This article first appeared on June 27, 2017 in ALB Insights, a weekly, ad-free newsletter that is sent to subscribers. To purchase your subscription, please email Amantha Chia at amantha.chia@thomsonreuters.com or call her at +65 6870 3917.
By far Asia’s smallest country, the Maldives has seen a surge in foreign investment in recent times, particularly in resort and infrastructure construction projects. This growth has led to a demand for services from the country’s established law firms, finds Raj Gunashekar
Located in the Arabian Sea, southwest of India, the island nation of the Maldives is Asia’s smallest country in terms of both land area and population, with less than 400,000 inhabitants. The main driver of the economy is tourism, which accounts for 28 percent of GDP and more than 60 percent of the country’s foreign exchange receipts, providing from upwards of nine-tenths of government tax revenues.
Despite its small size, deal flow in the Maldives has been steady. ”Compared to regional neighbors such as Singapore or India, the Maldivian market appears small, but the transactions are significant when you consider the economy’s size,” says Shuaib M. Shah, founding partner of Shah, Hussain & Co, which is based in the capital Malé. “The Maldives is a tiger economy.”
Ali Naeem, managing partner of CTL Strategies, observes that overall, the demand for legal services has increased over the past two years. “This is reflective of the increase in multimillion dollar infrastructure projects by the government, new investments in the tourism sector, and growth in the business confidence. This has also opened up the legal market for firms with specialisations in areas such as arbitration and taxation,” he notes.
The majority of law firm clients are multinational corporations engaged in the acquisition and operation of tourist resorts, government infrastructure construction projects, telecommunications, banking and finance and aviation. Firms also represent foreign banks that fund multi-million construction projects.
Corporate clients, both local and foreign seek advice on the Maldivian legal system, and the enforceability of contracts, tax, foreign investments, and acquisitions,” says Abdulla Muizzu, a partner at Praxis Law Firm.However, practices such as competition, antitrust, energy, intellectual property, investment funds and financial services are not that developed, according to Naeem.
In the last few years, Maldives law firms have also been acting for a number of Chinese state-owned companies and banks on infrastructure projects.
A GROWING MARKET
While it’s true the Maldives legal market has its drawbacks – lawyers cite regulatory uncertainties and a weak judiciary, among others – there’s no doubt that it is set to grow on the back of increased foreign investment.
“The demand for commercial legal services will continue to grow, although the market is still expected to be controlled by a few law firms and new entrants with an edge over these traditional firms are going to pose a significant threat to the existing firms,” says Naeem. “Tax disputes will develop into an important practice area in the legal sector alongside the existing ones.”
To meet that demand, higher education institutions in the country have introduced degree programmes in law. “The number of lawyers will increase in the next few years as a result, says Muizzu. “A number of them are expected to join companies and government agencies as in-house legal staff.”
Recent legislative reform has led to the focus being drawn to arbitration and the growing need to adopt efficient and effective court mechanisms for commercial matters. “While the current focus seems to be very much on the commercial market, it should be noted that other areas are also evolving, as evidenced by the recent enactment of the Criminal Procedure Code,” says Shah.
To contact the writer, please email raj.gunashekar@tr.com
