The Future Of The Arabian Gulf Lies In Energy And A Great Deal More

Thursday, May 1, 2008 - 01:00

Editor: Would you tell our readers something about your professional background?

Weems: I am a Texas attorney who has practiced internationally since 1984, having first obtained my law degree from Texas Tech University and an LL.M. from the University of Sydney, Australia. I also attended business school, specializing in international business, at the Thunderbird School in Arizona. My specialty is energy law and, in particular, gas and liquefied natural gas (LNG) projects. Since 2000 I have been a partner with King & Spalding and presently serve as Managing Partner of the firm's Middle East offices in Dubai and Riyadh.

Editor: Please tell us about your practice. How has it evolved over the course of your career?

Weems: My practice has had an international focus from the beginning. At the outset I was in private practice for five years engaged principally with legal issues associated with the international trade of various commodities. In 1990 I elected to take my practice overseas when I accepted the position of Associate General Counsel of Virginia Indonesia Company - then a subsidiary of Ultramar Petroleum (UK) and Union Texas Petroleum (U.S.) - based in Jakarta, Indonesia. During the early 1990's much of my work involved negotiations with Japanese, Korean and Taiwanese energy companies on very large LNG sales contracts and with European shipowners on various transportation agreements. I first returned to the U.S. in 1996 to serve as international counsel for ARCO (Atlantic Richfield) in Dallas, where I was responsible for legal issues in the Middle East and sub-Saharan Africa. That assignment was interrupted when ARCO made a very large natural gas discovery in Eastern Indonesia, and since I was the international attorney with the most experience in LNG and the region, I was asked to return to Jakarta to become lead counsel on what became the multi-billion dollar Tangguh LNG project. I led that effort for two years, and then, when my children reached high school age, returned to Texas to recommence my private practice in Houston. The decade I spent in-house out of the U.S. was, of course, rewarding from a cultural perspective, but it also gave me invaluable commercial insights of the global energy industry that are rarely afforded outside counsel.

One of the most valuable experiences I have had over the years is seeing so many of these large transactions from the viewpoint of both a law firm lawyer and of an in-house corporate attorney. Put very simply - and I stress this with our younger associates - if, as a law firm lawyer, you do not make the day-to-day job of your corporate counsel clients easier, don't be surprised if your telephone stops ringing.

Editor: Would you share with us the firm's thinking behind opening offices in Dubai and Riyadh?

Weems: Well, the strategic purpose of opening these offices was to allow King & Spalding to take better advantage of opportunities that have been developing for two decades for the firm in relation to its Middle East practice. Just a few years ago EuroMoney gave its first Islamic Finance Law Firm of the Year award to King & Spalding and, indeed, the firm has been working in this area since at least the mid-1980s. Many of our Islamic finance clients, who traditionally invested in the U.S. and Europe, have been telling us that they wished to expand their investments in their own region and in other parts of Asia, and that certainly had an impact on the firm's decision to open the two offices. In addition, the firm's energy practice has continued to grow, and having a permanent presence in the Middle East and North Africa region is now more important to energy clients than ever before. And, finally, we have been seeing an increasing volume of excellent corporate work - about half of which is neither Islamic finance nor energy-related - for Middle Eastern clients. All of these factors contributed to the decision to commit to a long-term presence in the UAE and Saudi Arabia. We have been very pleased with the Middle East results so far, and expect to add additional practice groups to our offices in the coming months.

Editor: How large are the two offices?

Weems: We added a partner in the Riyadh office and two counsel in Dubai in April, which brings us to a total of 18 lawyers in the two offices. Our lawyers are principally admitted in the U.S., the UK or a Commonwealth country, Many of our lawyers have a connection to the region as Egyptian-Americans, Palestinian-Americans, Syrian-Americans, Iraqi-English and so on, and consequently more than a dozen of our lawyers are fluent Arabic speakers. King & Spalding has an understanding of the culture of the region which, combined with the best in legal education and experience, is key to the success of a law firm seeking to practice here. In addition, we have looked for lawyers, both within King & Spalding and from elsewhere, with a dedication to the region.

Editor: Can you give us an overview of the practice groups represented in the two offices?

Weems: At present there are three practice groups: finance, corporate, and global transactions, all led by very experienced lawyers. Finance partner Jawad Ali, who transferred from London, and corporate partner, Benjamin Newland, who transferred from Atlanta, are the other partners in the Dubai office. Finance partner Michael Dunphy in Riyadh concentrates on major project finance matters. Finance includes traditional finance as well as Islamic finance. Corporate work includes mergers and acquisitions, and global transactions involves construction, project development, maritime and many energy-related areas. In fact, about half of our work over the past year has been non-energy related, such as M&A and hotel development. Many of our transactions cross traditional practice group boundaries, and as a result we work closely with the firm's offices in London, New York and Houston on a regular basis. We also call upon other offices on an as-needed basis. In the coming months we expect to add additional capability in the areas of arbitration, funds and real estate to our Middle East offices.

Editor: Would you tell us something about the $3 billion water financing project that has attracted press attention recently?

Weems: While this project did capture the attention of the press, it is but one of many large transactions we have completed over the past year. I do think, however, that it is representative of the talents that the firm possesses on the ground in this region and demonstrates what we can do for our clients. We assisted Suez Energy International and Mitsui & Co. on a joint venture agreement with Qatar Petroleum and Qatar Electricity & Water, and our work involved structuring arrangements, financing, and construction. In other words, it was a project that cut across a variety of disciplines and practices and called for considerable coordination. When completed, the project will constitute the largest power and water financing in the world - in excess of $3 billion - and is expected to generate revenues of over $22 billion over some 27 years.

Power and desalinization and the development of potable water sources are among the most important needs of the region, particularly in the case of Qatar and the United Arab Emirates, where populations are growing, urbanization is underway and the diversification of the economy - away from pure energy - is a conscious goal. As hotels and office complexes, residential real estate and a variety of commercial real estate developments are added to the region's economy, the need for power and for water becomes even more crucial than in the past. I believe the statistics show that the amount of energy (especially natural gas) dedicated to local consumption, together with local water consumption, is growing faster in the Arabian Gulf region than in any other region in the world.

Editor: The Arabian Gulf represents one of the global economy's drivers but parts of the region are unstable or hostile to globalization, or both. Would you share with us your thoughts on the future of the region as a place to do business in light of these realities?

Weems: Despite what much of the press portrays about the Middle East, I would have to say that we do not see instability in the Arabian Gulf region, also called the GCC. This is a stable area. The vast majority of the governments of the GCC region are very pro-business, and, in the interests of their people, they have opened up their economies to the outside world. As a consequence of what were difficult decisions when made, those economies are doing extremely well today.

Fifty years ago the Middle East was centered on Egypt and Syria and not on the countries of the Arabian Gulf. That has changed. The Arabian Gulf countries constitute a newly arrived region in the Middle East. Part of this is due to petrodollars, to be sure, but I think a greater contribution to the emergence of these countries is the result of the open-mindedness of the respective governments. We have, consequently, a great deal of confidence in the future here. I am hopeful that the pro-business approach fostering investment and stability that are so much a part of this region will serve as a model for other countries in the Middle East. One of the reasons for my optimism is the increasing volume of transactions that our offices in Dubai and Riyadh is handling outside the Arabian Gulf region throughout the Middle East, including North Africa and even Iraqi Kurdistan.

Editor: What are the concerns that we should be calling to the attention of our corporate counsel readership as they contemplate doing business in the Arabian Gulf for the first time?

Weems: Many American companies are asleep at the wheel with respect to the opportunities that are available in the Arabian Gulf region today. In part, this may derive from the depiction in the Western press of the entire Middle East as a single unit dealing with the same security and stability issues. In point of fact this is not the case. As I indicated earlier, the Arabian Gulf is a very stable region of more than 300 million people, and all of the economies of the region, from Saudi Arabia to Kuwait to Oman, are thriving. American companies that are deterred from entering this arena because of what they perceive as a kind of generic Middle Eastern instability are going to miss opportunities that are available today but may not be tomorrow.

Another issue that is important to your readers is the fact that doing business in the Middle East is greatly dependent on personal relationships, and these take time to develop. There is a certain comfort level that must be attained before the deal is struck, and this is a direct contrast to the way business is conducted in Europe or North America. Those who have done business in East Asia will understand this concept. That means being available for face-to-face meetings and demonstrating a commitment to the region. In addition, I would say that it is a mistake to try to execute a transaction by utilizing lawyers who have practiced in the region and understand its culture for "local law" issues only, while the "major issues" are addressed by home office lawyers in New York or Chicago who approach the Middle East as just another international transaction. In my experience that kind of excessive control from corporate headquarters is counterproductive in this environment. Far better to involve firms such as ours from the outset of the transaction so that we can add real value.

The British have been in the Arabian Gulf for a long time, and local enterprises are more familiar with English law than with, say, New York law. As a consequence the law firms that practice in the region - King & Spalding among them - have considerable English law capability. A company would need to have access to such capability, at least until a higher comfort level is reached on having transactions governed by the law of an American jurisdiction.

Please email the interviewee at pweems@kslaw.com with questions about this interview.