Charles Avery reports on the firms taking a stand as sanctions bite
When news broke that Russia had invaded Ukraine, international law firms looked on in horror at the events unfolding and found themselves in the same predicament as just about every other major corporate entity.
On the one hand, firms were under severe pressure to cut ties with Russia, to stand in solidarity with the sanctions and condemnation from numerous western nations. On the other, firms had to think about the legal and economic implications that severing such relationships would have, as well as how best to take care of staff based in the region.
After a slew of statements announcing that firms were considering their positions, Linklaters was the first major player to take decisive action. On 4 March, the firm announced that it would ‘wind down our operations in Russia and close our Moscow office’, while also vowing that it ‘will not act for individuals or entities that are controlled by, or under the influence of, the Russian state, or connected with the current Russian regime, wherever they are in the world’.
This announcement opened the proverbial floodgates, and soon almost all firms with a Russian office were taking similar steps. Norton Rose Fulbright followed a few days later (7 March), as did Akin Gump, Latham & Watkins, Freshfields Bruckhaus Deringer, Cleary Gottlieb (9 March), and Allen & Overy, Clifford Chance and Herbert Smith Freehills (10 March).
Mishcon de Reya has taken a different tack. Though it does not have a Russia office, the firm is well known for its work for oligarchs, in particular its VIP Russia product, which provides advice to wealthy clients on investment, property and immigration matters. The firm has said that it will continue to work for Russian clients who are not the direct subject of sanctions, citing the fact that some clients ‘are themselves the target of President Putin’s government’.
While many have wound down their offices in the region, other firms have taken advantage of their firm structure to take a different approach. Baker McKenzie, DLA Piper and Dentons, all of which operate as Swiss Vereins, have elected to sever ties with their Russia offices entirely, leaving them to operate as independent practices. The structure allows a firm to present as a single cohesive unit, while enabling offices to maintain a substantial level of separation. In practical terms, this means that offices can merge and demerge relatively easily.
‘After 17 years in the country, we are withdrawing from our operations and will no longer have DLA Piper offices in Moscow and St Petersburg,’ DLA Piper said in its statement. ‘Our intention is to transfer the Russian business to our team there. We will ensure an orderly transition in accordance with our legal and professional obligations to both our clients and our people.’
What the future has in store for these newly severed offices is an open question. It is hard to imagine the outlook is a rosy one, as these practices effectively must operate as boutiques, suddenly cut adrift from an international network that supplied work and supplementary expertise. Staff futures are by no means secure.
What’s next?
As almost all large international firms have now played their hands, the coming months are likely to be quiet. Russia is to all intents and purposes cut off from the international legal world, and that will have consequences for those looking to do business there. As with all sanctions imposed on Russia, it is a question of monitoring the situation and waiting for measures to take effect.
That is little consolation for the hundreds of lawyers, as well as all other staff integral to running a law firm, that find themselves out of work. While some firms have suggested that they intend to support staff as far as possible, it is not yet clear what this could entail, and too strong commitment to this goal could undermine the reason for taking action in the first place.
The possibility is there for lawyers to move to offices in other jurisdictions, but it is difficult to see this as a realistic option for many. Family ties and immigration requirements could both make this unworkable for most lawyers. Equally, Russian-qualified lawyers have just seen the value of their expertise plummet on the international market, so it is hard to see who would take them. Some may be able to find roles at domestic Russian firms, but the market simply will not be able to absorb them all.
Regrettably, most lawyers look set to be stuck in limbo until the conflict resolves. If they are lucky, they may find themselves welcomed back into the international legal community in just a few short months. If not, their careers could be permanently derailed through no fault of their own.