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Not all Saudi Arabian firms are desperate for an association agreement – foreign firms need to bargain harder in Jeddah.

Jeddah’s fortunes have sprung from the Red Sea.

The city of Jeddah, on the west coast of Saudi Arabia, stands in stark contrast to the capital. While Riyadh sits and bakes in the dry isolation of the desert, Jeddah’s fortunes have sprung from the Red Sea. As the country’s biggest port, it has seen foreigners come and go for centuries.

Jeddah also receives Muslims from all over the world due to the Mecca pilgrimage, and some say this has led to a wider range of views and cultures (it is acceptable for a woman not to wear a headscarf, for example). Compared with Riyadh, where Wahabbi religious police are omnipresent, the city is a model of cosmopolitanism.

Perhaps this constant exposure to foreigners has also shaped the attitude of local law firms: unlike their counterparts in the capital, independent firms in Jeddah seem in no hurry to court the newcomers.

Independently happy

For one thing, the city is already home to the three leading independent law firms in Saudi Arabia – The Alliance, The Law Office of Hassan Mahassni and The Law Office of Dr Mujahid Al-Sawwaf. The firms are well-known in the market and have been practising Saudi law out of Jeddah for years. They also have no intention of moving to the hostile climes of Riyadh, nor hooking up with a larger foreign firm.

While Hassan Mahassni has dabbled in associations with White & Case and Trowers & Hamlins in the past, all three firms say they are happy with their independence for now. Along with staying in Jeddah, the firms say this approach gives them more freedom and flexibility.

“When you’re not tied up to one firm, you can choose the best option for your clients,” says Basel Barakat of Hassan Mahassni. “At the end of the day, we’ve got clients and we don’t need an association to bring in the big mandates.”

David Wells of the Law Office of Mujahid Al-Sawwaf says the firm competes fine without an association, and is frequently mandated by firms with no presence in Saudi Arabia such as Slaughter and May and Linklaters.

It is not for a lack of offers: all three firms have been approached numerous times by international firms. It looks like potential courtiers need to try a little harder.

Like renting

Andreas Haberbeck says independence isn’t a matter of policy for The Alliance, which might consider an association agreement. But he is yet to be convinced by any offer.

“We’ve been asked by everyone if we’re interested in having an association. We say: ‘Yes we are, but can you explain how an affiliation will improve us?’” says Haberbeck.

The answer, it seems, rarely satisfies: “They want local firms to be happy just to be in an association, whereas we would lose referrals and also control.”

Loss of referrals is an important issue for Saudi firms, says Ali Abedi, also of The Alliance. Abedi says international firms have been unwilling to compensate Saudi firms for the loss of referral income; revenue which makes up a significant proportion of their overall takings.

“We get at least half our fees from referrals, but if we hooked up with, say, Herbert Smith, we wouldn’t get work from Clifford Chance or Allen & Overy,” says Abedi.

Instead of instructing a local firm associated with a rival, says Abedi, the international firms would rather pay a smaller independent firm around $300,000 a year simply for the use of its Saudi licence. “It’s like renting,” he says.

Unless international firms are willing to budge from their positions and offer better terms, Jeddah's three independents will be more than happy to continue picking and choosing business at their leisure.

Tags: Middle East, Expansion and strategy, Saudi Arabia, Features, The Alliance, The Law Office of Hassan Mahassni, The Law Office of Dr Mujahid Al-Sawwaf