At Legal Week's Corporate Counsel Forum in Dubai, in-house delegates discussed their increasing power after Dubai's economic meltdown. John Malpas reports

On the face of it, the Dubai Financial Services Authority's (DFSA's) investigation into the misuse of assets belonging to the jeweller Damas makes very grim reading for anyone championing corporate governance in the Gulf.

The three brothers who controlled the listed business were ordered to repay DH365m (£69m) and nearly two tonnes of gold they had taken from the company for personal use. Among the sanctions imposed by the DFSA – its toughest to date – was the removal of the company's entire board of non-executive directors.

The Damas affair was a relatively local one. When state-owned investment vehicle Dubai World asked for a six-month delay on debt payments in November last year, stock markets across the world tumbled. Last month, ongoing negotiations to restructure the group's £10bn debt mountain reached an important milestone. Remarkably, Dubai appears to be on the road to recovery.

At the Legal Week Corporate Counsel Forum Middle East, which took place in Dubai on 11 May, one delegate remarked that the recent exodus of business professionals from Dubai had been replaced by a trickle of professionals coming from the other direction. The region's community of in-house lawyers will be hoping that the successful restructuring of Dubai World's debt will not only draw a line under the crisis but also herald the arrival of a more stable environment – one in which antics of the kind that went unnoticed at Damas are not allowed to happen.

Included in the DFSA's ruling against Damas were detailed stipulations about the governance structure required of the jeweller clearly designed to establish a benchmark for all companies regulated by the body. It would be misleading to characterise Damas as a typical United Arab Emirates business, but few in-house lawyers in the Gulf would claim that they operate in a more settled and predictable environment than their colleagues in Europe and other Western economies.

In-house lawyers in the Middle East fall broadly into two camps: those representing multinational companies and institutions that are active in the region and those representing regional bodies, which are typically privately-owned or government-run companies and agencies.

Often – as proved to be the case with Dubai World – the ownership structures of regional companies and conglomerates are opaque and highly complex. Corporate governance is in its infancy. At the conference, Jumeirah Group chief legal officer Robert Swade led a session on corporate governance during which the audience was polled on the internal governance of the companies they work for.

Only 30% of delegates worked at companies run by a board of directors with independent non-executive members. Just under a quarter (23%) worked at companies where the general counsel did not attend the board in any capacity. And almost half of the delegates (40%) said their companies did not undertake an annual risk assessment.

While the standards of governance revealed by the poll appear weak to Western eyes, there is little doubt that had a similar exercise been conducted three years ago, the contrast would have been much starker. At the forum, a panel of leading general counsel agreed that the authority of in-house lawyers in the region had been significantly strengthened by the financial crisis thanks to a move by businesses to establish better governance and risk management structures.

Transguard Group general counsel Julianne Stringer took up her role at the regional security provider, facilities management and cash management company earlier this year. She said she had been brought in specifically to build a robust in-house legal team and ensure that the business had internal resources to work with external legal providers.

"Corporate governance is the be all and end all and it is a clear management mandate, which makes my job very easy," she said. "They welcome the feedback – it is a very open forum and it is fabulous to be involved and provide guidance at board level."

Alongside a new emphasis on governance and risk management in the region has been an increase in the complexity of the work required of in-house lawyers. This has given further impetus to the drive by many companies and institutions to build more solid and versatile in-house teams.

Mashreq Bank senior vice president and general counsel Fadi Mudarres said his team has doubled in size since the crisis. "Contentious litigation matters have increased tremendously and there is the expectation internally that you are going to be able to handle that," he said.

However, National Commercial Bank group chief legal counsel Dr Hussein S Akeil tempered the panel's upbeat message about the increased status and authority of in-house lawyers with a warning to use their power to veto decisions with great care. "If you come out with a very strong internal opinion that something should not happen it will take a very brave business person to fly in the face of that," he said. "You have to realise that and you have got to be practical."

In Europe, senior in-house lawyers have been struggling to reconcile their conflicting roles of business facilitator and internal watchdog for years. In the past, in-house lawyers in the Middle East have complained of struggling to get close to the decision-making process. That may be about to change – as long as they use their newfound influence wisely.

"If, as general counsel, I simply said to my boss or my board 'you can't do this', I'd have a life expectancy of minutes," GEMS Education general counsel Khalid Khan told the conference. "The price of 'no' is having a good alternative."