Moscow movers and shakers
3 October 1998
In the former Soviet Union, consolidation and strengthening is making some firms more equal than others, writes Chris Fogarty
Moscow-based international lawyers say a two-tier structure is emerging between the larger, more prominent firms and smaller, struggling practices.
Sixty eight firms have offices in the city. According to observers, a core of four British and three US firms are breaking from the pack.
Size really matters in a country as large as Russia. "It's not credible if you're going to go into this market with five or six people," says one partner form a large practice.
"I think there's bound to be a rationalisation over the next few years," adds Freshfields Moscow partner Jeffrey Roberts.
His firm, along with Linklaters, Clifford Chance, Allen & Overy and big US firms such as Akin Gump Strauss Hauer & Feld, and Coudert Brothers are among those pinpointed as moving ahead of the competition, although no figures have been produced to back this up.
One large Moscow firm claims it does not have enough lawyers to carry out its workload, while another partner claims smaller firms are sitting on their hands.
Many of the big firms also say they are being bombarded with applications from lawyers at smaller Moscow practices who are looking to move.
Yet locating the right talent, especially Russian lawyers, is proving difficult and very expensive. Young Russian lawyers know what they are worth and demand big money with bright career prospects.
"It costs just as much to have an assistant in Moscow as it does in New York," says Coudert's Moscow managing partner Bruce Bean.
There are few Russian lawyers over the age of 30 working in international firms. Instead, young talented lawyers educated in free market economics and legal theory are being snapped up.
Freshfields now has 10 law students working as paralegals as part of a scheme to get lawyers into the firm before they are out of the lecture theatre.
Yet although the brightest Russian lawyers are being aggressively hunted, the government has not clamped down on Western firms.
"So far there has been no indication of any move to make life difficult for lawyers here," said Cameron McKenna partner John Hammond.
Despite the extremely high entry costs and shortage of lawyers, European firms in particular continue to arrive while New York-based Debevoise & Plimpton have just announced plans for a new Moscow office.
Managing partner Barry Bryan pointed out that the firm had been involved in Russia for the last seven years and had already built up a "substantial practice".
Bryan maintained that while there is hot competition in Moscow there is also plenty of work. Indeed the Moscow legal landscape may not be as bleak for newly-arrived and smaller firms as their large-scale rivals paint it.
"We can see that there is enough work for us and we think enough for the competitors as well," said Bruckhaus Westrick Heller Loeber resident partner Bauer Klaus-Albert. He offers an insight into why so many European firms are flocking to Moscow. "We believe if you want to be successful you have to be strong here."
Bean, who is also chairman of the American Chamber of Commerce in Russia, suggests that the market is more fluid than larger firms may like to think. "You've had big firms come and go and you will see more firms come and go," he says. "There will always be room for some new firm to come in."
He adds that the type of work that firms do is constantly shifting and suggests that timing and luck, as much as heavy commitment and resources, can determine the success of a firm working in Russia.
There is also disagreement among lawyers over the need to expand within Russia. While most of the larger firms are planning, or have opened offices in the former Soviet republics, many lawyers in Moscow say expansion in
Russia is pointless as the country is incredibly centralised with all work flowing through Moscow.
Salans Hertzfeld & Heilbronn partner Tim Stubbs disagrees. Based in St Petersburg for the last five years Stubbs says although it is just a three-hour train journey from Moscow, the city is providing enough work to support half a dozen foreign firms.
Large-scale industrial projects and inward investment from manufacturers such as Coca Cola and Gillette have provided plenty of work and made St Petersburg Russia's equivalent of Chicago to New York or Manchester to London.
The city also offers a slower pace than Moscow but Stubbs says unlike the capital there is a supply of talented young Russian lawyers available.
For now debate over how foreign firms in Russia will fare, or the direction in which they will grow, reflects life in a country where the future is uncertain but never uninteresting.