Moscow

 

In December of last year, Boris Johnson became the first U.K. foreign secretary to visit Russia in five years. Now, following claims and counter-claims about the Salisbury nerve agent attack in the U.K., his visit seems unlikely to be repeated soon.

The legal industry has played its own role in the unfolding drama, with U.S. President Donald Trump’s lawyers drawn into the investigation into Russian election interference, and Conservative MP and foreign affairs committee chair Tom Tugendhat going so far as to call on lawyers to consider the “moral decisions” they take when they engage with Russian clients.

Partners, however, are understandably skeptical about the characterization of unscrupulous lawyers cashing in on work for disreputable Russian clients, while also acknowledging the need to tread carefully.

“We are particularly careful with Russian clients in applying the legal criteria that exists, particularly in relation to sanctions,” said Dentons arbitration partner Dominic Pellew, who was based in Moscow for over three years. “If the regulations that we have to apply get tougher, then law firms will apply them, but it will be difficult for me or anyone else personally accepting work to be expected to apply their own standards.”

Pellew added that while firms do consider reputational issues when considering whether to accept clients, they tend to take the more “legalistic approach” of doing due diligence that ensures the work falls within the law. “In reality, the former criteria is quite rarely applied in practice and it is difficult to ask firms to apply in this situation”, he says.

One firm currently coming under public scrutiny in the context of the Russia furor is Squire Patton Boggs. The firm, which this week ended its alliance with Trump’s personal lawyer Michael Cohen following an FBI raid on his New York office, has also attracted attention for its role advising under-fire political consulting firm Cambridge Analytica, as well as for its past work for Russia’s Gazprombank.

One M&A partner who has previously practiced in Moscow and has a large Russian client base agrees with Pellew that the implication that law firms are facilitating illegal activities with Russia is wrong, and that the number of western lawyers working with “dodgy” clients is very low. But they will now likely be extra careful.

“What is happening with Squire Patton Boggs will have firms looking over their shoulder—it is a wake-up call for firms to do more compliance and check their client list,” he said.

But he also said most said big firms understand that it is not advisable to start picking clients based on whether they are popular.

“If you represent Adolf Hitler, I can see why you might consider backing away from that client, but just because a company like Gazprom is state-owned, that doesn’t mean that they are the Russian government,” he said.

One London-based M&A partner who works across his firm’s Russian and London offices said that Western lawyers can have a positive impact on Russia, encouraging best practice in a country that has scaled back its efforts to engage with the West on international relations.

“There is a lot of political heat now attached to anything Russian, but when Western lawyers are there, we are a reminder that the rest of the world has rules, and that Russia has to comply by those rules if it wants to play,” he said. “For politicians to attack us because of Russia hysteria in the press does not help us in doing that.”

All of the lawyers contacted for this story said that the political relationship between Russia and the U.K.—and particularly the heavy sanctions applied by the U.K. and U.S. following Russia’s annexation of Crimea in early 2014—have affected the type of work available. The American Lawyer wrote about this in detail in a story published last year.

Baker McKenzie CIS managing partner Sergei Voitishkin said that politicians have not been helpful in making lawyers’ lives easy in Russia.

“As a business, we have seen many political crises, such as the sanctions imposed in 2014,” he said. “If major new sanctions are imposed, that will affect us.”

He said his practice tries to stay away from politics and focus on servicing clients on the business side. “Political tensions are an obstacle to the business we do,” he said.

Another U.K. infrastructure partner with clients in the CIS region said that over the three years since sanctions were first imposed, he has seen a shift away from cross-border work involving Russian clients and a move toward “local and regional work” within Russia. Private equity has suffered too, he says, owing to the sanctions placed on Russian businesses.

“I suspect the best practices are still doing the best work out there, but I would imagine it is not good cross-border stuff,” he said. “[They say] you have to steer your way through a lot of trouble in Russia at the moment. Firms will be looking at whether their client base is still considering Russia, and will be dictated by that.”

Pellew also highlighted negativity toward Russia among European and American companies as a major factor in what work is available, specifically noting that the financing of projects in Russia has become more difficult. “In concrete terms,” Pellew said, “if there is any increase in sanctions or other controls, we will feel the squeeze in terms of business.”

This is echoed by an M&A partner with Russian clients who said that large-scale projects such as shale oil or arctic developments have reduced in frequency, while capital markets work has suffered as Russian banks and companies have been prevented from raising capital by “targeted sanctions.”

However, despite the geopolitical upheaval, Voitishkin said that Baker McKenzie has no plans to scale back its 260 lawyer-base in Moscow. Similarly, other U.K. law firms with large Russian practices have not scaled back their lawyer numbers since the implementation of sanctions. Allen & Overy has seen its office grow slightly to 22 lawyers, while Dentons and White & Case have 112 and 60 lawyers in Russia, respectively.

“I am not aware that any of our clients have been reconsidering their strategies in Russia due to this new crisis in relations between Russia and the U.K. Obviously politicians have their own agendas and react to internal developments in their own countries and we have to look at how that can affect us, but at the moment, we have no plans to downsize or leave the market,” Voitishkin said.

Pellew was similarly resolute in his response to the call by British MP Tugendhat for firms to consider their activities in Russia.

“It is problematic with Russian clients because as we have seen from the ‘Putin List’ in the U.S., these people are just a collection of wealthy Russian businessmen that you can get off any Forbes list,” he said. “There are value judgments to be made. I would rather that judgment be made by the government and Parliament rather than by me or a law firm.”