Wet Jobs Don't Pay Lawyers Much in Russia

15.12.2009 — Analysis

In about a year's time, when the crisis is over, the Urals will see a substantial increase of the demand for international level legal services. Harry Hedman, a senior partner at Hedman Partners law firm (Finland), told RusBusinessNews in an interview who and why will need them.

- Mr Hedman, why did your company decide to come to Russia and open offices in St. Petersburg and Ekaterinburg?

- We established our first office in Moscow as early as 1989, jointly with an American law firm and a Soviet lawyers' organization. Back then, the USSR only allowed foreigners to start business within the country jointly with a Soviet party. Prior to that I sent two highly qualified consultants to Moscow to do a market research there and study the demand for private legal practice. Both of them concluded that there would be no demand for private lawyers in the Soviet Union in the foreseeable future.

Nevertheless we decided to go for it and jumped at the opportunity of being the first although there is no place on Earth where there are no lawyers. Later on we sold our Moscow office to our partners, but we opened a representative office in St. Petersburg in 1992; we still own it wholly and it is quite successful. The city on the Neva river is located close to Finland and it has a well-developed bilateral economic cooperation between Russian and Finnish companies.

Today American, English, and French law firms are mostly concentrated in Moscow. Then we thought of Ekaterinburg, a big Russian city which hasn't had foreign law firms yet. After conducting a market research we came to the conclusion that international level legal services are not offered in Ekaterinburg. That's why we opened an office here in February 2009.

- How hard is it to be a trailblazer in Russia?

- One must have red hair like mine, otherwise it will turn grey (smiles).

- What difficulties have you faced here?

- Russian business is not accustomed to using lawyers' services, it has no legal traditions. It is very difficult to advise companies since they're not prepared to accept legal assistance like that. In the West, business, finance and law are equally important. Whereas Russian companies only turn to lawyers when there's a problem.

All in all, legal profession in Russia has existed for about 15 years. When I was in Moscow for the first time I asked my Soviet colleagues what was the best case that a lawyer might take on. The answer was: a murder, because relatives would pay a lawyer any amount to defend their family member. In the West, however, lawyers' highest fees come from working with business.

When the USSR collapsed, there was no legal tradition in Russia. Now we see very good Russian law firms appear. However, they mostly operate in Moscow and St. Petersburg. There're few of them in Ekaterinburg.

- Nevertheless, many Russian experts consider the Urals school of law to be the best in the country. The legal services market in Ekaterinburg is extremely competitive. How difficult it is for you to fight for clients?

- Of course there's always a competition; however, there is place for every player on the market. We are different from Russian law firms because we've been working for 35 years now and we participate in international business.

Certain new forms and ways for legal business development mostly appear in the USA. From there these novelties spread to Europe, proceed to Scandinavia and end up in Russia. It is a never-ending process. So once you have achieved a certain level, there's always a higher one. The clients who worked in New York, London, Helsinki or Stockholm and came to Russia would certainly be willing to get the same level of legal services.

For a company that only has an office in Russia which is not connected with the rest of the world, one that doesn't go through this kind of international development, it will be very difficult to attract foreign clients.

Within our Group we send our employees to study in Europe and America every two months so that they draw upon new ideas. We visit many international seminars and conferences and very seldom see Russian lawyers there.

- You mostly offer legal services to and represent the interests of foreign persons in Russia and defend the rights of Russian citizens and entities abroad. What kind of typical legal problems they come to you with?

- First, we help foreign clients adapt their corporate policy to the Russian environment. This is a very wide range since every company has its own way of doing business. Clients come to us asking whether they can we do this or that in Russia, and how they can do it.

Secondly, we advise foreign companies on the correct way of maintaining document workflow in Russia. There is progressively less paperwork in the West, whilst in your country having a lot of various documents is still mandatory. Being engaged in legal work in Russia we see how bad the state of companies' documentation is.

When a Russian company enters foreign market it comes to us with the similar questions. Russian companies find it hard to prepare a contract that would meet European or U.S. standards. The problem is, the Russians mostly pay attention to the economic component of the transaction and often disregard the legal side.

We also want to offer services to Russian business here to help them work with foreigners. Because when the crisis is over, Ekaterinburg will be one of the most interesting top cities. This is absolutely true and everyone is talking about it.

I understand that we have come to Ekaterinburg in a very bad time in terms of economic situation. However, the timing is perfect for finding good employees and training them so that they grasp the differences in Russian and Western mindsets. It takes about two years for a law firm to get used to the market and start operating steadily. We have actually been working for one year in Ekaterinburg and we know we're on the right track. Of course we would like to see more money in business, but generally speaking it's not too bad.

- Your corporate website says that the company provides "innovative strategic solutions to your legal issues". What kind of innovations is meant? It is difficult to imagine how one can improvise and be creative within the framework of established legislation.

- In the business law all laws, subordinate legislation and practices are tools for business. What we meant by that phrase was adapting laws to business. In some cases, when a law prohibits doing something, a business concept must be altered so that the same result could be achieved in a different way. This is similar to how Rubik's Cube is solved.

We never go around a certain regulations, we're always within law, it is one of the key rules. However, within the law there is room for manouvre. All you need is specialist knowledge.

- Corruption is very strong in the Russian judicial system. How would you evaluate judges' work?

- We try to help a client in such a way as to prevent judicial examination at all. In many parts of the world, in case your partner is acting in an improper manner, you can go to court and find justice there. However, this doesn't work in Russia. In my opinion, the Russian judicial system has advanced very well; however, courts are still not independent. They remain a part of the public administration. Both the state and individual officials can influence their judgement.

As far as corruption goes, I can say it was there 10 years ago, but now it doesn't exist any more, at least in Moscow and St. Petersburg.

Young Russian judges certainly bring fresh hopes, especially women judges. They are more professional than men and they instill trust in the judicial system. I am optimistic about the further development of your country's judicial system.

- What are Hedman Partners' further plans in Russia?

- We plan to employ about 7 lawyers in our Ekaterinburg office. We hire more new people and it was a nice surprise for us that there're so many English-speaking lawyers in Ekaterinburg.

We also plan to establish a legal network in the Urals region. We would like to find partners in other cities where we don't have our own offices. This is because international level services are required there, not permanently but occasionally.

When the crisis is over we will need to take another look at the legal services market and evaluate its new condition. So far it is difficult to make any decisions about the development for more than two years.

Interview prepared by Pavel Kober