Law firms face additional hurdles to cut ties with Russian clients

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  • A few lawyers and firms have publicly backed down from big Russian clients.
  • Experts said ethics rules could be reasons for other companies’ silence.
  • White & Case and Freshfields said they were reviewing their work but did not provide details.

As the world reacts to Russia’s invasion of Ukraine, pressure is mounting on the legal industry to sever ties with Russia.

Major law firms are scrambling to take care of their representation of major Russian entities. Some, like Sidley Austin and Venable, have would have cut ties with state-owned customers, citing sanctions that restrict business with Russian companies. Norton Rose Fulbright announced on Monday the end of its activities in Russia and the closure of its Moscow office.

But others dragged their feet.

White & Case, which has earned at least $12 million helping Russia defend against international arbitrations, did not say whether it was dropping the country as a client. The company told Insider it is looking at some customers with ties to Russia and Belarus, but won’t comment on any specific cases.

Lawyers and law firms are often the subject of criticism for their clients, although the profession generally asserts that lawyers are there to be good advocates, regardless of perspective. The United States Constitution guarantees the right to counsel in criminal cases, and the corporate law profession has widely applied this principle to justify all types of representation, including transactions and lobbying.

But Russia’s invasion of sovereign Ukraine – which has turned into attacks on Ukraine’s largest nuclear power plant – is changing the conversation around service providers working for Russian interests and has prompted critics to speak out against Big Law’s representation on this front.

Charles Kotuby, an international litigation attorney who teaches at the University of Pittsburgh School of Law, said the law firms that represent Russia “bring help and comfort to a state that flouts the last century of international law”.

He noted that Alain Pellet, a French lawyer who represented Russia in state-to-state disputes, had resigned and posted a letter who accused his former client of disregarding international law.

Curtis, a law firm known for representing governments in disputes, has also stopped representing Russia in several cases, according to the Global Arbitration Review. Company president George Kahale and a spokesman, Jack Pettit, did not respond to requests for comment.

Skadden and Freshfields mined legal gold in Russia

Skadden, the mergers and acquisitions powerhouse that has built a thriving practice in London working for wealthy Russians, doesn’t seem keen on putting distance between the firm and its clients, who have included billionaires linked to Russian President Vladimir Putin such as Mikhail Fridman and Roman Abramovich.

The firm represents Alfa Bank, owned by Fridman, in litigation in the United States. The European Union sanctioned Fridman, saying he had been described as “a top Russian financier and enabler of Putin’s inner circle”. He has called for an end to the “bloodshed” and said he was hesitant to make political statements due to his business in Russia and Ukraine.

Skadden’s portrayal of so-called oligarchs began in the late 1980s or early 1990s with the entrepreneurial efforts of Bruce Buck, the Financial Times reported in 2018. Buck has since retired from Skadden and is now chairman of Chelsea Football Club, which is owned by Abramovich. Skadden faced intense scrutiny in 2018 when one of his former associates, Alex van der Zwaan, pleaded guilty in US Special Counsel Robert Mueller’s Russia investigation.

Spokespersons for Skadden did not respond to a request for comment.

Freshfields, one of the UK’s largest firms, has been granted a special license to continue representing VTB Bank, a sanctioned Russian bank, in proceedings in England, Bloomberg reported last week, citing a lawyer from the business. But Monday, Bloomberg reported that the law firm said it severed ties with VTB.

A spokesperson said in a statement that Freshfields acted “promptly and responsibly” to comply with the law and preserve its reputation and had “terminated, suspended or refused” certain activities, although it did not name any. specific customers.

Historically, Baker Botts, a company with roots in Texas, has profited from the work of companies and disputes in and for Russia. Along with Cleary Gottlieb, he earned at least $30.9 million representing Russia in a sprawling arbitration case that is still being fought by White & Case. Eight years later, however, Baker Botts condemned Russia’s actions.

“We condemn the invasion of Ukraine, and hope for a cessation of hostilities as soon as possible,” the firm said in a statement. published by Reuters.

“We are actively considering the complicated impacts of this conflict on our clients and the future of our work in Russia,” he said. “These include serious ethical, moral and legal considerations for the company’s next steps and working directly with customers on any necessary transitions.”

Dumping customers too quickly may violate legal ethics rules

US companies were quick to sever ties with Russia in a show of support for an independent Europe. BP has announced its intention to withdraw from a major Russian energy company. Airbnb CEO tweeted that he had withdrawn from Russia. And Apple said it won’t sell its products in the country.

But legal representations are accompanied by rules of ethics.

U.S. law firms have obligations to their clients that are governed by ethical rules established by various state bars and courts, said Ronald Minkoff, who chairs Frankfurt Kurnit Klein & Selz’s professional liability group.

Companies representing clients in pending lawsuits, for example, must seek approval from the judges presiding over their case in order to withdraw their representation, Minkoff told Insider.

“You can’t just walk away,” he said. “The judge is going to have to decide if this can continue or if he can suspend it,” he said, using a term for a pause in litigation.

Legal ethics rules also often require law firms looking to drop clients to show that those clients broke the law or that they would be able to find a replacement lawyer, he said. But he acknowledged that reputation issues for law firms are changing rapidly.

“Of course, companies also have other considerations – they don’t want to represent Russian companies at the moment,” he said. “It’s just, like, bad news.”

Norton Rose Fulbright said on Monday he would not take on any new cases “from entities or individuals linked to the current Russian regime”, whether sanctioned or not, and that he would abandon existing work for them “when our professional obligations as that lawyers permit”.

“Where we cannot go out of the ordinary business, we will donate proceeds from this work to appropriate humanitarian and charitable causes,” the company said.

The legal community is closely watching major law firms with offices in Moscow and ties to Russian state-backed entities, with some lawyers sharply criticizing their work.

George Casey, the head of Shearman & Sterling, which represented investors who tried to collect a $50 billion arbitration award from Russia, posted on LinkedIn comparing Putin to the Nazis and condemning the “active support” of anonymous professionals for Russia.

Harvard law student Ryan Donahue said in a LinkedIn post that he turned down a summer associate position because the company where he was to work had not committed to giving up his work for Russian banks and state oil and gas companies. He did not name the company.

“Many law students from all over the world have messaged me,” Donahue told Insider. “I think there will be serious consequences for law firms that do nothing: the talent market is boiling and there are many other firms.”

There is also wiggle room in sanctions for lawyers to continue some forms of representation with Russia.

The US Treasury Department, for example, has prohibits US investors from investing in new sovereign debt issued by the Central Bank of Russia and other public financial institutions. But these restrictions still allow their existing debt to be traded on the secondary market – transactions that the law firms advise on.

US sanctions targeting Russian and Belarusian individuals with ties to Moscow also allow for certain exceptions for legal representation, including for mounting legal challenges to those same sanctions.

The work of law firms followed the opening of Western economies to Russian capital

Many law firms have comfortably done business with Russian entities for decades without any obvious fear of reputational damage. After the Cold War, major law firms expanded their work for Russian clients, performing mostly transactional work, and opened offices in Moscow.

Their growing involvement followed a boom of Russian billionaires, many of whom got rich when state-owned companies were privatized from the 1990s. For years, they were an important source of income for law firms and other companies in Western economies that have opened doors to Russian businessmen, investments and transactions.

London’s popularity among wealthy Russians earned it the nickname Londongrad. The Premier League’s Chelsea Football Club is owned by Abramovich, who said this month that he would sell it. And former German Chancellor Gerhard Schröder was appointed last month to join the board of Russian energy giant Gazprom.

The so-called golden visa programs in Europe and the United States have also allowed wealthy individuals to immigrate and establish residency in exchange for large payments. The US EB-5 visa program for wealthy individuals seeking to immigrate requires certain applicants to invest at least $1.8 million in US interests.

“The oligarchs bought up assets like yachts and sports teams in the West – obviously there was a public policy choice in all of those countries to welcome Russian capital,” said Joydeep Sengupta, a lawyer at Mayer Brown in Paris.

“To be fair to law firms and other service providers, there were no prohibitions on many types of transactions dealing with Russian state-owned companies, including those owned or controlled by Russian oligarchs,” a- he declared.

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