Russia’s propensity for volatility is infamous. Since its revolution 100 years ago, it has lived through events that the Soviet Union’s founders would never have imagined. Today, amid heightened geopolitical tensions, it continues to face huge uncertainty. But its law firms are adamant that it will continue to provide solid revenues.
‘Reports of Russia’s decline are much exaggerated and most of the issues with the West are not business-driven,’ argues Dimitry Afanasiev, chair and co-founder of Egorov Puginsky Afanasiev & Partners (EPAP). ‘When oil prices head north of $60 and the cycle in hard assets turns, we will remain strategically-placed to capitalise on the opportunities.’ Continue reading “Rousing the bear – Russian counsel force to hunt in new places”
If the mood of a city can be gauged by the bustle of its shops and restaurants, then law firms active in Russia and much of the wider CIS region should not be especially fearful. Björn Paulsen, co-head of German firm Noerr’s Moscow office, says despite the recent devaluation of the rouble coming amid prolonged economic turbulence, few tables are empty in the Russian capital’s top eateries. ‘The crisis has already reached the bottom and now the market is on the rise again,’ he says.
While there have been numerous false dawns born of blind optimism over a Russian recovery in recent years, the consensus now is that economic and political woes have bottomed out, and lawyers, while talking as good a game as ever, have reason to be upbeat. Money is trickling into the region as foreign investors, particularly those from Asia, try to take advantage of cheaper assets. Government initiatives to create a more investor-friendly environment are welcomed by the region’s elite legal advisers. Continue reading “The Russia report: A new thaw?”
There’s an old Russian joke about a foreigner who visits the Soviet Union. Knowing his letters will be read by the state censor, he devises a system to communicate with friends back home. If his letter is written in black ink, the message is true. If it is written in red ink, the message is false. Eventually his friends receive a letter from Russia written in black ink: ‘Dear friends, I hope this letter reaches you. Contrary to the lies in our press, life in the Soviet Union is wonderful. Food is plentiful, apartments are spacious and well heated, and there are no shortages. In fact, the only thing I can’t find here is red ink.’
Asking international lawyers about the year they have just had in the Russian market is a similar exercise in reading between the lines. While many firms report that they are still making money, fuelled largely by a boom in restructuring work, this picture is undoubtedly airbrushed by lawyers’ unwillingness to discuss the negatives. No-one, however, is in any doubt that the precipitous decline of the Russian market is hitting revenues. Continue reading “Aboard the propaganda train – sweat and spin amid a turbulent Russian market”
Russia-based lawyers are a hardy bunch, conditioned to working in a volatile market where ups turn into downs on an almost annual basis. No matter how good things might appear, they are well aware that some form of political interference or economic disaster might be lurking around the corner. Most get by on the knowledge that Russia’s lucrative market is remarkably robust and that in the long term it always seems to bounce back.
Yet, even for the most seasoned western lawyers who went through the Russian sovereign debt default of 1998, the events of 2014 are proving an altogether different experience. While previous Russian misdemeanours were largely tolerated – be it the Russo-Georgian war of 2008 or the politically motivated imprisonment of Mikhail Khodorkovsky in 2003 and the subsequent dissolution of Yukos – it has been impossible for the West to ignore Russia’s actions in Ukraine. Russia’s annexation of Crimea in March 2014, the subsequent war and support of separatists in Ukraine’s eastern Donbass region, and the inevitable ratcheting up of economic sanctions from the US, EU and other western states, has led to a situation so intractable that few can see an obvious way out. Continue reading “Chasing the bear – Sanctions bite on Russia’s legal market”
While their transactional colleagues in Moscow are suffering, the current sanctions on Russia have been a boon to trade and sanctions lawyers, who are fielding countless enquiries from Russian and international clients. The fact that the sanctions are so multi-layered, leaving plenty of scope for interpretation, has increased the demand, particularly when it comes to deciding what constitutes a controlling stake in a company, something that was relevant to the designated Russian individuals who were named in the first few rounds of sanctions and who owned stakes in many different companies. This uncertainty has, in many respects, been more damaging to Russian business than the sanctions themselves, something that the US authorities were fully aware of when they rolled them out.
‘I spoke with US officials on behalf of certain clients and said to them that greater precision in the sanctions-related announcements could make it easier for the US companies to comply,’ says Jeremy Zucker, co-chair of Dechert’s international trade and government regulation practice. ‘On multiple occasions, the US officials responded that the imprecision was deliberate because the uncertainty it develops among American industry leads to greater pull-back from Russia than is actually required by the sanctions themselves. As with a blanket ban, greater precision would remove much of that element of choice.’ Continue reading “Straining the bonds – why disputes counsel is high on the agenda in Russia”
Given that domestic litigators in Russia and the CIS regularly see their clients’ largest commercial disputes go abroad, usually to be resolved under English law, they treat the outflow of work with unexpectedly good grace. This is mostly based on the realisation that this exodus of high-value litigation not only reflects what clients want, but also what they need. But what’s best for clients isn’t always best for advisers’ bottom lines.
‘The tendency for cases to go to the UK High Court will remain for the next two or three years,’ says Markian Malskyy, head of alternative dispute resolution (ADR) at Ukrainian law firm Arzinger. ‘Normally the bigger Ukrainian law firms would try to exclude the domestic courts from any potential disputes. One party will usually hope that the UK courts will accept jurisdiction. This looks like a good platform for objective justice – still hard to find in the CIS.’ Continue reading “A question of confidence – Russians strive to keep high stakes disputes at home”
Boris Berezovsky v Roman Abramovich; Michael Cherney v Oleg Deripaska – these were the two headlining title bouts that for a brief and glorious moment took the often prosaic world of shareholder disputes out of the business sections and on to the front page of almost every national newspaper.
They involved a cast of colourful litigants with a seemingly bottomless pit of money and grudges, whose lawyers, particularly the barristers, were turned into media stars, if only for a while. The costs were huge and the outcomes of both cases well documented. Continue reading “After the gold rush – has the age of the oligarch dispute passed?”
The Russian legal market can be an unpredictable beast. A history of interfering politicians, corruption and debt crises, both internal and external, have meant that since the collapse of the Soviet Union, law firms in Moscow have struggled to maintain a steady grasp on just what might be around the corner. Despite all the variables, however, there is one constant, and that is the energy and natural resources sector, which dominates Russia’s foreign exports – in 2011 oil and gas revenues accounted for 10.4% of Russia’s GDP (up from 7.6% in 2009). Provided that commodity prices don’t drop for a sustained period of time – particularly crude oil, which has been strong since going above $50 a barrel in 2005 – a decent volume of work can be assured.
This was underlined in 2010, when the Russian state-owned oil producer Rosneft launched projects in the Kara and Barents Seas after obtaining licences to explore four blocks in Russia’s Arctic shelf. Three major joint ventures with the Western energy companies Exxon Mobil, Statoil and Eni were subsequently signed in 2011 and 2012. Continue reading “Russia: pipelines east”
Russian business and politics can rarely be described as boring. Each year throws up its share of dramas, and 2011 is no exception to the rule.
From prime minister Vladimir Putin’s recent, and not entirely unexpected, self-anointment as Russia’s next president, through to Rosneft’s doomed oil exploration joint venture with UK oil major BP and its subsequent rebound into ExxonMobil’s welcoming arms. These events, and more, have shown that Russia hasn’t lost its flare for political and economic intrigue and infighting. Nevertheless, compared to the problems faced by some of its neighbours in the CIS and Western Europe, Russia has come through the year with a veneer of respectability and stability. Any knocks it has taken have come from external sources. Continue reading “Russia: Shades of grey”
Global law firms have traditionally dominated the corporate market in Russia and the CIS. LB assesses the chances of those domestic firms taking on the internationals at their own game.
Dimitry Afanasiev, chairman of the Russian law firm Egorov, Puginsky, Afanasiev & Partners (EPA&P), is fully aware of the challenges that lie ahead. On 19 July, EPA&P announced that it was to take over the Ukrainian firm Magisters, creating a pan-CIS firm with over 300 lawyers and, as reported in the legal press, a combined turnover of €115m. In doing so, the firm has planted a serious flag in a market that has always been dominated by major internationals. Continue reading “Russia: Space Invaders”