Guest blog: Arbitration in the MENA region—Industry trends and influences
The 5th ICC MENA Conference on International Arbitration is currently underway in Dubai.
In anticipation of the high-level event, we sat down with conference speakers Lorenzo Melchionda, a partner at BonelliErede, and Cristian Gual, a partner at Uría Menéndez, to discuss the latest industry trends and factors influencing the region. BonelliErede and Uría Menéndez, are just two of the six international law firms that make up The Best Friends group, who are platinum sponsors of the ICC MENA Conference. The other firms include Bredin Prat, De Brauw Blackstone Westbroek, Hengeler Mueller, and Slaughter and May.
Let’s get clued up on the arbitration happenings of the region:
1. Mr Melchionda, you are based in BonelliErede’s recently opened office in Cairo. Can you tell us about the scope of your practice in the region and the developments you expect to see in the near future?
Mr Melchionda: The decision to open an office in Cairo is part of an overall expansion strategy to which BonelliErede is fully committed and represents the future of the firm. This is why the firm has also opened an office in Addis Ababa, Ethiopia and has plans to open other offices outside Italy.
In recent years, new and expanding investment opportunities have emerged across North Africa. Remarkably, this trend is enduring despite the turmoil and disorder ensuing from the civil war in Libya—which has put a halt to a series of major projects in the country—and the upheaval of the Arab Spring and its aftermath. For instance, Egypt had embarked on a series of major oil and gas, as well as construction and energy projects (including renewable energy). This year and 2018 will be crucial for Egypt: the development of the Zohr giant gas field, which is expected to start production at the end of the year and reach full production capacity in 2019, will give the Egyptian economy a shot in the arm and help to resolve many of the country’s financial problems. Another example of this positive trend is Algeria, where a series of infrastructure, public housing and renewable energy projects have been launched in an effort to diversify the economy and reduce reliance on fossil fuels. Similar projects have been introduced in Tunisia and Morocco, attracting significant investments in the manufacturing sector. The same is true for the bordering region of East Africa.
BonelliErede sees the huge potential in the MENA region, as well as in the African market. As such, the firm has decided to strengthen its arbitration capability in the area by establishing a presence on the ground. Working with our Italian offices, and in cooperation with our local partner, a top-tier firm in the region, the Cairo office offers a broad range of legal services from corporate and commercial to banking, investment protection and, of course, dispute resolution. In particular, the international arbitration practice covers all the relevant fields, including construction; investment treaty arbitration and disputes arising from energy and oil and gas deals; mergers and acquisitions transactions; commercial contracts; and joint ventures.
2. Mr Gual, with offices in six countries throughout Latin America, you have an excellent overview of industry trends around the continent. In which sectors could Middle Eastern investors be interested in doing business there?
Mr Gual: Infrastructure will be key to lifting the country’s competitiveness. The next generation of infrastructure will most likely be financed by the private sector—from yield-seeking banks and growing Latin American pension funds to international funds, infrastructure companies, equity investors and non-bank lenders. In countries like Brazil, Chile, Colombia and Mexico, the governments have designed ambitious public-private partnerships (PPP) projects.
Governments across Latin America are revamping their PPPs legal structures and creating private concessions to attract international infrastructure investors. Opportunities can be found in sectors, such as infrastructure; energy and renewables and even health. Examples of this include Chile’s wind and solar projects; Colombia’s successful 4G toll road PPPs and the rollout to the health sector; Brazil’s power, airports, energy, transportation and water and sanitation projects; and Peru’s recently presented portfolio of 32 PPP projects and its government’s aim to ramp up the procurement of projects to the private sector in transport, energy, mining, housing, sanitation, hydrocarbons and health sectors.
3. Mr Melchionda and Mr Gual, in your view, how has the fall in oil prices in 2015-2016 changed or affected investments in the MENA? Has it pushed to reinforce other industry sectors? Where do you see investment opportunities for European companies?
Mr Melchionda: Global crude prices remained weak throughout 2016 with Brent averaging US$45—but ended the year at a higher level of US$55. After years of volatility, in its last report the United States Energy Information Department (EIA) forecast that the oil market is on its way towards balancing out and will be achieved in the second half of 2017. Stabilising oil prices and large international sovereign debt issuances (often arranged to compensate for the drop in oil revenues) will improve the investment capacity of governments in the region over the next 12 months. The funding conditions for banks are also expected to improve. At the same time, the swings in economic growth caused by gyrations in the oil price over the past have urged oil producing countries to diversify and modernise their economies. Thus, it is fair to expect that the improved outlook for oil prices coupled with the signs of a stronger global growth rate will lead to both publicly and privately funded projects. In the next few years, the MENA region as a whole is expected to be among the world’s fastest growing—driven by major construction projects, such as Smart City Dubai, Qatar Vision 2020, as well as other equally ambitious projects in North Africa and other emerging markets.
European investors may reasonably expect investment opportunities in the region across a wide variety of sectors, including high-tech infrastructure and real estate; renewable energy; food; health care; transportation; and logistics services. While cancelling or scaling down the size of certain major projects in the oil and gas, as well as in the energy sector more broadly, countries like Algeria, Iran, Kuwait and Saudi Arabia have announced that they will not substantially change their investment plans despite low oil prices. Other countries with lower fiscal buffers struggling to recover from conflicts and instability—particularly Iraq— will continue to face challenges in executing their ambitious capacity expansion programmes.
Mr Gual: On the whole, the MENA region will continue investing in oil and gas and the energy sectors as major exporting countries seek to reinforce their positions in global markets. The Gulf Cooperation Council (GCC) countries and Iran are driving investment in the region and will be well positioned as oil prices start increasing. The governments in the region’s non-exporting countries will also invest in their domestic power sector, including in renewable energy, as electricity demand continues to rise.
4. Mr Melchionda and Mr Gual, your firms are part of a group of independent law firms, often referred to as the “Best Friends.” How does the Best Friends group work in practice?
Mr Gual: The Best Friends are a group of six leading international law firms: BonelliErede, Bredin Prat, De Brauw Blackstone Westbroek, Hengeler Mueller, Slaughter and May and Uría Menéndez. We have made long-term investments to help foster connections among the firms on all levels. The Best Friends group shares the same culture of excellence and an absolute commitment to making the difference for our clients. Together, we have developed extensive and meaningful relationships with like-minded firms across the globe.
The Best Friends international arbitration group is one single practice group of approximately 45 partners and 150 associates. We operate as one team in daily communication on cases and other non-billable projects. In addition, we represent clients in all phases of the arbitration, including in post-award setting aside or enforcement proceedings before domestic courts.
Our lawyers know each other very well thanks to a long-standing history of working together on joint matters. Further still, our partners meet regularly to share know-how, in addition to discussing various business development activities. The Best Friends also exchange lawyers through secondments, operate cross-firm working groups across practice areas and industries and run joint training programmes several times a year.
Mr Melchionda will be speaking on Tuesday, 4 April, which is the first day of the ICC MENA Conference on a panel entitled “Recovery of arbitral awards.” The following day, Mr Gual will speak on a panel entitled “Performance guarantees in construction arbitration.”
Learn more about the ICC MENA Conference on International Arbitration.
*Disclaimer: The content of this interview does not reflect the official views of the International Chamber of Commerce. The opinions expressed are solely those of the authors and other contributors.