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Legal Market Overview

A three-pronged crisis of the Covid-19 pandemic, an oil price crash and sustained social unrest torpedoed the Algerian state in 2020. Amidst widespread popular discontent with the current regime led by the Hirak movement, which is demanding fundamental reforms that would eradicate corruption and socioeconomic inequalities, Algeria continues to struggle with the same challenges it has faced for at least a decade. This time around, however, the country was also forced to deal with the ongoing coronavirus pandemic and a sharp drop in oil prices. Long-term aims to diversify the economy have also been deprioritised; the North African country’s non-hydrocarbon exports hover close to 2% of total exports, meaning it is one of the most hydrocarbon-dependent countries in the world.

Attracting boycotts, and overshadowed by the pandemic, a controversial late 2020 referendum by the current regime to update the constitution resulted in a record low turnout. Despite this, Algerian President Abdelmadjid Tebboune signed this new constitution, which critics say undermines judicial independence, into law in early 2021, just weeks after returning to Algeria after spending two months in Germany seeking treatment for Covid-19. According to some external forecasts, a partial economic recovery is predicated upon a rise in demand, a rebound in hydrocarbon production and exports, and structural reforms that restore confidence and foster private sector investment.

At the outset of 2020, Algeria’s new hydrocarbon law, designed to reverse declining foreign upstream investment through improved contract terms and tax rates, finally came into force, aimed at restoring the attractiveness of the sector against a backdrop of low oil and gas prices. Reacting to the economic threat posed by Covid-19 as well as oil and gas price unpredictability, Tebboune’s government later announced the end of the 51/49 rule governing foreign investment, lifting restrictions on foreign investment in non-strategic sectors. In addition to the removal of the 51/49 majority ownership rule, two other provisions favourable to investment were added, including the re-introduction of the right to use foreign financing.

As a result of the political turbulence and economic uncertainty, the numbers of transactions and cases in various practice areas have dwindled. Traditional mandates in energy still dominate; firms continue to hold out on increased levels of foreign direct investment and relative political stability as a means of revitalising the legal space. Domestically, the legal market is contracting, with multinational firms who possess both global networks and vast resources increasingly prominent on major mandates.