Dentons lifer casts legal eye on how UAE manages its affair

Michael Kerr says the changes in local laws should mitigate the risk of another property bubble. Satish Kumar / The National

After 10 years in the UAE, Michael Kerr has reached a tentative conclusion on the way the country is run.

“They’ve got a very attractive place here, but they have to look after the patrimony, and the security and the future of the population. So not selling the family silver is a very important concept,” says the 49-year-old lawyer, who is managing partner of the Middle East business of the international law firm Dentons.

He was speaking in the context of the new federal company legislation which is awaiting decree, and which some legal experts had expected to dramatically increase the amount of foreign ownership of a corporate entity, currently pegged to 49 per cent.

Although the law has yet to be finally enacted, it looks as though companies outside free zones will still have to be majority owned by Emiratis. It is expected that exemptions for some companies and sectors will be allowed on a case-by-case basis, however.

“I think I’ve learnt how things are done here. There’s no desire to upset the general legal structure, but a willingness to show flexibility. That’s how the UAE works, and it has worked well,” he says.

Mr Kerr, a native of Belfast, Northen Ireland, is so far a Dentons lifer, having joined the firm after qualifying in law from King’s College, London and the Sorbonne, Paris. He was asked to join the Dubai office, which had already been in place some 45 years, in 2004.

“Dubai was clearly taking off then, and the construction sector in particular. My background was in litigation and disputes, which was still relatively new here then. I didn’t expect to be here 10 years, but there has certainly been enough work to justify it,” he says.

Disputes litigation peaked just after the effects of the global financial crisis hit the UAE, and Dubai in particular, in 2009. “The construction industry talks of front-end and back-end phases, where the front is building things and the back in disputes. I think we’re still at the back end, but it’s quieting down. Lots of mothballed and new projects are starting up again,” he says.

To those who warn that the rising UAE property market could be in danger of reaching “bubble” territory again, he says the changes in local laws should mitigate the risk. “The law is fine, and the contractors are less willing to assume high levels of risk. The question is whether the authorities, and I’m thinking in particular of the Land Department, have learnt the lessons of before.

“The changes to transaction tax and mortgage rules have been good things, aimed at curbing flipping [selling off-plan properties for a quick profit], but I think it [flipping] is still happening, though maybe not at the levels of before.”

A crucial test of the authorities’ willingness and ability to take stock of the new environment will emerge with the full plans for the Expo 2020 business exhibition, expected later this year, which he thinks should pay more attention to planning and zoning regulations.

Dentons has grown from a London-based firm of about 30 partners to what Mr Kerr calls a “polycentric” global organisation with 80 offices in 52 countries in his 26 years with them. This year, it will once again contribute the legal chapters to the well-respected Oxford Business Group’s annual report on Dubai, a tour d’horizon of the legal scene in the emirate.

The multiplicity of legal systems is one theme. “I think we’ve reached the stage of comfortable co-existence between the main civil and criminal systems, and the free zone legislation. But the expansion of the Dubai International Financial Centre jurisdiction in 2012 could shift the landscape. I think it will become more common for onshore companies to use DIFC courts,” he says.

Dentons has represented clients involved in cases that came about after the financial difficulties of Dubai World, but Mr Kerr sees no signs yet that a general bankruptcy law is seriously being considered. “It could just be a sign that the economy is moving in the right direction again,” he says.

The legal business has certainly become tougher in the UAE, he says. “It couldn’t get more competitive. The legal market is overpopulated. The Middle East is a very active economic region and it needs international legal expertise, but when you’ve got too many for the work involved, that’s not good. The aspirations of some of the newer entrants have not always been met.”

Denton’s faces competition from American firms in energy, and what he calls the “London magic circle” in finance and banking.

But he keeps a close eye on Al Tamimi & Company, the local Dubai firm. “They are a breed apart. They have a unique view and built a great brand,” he says.

The branch in Abu Dhabi shares a building with the Abu Dhabi Stock Exchange, but he might consider moving to the site of the new Abu Dhabi Global Market on Al Maryah Island, depending on rental levels and the as-yet unpublished regulations for the new free zone.

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