Should they stay or go? Firms face hard choices in Russia

The skyscrapers of the Moscow International Business Centre, also known as “Moskva-City”, are seen just after sunset in Moscow, Russia July 12, 2018. REUTERS/Christian Hartmann

(Reuters) – When now-defunct Coudert Brothers in early 1988 became the first U.S. law firm to open an office in Moscow, it was big news —feel-good evidence of glasnost in action as the Cold War sputtered out.

Coudert’s clients “all have reacted enthusiastically to the prospect of having Western legal counsel available to them in Moscow,” the firm’s chairman said at the time, per a Reuters report.

Other firms were close behind. Baker McKenzie set up shop in Moscow a year later, followed by White & Case in 1990; Cleary Gottlieb Steen & Hamilton in 1991; and Skadden, Arps, Slate, Meagher & Flom in 1992. About 20 Am Law 200 law firms now have offices in Russia working on behalf of Russian and international clients.

But getting in, it seems, is a lot easier than getting out.

While a long list of companies such as Shell PLC, Ford Motor Co, Fed Ex Corp and Apple Inc have announced they are suspending or quitting doing business in Russia in light of the Ukraine invasion, Big Law has been far more circumspect.

The caution is understandable.

“The stakes for law firms are much higher,” said Zeughauser Group legal consultant R. Bruce McLean, who was chairman of Akin Gump Strauss Hauer & Feld from 1996 to 2013 as the firm expanded its presence in Russia. Akin currently has 14 lawyers based in Moscow, according to the firm’s website, down from more than 30 before a group split off in 2018.

Closing an office, even on a temporary basis, would likely mean “losing the firm’s Russian lawyers and losing the loyalty of Russian clients built over a very long period of time,” McLean told me. “You’re either in or out — and if you’re out, it will probably be hard to return.”

Given that the invasion (Russia calls it a “special operation”) began just eight days ago, McLean finds it understandable that firms would opt to “wait and see how things develop and not make a quick decision in the heat of the moment.”

Heroic? No.

Practical? Yes.

Indeed, as my colleague Jacqueline Thomsen noted, many firms with offices in Russia have refused to say anything about their plans, either declining comment or not responding to media queries.

A few offered vague statements about reevaluating client relationships in light of U.S. and EU sanctions.

White & Case, for example, said its 46-lawyer Moscow office remains open and the firm is “taking steps to exit some representations in accordance with applicable rules of professional responsibility” as well as “complying fully with all applicable sanctions.”

A firm spokesman declined to provide information about specific clients, though Russia’s TASS news agency in 2017 reported that the Russian government hired White & Case to sue the United States over seized diplomatic property. Then-Russian Justice Minister Alexander Konovalov told TASS that the firm has “a rich history. They helped Russia by representing its interests in the Yukos case.”

So yes, that might be an example of a client relationship to reexamine.

The boldest response I’ve seen to date has come from Baker Botts, which has 17 lawyers in Moscow.

There was a point circa 2005 when the firm was gung-ho about its Russia work, describing the country in a press release as “a global energy hub” brimming with opportunities in the natural resources, power production, metals and manufacturing sectors. Baker Botts was in a “unique position to offer unparalleled legal service,” the firm boasted.

But Baker Botts struck a very different note in a statement this week.

“We condemn the invasion of Ukraine, and we hope for a cessation of hostilities at the earliest moment,” the firm said, breaking with many of its peers by calling Russia’s action an invasion and explicitly denouncing it.

Baker Botts went further still. “We are actively examining the complicated impacts of this conflict on our clients and the future of our work in Russia. These include the serious ethical, moral and legal considerations for the firm’s next steps and working directly with clients on any necessary transitions.”

“Moral considerations” is not a phrase I’ve seen other firms use in this context, but I think it should be.

Yes, firms have an obligation to their Russian clients (or at least the ones not on the sanctions list). They can’t unceremoniously dump them, shut down their offices overnight and leave the furniture on Petrovka Street. That’s no way to practice law.

On the other hand, I think it’s appropriate for firms to think hard about whether they want to keep doing work that could serve directly or indirectly to prop up the government of Vladimir Putin.

As McLean noted, lawyers “are advocates for our clients. Generally speaking, we don’t make value judgments — but there are limits.”

Moreover, he said, firms are “very serious” about potential hits to their reputations.

If Russia remains an international pariah, if firms find their U.S. offices picketed or law students refusing to work for them (The New York Law Journal reported Wednesday that one Harvard 2L quit a summer associate position due to the firm’s involvement in Russia) then firms may decide that saying “dosvidaniya” to their work in Russia is the only right answer.

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