The rise (and rise) of in-house counsel across the GCC

May 12, 2017

The complicated market dynamics of a region that has had to adjust its economic outlook due to direct (the Oil Price, regional instability) and indirect (Brexit, US Elections) factors, has led to a greater focus on cost, and the importance of getting more ‘bang for your buck’. In the Legal arena, this has increased pressure on the those in ‘Big Law’ to address their levels of flexibility in how they work with their clients. Whilst the jury is still out on just how responsive Private Practice has been to these demands, an area that has seen sustained growth in increasingly trying times, is that of the In-House Counsel. Whether this comes in the form of additional headcount, or simply a greater appreciation of the importance of having a dedicated resource ‘In-House’, the spotlight is shining on In-House lawyers in the region like never before, for good and bad.

By definition, it’s safe to argue that the Middle East is no longer an ‘emerging market’, despite continued reference towards this definition in many parts of the world. The financial markets, liquidity, infrastructure, and general maturity of the economies of the GCC would put us very much in the established markets space. Yet if we apply this again to the Legal sphere – specifically from an In-House perspective – then things are certainly less mature. Many International and Local businesses still do not have dedicated In-House Counsel in the GCC, despite significant business activity. Traditionally two arguments have been forwarded to explain this; one is that – for Multinationals with large and established functions in Europe and the US – the lion’s share of the complex legal work can be handled by lawyers in other markets. Secondly, many companies feel that the use of external Counsel provides them greater business flexibility. In both cases, the utilisation of external Counsel is a necessity, even for the smallest of matters.

The GCC Market has yet to reach a stage of maturity in the way that Legal services are offered. Businesses like Lawyers on Demand (LOD) are only beginning to make their first tentative steps into the region (with licencing issues to navigate before any real ground can be made), and Legal Tech is yet to make much of a splash in comparison to other markets globally. What this all means is that CEOS, Boards, and Chairmen have a binary option; external Counsel or Internal Counsel. If the argument goes that external Counsel offer specific skillset in an arrangement that allows businesses greater flexibility around fixed term cost, what of the argument for companies to hire In-House Counsel?

According to David B Wilkins, in his article ‘The In-House Counsel Movement, Metrics of Change’:

“Supporters of the in-house counsel movement typically advance three types of arguments to justify a greater role for internal lawyers: an economic argument, which holds that strengthening in-house legal departments will lower legal costs; a substantive argument, which holds that internal lawyers will give better legal advice than outside lawyers because of their more intimate knowledge of the company’s business and culture; and a professional argument, which holds that inside lawyers are better positioned to be the guardians of the company’s corporate citizenship and long-term interests and values.”

In a cost-conscious market, the economic argument seems to be most compelling. Yet still, many companies prefer to rely on their In-House Counsel sitting outside of the GCC to handle legal matters for the business. Whilst workable, this can be flawed. The GCC Countries are all unique, business done differently in each jurisdiction, each with its own legal peccadilloes to manage and navigate. A dedicated In-House Counsel on the ground, who has spent time in the region and understands the challenges of the GCC can more effectively manage a company’s Legal risk, fully reinforcing the substantive and professional arguments that Wilkins puts forward in his article.The growth of In-House Counsel has been further compounded in recent years (especially since the GFC) with greater recognition of the business-critical importance of Compliance. It seems obvious that international businesses (especially those listed on the markets) would be particularly conscious of this, however it is equally important in Local Corporates, especially in instances when they are doing cross-border business with international companies. Compliance has traditionally been the mainstay of Audit departments, however with things like FCPA, FATCA, and the Anti-Bribery Act in the spotlight across the GCC, In-House lawyers are taking a greater lead in this realm. Taylor Root has worked on several dedicated Compliance Counsel roles in recent years, and in general, it is expected that even those stepping into broader Regional Counsel positions have a strong understanding of Compliance – both reactive and pro-active. This rise has been more pronounced as many of the Big Law firms don’t necessarily have as much on-the-ground expertise in the Compliance space. As such it is one of the few areas where we have seen International hiring taking place to bring skillset into the market. As a 2015 Legal500 report stated:

“Anti-bribery and compliance are now leading concerns for businesses across the Gulf. According to our client survey, 88% of businesses in the region will struggle with compliance in the next 12 months. Finding ways to implement compliance plans will be one of the most pressing issues legal teams face in the coming year.”

Later in the same report, there is this telling quote:

“Legal teams are growing in size. In what might be more bad news for the region’s firms, the companies we spoke to generally agreed that building larger teams and sending less work to external counsel would become more common.”

We must take this with a pinch of salt. It’s important to note that there is no suggestion that the rise of In-House Counsel in the GCC spells the end of external counsel. That’s not realistic, nor likely. Put simply, the market is just maturing, becoming more reflective of global markets where both co-exist very successfully. What is undeniable however is that the number of In-House Counsel in the GCC has increased significantly in the past five years in the region, as businesses begin to appreciate just how valuable having their own dedicated In-House Counsel can be. The view of ‘Legal as a Cost Centre’ is changing, as business leaders see the ‘before the fact’ value of having dedicated Counsel within their business. In more mature businesses in the GCC – both Multinational and Local – teams have grown exponentially in recent years to keep up with business need. It’s easy to see the chain reaction taking place; Counsel is hired, justifies the economic, substantive, and professional arguments of their bringing on board, and then the business sees fit to hire more like them. This has been happening in the US since the 1980s, and we have seen similar patterns in the GCC in the past decade. The rise of In-House Counsel is now an important part of the conversation regarding the GCCs legal landscape. As Wilkins succinctly puts it:

“To date, most of the discussion on the corporate legal services market in emerging economies has focused on the growth of domestic, large commercial law firms and the resulting competition between these new entrants and the global giants that are also seeking to serve these markets. If the U.S. experience is any indication, however, the outcome of this competition and the shape of the corporate legal services market in emerging economies will be greatly influenced by another factor: the potential expansion of the in-house counsel movement.“

Taylor Root has been actively recruiting Legal & Compliance professionals across the GCC since 2007. We have the largest team of In-House specialists on the ground in Dubai and specialise in end-to-end In-House recruitment, with particular expertise in newly-created Regional Counsel roles, General Counsel roles, and dedicated Compliance Counsel positions. If you are thinking about hiring your first In-House Counsel, looking to expand your existing team, or even thinking of moving to a new role, please do not hesitate to get in touch with us.