Independent Russian law firms are experiencing a surge of work as corporations seek to limit their exposure to Russia at the same time as international law firms are closing down their Moscow operations.
Several local firms say they are picking up mandates dropped by international firms that have hurriedly exited Russia leaving some clients without legal counsel.
“We do see an increase of work as many western clients are seeking advice on their Russian operations and several Russian clients are assessing the risks of sanctions regime” said Suren Gortsunyan, managing partner at Rybalkin, Gortsunyan, Dyakin & Partners.
Another managing partner at a Russian firm said he has seen a significant increase in clients approaching him for help in the last fortnight. The number of mandates his firm has been contacted on stands at “likely dozens” with a percentage increase in “multiple digits”.
Despite firms making public statements to wind down existing work in accordance with “legal and professional obligations”, the managing partner says some corporations have been suddenly dropped and deals ditched midway.
He added: “In the last seven days I’ve had very large scale blue chips reach out to me asking about finance leases, and a big food chain reached out to say that Linklaters has just dropped them mid-way in an M&A deal having delivered just one draft of the shareholders agreements, then not sending through the rest.”
Linklaters declined to comment.
Such situations are happening frequently, according to the managing partner: “Even just yesterday a really large oil and gas company approached me as they had just been dropped by their firm. That’s it. They don’t have any counsel at all at the moment.”
Rather than referrals from firms who have closed in Russia, companies are approaching Russian boutiques directly, local leaders say. Several partners say they have seen a particular influx of companies reaching out who were clients at their former international firms, including Allen & Overy, Latham & Watkins and Akin Gump Strauss Hauer & Feld.
Another Russian firm, Pepeliaev Group, is experiencing the same. It told Law.com International: “We notice that there are a number of referrals regarding potential reorganisation of ownership due to counter-sanctions issued by Russia.”
Since Akin Gump Strauss Hauer & Feld confirmed yesterday it was shuttering its Moscow office and relocating its lawyers, all 25 large international firms that had a presence in Russia have now confirmed they are pulling out of the country.
Some of the largest independent firms in the country include Moscow-based law firm Alrud which was established in 1991, Egorov Puginsky Afanasiev & Partners and Liniya Prava.
Partners expect the scale and quantity of potential mandates to increase at highly-regarded Russian independent firms. One partner said: “There are bigger Russian law outfits than us, like Alrud, so if we’re seeing an increase to this extent I can’t imagine the type of clients they’re getting.”
Elite U.K. firm Slaughter and May confirmed last week is would be maintaining its referral relationship with Alrud.
Clients are seeking counsel on financial leases, sanctions and how to continue business operations in Russia. “Faced with pressure from their national regulators, depending on the parent company’s country, business wants to know how to keep on “living” in terms of the legal regulation and at the same time ensure compliance with the Russian law” said Stepan Guzey, partner at Russian firm Lidings.
He added that Lidings has also noticed an increase in the number of referrals over the past two weeks, and “most requests relate to doing business under the sanctions imposed by the West and counter measures taken by the Russian Federation”.
International transactional activity has significantly slowed in the last month following extremely high levels of activity in 2021. In the week ending 3 March 2022, there were a total of 34 M&A transactions in the U.K. The last time the figure was that low was the final week of 2020 at the height of the pandemic.
In 2021 European M&A hit a 14 year high with deals totaling $1.4 trillion, but so far this year deal value has been down, worsened by the Ukraine invasion. In February 2022 alone deal value was down 63% compared to last year—from $31.3 billion to $11.7 billion.
However, partners in London predict a bounce back in M&A activity as a result of companies divesting Russian assets. One London partner at a Magic Circle firm commented: “You’ve got the likes of BP saying it’s going to divest, there will be lots of M&A transactions.”
A&O, Latham and Akin Gump did not comment.
