If you are a devout follower of the legal press, you’ve no doubt noticed that currency has frequently cropped up in our articles of late.
Global law firms have to manage currency like any other multinational business, of course. But with the overwhelming majority of Big Law revenue still generated in traditionally stable Western markets, currency exchange has generally been a minor administrative issue rather than a serious cause for concern.
A number of geopolitical and economic shocks over the past 18 months have brought currency high up the managerial agenda. The weakening of the British pound against the U.S. dollar since the Brexit vote, for example, has had a particularly dramatic impact on the market, strengthening the already considerable buying power of American firms across the Atlantic and helping them further dominate the London recruitment market. But any headaches caused by this changeable trans-Atlantic dynamic pale into insignificance when compared to what has happened in Russia over the past few years.
The double whammy of severe international sanctions imposed following the conflict in Ukraine, and the impact of falling global energy prices on the Russian economy, which is still heavily dependent on oil, has resulted in wild swings in the value of the ruble.
The currency practically halved in value in 2014 and has been so volatile that Travelex, the world’s largest currency exchange company, has completely stopped trading in Russian rubles for the past two-and-a-half years.
I only discovered this earlier this month, when seeking to buy rubles two days before flying to Moscow to report on a feature article, which you can look out for in the coming weeks. Cue a panicked rush into town to find an alternative bureau de change that was selling the currency. It wasn’t the only pre-travel stress I encountered for this particular trip.
It turns out that the visa application process has become significantly more arduous since I last visited Russia, some seven years ago. In addition to the perfectly reasonable questions about whether I’ve had any specialist training in biological or chemical warfare, I also had to list every foreign trip I have made in the past 10 years. With dates.
I only travel abroad a handful of times each year, but it was still a major pain trying to dig up all of the relevant information. What would this entail for jet-setting lawyers who spend half their lives crossing international time zones? I can only imagine.
The currency situation has led to some awkward and costly interactions between international law firms and Russian clients, where the value of the ruble against the dollar has shifted during the course of ongoing matters. This has been exacerbated by the fact that the Moscow offices of international firms typically bill in dollars (or euros, for some U.K.-based firms), whereas the in-house legal budgets of Russian companies are obviously in rubles.
During my meetings in Moscow last week, I heard countless stories of instances where a law firm’s bill has ended up proving much more expensive than a client originally anticipated. Similarly, there have been times when a law firm received significantly less than expected at the end of a project.
The ruble has strengthened and stabilized of late, but the rates charged by international law firms still look much more expensive to Russian clients than they did a few years ago. And lawyers are taking nothing for granted. Just last week, the ruble went back into decline after oil prices fell to their lowest level since November and the United States broadened its sanctions against Russia.
It is little wonder that several lawyers at international firms told me they are still wary of pricing larger—and lengthier—client matters in rubles. “For quick and dirty work, it’s fine,” said one partner in the Moscow office of a U.S.-based firm. “If the project is more significant, we wouldn’t want to take the risk.”
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