On 21 February 2022, Russian President Vladimir Putin deployed troops into the eastern Ukrainian provinces of Donetsk and Luhansk. Under the guise of establishing independence for the region, on 24 February, Russia went on to invade the remainder of Ukraine and began bombing the capital city Kyiv as well as other key cities and infrastructure. Millions of Ukrainians have fled the country causing the largest refugee crisis in Europe since World War II and an outpouring of sympathy to the millions of people who have been forced from their homes.
Western media has been vocal in its criticism of Russia and more recently Belarus (which has joined the war in support of Russia), and governments around the world have imposed harsh sanctions not just on oligarchs but increasingly on ordinary residents in Russia and Belarus. Inevitably, the spotlight has fallen on the legal profession’s activities in Russia and the services provided to high net worth Russian individuals. Law firms around the world that do business in Russia or Belarus have been forced to take decisive steps in responding to the rapidly evolving situation.
Many law firms are no longer accepting instructions from businesses, entities or individuals connected with Russia, in part because the most recent expansion of sanctions prohibits a range of investment and financial services in respect of which lawyers are routinely involved to persons ordinarily resident in Russia. Other firms have announced that they are continuously reviewing their Russian and Belarusian client representations and are taking steps to exit some representations in accordance with applicable rules of professional responsibility. Part of the difficulty derives from ethics rules, especially in the U.S., that require lawyers to make sure clients don’t face a “material adverse effect” if they decide to stop representing them. Failure to do so, may lead to disciplinary complaints. Norton Rose Fulbright have tried to balance the need to comply with their professional obligations whilst not being seen to benefit from working with sanctioned Russians by stating that where they cannot exit from current matters, they will donate all profits from that work to appropriate humanitarian and charitable causes. Others have responded differently by offering pro bono services instead.
City firms prepare to drop Russian clients after Ukraine invasion
Many leading firms have considered dropping Russian clients altogether as the war in Ukraine intensifies. A number of these firms have offices in Moscow and other Russian cities and pressure is mounting for professional services firms to cut all ties with Russia.
These pressures (as well as the potential commercial and reputational risks of continuing to operate in Russia) has led to some law firms including Squire Patton Boggs, Akin Gump Strauss Hauer & Feld and Latham & Watkins, to announce that they will be closing their offices in Russia entirely.
Whilst law firms are under huge pressure to cut ties with Russia, the Law Society has been vocal in their support of firms representing Russian clients and in particular those working to ensure sanctions imposed by the UK government are lawful. Despite the concerns and pressures, many commentators have noted that it is vital for our system of justice that law firms are able to represent their clients, whoever they may be, so that the courts may act fairly and ensure that the rule of law is upheld.
Law firms with offices in Russia employ large numbers of loyal local staff who depend on their job to fund their lifestyle. Closing Russian offices likely leaves these individuals unemployed – whilst the arguments for punishing the Russian economy may be persuasive, it is more difficult to justify the hardship that will be caused to normal middle class Russians by Western firms pulling out of the country. On the flipside foreign nationals working in Russian offices of law firms are arguably more at risk than before and so many firms will want to remove their non-Russian staff from Russia.
The sanctions imposed by the UK, EU and US impact directly on ordinary people. It is easy to focus on the pain and suffering being imposed on the people of Ukraine by the actions of the Russian government, but the effect of sanctions will hurt the Russian people. Law firms have to tread a fine line balancing the legitimate expectations of Western media and clients that they will not profit from oligarchs who are in part responsible for enabling Putin’s war in Ukraine, the duty of care they own to their staff and clients in Russia, and the need to avoid actions that will hurt individual Russians unconnected with the war being waged by their government.
Buckworths will be hosting a FREE online session on Tuesday 5 April, 12:30pm GMT on the impact of UK sanctions on the ability of UK companies with Russian investors and/or shareholders to raise investment. To sign up click here.