The Covid-19 pandemic hit the Russian Federation particularly hard, with the country repeatedly topping all lists for its highest numbers of reported coronavirus cases in Europe. The consequences for the Russian economy were almost instant, with local unemployment rates climbing quickly and consumption rates declining early in the spring of 2020. Naturally, the legal market was also affected by all this.
At the time, both Russian and international law firms had something in common: they were quick to react to the pandemic, closing offices and adjusting successfully to working remotely. Not only did the legal market do its best to contain the impact of the pandemic among its employees and clients – eventually, it played an active part in combating its spread.
A surprise was how quickly independent firms adapted to a new way of life. One example is Egorov Puginsky Afanasiev & Partners (EPAM), the largest Russian independent law firm with historic roots in Moscow, but which also assumes a leading position in terms of both revenue and size in St Petersburg and across the CIS (Belarus and Ukraine in particular). At the end of 2020, EPAM won a special Russian award for ‘Coronavirus Law’, a recognition of its support for its employees during all stages of the pandemic. EPAM also paved the way for voluntary mass vaccination by becoming the first law firm worldwide to ensure that all its employees and their families received a vaccine against the virus.
The pandemic and the contracting economy forced all law firms to reassess their survival strategies. This meant looking for solutions beyond areas that were most likely to be affected. Real estate, international trade and corporate were already suffering as a result of the imposed international sanctions regime – and they offered little refuge under the new circumstances.
Over the past few years, litigation expertise has been particularly high in demand. The country’s commercial (so-called ‘arbitrazh’) courts exercise exclusive jurisdiction over insolvency cases involving both corporate debtors and natural persons. The top Euro Elite performers in the domestic litigation space by far are EPAM and ALRUD. The past year was no exception and these firms retained their strength in the area, as clients were in desperate need of insolvency-related advice. Apart from this formal contentious insolvency procedure, insolvency specialists were very busy providing advice on the country’s moratorium preventing the initiation of insolvency proceedings against certain classes of debtors.
The government and a number of regulators have been active on other fronts, which means demand for regulatory advice has also been high. The Federal Antimonopoly Service, the country’s antitrust regulator, has been gradually expanding its powers, so it came as little surprise when it rushed to take measures relating to price control of goods in the pharmaceutical, food supply, and medical sectors. Employment law and tax advice have been among the other significant sources of regulatory work and, respectively, solid drivers of business for firms.
Meanwhile, the Russian technology sector usually attracts less foreign investment than the typically strong oil, gas and metals industries. Yet, 2020 saw independent firms adjust their offering to handle tech-sector mandates. During the pandemic, the Russian economy has been facing the first decrease in petroleum production since the global recession in 2008, an unusual phenomenon owed in part to multiple agreements reached with OPEC as well as an uncertain oil and gas demand across the European Union.
The pandemic and global oil prices triggered fears that the high exploration costs may not be well justified, but multiple high-price projects are still under way in 2021, including those led by giants Rosneft and Gazprom. Many law firms have been handling all types of issues relating to these projects, but the energy sector remains in trouble, and so the legal market has redirected some of its attention towards tech.
Initially regulators were concerned with big data in the IT and banking sectors; all IT specialists quickly started advising on data privacy, digital rights, compliance and big data transfers. Even after the pandemic struck, the Russian government kept its commitment to and prioritised the country’s digital sovereignty. This manifested itself in the introduction of several new pieces of legislation seeking to promote the development of artificial intelligence and machine learning. The new regime entered into force in January 2021 and has generated significant work flows for law firms; this is expected to persist as a trend, as the country has some catching up to do with its innovation agenda compared to Western countries. Banking and finance lawyers are also increasingly focusing on the technology sector. Tech now carries increasing weight on the Russian stock market and in December 2020, Russian internet company and operator of one of country’s most popular social networks, Mail.ru, replaced diamond miner Alrosa on the Moscow Exchange (MOEX) index.
Meanwhile, the push for responsible investing by the MOEX has also been making news – it introduced its first sustainability indices in 2019 and published its first Sustainability Report in the summer of 2020. The enthusiasm for going green has also spread across other CIS members. Ukraine also introduced its green bonds market and the Verkhovna Rada, the country’s parliament, also showed support for regulating green bonds.
From a legal perspective, independent law firms may need to place additional efforts in catching up in this space, since international firms have some competitive advantage as a result of their global network. Environmental, social and governance (ESG) initiatives have been creating a buzz in Western countries for some time now, and Russia-based teams can tap into international firms’ resources and learn from their colleagues abroad. All agree that sustainable finance is expected to continue spreading, especially given the CIS region’s dependency on the fossil fuel, mining and metals industries. LB