Solicitors battle with locals for spoils of capitalism

Many of the biggest UK and US law firms have a presence in Russia, but Jonathan Ames finds that the local competition is beginning to fight back – and both sides are optimistic about the current legal market


Throughout the economic reforms of 1993, every Muscovite must have marched out and bought a car. And then, for good measure, many of them must have decided to buy a second vehicle in an attempt to emulate the perceived consumer culture of the West.


Motor traffic is throttling Moscow – and that is one of the first points English lawyers practising in the city notice on arrival. It is also one of the main inhibitors to doing business in the Russian capital. ‘The biggest frustration on a day-to-day basis is just getting around the city,’ says an exasperated Peter Timchur, a partner in Allen & Overy’s Moscow office. ‘The traffic chokes the city causing enormous downtime travelling to and from meetings.’


Christopher Owen, a partner with Lovells in Moscow, also fingers traffic congestion as a major problem when trying to do business in Russia. On a more specific legal profession level, he also cites local recruitment as an issue.


‘There is a limited pool of top-quality lawyers – it is expanding but not keeping up with demand,’ he says. Indeed, Mr Owen makes a special plea for any fluent Japanese-speaking Russian lawyers to get in touch.


‘Also, the UK has a very small population of Russian-descent or graduates with Russian language skills compared with perhaps the US and France, a fraction of whom become lawyers, and a fraction of them want to work here.’



Having said that, there are 11 English solicitors’ firms with offices in Russia, indicating at least a perception that business can be done there. However, at least one prominent local Moscow lawyer maintains that UK and US law firms face a steep climb when they relocate.


Alexander Dobrovinsky is the senior partner at Alexander Dobrovinksy & Partners, a firm that claims to be the biggest domestic corporate law practice in Russia. Mr Dobrovinsky founded the firm in 1992 and waited a good three years before a major client came on board.


Now the practice has 60 lawyers and a stream of top-200 Russian companies on its client list, predominately from the oil, gas, banking, construction, metallurgical and engineering sectors.


According to Mr Dobrovinsky: ‘UK and US firms in Moscow work with their own clients. They know nothing about local law and they try to steal lawyers from local Russian firms. They will always exist but there is no real future for them here. They are pushed into opening Moscow offices by their clients, but none of them really wants to open here.’


Yury Timokhov, a lawyer with fellow local law firm Yust, agrees to an extent. ‘The largest foreign law firms feel obliged to open in Moscow because they are pressured by their clients,’ he maintains. ‘If a large foreign business is thinking about opening in Moscow, then it will want its law firm to be here. If that law firm isn’t on the ground for instructions, then that company won’t be happy. But for the application of purely Russian law, then we are seeing foreign companies instructing local Russian law firms.’


At Lovells, Mr Owen accepts part of that analysis. ‘Our main competition is the other large US/UK law firms, whether for work in the Russian market or inward investment for Russian or other investors, or outward investments and/or capital raisings by Russian clients,’ he says.


‘However, Russian firms have increasingly become more familiar with the requirements of international clients and represent a viable alternative in many practice areas – in particular, real estate, intellectual property filings and registrations, litigation as well as company incorporations and reorganisations. Indeed, Lovells regularly outsources work in these areas to a number of vetted Russian firms.


‘I would expect this overall trend to continue, so that major foreign firms move towards developing more complex areas such as project finance, acquisition finance, securitisation, and derivatives as clients here demand more sophisticated funding solutions.’

Peter Timchur: traffic chokes MoscowMr Timchur supports that view: ‘Russian firms will continue to expand and will prove to be credible competition for domestic work. [But] if they are to become real competitors for international work, then they will need to buy talent and that would stretch their existing salary structures. ‘Establishing their brand in the international market will also be a challenge. Of course, if the domestic market continues to expand at its current rate, the Russian firms may decide they do not need international capability. ‘At present, the concentration of wealth and the presence of large legal departments in the major companies restrains the growth of the domestic legal market. For that to change, the domestic banking industry needs reform to see the growth of small- and medium-sized enterprises, and the lawyers will need to convince these potential new clients that external legal advice can add value. In the current climate, those are two pretty big ifs.’ Big ‘ifs’, indeed, but Mr Dobrovinsky waves the flag enthusiastically for the future of business of all sizes in the new Russia. ‘Russia is the best place in the world to do business today. There is much undeveloped opportunity. It is a large country and there is great potential outside of the major cities.’ The one potential stumbling block – as ever in Russia – is the position of the authorities. In this case, the government’s view of legal professional privilege, which lawyers say is under threat in the current Yukos trial. ‘If legal privilege is not protected, there is no future for law firms in Russia,’ warns Mr Dobrovinsky.