Unrest in Ukraine Ripples Through Global 100 Firms

Unrest in Ukraine Ripples Through Global 100 Firms Oklaey / Flickr Protest rally in Kiev, November 2013.

Just days after teetering on the edge of civil war amid violent clashes between opposition forces and security services loyal to former Ukrainian President Viktor Yanukovych, the country’s capital of Kiev began to regain some semblance of normalcy this week.

The calm didn’t last. By Sunday, with Russian forces moving to seize control of the Crimean peninsula in the face of President Obama’s warning that military intervention would have consequences, Ukraine was mobilizing its own troops and the country’s prime minister was declaring Ukraine on the “brink of disaster.”

The fast-moving events unfolded within days of the collapse of the peace deal announced on Feb. 21 that unraveled when Yanukovych fled Kiev for the eastern city of Kharkiv and then on to Russia. On Friday, the ousted Ukrainian leader held a press conference in the southern Russian city of Rostov-on-Don at which he vowed to reclaim control of a country divided into a pro-Russian east, where armed men have taken over government buildings and airports in Crimea, and a western region that favors closer ties with the European Union.

The battle over Ukraine’s future comes almost a decade after the so-called Orange Revolution, which proved to be a false start in the country’s effort to separate itself from its Soviet past. Now, as Russia and the EU angle to bring Ukraine into their respective spheres of influence, large international law firms such as Baker & McKenzie, Chadbourne & Parke, Clifford Chance, Dentons, DLA Piper and Squire Sanders are getting caught in the middle.

Peter Teluk, the Baltimore-born managing partner of Squire Sanders’ office in the strife-scarred Ukrainian capital, says the firm’s employees had a “firsthand view” of the historic events unfolding there. Squire Sanders’ office, which closed for three days before reopening on Feb. 24, is located on Kiev’s main street next to the Maidan, a central square that has served as a battleground between opposition forces and the Berkut riot police.

“When the tanks began rolling through the barricades, I said to one of my partners that I thought we’d have to close the office for good, because there’s no point in being in a place without the rule of law,” says Teluk of the violence that claimed 88 lives. “Now there’s a little bit of euphoria that the people protesting on the street have effectuated a big change, but there’s still a lot of work to be done.”

Squire Sanders, which had spun off its Kiev base in 2003 before returning to the city five years later, bolstered its operations in Ukraine last year by forging an alliance with leading 32-lawyer local firm Salkom LLC. Teluk, who has served three times as an election observer in Ukraine, is optimistic that the country can heal its political divide and that the newly formed national unity government will take the steps necessary to curtail rampant corruption and restore the public’s confidence in the state.

Teluk says Squire Sanders tries to remain apolitical in Ukraine, but acknowledges that employees of the firm have personally supported the opposition. Oleksandr Kurdydyk, the head of the finance and projects group in DLA Piper’s Kiev office, says that some of his firm’s employees have also participated in the protests in hopes that a new government will reform the country’s judicial system and promote more transparency in the public tender process.

According to Transparency International, Ukraine is one of the world’s most corrupt countries. The ouster of Yanukovych, whose lavish presidential estate on the outskirts of Kiev shocked many the protesters who overran it a week ago, has some in the large law firm community welcoming a new era in the country’s history.

“Chadbourne attorneys believe this change in government will have a positive effect on the business climate in Ukraine,” Chadbourne’s Kiev managing partner, Jaroslawa Johnson, told The Am Law Daily via email. “Replacing the corrupt Yanukovych regime with a new democratic government will attract much-needed foreign investment.”

DLA’s Kurdydyk notes that the interim government faces “challenging targets” given the country’s perilous financial position. The new regime’s early steps have included asking the International Monetary Fund for urgent economic assistance. IMF managing director Christine Lagarde, who served as Baker & McKenzie’s first female chair from 1999 through 2004, has dispatched a fact-finding team to Kiev to evaluate the country’s financial needs; Swiss and Austrian authorities, meanwhile, have moved to freeze Yanukovych’s international assets.

Baker & McKenzie was the first international firm to open an office in Kiev after the Soviet Union fell in 1989. Serhiy Chorny, head of the firm’s banking and finance and capital markets practice in the city, also coheads the office there with energy, mining and natural resources partner Serhiy Piontkovsky. Chorny said in an email that Baker & McKenzie has resumed normal business operations following the recent unrest, but was forced for a time to rely on employees working remotely for safety reasons.

“Our colleagues are worried [about] the future of the country right now, and the main concern I have heard is the risk of the opposition leaders, now gradually seizing power, failing to meet the expectations of the protesters and people in failing to build a new country based on the respect for human dignity, fairness and law,” Chorny writes in his email. “So many people died for this to be achieved.” He sounds a patriotic note in offering his personal perspective on the recent events. “We are proud of our people and our country—in many former Soviet countries, people do not believe they can change anything in how their country is run. We Ukrainians can. But this takes victims whom the country mourns these last [few] days.”

To Chorny and many other Global 100 firm attorneys based in the Ukrainian capital, what has unfolded in the country over the last three months is the product of legitimate protests targeting bribery, the suppression of human rights and what Chorny calls the “cynicism of those in power, of whom Yanukovych was the symbol.”

Daniel Bilak, managing partner of CMS Cameron McKenna’s Kiev office, echoes that sentiment. “All we want from the new government is that they stop the stealing,” Bilak says. “The country will then stand on its feet very quickly.”

East vs. West, Dealmaking Caught in the Middle

Kiev’s new leaders have promised more integration with the EU, which while not a popular pledge in Russia, is critically important to business-minded corporate lawyers at foreign firms eager for a rush of cross-border transactional work tied to Ukraine’s natural resources.

The country’s shale gas reserves have the potential to bolster the flagging Ukrainian economy—struggling long before the protest movement took flight—and help the country achieve energy independence. But making shale deals with Western companies would also pull Ukraine away from Russia’s orbit, and many inhabitants of Ukraine’s eastern regions prefer to maintain close ties to Moscow.

It was Yanukovych’s decision to reject a political and economic association deal with the EU in favor of forging closer ties to Russia that set off the antigovernment demonstrations in November. That same month, as reported by The Am Law Daily, the Ukrainian government and Chevron struck a $10 billion shale gas exploration and production sharing agreement. It was the Yanukovych regime’s second $10 billion energy deal in less than a year, following a similar accord with Royal Dutch Shell in January 2013.

Working with attorneys from Morgan, Lewis & Bockius, leading Ukrainian firm Asters advised companies connected to Ukraine’s government on both of the $10 billion transactions. Asked about the status of those deals in light of the recent upheaval, Asters senior partner Armen Khachaturyan told The Am Law Daily in an email that the Chevron and Shell agreements “signed by Ukraine in 2013 are valid contracts to be implemented according to their terms, and there is no doubt at the moment that the new government will treat them in any other manner.”

Clifford Chance, which opened its Kiev office in 2008, advised Chevron on its Ukrainian shale exploration deal. Contacted about the status of the Magic Circle firm’s Kiev operations, a spokeswoman told The Am Law Daily that Clifford Chance’s 20-lawyer office in the city reopened for business on Feb. 24 after being closed for three days as the situation in the city worsened.

Margarita Karpenko, an ethnic Russian and the managing partner of DLA’s Kiev office, says that many of the divisions between Ukrainian factions in different regions are overblown. What’s really needed, she says, is investment in eastern Ukraine that provides the economic impetus for social change.

The Am Law 100′s Ties to Tymoshenko Case

While many of the lawyers at large firms who spoke with The Am Law Daily about the evolving situation in the country remain upbeat about its future despite the fast-moving events on the ground, not everyone is pleased with the current state of affairs in Kiev. Russian Prime Minister Dmitry Medvedev—himself a lawyer and Russian President Vladimir Putin’s second-in-command—has likened the opposition’s seizure of control to an “armed mutiny.”

Ties between the legal communities in Russia and Ukraine run deep. Egorov Puginsky Afanasiev & Partners, a Moscow-based firm with close ties to the Kremlin, picked up a presence in Kiev thanks to a 2011 merger with Magisters. The latter had by then already expanded throughout the Commonwealth of Independent States—a regional organization of former Soviet republics—and once served as counsel to former Ukrainian Prime Minister Yulia Tymoshenko on controversial natural gas contracts with Russia.

Tymoshenko, who has a complex past, was released from a Kharkiv prison on Feb. 22 as the opposition overwhelmed Yanukovych. She was jailed after being convicted at a controversial abuse of power trial in 2011 that her supporters claim was the product of Yanukovych’s political whims. The proceedings led to roles for attorneys from at least three Am Law 100 firms.

After being convicted, Tymoshenko filed a human rights suit against the Yanukovych-led government with the European Court of Human Rights. Tymoshenko eventually prevailed in her claim that the charges against her had been trumped up, but not before Ukraine’s ministry of justice hired Skadden, Arps, Slate, Meagher & Flom to conduct its own inquiry into the circumstances surrounding Tymoshenko’s trial.

In late 2012, Skadden partners Gregory Craig, who joined Skadden from the Obama administration in 2010; Clifford Sloan, who left the firm last year after being tapped to serve as the president’s envoy for the closing of the Guantanamo Bay detention center; and Margaret Krawiec produced a 303-page report that described the prosecution of Tymoshenko as procedurally flawed, while also criticizing the former prime minister’s conduct, according to a story at the time by sibling publication The National Law Journal.

Several human rights groups were quick to criticize the report, which was at odds with another report released in June 2011 by Covington & Burling. The Covington findings, in turn, were critical of an October 2010 investigation into the Tymoshenko prosecution prepared by the Yanukovych government’s lawyers from Akin Gump Strauss Hauer & Feld and Washington, D.C.’s Trout Cacheris. Covington concluded that the charges against Tymoshenko were in fact politically motivated, and that no evidence existed of crime or corruption in her actions.

The Skadden report took another turn in the spotlight earlier this week, when correspondence with lawyers from the firm turned up in a stack of official documents found in Yanukovych’s former presidential compound after he fled the capital. (A website called YanukovychLeaks has already been set up to publish them.)

In a lengthy statement provided Friday to The Am Law Daily, a Skadden spokeswoman said the purpose of the firm’s report was “not to opine about whether the prosecution was politically motivated or driven by an improper political objective.” Instead, the firm emphasizes sections of its report that state that Tymoshenko was “denied basic rights under Western legal standards” and that “she was improperly incarcerated during the trial.”

Skadden’s fees for the work were also a subject of some controversy. After the firm’s report became public, Tymoshenko and her Ukrainian attorney asked U.S. Attorney General Eric Holder Jr., a former Covington partner, to investigate the circumstances surrounding the firm’s hire. In making that requst, they noted that the Yanukovych government had not conducted a tender offer before retaining Skadden. The Kyiv Post reported at the time that the Ukrainian government had paid only 100,000 Ukrainian hrvynia—a little more than $10,000 under current exchange rates—but that a wealthy businessman could have picked up the firm’s remaining tab.

The statement Skadden provided Friday did not include any comment on financial matters related to its work, except that it had agreed to write its report on the condition that it “would be totally independent” and that the firm itself “would not engage in any activity in the United States or elsewhere on behalf of the government of Ukraine.”

Cultivating D.C. Connections

Others are less hesitant about advocating for the interests of a country with a long history of employing legions of U.S. lawyers, lobbyists and consultants.

Yanukovych’s ouster has sent lobbyists retained both by him and his Party of Regions–led government scrambling in Washington, D.C., according to a report by the Daily Beast. While no Am Law 100 firms are advising the government directly, the Podesta Group and Mercury Public Affairs have been retained by an organization called the European Center for a Modern Ukraine (ECMU).

The Sunlight Foundation, a watchdog group, recently reported on a federal loophole that allows Podesta Group and Mercury lobbyists representing the ECMU—a Brussels-based nonprofit founded by Yanukovych’s Party of Regions—to register their activities with the U.S. House of Representatives and Senate, rather than with the Justice Department under the Foreign Agents Registration Act.

Others with close ties to Yanukovych and his Party of Regions have also sought influence in Washington, D.C.

Senate lobbying records show that Akin Gump received $480,000 in 2012 for its work on behalf of Systems Capital Management (SCM), a company controlled by Ukrainian billionaire Rinat Akhmetov. The Blog of Legal Times, a sibling publication, reported in March 2012 that the firm had been retained by Akhmetov, Ukraine’s richest man and a onetime member and supporter of Yanukovych’s Party of Regions.

Akhmetov’s political ties helped him earn $3 billion from the sale of state assets two years ago. Like Yanukovych, he hails from the industrial Donetsk region in Ukraine’s east and has long turned to Akin Gump for legal counsel. Over time, the firm has helped Akhmetov secure a U.S. visa, obtain retractions over news stories and defended his business practices.

Akin Gump public policy partners Sean D’Arcy and James Tucker Jr., international trade partner Stephen Kho, senior advisers L. William Paxon and Victor Fazio and consultants Barney Skladany Jr. and Janine Smith are among those who advised Akhmetov’s SCM on “economic development initiatives,” according to lobbying records.

The Kyiv Post reports that Akhmetov and fellow oligarch Dmytro Firtash, both prominent players in Ukrainian politics, could potentially see their political influence wane under a new government. An Akin Gump spokesman declined to comment about the firm’s work for Akhmetov and how his fortunes might be affected by current events in his homeland. (As it happens, Akhmetov also owns the most expensive home in the United Kingdom.)

The ranks of those with ties to Ukraine’s ousted government and prominent U.S. firms also include Dmitry Shpenov, a Party of Regions member, who paid a $40,000 retainer in late 2012 to Atlanta-based Arnall Golden Gregory. Gene Burd, an international business partner with the firm in Washington, D.C., told Reuters in late December that he had ceased his lobbying work for Shpenov after the situation in Ukraine began to deteriorate late last year.

Yuriy Ivaniuschenko, a Ukrainian steel magnate, hired Sidley Austin’s global complex commercial litigation head Joseph Tompkins Jr. last year to help him secure a U.S. visa. Ivaniuschenko owns Ukraine’s sixth-largest coking coal company and is a Party of Regions parliamentarian.

The New York Times recently reported on the links between Ukrainian oligarch Victor Pinchuk and Douglas Schoen, a Harvard Law School graduate and former Clinton administration official turned lobbyist. Schoen has received a $40,000-per-month retainer from Pinchuk since 2000, and the Times notes that Pinchuk has also been a major contributor to the Bill, Hillary & Chelsea Clinton Foundation. (Pinchuk, who is married to the daughter of former Ukrainian President Leonid Kuchma, wrote an op-ed for The Kyiv Post calling on Ukraine’s leaders to be as mature as its citizens.)

Tymoshenko too, relied on the counsel of U.S. lawyers to eventually prevail in her bid to get out of prison and invigorate the opposition movement.

James Slattery, a six-term U.S. congressman who rejoined Wiley Rein in 2009, has been representing her husband, businessman Oleksandar Tymoshenko, since early 2012. Over the past two years, Wiley Rein has reaped $920,000 for its efforts on behalf of the Tymoshenkos. Slattery spoke with The Blog of Legal Times this week about his work helping secure Tymoshenko’s release from prison.