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Previously regarded as one of the most progressive countries in the gulf, the tiny oil-rich state of Bahrain was rocked by mass protests in February and March this year. Inspired by uprisings in Egypt and Tunisia, the predominantly Shiite muslim demonstrators organised rallies calling for greater democracy, in a country where they are ruled by a Sunni Monarchy....

Previously regarded as one of the most progressive countries in the gulf, the tiny oil-rich state of Bahrain was rocked by mass protests in February and March this year. Inspired by uprisings in Egypt and Tunisia, the predominantly Shiite muslim demonstrators organised rallies calling for greater democracy, in a country where they are ruled by a Sunni Monarchy.

These events led King Hamad bin Isa to declare a three-month state of emergency. However, since June 1 2011, when the emergency conditions were lifted, rallies have been staged demanding a proportionate representation of the Shiites in government and an end to discrimination. This has led to many protestors being tried including the head of the human rights section of a radical Shia party Al-Haq, Abduljalil Abdullah Al-Singace who received life, as did the parties' leader. The spotlight has turned elsewhere but in Bahrain the tensions are still simmering and much remains unresolved.

The majority of lawyers insist this period of turbulence was a "blip," as two partners referred to it, for what is otherwise one of the most stable countries in the gulf. "It seems very much business as usual," one says, "There was a bit of a lull in terms of certain deals going on hold, a little bit of a wait and see." Another partner concurs "It had a bit of a chilling effect in terms of the business and from a reputational point of view all the eyes of the world were on Bahrain so that did have an impact."

Prior to the now notorious events, the country was dealing with a more familiar quandary. "The gulf region caught up a bit with the crisis lately. It started falling off later here," explains one partner. This lag has seen crisis-driven work creating a decent deal-flow in the last 12 months: "There's been various restructurings of debt and that's been a bit of a follow on from credit crunch times," says one finance partner.

"The capital markets are flat," as one partner succinctly puts it. Businesses are unwilling to accrue any more debt and investors are hesitant. The only active player has been the government. It issued its largest sovereign bond ever at $1.25 billion in March 2010 and then in October, Mumtalakat, Bahrain's sovereign wealth fund launched an IPO issuing 11.5% of Aluminium Bahrain (ALBA) raising $338 million. Unsurprisingly a planned $1 billion sovereign bond issue in February 2011 was delayed.

It is too early to see what the extent of the damage the countries part in the 'Arab Spring' will have on the economy but based on current statistics it doesn't look good. The countries growth forecasts have been downgraded twice this year, making it the worst performing state in the region. Its sovereign bond rating has suffered similarly having been cut from A3 to BAA1 and according to the HSBC Middle East sovereign bond index, as of June 29 the country was the worst performer among the region's dollar bonds with maturities of ten years.

Traditionally an investor friendly country, Bahrain will have certainly lost prospective capital and this will subsequently reduce law firm's mandates. "The impact on the business will be on new companies holding back their expansion plans in the region. Things like company start ups will be quieter," admits one partner. One point of solace for firms is that the unrest has spurred the government on with projects: "There's government money being spent and projects are being brought forward and we've certainly seen that in Bahrain," says a lawyer.

The Government's 2030 vision, which involves wide-scale plans for privatisation is still intact and was moving even before February. Norton Rose and Freshfields, the Governments firms of choice, have both been active in the last 12 months advising on PPP (public-private partnership) deals which have been granted to private companies. One was for a contract to build and operate a waste-to-energy plant and integrated waste management system and another for a sanitation treatment in plant in Muharrak, which is yet to be awarded. Freshfields have also been mandated to advise the Government on its first affordable housing project, something that is greatly lacking in the country. "It's in the press every day. It was highly politicised before February so you can imagine what it's like now," says one lawyer. "It has been actively pushed forward because they want to see that succeed. They want to show that they are looking after the public interest.

In terms of the legal landscape, lawyers in the UAE and Saudi Arabia noticed an influx of partners from banks and law firms with offices in Bahrain when the trouble erupted in March. Firms were, however, quick to dismiss these measures as merely temporary evacuations while things settled down.