The fast-changing regulatory climate and the growing importance of environmental, social and governance (ESG) considerations are top of mind for legal decision-makers.
As expected, our survey of legal decision-makers in the MENA region illustrates conclusively how the role of the general counsel (GC) and legal decision-maker is growing in importance across the region. Ninety percent of legal decision-makers now advise on corporate strategy, and nearly two-thirds (62%) expect the GC/legal decision-maker role to take on a greater business advisory remit in the coming years. (see Fig 1)
Three out of 10 legal decision-makers say that identifying and enabling opportunities for business growth is their main priority, putting this element of the legal role second only to the management of employment issues, redundancies and internal disputes, and ahead of facilitating business in existing markets.
Mona Madi, Legal Director – Head of Legal & Compliance IMEA at retail and consumer brands business Henkel Jebel Ali FZCO, says: “There is always an emphasis on the importance of partnering with the business, helping them assess risks, trying to be pre-emptive in terms of those risk assessments and helping them to make prudent decisions.” She adds: “If we look at the changes that have taken place in the last couple of years, we can see that business priorities have evolved. There’s a lot more emphasis on creating impactful change and gaining competitive advantage. That has called for legal teams to provide more support on a strategic level, strategising on plans and on potentially contentious issues, and continuing to be a lot closer to the business.”
Urvaksh Doctor, Senior Legal Counsel heading the legal team for MEA at the US-listed multinational fintech company FIS, agrees that the pace of change in the region continues to enhance the role of the legal decision-maker. “Traditionally, in-house legal teams have always been seen as roadblocks rather than partners to the business,” he says. “At FIS we call ourselves ‘legal partners’ internally, because we are on board with the company’s stated objective of growth and instead of saying ‘no, you can’t do this’, we aim to say ‘these are your risks and here are our recommendations’ unless of course the proposal violates legal or company policy requirements.”
Two years after the start of the global Covid-19 pandemic, the need to focus on agility and resilience at a corporate level has impacted all businesses. In the MENA region, two emerging themes have strengthened the role of the GC and legal decision-maker: the fast-changing regulatory climate and the growing importance of ESG considerations.
The pace of change in MENA’s regulatory environment is rapid, with legal decision-makers across the region contending with updated laws in a wide array of areas – from data privacy and consumer protection to new labour laws, foreign investment and cryptocurrencies. Many legal decision-makers welcome the progress being made in the regulatory landscape and are working to capitalise on the opportunities on offer.
Amelito Mutuc is General Counsel (Business Development) at listed power generation and water desalination company ACWA Power, a national champion in Saudi Arabia. He welcomes the regulatory change taking place in the UAE and elsewhere: “All these regulatory changes are actually good for us, because we see them bringing the region in line with the Western world. We see it as forward-thinking and makes it easier for lenders, and borrowers, to set out the legal basis for whatever arrangements we are entering into.”
All these regulatory changes are actually good for us, because we see them bringing the region in line with the Western world. We see it as forward-thinking and makes it easier for lenders, and borrowers, to set out the legal basis for whatever arrangements we are entering into.”
We asked legal decision-makers about the most pressing risk and compliance issues that they need to address in the region in 2022, and we found the top three to be new financial standards and taxation, changing ownership regulations and new health and employee welfare / employment standards.
Such changes put legal teams in the spotlight within their organisations. A legal counsel expert at a regional investment holding firm says: “Over the last few months we’ve had enormous legislative change in the UAE, where the laws by which we operate have been revamped significantly. There’s a new employment law, changes to the company law and new rules on data protection that will impact absolutely everything we do.”
They point to new legislation in Saudi Arabia also, and a new banking law in Egypt, as evidence that the region as a whole is evolving its regulatory approach, adding: “The winds of change are blowing.”
With so many changes on the horizon, there are bound to be challenges felt among the legal decision-making community. Our survey reflects this sentiment: More than half (51%) of legal decision-makers perceive sudden changes to regulatory policy as a challenge. (see Fig 2) New health and employee welfare standards are seen as particularly challenging, with almost half (49%) of the legal decision-makers we surveyed having difficulty keeping pace with new regulation in this area.
Jake Barnard, General Counsel at global advisory and educational management firm GEMS Education, agrees that: “Legal teams within the Middle East are dealing with an extremely high rate of change in terms of new regulations coming on board. From an in-house perspective, this means that core judgement skills have become even more valuable, as you deal with an increasing number of issues coming from different directions.”
The rate of change in the region is requiring new skills from legal decision-makers, he adds: “At times you may to push external counsel, and to question whether their advice is truly relevant, so that you can give more helpful opinions to your ultimate clients. This becomes more important the faster things change.”
It is not just new rules that need to be understood, but also how they will be enforced. More than five in 10 (54%) of the legal decision-makers we surveyed view unpredictable regulatory enforcement in the region as a challenge.
Fraser MacKinven, General Counsel at sports and events business Flash Entertainment, argues it is not so much regulatory change but rather its implementation that can create challenges. “Ideally, everything should develop at the same pace,” he says. “Sometimes one thing can shoot ahead of the other. For example, you might have the regulations being introduced without the relevant authority being established to enforce them, or without the necessary solutions being available to make the regulations workable in practice.”
Still, MacKinven is positive about the UAE’s efforts to update legislation in line with international best practice, noting music rights as an area particularly relevant to Flash Entertainment. He says: “The UAE rightly has a desire to identify where there are potential shortcomings in its regulations and address them. We are seeing initiatives that continue the UAE’s development as a first-class jurisdiction in which to do business. That’s a positive for our business.”
The need to stay abreast of legal change is moving up the corporate agenda and is increasingly a board-level issue. More than half of respondents (54%) report that they have a seat on the board, or equivalent, while sixty percent now routinely advise the board on business strategy. (see Fig 3)
Goktug Seckiner is Managing Director and Board Member at Dogus Group, one of the largest private sector conglomerates in Turkey, with a portfolio including restaurants, cafes and construction companies. He says his business is evolving its approach on the legal side: “Whatever I am doing now – whether signing contracts with partners, entering joint ventures or negotiating with landlords – legal and compliance is playing a bigger role. My observation is that it is not just about needing more lawyers, or the involvement of more lawyers. On the other side of the coin, I feel that we need to increase the legal knowledge of our executives; that is going to help the business a lot.”
Another area growing in importance, and increasingly requiring the expansion of skill sets within the team, is ESG. More than nine in 10 (94%) legal decision-makers now occasionally or regularly assess ESG risk and compliance within their role, while eighty percent expect ESG considerations to become more important to their work in 2022. (see Fig 4)
Governments across the region are taking steps to improve sustainable growth across the region, with the recent UN Climate Change Conference (COP26) accelerating the commitment to such plans. In order to reach its zero-emission target by 2060, Saudi Arabia has set a target of generating 50% of the nation’s power needs using renewable energy by 2030.
The UAE, meanwhile, has established the Abu Dhabi Hydrogen Alliance as it looks to reach Net Zero emissions by 2050, while Egypt intends to increase electricity supplied from renewable sources to 20% by 2022 and 42% by 2035.
With Egypt set to host COP27 in 2022, and the UAE hosting the summit the following year, the region is set to be a centre for climate change action over the coming years. This will result in more pressure on companies to comply with ESG regulation. Our survey shows that legal decision-makers based in Egypt are ahead when it comes to assessing ESG within their role – 40% regularly assess ESG risk and compliance factors, compared to the regional average of 33%.
Captain Abdulla Al Hayyas, Acting Director of Marine Transportation Affairs at the Ministry of Energy and Infrastructure, United Arab Emirates, says that the shift to less carbon-intensive energy sources, fuelled by international regulation, has become a priority in the region’s shipping industry. “Change is coming to the shipping industry. Ships are transitioning away from traditional fuel sources to environmentally friendly fuels, and the infrastructure needs to be in place to support this shift. Ship owners should be ready to implement any new requirement to ensure cooperation with both ports and fuel suppliers.”
Nasreen Bulos, Regional General Counsel for MENAT at HSBC, says ESG is a leading priority for her business, and she is upskilling her team to prepare for its growing importance in the financial services industry. “That is clearly a big area of focus, I think for every GC, but particularly in financial services. We need to keep updated on the latest principles, whether that’s in the green bond space, sustainability-linked loans or in relation to taxonomies.”
ESG is clearly a big area of focus, I think for every GC, but particularly in financial services. We need to keep updated on the latest principles, whether that’s in the green bond space, sustainability-linked loans or in relation to taxonomies.”
She also identifies an opportunity for legal teams to take a leadership role when addressing ESG issues. “It is an area where we are going to see a lot of rulemaking, and so there is a role for us in thought leadership around what might come,” says Bulos.
This change is reflected in our survey: four out of 10 legal decision-makers in the MENA region say ESG regulation is now evolving at a faster pace than their business can handle, with the same number saying that they respond to ESG regulation on a case-by-case basis. (see Fig 5)
This number rises among Qatari respondents, with 46% of the legal decision-makers we surveyed saying that ESG regulation is evolving at a faster pace than their business can handle – the highest across the region. The Qatar Stock Exchange (QSE) has been working on providing an ESG regulatory framework within the country, and recently launched its sustainability benchmark index for listed companies in order to identify companies with a strong ESG profile.1
Jake Barnard, General Counsel at GEMS Education, believes that ESG has become impossible to ignore. “ESG has turned into a subject that people can’t stop talking about. I think we are just at the beginning of how significant ESG is going to be, in terms of what investors, customers and employees will expect. Those expectations are likely going to outpace regulations for a while. If it’s not on your current agenda to really get to grips with ESG, it needs to be very quickly.”
