The sands of the Middle East have proved a bountiful, if challenging, hunting ground for law firms over the years. Early movers have ridden successive booms to great effect, as well as enduring their accompanying busts.

The region is continuing to bounce back from the global financial crisis that hit markets such as Dubai hard.

Against this comeback, yeserday's news that Herbert Smith Freehills (HSF) is to close its Abu Dhabi office within a month may have come as a shock to many casual observers.

And yet it is far from the first firm to make this move. Latham & Watkins announced in March that it was to close its Abu Dhabi and Doha offices by the end of this year. Its move was followed a couple of months later with the discovery that fellow US firm Baker Botts had decided to withdraw from Abu Dhabi at the start of 2015.

In none of these cases was the decision made because of a need to cut staff. HSF is set to move all five of its lawyers to its Dubai base.

Latham's 13 lawyers across the two offices were offered the opportunity to move to its consolidated base in Dubai, and accepted the offer. The firm had concluded, following an extensive review, that it did not need a base in each market and could instead run its regional operations from a central hub in Dubai. As such, managing partner Bill Voge was keen to reassure clients that Latham was still "deeply committed" to the Middle East, which was a "key strategic market for the firm".

In Baker Botts' case the firm also moved most staff from its now defunct Abu Dhabi office to its remaining Middle East bases in Dubai and Riyadh. One partner relocated to Washington DC with the firm. Baker Botts said its decision was based on the need for a "more efficient management of operations in the Middle East".

Any suspicion that the downsizing really signalled a partial withdrawal from the region was quashed when Baker Botts went on to hire Trowers & Hamlins United Arab Emirates (UAE) head Abdullah Mutawi and its international disputes chief, Lucas Pitts, in Dubai earlier this year.

While other firms do not seem to be lining up to follow the trio out of the region, there has been a more subtle shift in the market. Partners paint a picture of 'ghost' offices in Abu Dhabi and Doha staffed primarily by a handful of support staff or junior lawyers, while partners fly in on a regular basis from other regional offices. They suggest that some firms are finding themselves caught between the need to be seen to be based in the cities and a level of work that is too low to justify the presence of multiple partners full time.

So, is the region's economic recovery starting to stutter or are some firms simply failing to capitalise on the abundant opportunities in the Gulf? "It is becoming an extremely competitive market and new [international] players need to have a real point of difference," says Husam Hourani, managing partner of large regional firm Al Tamimi & Company. "It has not been easy for those that have come into the market. Relying on an existing client base alone is not enough."

James Bowden, partner at local outfit Afridi & Angell, adds: "The issue with Abu Dhabi is not that there's no work there, it's that it's difficult for newcomers to access in a short timeframe.

"In Dubai people will give you work; in Abu Dhabi you have to understand the Abu Dhabi landscape, where you have 20-30 people who control much of the wealth and companies and most of them come from nine prominent Al Ain or Abu Dhabi families. If you want to be on the radar you have to have deep relationships with some of them."

To build those relationships partners at local firms say you still need a base on the ground. "There's absolutely no substitute for meeting people [clients] face to face, even by using modern technology such as Skype," says Mike Wakefield, partner at Galadari, who has been in the region for more than 20 years. He explains that the withdrawals from Abu Dhabi and Qatar are mostly coming from firms that have not built their businesses organically but instead invested heavily in teams, expecting higher returns.

The significant fall in oil prices last year did not help business, though most partners caution that its importance is often overstated. "Developers are focusing on delivering two or three projects rather than spreading themselves too thinly," says one. Another adds that the country still has massive cash reserves to invest and the oil price is still well above the point for the country to make a profit.

The conservative culture of the ruling families, and by extension the mostly government-owned businesses, can make taking the road to the exit a one-way journey. As one partner point outs: "If you pull out of Abu Dhabi, because you need to be given a licence, you can find it hard to go back. They're not particularly keen on it."

It is for this reason that sources suggest some firms' bases in Abu Dhabi and Doha are becoming ghost offices – maintained to keep up the appearance of a solid presence in the region, and the opportunity to rebuild if necessary. "I'm aware of several firms that have substantially reduced their number of lawyers but they don't want to lose their licence or risk their reputation so they leave the office open," says Hourani.

But he adds that clients are becoming wise to this tactic and are asking firms increasingly specific questions during the appointment process to ensure that they have partners on hand. "When, as a client, you have to wait three days to meet your lawyers, you realise that it's not a fully operational office," he adds.

The story in Qatar
In Qatar the picture is similar. An influx of investment had been anticipated to support the infrastructure of the World Cup but many have been left disappointed by the pace of change.

James Bremen, a partner in HSF's Doha office, which is not at risk of closure according to the firm, says: "Firms invested and ramped up their capacity in expectation of a significant amount of legal work ahead of Qatar's 2022 World Cup. In reality, perhaps too many firms opened in the market for the volume of legal work actually required.

"In addition to this, clients in Qatar have recruited high-quality in-house teams and so the amount of external legal spend is perhaps less than some firms may have anticipated."

Another partner at an international firm adds: "Qatar is a bit like Abu Dhabi. A flood of firms have come in and many are struggling because the government likes to deal with people they have a long history with".

Bowden describes the rush to set up shop in Qatar in recent years as a case of "irrational exuberance". He says: "My experience in Qatar is that it's not very developed, it's not particularly accommodating to foreigner lifestyles and it has a long way to go in terms of its infrastructure and developing a critical mass of professionals and foreign businesses.

"You have people doing projects and then leaving. That used to be what the UAE was like 20-30 years ago. In my view it is not yet competitive with the more developed UAE markets."

Given the predicted rush of work around the 2022 World Cup never materialised, those in the region are not overly concerned about the prospect of the event falling through as a result of the corruption scandal engulfing football's governing body, FIFA, and the Qatar event in particular. Most believe that the run up to the event helped stimulate a raft of infrastructure developments that would probably have happened anyway, and, although the pace of development may slow, there will still be enough to keep the country's legal market afloat.

However, Wakefield argues that its importance should not be underestimated: "The World Cup, and infrastructure projects relating to it, have become more important to Qatar economically with the fall in global energy prices. The industrial desalination water facility scheme is the most recent of $14bn (£8.9bn) worth of projects that Qatar has either cancelled or put on hold."

However, he notes that there will still be opportunities for law firms should the World Cup fall through. "Firms will be very excited at the prospect of growing compliance teams to do lots of investigations if the World Cup is dropped and any wrong-doing established."

Dubai's draw
International firms' restructuring efforts in the region – whether publicly disclosed pullouts like Latham's and Baker Botts', or more subtle relocations of lawyers – are not just about slower markets in Qatar and Abu Dhabi but also about Dubai pulling in more lawyers. "Dubai has always been and continues to be the hub in the regional market," explains Hourani. "If you want to be close to the banks then this is the place to be." The city also has good transport links to its neighbours and beyond and so is the logical place for a hub.

Partners based in Dubai say the city is on the verge of a full boom cycle, having cast aside the shadows of the economic crisis that hit businesses and their legal advisers hard.

It doesn't hurt, adds Wakefield, that it is more friendly to westerners and is therefore an easier sell to lawyers asked to relocate to the Gulf. "It's a more central location with excellent transportation links and offers an attractive work/life balance, which has encouraged and continues to encourage law firms and global companies to choose it as a base of operations regionally," he says.

Choosing a strategy
So who has the right strategy in the region? Opinion is predictably divided. Those at local firms argue it will be exceedingly difficult to win work from many of the region's large, government-backed clients without multiple bases.

However, at the same time they concede that, if firms have not fully broken into that client base, they are sacrificing little by concentrating on Dubai alone. And it will still be possible for them to win work in Abu Dhabi and Qatar from Dubai – it is just more likely to involve following other clients to these regions rather than winning local businesses.

In contrast, partners at international outfits are sympathetic to the decision by Latham and HSF to focus on building a regional hub covering the whole market rather than trying to have a small base in each location.

"There's no doubt that Dubai is the trading hub for the gulf," comments one partner at an international firm. "It has recovered from the financial crisis and work has certainly improved here. During the Arab Spring many people relocated from elsewhere to Dubai and now there's an upswing."

While the path to further growth in the Middle East may be more rocky than it has been, it remains a market with significant potential.

The sands of the Middle East have proved a bountiful, if challenging, hunting ground for law firms over the years. Early movers have ridden successive booms to great effect, as well as enduring their accompanying busts.

The region is continuing to bounce back from the global financial crisis that hit markets such as Dubai hard.

Against this comeback, yeserday's news that Herbert Smith Freehills (HSF) is to close its Abu Dhabi office within a month may have come as a shock to many casual observers.

And yet it is far from the first firm to make this move. Latham & Watkins announced in March that it was to close its Abu Dhabi and Doha offices by the end of this year. Its move was followed a couple of months later with the discovery that fellow US firm Baker Botts had decided to withdraw from Abu Dhabi at the start of 2015.

In none of these cases was the decision made because of a need to cut staff. HSF is set to move all five of its lawyers to its Dubai base.

Latham's 13 lawyers across the two offices were offered the opportunity to move to its consolidated base in Dubai, and accepted the offer. The firm had concluded, following an extensive review, that it did not need a base in each market and could instead run its regional operations from a central hub in Dubai. As such, managing partner Bill Voge was keen to reassure clients that Latham was still "deeply committed" to the Middle East, which was a "key strategic market for the firm".

In Baker Botts' case the firm also moved most staff from its now defunct Abu Dhabi office to its remaining Middle East bases in Dubai and Riyadh. One partner relocated to Washington DC with the firm. Baker Botts said its decision was based on the need for a "more efficient management of operations in the Middle East".

Any suspicion that the downsizing really signalled a partial withdrawal from the region was quashed when Baker Botts went on to hire Trowers & Hamlins United Arab Emirates (UAE) head Abdullah Mutawi and its international disputes chief, Lucas Pitts, in Dubai earlier this year.

While other firms do not seem to be lining up to follow the trio out of the region, there has been a more subtle shift in the market. Partners paint a picture of 'ghost' offices in Abu Dhabi and Doha staffed primarily by a handful of support staff or junior lawyers, while partners fly in on a regular basis from other regional offices. They suggest that some firms are finding themselves caught between the need to be seen to be based in the cities and a level of work that is too low to justify the presence of multiple partners full time.

So, is the region's economic recovery starting to stutter or are some firms simply failing to capitalise on the abundant opportunities in the Gulf? "It is becoming an extremely competitive market and new [international] players need to have a real point of difference," says Husam Hourani, managing partner of large regional firm Al Tamimi & Company. "It has not been easy for those that have come into the market. Relying on an existing client base alone is not enough."

James Bowden, partner at local outfit Afridi & Angell, adds: "The issue with Abu Dhabi is not that there's no work there, it's that it's difficult for newcomers to access in a short timeframe.

"In Dubai people will give you work; in Abu Dhabi you have to understand the Abu Dhabi landscape, where you have 20-30 people who control much of the wealth and companies and most of them come from nine prominent Al Ain or Abu Dhabi families. If you want to be on the radar you have to have deep relationships with some of them."

To build those relationships partners at local firms say you still need a base on the ground. "There's absolutely no substitute for meeting people [clients] face to face, even by using modern technology such as Skype," says Mike Wakefield, partner at Galadari, who has been in the region for more than 20 years. He explains that the withdrawals from Abu Dhabi and Qatar are mostly coming from firms that have not built their businesses organically but instead invested heavily in teams, expecting higher returns.

The significant fall in oil prices last year did not help business, though most partners caution that its importance is often overstated. "Developers are focusing on delivering two or three projects rather than spreading themselves too thinly," says one. Another adds that the country still has massive cash reserves to invest and the oil price is still well above the point for the country to make a profit.

The conservative culture of the ruling families, and by extension the mostly government-owned businesses, can make taking the road to the exit a one-way journey. As one partner point outs: "If you pull out of Abu Dhabi, because you need to be given a licence, you can find it hard to go back. They're not particularly keen on it."

It is for this reason that sources suggest some firms' bases in Abu Dhabi and Doha are becoming ghost offices – maintained to keep up the appearance of a solid presence in the region, and the opportunity to rebuild if necessary. "I'm aware of several firms that have substantially reduced their number of lawyers but they don't want to lose their licence or risk their reputation so they leave the office open," says Hourani.

But he adds that clients are becoming wise to this tactic and are asking firms increasingly specific questions during the appointment process to ensure that they have partners on hand. "When, as a client, you have to wait three days to meet your lawyers, you realise that it's not a fully operational office," he adds.

The story in Qatar
In Qatar the picture is similar. An influx of investment had been anticipated to support the infrastructure of the World Cup but many have been left disappointed by the pace of change.

James Bremen, a partner in HSF's Doha office, which is not at risk of closure according to the firm, says: "Firms invested and ramped up their capacity in expectation of a significant amount of legal work ahead of Qatar's 2022 World Cup. In reality, perhaps too many firms opened in the market for the volume of legal work actually required.

"In addition to this, clients in Qatar have recruited high-quality in-house teams and so the amount of external legal spend is perhaps less than some firms may have anticipated."

Another partner at an international firm adds: "Qatar is a bit like Abu Dhabi. A flood of firms have come in and many are struggling because the government likes to deal with people they have a long history with".

Bowden describes the rush to set up shop in Qatar in recent years as a case of "irrational exuberance". He says: "My experience in Qatar is that it's not very developed, it's not particularly accommodating to foreigner lifestyles and it has a long way to go in terms of its infrastructure and developing a critical mass of professionals and foreign businesses.

"You have people doing projects and then leaving. That used to be what the UAE was like 20-30 years ago. In my view it is not yet competitive with the more developed UAE markets."

Given the predicted rush of work around the 2022 World Cup never materialised, those in the region are not overly concerned about the prospect of the event falling through as a result of the corruption scandal engulfing football's governing body, FIFA, and the Qatar event in particular. Most believe that the run up to the event helped stimulate a raft of infrastructure developments that would probably have happened anyway, and, although the pace of development may slow, there will still be enough to keep the country's legal market afloat.

However, Wakefield argues that its importance should not be underestimated: "The World Cup, and infrastructure projects relating to it, have become more important to Qatar economically with the fall in global energy prices. The industrial desalination water facility scheme is the most recent of $14bn (£8.9bn) worth of projects that Qatar has either cancelled or put on hold."

However, he notes that there will still be opportunities for law firms should the World Cup fall through. "Firms will be very excited at the prospect of growing compliance teams to do lots of investigations if the World Cup is dropped and any wrong-doing established."

Dubai's draw
International firms' restructuring efforts in the region – whether publicly disclosed pullouts like Latham's and Baker Botts', or more subtle relocations of lawyers – are not just about slower markets in Qatar and Abu Dhabi but also about Dubai pulling in more lawyers. "Dubai has always been and continues to be the hub in the regional market," explains Hourani. "If you want to be close to the banks then this is the place to be." The city also has good transport links to its neighbours and beyond and so is the logical place for a hub.

Partners based in Dubai say the city is on the verge of a full boom cycle, having cast aside the shadows of the economic crisis that hit businesses and their legal advisers hard.

It doesn't hurt, adds Wakefield, that it is more friendly to westerners and is therefore an easier sell to lawyers asked to relocate to the Gulf. "It's a more central location with excellent transportation links and offers an attractive work/life balance, which has encouraged and continues to encourage law firms and global companies to choose it as a base of operations regionally," he says.

Choosing a strategy
So who has the right strategy in the region? Opinion is predictably divided. Those at local firms argue it will be exceedingly difficult to win work from many of the region's large, government-backed clients without multiple bases.

However, at the same time they concede that, if firms have not fully broken into that client base, they are sacrificing little by concentrating on Dubai alone. And it will still be possible for them to win work in Abu Dhabi and Qatar from Dubai – it is just more likely to involve following other clients to these regions rather than winning local businesses.

In contrast, partners at international outfits are sympathetic to the decision by Latham and HSF to focus on building a regional hub covering the whole market rather than trying to have a small base in each location.

"There's no doubt that Dubai is the trading hub for the gulf," comments one partner at an international firm. "It has recovered from the financial crisis and work has certainly improved here. During the Arab Spring many people relocated from elsewhere to Dubai and now there's an upswing."

While the path to further growth in the Middle East may be more rocky than it has been, it remains a market with significant potential.