Tightened belts, bottlenecks and legal tenders

Both the heads of consulting firms and the customers of their services do not see the near future of the legal business in rosy colors. There has been a freeze in politics and economics, it’s time to tighten our belts and not look with much hope at the East—it’s difficult to work with it, they agreed at the VII International IBA Conference. Here, lawyers learned, for example, how to find “bottlenecks” in the management of a firm that prevent them from making money. They also managed to discuss the chances of large corporations becoming desirable clients for lawyers. Businesses are interested in how to behave under sanctions and deoffshorization and how to win tax and corporate disputes, said a corporation lawyer. Large businesses with state participation are increasingly placing orders through tenders, but where to complain about violations is not always clear, marketers agree.

“Russia remains an important jurisdiction,” assured the President of the International Bar Association (IBA) Michael Reynolds, opening the annual IBA conference “Law Firm Management”. It took place last Friday, November 28, 2014, at the Moscow Marriott Royal Aurora hotel. Reynolds promised IBA support to the Russian Federal Chamber of Lawyers: the parties are going to discuss established practice in the field of regulation of the legal profession, he said. The first vice-president of the FPA, senior partner of the law firm YUST, Yuriy Pilipenko, did not remain in debt. He noted the warming of relations between the legal profession and the domestic Ministry of Justice over the past few years and stated that the legal community owes this to interaction within the IBA (the forum was held for the seventh time, and the IBA also supports the St. Petersburg International Legal Forum, which has been taking place since 2011). But much more attention has been paid to the colder weather in public spheres. “Freezes in politics and economics” will inevitably affect the Russian legal market, Pilipenko believes. Nobody argued.

Tighten your belts and don’t look to the East with optimism

“Lack of growth in the Eurozone, halt in investment projects, insecurity and uncertainty,” Michael Roch, CEO of the British consulting company KermaPartners, described the key trends of the near future. Private capital and large corporations are the hope for lawyers in these conditions, Roch noted. There were no private investors at the conference, but a representative of the latter, Valery Sidnev, director of legal affairs at Eurochem, a fertilizer production company, responded. “Everything that could be worse has happened,” he said about sanctions, the modernization of the judicial sector and civil law, the law on controlled foreign companies (introduced to the Duma at the end of October, which involves paying taxes in Russia for owners of foreign companies, more >> ). But Russian corporations will need legal services, Sidnev believes. We are talking about narrow issues of sanctions and de-offshorization, and about a wider range of tax and corporate litigation, domestic mergers and acquisitions, which may revive during a crisis, Sidnev listed the areas. He also expressed the hope that banking lawyers will become more “creative” in conditions when the usual international capital markets are closed. “Russian business views this as a challenge,” he concluded.

“Not everything has happened that could happen,” Yuri Pilipenko warned him and his listeners. – It makes sense to expect new initiatives; there are very creative people in our Duma.

Another strategic direction for the Russian legal business could be cooperation with Asian firms, Sidnev believes, although he makes a reservation about the specifics of the region. As an example, he cited two EuroChem transactions. According to him, the acquisition of a small plant in China, which took four months to build, had to be coordinated with the local antimonopoly service for almost a year (reports about the construction of a joint venture between EuroChem and Migao Corporation appeared in November 2013.) Sidnev contrasted this case with the acquisition of a plant in Belgium, worth $1 billion – this deal was agreed upon in just 2.5 months, he said (EuroChem acquired a plant in Antwerp from BASF in April 2012). Pilipenko also warned against an optimistic attitude towards the East. “It’s difficult to work with them,” he said. he believes. He also backed up his words with an example: a one-page general agreement between the Russian Federal Chamber of Lawyers and Japanese colleagues without financial obligations took eight years to negotiate. “We are Europeans after all,” Pilipenko is sure.

Both YUST partner and Andrey Dontsov, partner at the international law firm White&Case, agreed that in general law firms will have to tighten their belts and get used to lower payment rates than before. But while domestic companies can find work by providing support to government agencies, an international firm may fare worse. According to Dontsov, we can only hope for the central offices, which “live well, profits and turnover are growing.” But when the bad times end, mid-level lawyers may be needed, Dontsov believes, and if you don’t start forming their layer now, “it will be difficult,” he believes. Other areas of work were also announced from the audience.

“From the experience of Iranian colleagues who spent 10 years under sanctions, I can say: develop criminal legal practice,” suggested listener Maxim Tafintsev.

And some believe that in crisis conditions it is worth thinking about new regions. Managing partner of the Alrud law firm, Vasily Rudomino, recalled that there are no offices of international law firms in Africa yet.

“Bottlenecks” in the finances of Russian and foreign companies

Before entering new markets, it makes sense to understand current problems: a session on financial management in a law firm was a success. The lawyers were told how the managerial “theory of constraints” works. As the co-organizer of the session, managing partner of the consulting company Legal Stratagency Alexander Khvoshchinsky, said, for any business process there are limitations caused by the human factor, existing procedures or markets – they can be called “bottlenecks” or “bottlenecks”. The general algorithm for eliminating them, Khvoshchinsky said, consists of five steps. You should find the limitations, ensure that they are loaded, configure other elements of the system so that they provide a constant load on the bottleneck, ensure the productivity of the bottleneck, and, if necessary, look at the system again to see if new problems have appeared.

Participants had different examples of how firms had encountered and resolved bottlenecks. “FBK-Pravo” had problems with billing and writing off funds adequately for hours worked, said Alexander Ermolenko, a partner of this company. “To keep customers, you had to do something with the accounts,” he shared. But he didn’t talk in detail about the solution methods, he only expressed it in the abstract: the company had to minimize the “creative approach.” And the company Pen&Paper, shared its partner Valery Zinchenko, had problems with capricious clients who either delayed payment or pointedly started looking for a consultant. The problem was solved by emphasizing the importance of the client and individualizing the approach, Zinchenko said. Not everything goes smoothly with personnel either. As Zinchenko said, criminal lawyers who were called to the firm were often used to “meeting clients in a cafe” and dressing in sweaters; it was difficult for them to change their minds, start going to work in the office and wearing suits. Zinchenko did not specify how to deal with this, but mentioned at the end of the session that he was going to continue looking for new people.

There were also examples from foreign experience. Partner at the German firm SKS Steuerberatung, specializing in international taxation, Dmitro Sonkin, described how their company fought the German tradition of paying the consultant’s bill after at least two reminders. The problem was resolved by automatically debiting funds from the client account, Sonkin said. As he clarified in an interview with Pravo.Ru, the possibility of direct debiting of funds is included as a mandatory condition in the client agreement, and they do not enter into agreements on other terms.

When lawyers laugh while discussing tenders

We concluded the session with a discussion on how to conclude client agreements when winning tenders for the provision of legal services. Since the beginning of 2014, their number in Russia has increased by 26% compared to last year and exceeded 9,000, said Diana Megreladze, head of the consulting department of the Association of Electronic Trading Platforms (AETP; deals with organizational and legal issues of tendering). Most of the purchases were carried out in late autumn, and the most expensive contracts, Megreladze listed, were Sberbank, Atomstroyexport, Gazprom, Rosneft, the Ministry of Culture, the Committee on Competition Policy of the Moscow Region (also held tenders for construction and transport services in region), Ministry of Finance. According to AETP calculations, the average final contract price is reduced by 19% compared to the maximum.

The importance of tenders as a source of procurement of legal services has increased, both Russian and international consultants agree. Marketing director of the law firm “Liniya Prava” Irina Kanaykina said that last year their firm took part in 79 tenders, winning about 23% of them. She also noted an increase in the company’s income in 2014 due to won tenders – up to 38% of the company’s total revenue, compared to 12% last year. “This trend is not only Russian, but also global,” Elena Belousova, head of the marketing department at Linklaters in the CIS, supported her, citing the experience of colleagues from other offices of this international company. According to Belousova, in two years the number of tenders in Europe in which Linklaters participated increased by 170%.

Belousova advised that when choosing a tender, study the requirements in order to understand how well the company meets them, so as not to waste the energy of couriers and a copier on unpromising applications. There was talk about errors and inaccurate information. “Liniya Prava” encountered them, Kanaykina said, and the correct strategy turned out to be to ask for clarification and clarification. “If you see strange demands, don’t hesitate to call,” Belousova supported. According to her, oddities can occur due to copying from a previous ad or an error by an inexperienced employee. And Megreladze from AETP shared that “not entirely legal and not entirely logical” demands are common. If violations are clearly visible, it is worth filing a complaint with the antimonopoly service, she advised. The first row of listeners responded to this advice with sad laughter.

Published in https://pravo.ru/

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Tafintsev Maxim Vladimirovich Moscow Bar Association № 77/14804 in the register of lawyers in Moscow Privacy Policy info@mt.com.ru 7 (495) 211 41 88 Telegram Vk

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Tafintsev Maxim Vladimirovich

Moscow Bar Association

№ 77/14804 in the register of lawyers in Moscow

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