When Crowell & Moring looked into embarking on its largest international initiative in a decade, the law firm decided it was prime time to foray into the Middle East, and in doing so, chose Egypt as its hub.
“We have committed more resources to opening this office and to our presence in the Middle East than we have to any new international initiative in a decade, so this is a significant undertaking by our firm,” said Morris DeFeo, partner at the US-based law firm’s corporate group.
Crowell & Moring opened an affiliate office in Egypt in partnership with Cairo-based Hegazy & Associates, helmed by Managing Partner Walid Hegazy, who has 15 years of legal experience in Islamic banking and finance, project financing, corporate restructuring and corporate governance.
The Cairo office will operate under the name Hegazy & Associates in Association with Crowell & Moring. To cement its foothold in the region, Crowell & Moring also formed an alliance with Saudi Arabia’s Al Enizy & Associates.
“Crowell & Moring historically has done a great deal of work in the Middle East, largely for government contracting clients and companies located in the Gulf and Egypt, as well as doing a significant amount of international dispute resolution work in the region,” said DeFeo, whose practice covers corporate finance, mergers and acquisitions, joint ventures and securities transactions.
Two years ago, the firm began exploring the desire to have a more established presence in the region, and in evaluating its options, Cairo was brought into focus as “the center of Islamic study, the center of law in the region,” DeFeo said.
They found that the needed expertise already exists, and can easily be utilized. “In virtually every country we go to and all the matters that we handle, very often the lawyers we are dealing with are Egyptian or Egyptian trained,” he said.
Moreover, he added, “Egypt and Cairo in particular are gateways for commerce and transaction throughout the Middle East, North Africa and sub-Saharan Africa.”
Coupled with “the dynamic quality of the Egyptian economy …[and] the increasingly pro-business nature of the government, led us to concentrate on Egypt as being a great place for us to establish our first international office outside the US in 10 years.”
The presence is part of what DeFeo calls the firm’s “integrated approach” to the Middle East, a “regional practice and capability” that is international in scope, recognizing the importance of having international caliber lawyers that are well-versed in local laws.
The firm is already doing work in Gulf countries, Libya, as well as Iraq and Afghanistan.
In partnering with Hegazy & Associates, “we found a wonderful partner [in Walid Hegazy]…an international M&A lawyer, [with] the expertise of Egyptian law, Islamic finance, in which he is one of the foremost experts in the region, Sharia-compliance, and simply doing business in the region,” said DeFeo.
On Islamic finance
While Islamic finance continues to attract the attention of US and European markets, it is still quite underdeveloped in Egypt, ironically the country where it all began.
Egypt pioneered Islamic banking in 1963 with the launch of Mit Ghamr Savings Bank — a small microfinance initiative — but has not been able to maintain a strong grasp of this niche market, which has since expanded regionally, and has more recently garnered a more global appeal.
The bank’s founder, an Egyptian economist, replicated the idea in the Gulf and found success in countries including Saudi Arabia and Bahrain, according to Walid Hegazy.
“Unfortunately, this effort did not continue in Egypt. Throughout the 70s and 80s, the attention on Islamic banking was more in the Gulf, oil-rich countries,” he said.
And it’s not for lack of human resources, as is the case with more nascent sectors such as telecom and IT.
“Egypt always supplied the [Islamic finance] industry with scholars, lawyers, bankers — professionals who are actually converting the conventional experience they have into Sharia-compliant transactions and instruments,” Hegazy said; however, this is not reflected in the size of the industry in Egypt.
Still, Hegazy is optimistic that this is already changing as this niche industry expands globally and Egypt recognizes the potential of enhancing its Islamic banking activities.
“The Central Bank has been reluctant for many reasons, probably more political than economic, not to promote Islamic finance. There were some doubts about transparency…and also the association with political Islam sometimes, is taken as a negative sign,” Hegazy explained.
Nowadays however, the CBE is encouraging, or as Hegazy says, “at least looking favorably at initiatives like the Abu Dhabi Islamic Bank initiative.”
The firm is currently discussing “potentially helping them [ADIB] with their services here.”
In his capacity as a legal expert, Hegazy said his role also encompasses promoting Islamic finance within the legal community as well as lobbying for Islamic finance within the CBE.
Bringing in an international perspective, DeFeo stresses that Islamic finance is a global trend. “The downturn in financial markets and the difficulties in the conventional banking arena have created even more opportunities in the Islamic finance field; and I think that will fuel the acceleration of growth even beyond what naturally would have happened.”
“I see it as a tremendous growth opportunity not only in the Middle East, but also in our other offices, particularly New York, Washington and London, where I think there are already significant Islamic finance transactions,” he said.
To the government’s credit, tight banking regulations in many ways helped save Egypt from the deepest effects of the economic crisis, Hegazy said, but when it comes to Islamic finance in particular, one can also argue that the sector is over-regulated.
Merely relaxing some of these regulations will not be enough for Islamic finance institutions to compete at the same level as conventional institutions. This needs to be accompanied by “introducing rules that are suitable for Islamic finance instruments and transactions… within CBE regulations or more on the corporate and civil law levels [and] capital markets regulations,” Hegazy said.