All of the big international law firms that had bases in Russia are out. They are shuttering their offices. The lawyers are gone. If administrative staff remain, it is only to wind down all operations, the firms say. Firm names may still be on the door, but all their legal work in Russia has ceased.
The overall reason for their departure, of course, is Russia’s invasion of Ukraine. But how the decision to leave was made is more complicated.
Some pulled out right away. Others took longer. Some had been there for a very long time. Many noted that extricating themselves from Russia was not easy, nor a decision taken lightly. Baker McKenzie, for example, which had 260 employees in Russia, including 130 lawyers, had operated in Russia for 33 years—the first international firm to be registered in the country. It opened while Russia was still part of the Soviet Union.
Most firms remarked that they had legal and professional obligations to both clients and employees and would ensure an “orderly transition” as they closed their doors. Their announcements were worded carefully, mindful, one law firm spokesperson explained to me, that they had to prioritize the safety of Russian co-workers and friends.
Of course, it’s hard to pull off a completely orderly transition in a time of crisis. The relatively rapid departure of international firms has left a vacuum, and independent Russian law firms are benefiting as corporations seek to find representation in Russia. Several local firms told Hannah Walker they are picking up mandates dropped by international firms that hurriedly left the country, leaving clients without legal counsel.
But there’s no reason to doubt that firms were, and continue to be, concerned for their former colleagues, especially as Russian president Vladimir Putin cracks down on any questioning of the war and is suspicious of anyone who has had ties to the U.S., the U.K. or to countries in Western Europe.
Still, the carefully considered reasoning for leaving the country involved a lot more than concerns about clients and staff.
Sanctions against Russia imposed by the EU, the U.S., the U.K., and other countries, which have only increased in the weeks since Russia began its invasion of Ukraine on Feb. 24, made it nearly impossible for law firms to ensure that they would not be violating the ever-changing regulations if they remained and continued much of their Russia-based work. So they had little choice but to get out.
At a Law.com International webinar last week, I discussed this and other issues with some of our staff who have been closely following the war’s ramifications for law firms You can watch the webinar here. And for more insights into how companies can navigate the increasingly complicated Russian sanctions framework, tune in this Wednesday to a webinar by Law.com’s Corporate Counsel | Advance on “Understanding The Effect Of Sanctions On Your Industry.” You can register for the webinar here.)
Clearly, sanctions were a big impetus for firms deciding to leave Russia. But Jack Womack found after examining the limited liability partnership accounts for five firms that most didn’t have all that much to lose. He found that the Russia revenues for most had been declining, and the Moscow offices had been money losers for many in recent years. To be sure, not every office has to be a firm profit center to justify its existence—Hong Kong has long been a challenge for many firms. But when other factors come into play, law firms increasingly have to act.
When DLA Piper, which had offices in both Moscow and St. Petersburg, announced last week that it is shutting them both down, it stated that it had “concluded that maintaining a presence in Russia is not aligned with our values and therefore no longer viable.”
Values. This is a topic that has come up again and again in both the corporate and legal worlds. International law firms have seen that it is no longer possible for them to sit on the fence—that they are in and of the broader world and cannot always be issue agnostic. They saw this after the murder of George Floyd and the rise of the Black Lives Matter movement. They witnessed this as Jones Day, which represented President Donald Trump in post-election lawsuits aimed at overturning the 2020 election, was targeted by protesters, in social media, and even by some of its own lawyers.
Social media is also playing a role in the legal industry’s response to the Ukraine war. Sites show Ukrainian lawyers, law firm staff, and even a judge trading suits and briefcases for military fatigues and weapons as they fight to defend their country. One site is called Dead Lawyers Society. A hashtag showing the Ukrainian flag followed by #BarAtWar” has emerged on LinkedIn. And while Law.com has recently been filled with stories about Am Law law firms that posted record revenues and profits in 2021, the founding partner of a leading Ukrainian described to Linda Thompson how the focus of his firm and others is now all about survival. “We’re not talking about profits anymore,” he said.
Clients, too, are paying attention. They want their outside counsel to be responsible citizens. And with corporations under increasing pressures related to the environment, social and corporate governance (ESG), this extends to examining the role their firms are playing to address social issues and climate change. It may not be enough for firms to reduce their own carbon footprints. Some clients are keeping a watchful eye on which companies their firms choose to represent.
In other words, law firms are now expected to convey purpose—and to do this with actions. They can no longer just tout their good intentions and promote their profitability to attract the best and the brightest, especially at a time when law firm loyalty appears to be waning and lawyers may jump to competitors at any moment. Young recruits coming out of elite law schools are also evaluating firms in this way.
Cynics might say this is the real reason law firms have been so public about their support for Ukraine and have exited Russia, as that they do not want to lose more business at a time when they are worried about the impact the war will have on global inflation, oil prices, IPOs and other deal activity that affect their bottom line.
While that may be a factor—and these are issues firms are now worried about—it seems like an overly jaundiced view, given that international law firms have demonstrated that they genuinely care about what is happening in Ukraine. As we wrote in a number of stories this week, the firms, their lawyers and office staff are donating a great deal of money, time and effort to aiding refugees.
Anne Bagamery wrote that partners, associates and staff based in the Warsaw offices of global law firms like Greenberg Traurig, Clifford Chance, Gide Loyrette Nouel, Hogan Lovells and Eversheds Sutherland are helping in various ways—donating clothing, sending food and literally opening their homes to refugees who need a place to stay. A London partner at Taylor Wessing is even traveling by car to the Polish border city of Przemysl to personally deliver badly needed items, such as sleeping bags and medical kits, to Ukrainian refugees. The partner and his wife have also launched a JustGiving page to raise money for refugees that will go to the British Red Cross.
Other firms are also actively raising funds: White & Case announced it is donating $1 million to the Ukrainian Red Cross and is matching donations made by its people to qualifying relief organizations, for example. Allen & Overy and CMS also said that they are making donations to the Red Cross. Others, including Herbert Smith Freehills, are sending money to aid organizations. Big firms in Germany and other countries in Western Europe have been sending food, clothing, money and people to assist refugees.
And in the specialized world of international law, Covington & Burling has shown its support for Ukraine by applying what it knows best—the law. It is representing Ukraine pro bono in a case the country brought against Russia in the International Court of Justice, arguing that Russia’s stated justification for the invasion—to prevent a genocide in eastern Ukraine—was false and unfounded. And last week, the Hague-based court did what Covington’s lawyers had requested: It ordered Russia to immediately suspend its military operation in Ukraine. The ruling, while binding, is largely symbolic because the top U.N. court has no enforcement powers. So does it matter? The short answer is yes. After the ICJ issued its decision, Covington partner Marney Cheek explained why. “The Russian invasion of Ukraine under the false pretext of preventing and punishing genocide is a threat not just to Ukraine but to the international legal order as we know it.”
Now there is also a call in the legal community for a new Nuremberg-style tribunal that would fill a loophole in international law so Putin could be prosecuted for alleged crimes of aggression in Ukraine. That tribunal would act in addition to already ongoing investigations of Putin at the International Criminal Court, which investigates and tries individuals accused of genocide, war crimes and crimes against humanity.
Clearly, amid what is being called the greatest humanitarian crisis in Europe since World War II, international law firms are not standing on the sidelines. Their actions show that at least in the current tragedy, they are indeed in and of the broader world.
But what about other events that have upset the geopolitical order?
China’s increasing control of Hong Kong, which began when it violently quashed pro-democracy demonstrations and has continued more recently with the shutting down of media outlets deemed critical of Beijing, the ongoing arrests of human rights activists and even lawyers, and the constant crushing of all dissent, has not sent international law firms packing. Not only have most international law firms remained in Hong Kong—still a crucial place to be for China-focused work—but they have avoided taking a stand.
No law firms pulled out of Saudi Arabia, either, even after clear evidence showed that the Saudi government was responsible for the assassination of Saudi Arabian journalist and dissident Jamal Ahmad Khashoggi. Nor have any firms stated they are donating to aid organizations that are working to alleviate the humanitarian crisis in Yemen, which many say has been exacerbated by Saudi Arabia’s role in that country’s civil war. In fact, more international law firms are now trying to open offices in Saudi Arabia, where they see increased business opportunities.
And where were the law firms when tens of thousands of Rohingya were forced to flee their homes in Myanmar after they were targeted with armed attacks and violence? And how many firms have left the country since last year’s military coup? The U.S. and several other countries have imposed limited sanctions targeting some individuals and entities but they don’t prohibit dealings with the government or restrict investments or the export of financial services to Myanmar—at least not yet. So law firms have been able to continue to do business there on behalf of their clients. This may soon change, however. The U.S. is expected to officially declare that Myanmar’s military committed genocide against the Rohingya, which will likely lead to more sanctions, including against the country’s state-owned oil and gas industry. The world is not watching Myanmar, though, so firms aren’t likely to make any pronouncements.
The proverbial elephant in the room, of course, is the question of what China will do about Taiwan. President Xi Jinping of China is closely watching the world’s reaction to Russia’s attack on Ukraine. But what if the day comes when China makes a move into Taiwan? China has laid claim to Taiwan ever since the island split from the mainland in 1949. And it has threatened to use force to reunite the two. Given that the war in Ukraine is proving costly as it drags on and that much of the world has united in its opposition to Russia’s invasion both politically and economically, China may not want to make any moves into Taiwan for a while. But when and if the time comes, what will law firms do then?
The invasion of Ukraine has changed the geopolitical world order. But it doesn’t appear to have fundamentally changed law firms’ standards of behavior. There is no moral realignment. At least not yet.