist its other clients in the region, including those in Iraq. But Wiley Rein & Fielding partner Rand Allen says that right now, government contracts lawyers aren’t swamped with legal work from Iraqi reconstruction because bidding for and negotiating the contracts to date has been been relatively straightforward. “Frankly, the contracting part of this is not nearly as challenging as the logistics,” he says. Richard Powers Jr., the managing partner of Dorsey & Whitney’s D.C. office, says the current contracts may appear less attractive to companies because most of them expire in one or two years. Companies are wary of jumping into a project that, in the short term, could be more costly than profitable. “It sounds like there’s a lot of opportunity, but at least in the short run, it may not be as great as we think,” says Powers, who chairs the Minneapolis-based firm’s Iraq practice group. Allen thinks a major challenge for lawyers whose clients snag these contracts will be navigating the unstable and fluid Iraqi legal system. Iraq’s interim governing authority, the Coalition Provisional Authority, has exempted contractors from some provisions of Hussein-era Iraqi law. The unsettled laws, however, remain a bigger problem for companies that are interested in doing business in Iraq without reconstruction contracts. “We’re waiting to see what the shape and content of the laws are going to be,” says Alexander Kritzalis, the New York-based chair of the Middle East practice group at White & Case. In general, lawyers have been hesitant to advise their clients to move into Iraq full force, past the safety of the reconstruction contracts and into private investment while the country lacks a formal system of courts and laws. PATIENCE IS A VIRTUE Lawyers with expertise in emerging economies say it will take some time before conditions in Iraq are favorable for foreign private investment. But Kritzalis says such potentially profitable opportunities are worth waiting for. He compares the situation in Iraq to that of Saudi Arabia in the mid-1970s. “If you turn the clock back to 1975, Saudi Arabia was a relatively undeveloped economy,” says Kritzalis, whose firm represents the Saudi oil company Aramco. Kritzalis sees no reason why the same fortune Saudi Arabia derived from its oil reserves couldn’t come to Iraq if reconstruction efforts are successful and a stable government, economy, and legal system emerge. “Iraq could become a magnet for inbound foreign investment,” he says. “They are coming out of a dark period.” White & Case, which has offices in Jeddah and Riyadh, launched a firmwide Iraq initiative right before major combat was declared over in early May. In addition to carefully watching the emerging economy, the firm has been active in helping clients bid for reconstruction contracts. Kritzalis says the country has significant resource wealth, and firms like his are eyeing the long-term potential for business in Iraq. “When conditions are stable, I think you’re going to find a stampede of Western law firms into Iraq,” he says. He acknowledges that White & Case wants to be among them. Kritzalis cautions that the country’s current instability makes it difficult to predict when, if ever, the market will be ready for outside investment. “Nobody could have forecast in April the situation on the ground,” he says. But he and other interested lawyers are keeping a close eye on developments in the region. “From the time we decide to pull the trigger, we could be on the ground in 30 days,” says John Lonsberg, the head of the Middle East practice group at St. Louis-based Bryan Cave. The firm has offices in Kuwait City, Riyadh, and Dubai. Earlier in the year, Lonsberg expected to be diving into Iraq work by September, but “my guess is we’ve set that back three or four months,” he says. It will take even longer, he says, to see a substantial American law firm presence on the ground in Iraq. Markoski of Squire Sanders says the progress that BearingPoint makes over the next few months in rebuilding and reintegrating Iraq’s economy will in large part determine the country’s attractiveness to foreign companies and their law firms. “It depends on how successful we are in helping the [Coalition Provisional Authority],” he says. “That will expedite the whole process.” But for the time being, most agree that the best strategy is patience. “Standing back, it looks like a great market if things turn around,” says Powers of Dorsey & Whitney. But “I don’t have a crystal ball.”

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