“It’s tangible, it’s real, it’s sensitive, it’s serious and it doesn’t look like it’s going to go away any time soon,” says one law firm partner of the diplomatic crisis currently roiling the Middle East.
The decision by Saudi Arabia, Bahrain, the United Arab Emirates (UAE) and Egypt to suspend diplomatic relations with Qatar on 5 June has caused shockwaves through the region, leaving law firm partners scrambling to assess the implications for their offices in Qatar and their clients.
Tensions are high and most of the partners who spoke to Legal Week were unwilling to be named. Highlighting the sensitivity of the situation, the UAE has made it a criminal offence to publicly express sympathy for Qatar or to criticise the UAE’s approach to the crisis.
Even before the embargo, the Qatari legal market was a difficult one for international firms, with arguably too many lawyers chasing too little work. Both Clifford Chance and Herbert Smith Freehills pulled back from the state this year, closing offices and moving staff to the UAE.
A sizeable contingent of international law firms remain in Qatar however, including Allen & Overy, Clyde & Co, Dentons, White & Case, Addleshaw Goddard, Eversheds Sutherland, K&L Gates, Simmons & Simmons, Squire Patton Boggs and DLA Piper.
Partners in Qatar and the wider region speculate that a prolonged embargo could lead to other firms rethinking their presence on the ground in the country.
One partner at a firm with an office in Qatar says: “I don’t believe many firms were making much money in Qatar even before any of these issues kicked off and the embargo will undoubtedly lead to a reduced transactional flow. You put those factors together and it is inevitable that firms will be having another look at their commitment to the country.”
The partner adds: “We remain committed to the state, but we always have to keep an eye on things. If this was to go on for a significant amount of time that could change the analysis of our commitment.”
A partner at a different firm, based in the UAE, says deals have been put on hold as a result of the crisis: “A few things we are working on are now on hiatus. But for now it is more of a convenient hiatus, ‘we will get back to you’, rather than anything official.”
A Qatar-based partner backs up the slowdown in regional activity but maintains domestic deals in Qatar are still happening. He says: “If you are doing cross-border deals with the UAE, Saudi or Bahrain I think that would get put on hold, but domestic transactions are still ongoing.”
On the whole, partners say they are adopting a wait-and-see approach to the crisis. The move by the UAE, Saudi and their allies came as a shock and firms are not rushing to take decisions.
“It came out of the blue,” one partner says. “I have not seen anything like it that’s for sure.”
“It is just wait and see, but it is more serious than previous sabre rattling,” another partner adds.
Firms contacted by Legal Week have not yet activated any contingency plans for moving staff out of the country but some – including Dentons, Eversheds Sutherland and Allen & Overy – say they are “monitoring the situation”.
Addleshaw Goddard’s Middle East head Andrew Greaves said: ”The safety and security of our colleagues and their families is absolutely of the highest priority for us and we are in constant dialogue with our staff and the British Embassy. Political instability and posturing in the GCC is not uncommon and it is to be hoped that the events of the last couple of days will blow over quickly without incident. If it becomes necessary, we have very clear contingency arrangements in place to relocate staff.”
While transactional work would likely be negatively affected by a prolonged crisis, partners say there may be scope for an increase in disputes work if the embargo continues.
One partner said: “If there are defaults in Qatar then there could potentially be more restructuring work, equally this could lead to force majeure claims under various contracts and that could lead to disputes.”
Despite the shock, partners and firms are keen to stress a “business as usual” message.
“You look out of the window and life is going on as normal; we are not complacent but it’s not doom and gloom and shelves empty in the supermarkets,” one Doha-based partner says.
Even if the resolution to the crisis is relatively swift, the shock of the embargo and the speed with which tensions have escalated mark a sea change from previous crises in the region.
A partner says: “Although I don’t think it will get resolved tomorrow, it will get resolved, but even when it does things will never be back to normal because this crisis will always be the in the background.”
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