Rise in major US law firms setting up in Saudi Arabia

November 28, 2024, 8:03 AM

Since last year a new framework has supported foreign law firms’ creation of joint ventures with local counterparts, through acquisitions or Saudi subsidiaries

Law firms open Saudi offices
Vision 2030 holds ‘potential’
Rapid issuance of new laws

Attracted by the host of complex and potentially lucrative legal issues raised by Saudi Arabia’s development push, several of the largest law firms in the US are formally setting up shop in the kingdom, either directly or through mergers and acquisitions.

Among those making the leap is Atlanta-based company King & Spalding.

A spokesperson confirmed to AGBI that the company submitted its application to acquire the local Abdulaziz H Al Fahad & Partners Lawyers on November 7 and that the deal was now “subject to regulatory approvals and customary closing conditions”.

The firm had already obtained direct accreditation to practice in Saudi Arabia through a foreign law licence in September 2023.

According to reports, King & Spalding aims to hold 75 percent of the new joint entity and operate it under its brand from Al Fahad & Partners headquarters in Riyadh.

Chicago’s Baker McKenzie and Philadelphia’s Morgan Lewis are among the other large US firms that, having had a small presence in Saudi Arabia for years, have now taken similar steps to fully establish themselves there.

The country is already the Middle East’s largest economy and, according to Karim Nassar, Baker McKenzie’s managing partner for Saudi Arabia, is bound to diversify further under Crown Prince Mohammed bin Salman’s Vision 2030 agenda.

“When compared to other markets, Saudi Arabia stands out due to its scale, rapid development and central role in the broader Mena region,” Nassar says.

“This makes it a particularly attractive market for expansion, offering a unique combination of high growth potential, legal modernisation and a strong need for global legal expertise.”

In July Baker McKenzie acquired a majority stake in its Saudi partner, Legal Advisors Abdulaziz Alajlan & Partners, and is running the combined firm under its name. Like King & Spalding and others, it also formally established Riyadh as its regional headquarters.

Saudi authorities have implemented many legal reforms in recent years.

Crucially, say sources, those include a new framework that since last year has supported foreign law firms’ creation of joint ventures with local counterparts, including through full-blown acquisitions, or wholly-owned Saudi subsidiaries.

Foreign lawyers have been cleared to practice in Saudi Arabia in 2021 if they secure a license from the Saudi Bar Association.

“These reforms, along with the modernisation of the legal and dispute resolution systems, ensure that foreign law firms can operate independently,” says Nassar.

Saudi Arabia has upgraded its framework for cross-border bankruptcy proceedings, arbitration, investments, domestic commercial disputes and is looking to reform labour-related regulation, according to sources.

The trillions of dollars Saudi Arabia is pouring into its physical and social infrastructure are yielding plenty of deal and regulatory work for lawyers, and plans are expected to produce increasingly thorny and high-value commercial disputes with international connotations.

Accessories, Formal Wear, Tie — Baker McKenzie’s Karim Nassar

Blazer, Clothing, Coat — Baker McKenzie’s Karim Nassar

“As a corollary to the volume of ambitious transactional activity we are witnessing in the kingdom, an uptake in contentious activity is anticipated,” says Sara Aranjo, who leads Morgan Lewis’s international arbitration, dispute resolution and global investigations practice in the Middle East and Africa out of Dubai.

Morgan Lewis applied for a licence to operate in Riyadh in April and that process is moving forward “as expected and we look forward to opening soon,” a firm’s spokesperson told AGBI in mid-November.

“In addition to traditional disputes in JVs [joint ventures], post-M&A, banking and employment, we can anticipate disputes arising from mega- and giga-projects, particularly in the renewable energy, hospitality, real estate, technology, and entertainment sectors,” Aranjo, who according to reports is expected to lead the new Saudi office, notes.

For an example of what that might mean, one needs to look no further than the lawsuit that David Grover, the former chief executive of Roshn, has been pursuing against the Saudi developer after his dismissal in April over what he alleges are $100 million in unpaid bonuses.

Complex disputes

“We are seeing bigger and more complex disputes,” says Nassar of Baker McKenzie. “This is in part due to the size and complexity of the projects that are currently being undertaken in Saudi Arabia.”

In addition, Nassar notes, the rapid issuance of a variety of new laws “has added more predictability to the judicial process” in Saudi Arabia, but demands time and expertise to fully settle as their “interpretation and application are still being tested in Saudi courts”.

New York-based Latham & Watkins was among the first American firms to secure a Saudi foreign law licence in March 2023. Chicago’s Kirkland & Ellis got one in October of that year and White & Case, from New York, in December.

Greenberg Traurig, from Miami, became “fully incorporated” in Saudi Arabia in April of this year, while Curtis, Mallet-Prevost, Colt & Mosle of New York followed suit in July.

UK law firms such as Herbert Smith Freehills, Clifford Chance, Linklaters, Mishcon de Reya, and Allen & Overy (now A&O Shearman after its merger with the American Shearman & Sterling) have done the same over the past 18 months.