More than 160 years after the discovery of a few gold nuggets turned San Francisco into a boom town, a different type of gold rush is under way 13,000 miles east in the Persian Gulf. It is turning Dubai — until a generation ago a minor pearl-fishing village — into a 21st century El Dorado.

This Middle Eastern gold rush has been spawned by the desire of the region's rulers to find a replacement for the energy economy. Oil reserves in Dubai — one of seven federation members that make up the United Arab Emirates — are expected to be more or less completely dry in another 25 years. Instead, where there were oil wells, the sheikhs have built glass and steel skyscrapers in an attempt to create an economic hub to rival Hong Kong and Singapore.

It is not all just shopping malls and gaudy, expensive hotels attempting to out-star each other. Dubai has also attracted a parade of leading international law firms in the past few years. A few pioneering English firms, such as Trowers & Hamlins, Clyde & Co and Clifford Chance, have had offices in the region for decades, but now every other managing partner from the City of London to Wall Street, Texas to California, is eager to demonstrate their Middle East strategy.

All of the UK's "magic circle" firms bar Slaughter and May are ensconced in the region, as are an increasing number of the white-shoe Manhattan practices. A few European firms have set up shop — Brandford-Griffith & Associates, the Paris niche practice, Loyens & Loeff, the Benelux firm — and Gide Loyrette Nouel is rumoured to be next in the queue. Even smaller British regional firms are getting in on the act: HBJ Gateley Waring, a Birmingham and Edinburgh firm, opened its doors in the city several months ago after poaching a couple of key staffers from the local office of Berrymans.

The financial opportunities are said to be huge. Gulf Arabs, enriched by ever-increasing oil prices, are like wealthy children in a sweet shop: they want things (skyscrapers, hotels, theme parks, motorways); they want the biggest and the best they can get; and they want them now. Ross Barfoot, a senior associate at the Abu Dhabi office of Trowers & Hamlins, estimates that there are128 private equity funds in the region with US$26.6 billion to spend.

The main game is project finance. The National Bank of Kuwait recently valued projects in the Gulf Co-operation Council (GCC) region — which consists of the UAE, Saudi Arabia, Bahrain, Kuwait, Oman and Qatar — as worth more than US$1 trillion over the next six years. Barfoot says: "The region is already one of the largest project finance markets in the world and the scale of investment required is such that it is unlikely that regional governments will want or be able to fund these projects by themselves."

But it is not just building shopping malls in the sand and man-made islands in the sea. Shipping, intellectual property and off-shore advice are all potential boom sectors. Then there is the practice area that no law firm in the region can ignore: Islamic financing. As the Muslim world becomes more powerful and financially sophisticated, it requires financial products that are Sharia-compliant. According to Hildebrandt, a consultancy: "The growth of sukuk issues [the Islamic equivalent of a bond] has developed enormously and the issue of traditional bonds has also shown significant growth."

Can the region really support such an influx of Western law firms? Partners at English and American firms talk about the opportunities in Dubai with almost Pavlovian predictability, but will there really be enough big-ticket work to go round? The UAE's population is 4 million, with Dubai itself accounting for 1.3 million — a few more than Birmingham. According to Jimmy Houala, the managing partner of Bin Shabib & Associates, a Dubai-based firm, there are only a handful of really big transactions every year but "three handfuls of international lawyers" competing to handle them.

The welter of hype over the incursion of the global giants also overlooks the local firms, such as Bin Shabib, Al Tamimi & Co and Hadef, that are capable of giving the global firms a run for their money. Haoula, who cut his teeth in the Dubai office of Clifford Chance, cautions that many English and American firms find that when they are on the ground the work continues to go to their head offices in London, New York or Texas because they do not have the "proper quality" of lawyers locally.

"The expectations from the international law firms when they come to the local market are not satisfied once they have established themselves," Houala says. "They realise that the quality of work is not really the quality of work that they were aiming for. A lot of them are not looking for anything other than cross-border transactions — until recently they have not been interested in the more local transactions."

Others are more optimistic, if still cautious. Sadiq Jafar, managing partner of the Dubai office of Hadef, says: "In the current climate of strong economic growth and high liquidity levels in the region, there would still appear to be sufficient work for most new entrants. [But] we are beginning to witness a dynamic whereby buyers of services are becoming more sophisticated and selective. This means that law firms with special skills and experience receive instructions in relevant practice areas. The level of competition among law firms for higher level fee assignments is on the increase."

That growing awareness on the part of local clients is a key point for Jafar. "The business community in the Emirates is becoming more and more sophisticated every day, and the top-end consumers expect high-quality products and services in every facet of their lives. This applies to lawyers in the same way that it applies to cars, airlines, hotels and architects."

As many prospectors who flocked to California in 1849 on the promise of untold riches ultimately ended up with little more than fool's gold to show for their trouble, their modern day equivalents could also find that all that glisters is not gold.

Jonathan Ames is the editor of The Brief, a specialist legal monthly magazine based in Dubai

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