Rules of law

Regulation of Russia’s legal market is again on the agenda. Joanne Harris finds out what this could mean for practitioners



For international law firms, ­setting up a practice abroad usually requires jumping through any number of regulatory hoops. In Russia it is a question of choosing the right business model and getting going – at the moment.

The country is one of the few legal markets with no real regulation governing legal practice. Those who want to appear in front of a court must join the Federal Chamber of Advocates, but non-contentious lawyers can practise with few restrictions. This applies to both local and international practitioners.

“As far as the legal profession is concerned it’s about as liberal as it could be,” says John Goodwin, managing partner of Linklaters’ Moscow office. “I think that’s a terrific effort by the Russian government to improve the quality of its financial markets. There’s some questions at the moment as to whether that needs to change.”

Dewey & LeBoeuf Moscow partner Brian Zimbler points out that the concept of ­regulating lawyers is not new to Russia. He says he still has the firm’s old licence on the wall in his office, dating back to the days when foreign firms had to obtain such a document rather than merely registering with the Ministry of Justice.

Foreign lawyers in Russia do not practise Russian law, but many foreign law firms now employ sizeable numbers of Russian practitioners who are able to give local advice.
“I’d never give advice on Russian law without consulting with our Russian lawyers,” affirms Paul Melling, founding partner of Baker & McKenzie’s Moscow office – another Western lawyer with a ­registration certificate on the office wall.

However, Russia is due to join the World Trade Organisation later this year, after years of lobbying effort. Zimbler says he thinks membership of the global trade body will make it harder for the Russian government to impose regulation that would impede the activities of foreign firms in particular.

Proposals currently under discussion in Russia – although, many hasten to add, still a long way from implementation – would see lawyers having to register with a bar association of some kind, thus broadening that registration process out from advocates only.

“The debate’s about whether it should be an independent bar,” says Andrey Goltsblat, managing partner of Goltsblat BLP. He says the establishment of such an organisation would give lawyers more protection, affording them the legal professional privilege that they currently lack.

The issue of what would happen to foreign law firms is still murky. Ownership of firms could be an issue, according to Goltsblat, in addition to the question of whether Russian and foreign lawyers would still be able to team up in partnership.

Bring it on

Despite the lack of clarity, practitioners from a wide variety of firms are predominantly supportive of the proposal to regulate lawyers.

“I believe this is a natural way of development,” says Oleh Malskyy, a partner at Astapov Lawyers, which has offices in both Russia and Ukraine. “Generally, any changes to a regulatory regime are first accepted as an additional burden but later it becomes part of life.”

Melling agrees. “Some regulation of the legal profession here is clearly required,” he says. “At the moment there’s essentially no regulation of lawyers here. The concern is always that in their attempts to regulate the law profession they [the authorities] approach it with a broad-brush approach and maybe do more damage than good. There’s always a concern that something bizarre might be done that requires law firms to shut down or register.”

Katerina Haslam-Jones, a partner at UK-Russian firm Padva Haslam-Jones & Partners, notes that the fact Russian lawyers don’t necessarily have to go to law school to practise is the primary reason why reform is needed.

“That’s where the major problem lies and that’s why the reform is so important,” says Haslam-Jones.

Malskyy believes that even the two-tier system of advocates and lawyers does not prevent non-advocates from getting involved in contentious issues. “Practising law is more looked at as a right to represent clients in court but we’ve never experienced any difficulty in representing Russian clients in Russian courts being Ukrainian lawyers,” he notes.

The question of regulating lawyers has occupied many minds in Russia for some time – indeed, since the introduction of the Advocacy Act of 2003. The long debate means that most in the market think ­regulation is inevitable.

Alexander Khrenov, partner of Yukov Khrenov & Partners – a firm of lawyers and advocates founded after the advent of the Advocacy Act – says: “When I attempt to analyse the various statements of the upper echelons of the Ministry of ­Justice, the Supreme Court of Arbitration and the ­Federal Chamber of Advocates to draw a lucid picture, I come to the conclusion that sooner or later we will come to one or ­another form of attorney monopoly.”

But Khrenov says the exact form is still very much up in the air. “The level of its boundaries, questions of obtaining attorney status, including by the representatives of the legal business community that were not previously attorneys – all of these and more are ripe questions to which are impatiently awaiting some answers, especially from the Ministry of Justice which has been charged with the execution of attorney ­practice reform by the government.”

Mickael Laurens, international policy manager for the Law Society of England and Wales, says the regulatory body had several meetings on the issue of regulating lawyers in Russia last year. The latest was with the Ministry of Justice in November, which is seen by the legal community as the natural regulator for lawyers in Russia.

Laurens believes the debate is currently overshadowed by the upcoming elections in Russia. The country is due to vote for members of the Duma, or parliament, in November 2011 and for a new president in 2012.

“So far it’s been many discussions and many debates, but nothing has yet been decided,” he says. “At the moment we haven’t seen any concrete proposal on which to make representation.”

Laurens says the Law Society is keen to ensure that the Russian legal market remains open for foreign firms, whatever regulatory framework ends up being put in place. “What we’re keen to tell the Russian authorities is that we believe the legal services market must be open to international cooperation work and Russian lawyers should be able to continue to work with ­foreign lawyers,” Laurens explains.

He says pushing this message will involve discussions about the types of vehicle that can be used for law firms, among other issues.

“Russia for us is a key jurisdiction,” he says. “We’re monitoring the regulatory debate and hope to assist the Russian authorities in any way they think is helpful.”

However, neither Laurens nor lawyers in international firms think the Russian authorities are likely to impede the activity of foreign lawyers to any great extent. The ­market has developed significantly since the fall of Communism and both Russian and ­international lawyers believe the presence of ­foreign firms is partly to thank for this.

One lawyer at a US firm says he does not think the lack of regulation has harmed the market’s development much.

“I don’t think the current approach has led to any harm whatsoever to the market,” he notes. “The market has been led by the practical results and the procedure of the firms involved. If someone abuses that they lose out commercially.”

Melling says domestic firms have indeed recognised the value of international firms.

“In virtually every way they’ve modelled themselves on how international law firms operate,” he says. “I’d be surprised to see senior figures in the legal profession here in Moscow lobby hard for international law firms to be restricted. Additionally, I think the Russian government and certainly ­Russian industry recognises the vital role played here by international law firms.”

Others agree. Zimbler says the very presence of international firms in Moscow helps create work by bringing in investment from foreign companies. He believes the best way to deal with the question of foreign lawyers would be to apply a reciprocity rule similar to that which exists in many other jurisdictions. That would give international firms the right to set up shop and offer foreign law in Russia, in exchange for Russian lawyers being able to offer Russian law elsewhere.

“We work closely with Russian firms and try to cooperate with them,” Zimbler says. “If they kicked all the foreign lawyers out of the market it would be a shame.”

The likelihood of this happening is ­minimal, but the likelihood of regulation happening soon also seems small. ­Regulatory debates in Russia have a tendency to drag on, and the legal community is resigned to this one being no different.

In the meantime, both Russian and ­international firms will continue to take advantage of one of the world’s most liberal legal ­markets. n