City lawyers cannot hide behind ‘the law’ over Russian clients

Nelita Collins

What do you do as a lawyer when sanctions are about to hit? Send a threatening letter on behalf of Russian clients to the Foreign Office, as Liz Truss said some law firms did? Issue a blanket ban on any public comment by staff about sanctions like City firm Norton Rose Fulbright?

Or think about who it is you should really be working for?

Russian clients present a headache for City law firms, as for other advisers. Lawyers are being accused of enabling and facilitating oligarchs. There are lots of reasons why that is overly simplistic. There are also reasons why firms cannot simply jettison clients, even if they might like to. They may not be able to say if and when they do jettison them.

Because of the global sanctions introduced in recent days, there are those for which, legally, firms can no longer work. If a client is on the sanctions list, that is more or less it. But that still leaves a large category of Russian clients who firms could act for, but perhaps should not. People who are not on the sanctions list, but who should be on an internal reputational black list.

It is important that firms do not use the defence that acting for a client is not against the law to justify continuing relationships that are morally dubious where they have the scope to sever ties.

This does not apply to barristers, who are bound by the cab-rank rule to take the next case that comes along, however objectionable. But solicitors have greater choice as to who they represent. And these will be difficult choices for many who have developed lucrative relationships with clients who were, at the time taken on, legitimate.

Both Magic Circle and US “Big Law” firms have built up sizeable businesses servicing Russia. Lots opened up in Moscow in the early 1990s after the Iron Curtain came down: Skadden, White & Case, Cleary Gottlieb, Clifford Chance, Linklaters, A&O and Freshfields among others.

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Those practices became higher profile when a stream of Russian listings came to the London Stock Exchange from the mid-2000s. But the work was not limited to the firms acting on IPOs. Almost all the Square Mile’s major players have held high-profile mandates for Russian clients, from Baker McKenzie, CMS and Dentons to Herbert Smith Freehills, Hogan Lovells and more.

Fair enough, in many cases. The clients were major international businesses, often welcomed on to the LSE with open arms. There were some that were undoubtedly more questionable than others. But plenty were not seen as pariahs — they were prestigious instructions.

When that did start to change after Russia annexed Crimea, firms pulled back. They slimmed down staff numbers in Russia and localised operations so expats came home.

But beyond ensuring that they strictly complied with sanctions, firms did not swear off clients linked to the Russian state after 2014. They kept their heads down and did what they could. To continue in that vein would now be naive. It would also be untenable when many of their other corporate clients are swearing off doing business in Russia at considerable cost.

Law firms are naturally conservative places, which resist taking controversial stances that might prove unpopular with potential clients. But you do not want to be the one continuing to do business where the oil, gas and mining giants deem it too politically toxic.

Firms are doing a lot of “reviewing” of their relationships. White & Case has said it is reviewing its Russian and Belarusian client representations, and “taking steps to exit some . . . in accordance with applicable rules of professional responsibility”. Baker McKenzie is reviewing its operations. Linklaters is reviewing all of its Russia-related work. A&O has said it will also refuse all new instructions and “stop all Russia-linked work that goes against our values”. Norton Rose has clarified that its lawyers can speak up in defence of Ukraine, they just are not allowed to speak about sanctions.

But mealy-mouthed statements should not be allowed to provide cover for a lack of real action. Firms do not need to shout about dropping Russian clients. It nonetheless needs to be clear that they will not carry on as they were before Russia invaded Ukraine.

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https://www.ft.com/content/71468746-5e48-493a-8d13-c4b520c9ee22

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