Written by 4:12 am EU Investment

What’s Happening in Europe, LatAm and the Middle East?

Europe By Anne Bagamery

Europe is having a moment. The European Union is busy rolling out directives on businesses of the future as well as tightening its already strict scrutiny of practices from competition to data protection. The long shadow of Brexit is falling on the continent, leading law firms and their clients to accelerate the establishment of a European presence independent of the U.K.

Germany continues to gear up for large-scale class-action litigation linked to ongoing issues such as the “Dieselgate” emissions scandal and the Wirecard fraud and bankruptcy, with major firms like Hengeler Mueller building out their white-collar litigation teams.

The Netherlands has become an increasingly attractive market for life sciences companies, prompting growth of life sciences legal practices. Environmental, social and governance, or ESG, matters have also become more prominent in the Dutch market, following the Hague’s District Court decision in May 2021 ordering Royal Dutch Shell to reduce its carbon dioxide emissions by at least 45% by the end of 2030.

France may be entering a complicated period for the M&A, private equity and financial services work that has surged in recent years. While major deals such as the €10 billion privatization of EDF are brewing and France’s innovative tech sector is thriving, law firms and their clients are bracing for political wrangling after the loss of President Emmanuel Macron’s parliamentary majority and what that may do to the country’s business-friendliness.

Key Industries

Energy, especially renewable energy, is taking on new urgency with the war in Ukraine highlighting the need for European countries to reduce their dependence on Russian fossil fuels. Law firms across the continent are reporting a surge in renewables projects and demand for related legal advice.

Real estate is getting a dual boost from companies rethinking their office needs post-pandemic and from the growth in e-commerce, which is fueling the need for logistics and warehousing.

Regulatory and Geopolitical Issues

Brexit While the U.K. voted to break from the European Union in 2016 and the separation took place in 2020, the practical effects of Brexit on trade, tariffs, employment and logistics, exacerbated by disruptions related to the COVID-19 pandemic and the Ukraine war, are now coming home to roost on both sides of the Channel. In Europe, law firms, like their clients, are adjusting to a more fractured business landscape in which having a strong base on the continent is becoming more important and the U.K. is just one of many parts.

War in Ukraine European law firms have faced many of the same issues as their clients in adjusting to the sudden shutdown of business from Russia and Ukraine, including the need to protect staff in or near conflict zones. Although sanctions have chilled most work for Russia-based clients, some practice areas, such as IP, are having to find ways to protect the ongoing interests of clients with assets in Russia.

European Union directives on data protection, the digital economy, and the metaverse GDPR, the EU directive on data protection, has become the de facto global standard, with organizations doing business in Europe adapting their practices to comply with its rigorous rules. Newer EU directives on the digital economy and artificial intelligence will make their presence felt as national legislatures enshrine the rules into law. The demand for advice on this shifting landscape is leading law firms across Europe to ramp up their ranks in IP/IT with specialists in data protection and cybersecurity, and even to create whole departments devoted to data and digital.

Foreign Direct Investment screening As part of an international effort to increase the transparency of cross-border business, protect national industries and combat money-laundering, regulators are intensifying scrutiny of the origins of foreign investment, causing law firms across Europe to ramp up their public and regulatory law teams. As one Italian partner put it, “You don’t know whether a given deal will trigger an inquiry, so you don’t want to take the chance. You want to get ahead of it.”

Climate change The European Commission has taken a leadership role in addressing climate change. EU courts escalated a major multijurisdictional case holding governments to account for missing climate goals, and cases have moved forward in Norway, Portugal and the Netherlands. The pressure is causing some defendants to seek new ways to recoup their losses, and parties on both sides are weighing the costs and benefits of arbitration vs. litigation in settling climate disputes.

Recent major law firm moves

Several international firms have expanded aggressively in continental Europe in response to Brexit. “A London base used to be enough,” one partner said. “Not anymore.” Bryan Cave Leighton Paisner has bulked up its presence in Paris and Frankfurt, Eversheds Sutherland has just opened a fifth German office, and Goodwin Procter has made a string of hires in Germany. Pinsent Masons opened a Luxembourg office to further a European expansion that began in 2021 with openings in Amsterdam and Madrid.

International firms are also ramping up their staffs in Brussels, “a focal point for the provision of competition advice,” one partner said. Privacy issues and data protection are also big in Brussels. The build-out at law firms in Brussels recalls a similar expansion in the late 1980s in anticipation of the 1992 European Single Market project.

Forecast Europe is looking to be a driver for the way businesses operate. Along with seeking data privacy and competition influence, the war in Ukraine as well as a rising consciousness of climate change is propelling efforts at energy independence and sustainable practices—areas where the EU has declared its ambition to be a global leader. While traditional transactional work such as M&A may ebb and flow in response to microeconomic factors, European law firms see themselves at the center of significant global trends that promise to change the way business—and law—are practiced.

Latin America By Amy Guthrie

Political shifts to the left have disrupted business across Latin America and slowed the pace of transactions as investors contemplate the changes in store for core industries such as energy. In recent years, leftist leaders have been elected in Mexico, Peru, Chile and Colombia—all countries that have traditionally been strong sources of cross-border legal work. Voters in Brazil, Latin America’s largest legal market, are set to vote for their next president in October.

Wealthy Latin Americans are pouring capital out of their countries and selling nonstrategic assets in an effort to diversify risk. These outflows have stoked demand for legal advice on tax, regulatory and compliance matters. At the same time, declining valuations for assets have kept M&A and cross-border finance humming, though that work is not exactly robust.

Countries of Interest: Brazil, Mexico, Chile and Colombia

Brazil Presidential elections loom in Brazil, the region’s largest economy, where far-right incumbent Jair Bolsonaro is trailing in the polls against controversial former President Luiz Inácio Lula da Silva, who leans left. There’s open talk of a coup to keep Bolsonaro in power should he lose the October contest. Transactional work has slowed amid the political uncertainties. Demand for compliance and tax work remains strong.

Mexico Mexico is benefiting from a trend to locate industrial production closer to U.S. consumers, as manufacturers attempt to reduce reliance on China and minimize supply chain disruptions. Holland & Knight launched a Mexican construction practice in August to advise companies that want to nearshore production.

Chile The December election of former student protest leader Gabriel Boric as president has led wealthy Chileans to shuttle capital out of the country and sell assets to diversify their income streams. These outflows have stoked demand for legal advice on tax, regulatory and compliance matters from clients who want to protect their wealth. Advice on data privacy and cyber-risk management also is in demand as Chile is in the process of approving a new data protection law, which will raise the regulatory standard closer to Europe’s GDPR.

Colombia Colombians elected their first-ever leftist president in June. The South American country has a long list of infrastructure projects that have provided steady work for global law firms over the years. Now, regulatory work is trending upward as Colombia signals a move away from traditional fossil fuels and attempts to adopt stronger protections for the environment and indigenous people. Energy teams in the country are shifting their focus to compliance. Renewable energy projects and green finance represent growing areas for law firms. Holland & Knight has added natural resources muscle in Colombia to field that work.

Key Industries/Practice Areas:

  • Tax, general regulatory, litigation and trade
  • Infrastructure, retail, fintech and agribusiness
  • Technology finance and cybersecurity
  • Manufacturing

Regulatory/Geopolitical Issues of Note:

  • High inflation
  • Weak local currencies
  • Growing interest and investment from China
  • Near-shoring
  • Declining support in the region for foreign investment in extractive industries

Recent major law firm moves

  • Gunderson Dettmer Stough Villeneuve Franklin & Hachigian opened an office in São Paulo, Brazil, in July to help juggle heavy demand for tech financing in Latin America. E-commerce and fintech have expanded dramatically in a region where consumer needs have long been underserved.
  • Clyde & Co opened a Chile office in August, which the firm expects to serve as a regional hub for Latin America. When asked why the firm is expanding its presence in the region, Lee Bacon, chair of Clyde & Co’s Latin America strategy group, said: “For legal services, the client decision-makers are now much more within jurisdictions.”
  • Holland & Knight launched a Mexican construction practice in August to advise companies that want to nearshore production in the country. Roberto Pupo, head of Holland & Knight’s Latin America practice, said, “We are advising several companies who are investing in the region as a result of cooling relations between the U.S. and China and supply chain disruption across Asia and Europe.”
  • In general, demand for tax partners is strong across Latin America as governments attempt to raise revenue and wealthy individuals look for ways to move capital offshore. Litigation and compliance also are areas for growth. Much-needed expertise in cybersecurity and other tech matters is scarce.

Forecast: Latin American countries are cooling on foreign investment in extractive industries at a time when global demand is strong for oil, metals and minerals. Countries such as Colombia and Chile even vow to decrease extraction in an effort to protect the environment. Mexico has taken an openly hostile stance toward private-sector investment in energy in an attempt to prop its own state-run energy firms. As a result, lawyers anticipate rising disputes and litigation across Latin America.

Middle East By Peter Shaw-Smith

Countries of Interest

The United Arab Emirates The UAE changed its weekend to Saturday and Sunday last year, firmly establishing Dubai as the region’s hottest business hub. The creation of a Virtual Assets Regulatory Authority has increased interest in cryptocurrency trading. In March, the UAE was added to the gray list compiled by the Financial Action Task Force, a global money-laundering watchdog. which may give pause to interest from international law firms and investors.

Saudi Arabia Saudi Arabia is set to see $7 trillion in government and investment spending in the next decade. Projects that are so large, they have been dubbed “giga projects,” are planned for the sparsely inhabited northeast and are expected to lead to the creation of a new set of laws that will revolutionize the country’s legal infrastructure. New regulations allowing foreign law firms to operate, either by forming a joint venture with local law firms, or through branch offices, are likely to encourage more international lawyers to take up residence.

Key Industries

Energy remains at the nexus of the Saudi economy, with an extra $500 million a day pouring into the kingdom’s coffers due to high oil prices. Neom, a planned city currently being built that will incorporate “smart” technologies, is designed to burnish its renewables credentials: its green hydrogen project envisages 4 gigawatts of renewable power from solar, wind and storage, while, with no roads, cars or emissions, The Line will run on 100% renewable energy and 95% of land will be preserved for nature.

Transportation has seen Gulf airlines, Emirates, Etihad and Qatar Airways set new global standards for comfort in the skies. Standing at the global trade crossroads, Saudi Arabia plans to quadruple port throughput by 2030, while the National Shipping Company of Saudi Arabia operates the world’s largest Very Large Crude Carrier (VLCC) fleet of 42 vessels. Abu Dhabi Ports Group’s recent initial public offering has spurred plans to catch up with Dubai’s Jebel Ali Port. Even Egypt is getting in on the act, almost doubling port capacity by 2024, and stabilizing following a decade of upheaval.

Regulatory and Geopolitical Issues

War in Ukraine The loss of Russian output to the global market has positioned the Gulf to make up shortfalls. Soaring energy revenues brought a 12-fold increase in Qatar’s budget surplus to $12.8 billion in the first half of 2022. Its liquefied natural gas (LNG) reserves will make it energy partner of choice in the future. However, President Biden’s attempt to persuade the Saudis to increase oil output was apparently unsuccessful.

Middle East as a U.S.-China battleground China remains dependent on Gulf oil imports and is looking to invest in the region to cement relationships. Lawyers say the Gulf states are using the threat of closer China ties to leverage an arms and procurement shopping list with the U.S.

Recent major law firm moves A drumbeat of regional expansion underscores the attractiveness of the Middle East. In the past two years, CMS launched its sixth office in the Middle East, Gowling WLG opened an Abu Dhabi office, regional powerhouse Al Tamimi & Co. unveiled Morocco, while U.S. firm Kobre & Kim initiated a regional office in Dubai. PwC Legal has growing ambitions in the region, with Qatar being its latest addition.

International firms will continue to ramp up their regional presence, especially in Saudi Arabia. Expect continued tension as Saudi Arabia attempts to lure lawyers away from the UAE.

Forecast The Gulf’s time is coming. It will attempt to tread the fine line between renewables potential, especially solar, and its status as default global oil producer. Some see Saudi Arabia struggling to catch up with the UAE, despite an economy over double the size. But as one seasoned observer put it, “Look where Dubai was 15 years ago—and look where it is today.”

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