Yuri Pustovit: The legal profession has become increasingly high-risk

Lawyers celebrated their professional day on December 3rd of this week. Established by a special decree in 2008, this day commemorates the adoption of a series of judicial statutes and legislative acts in Imperial Russia on December 3, 1864 (November 20, according to the Old Style calendar), which formed the basis of judicial reform. The legal landscape has evolved significantly since then, and today, the profession is undergoing another period of transformation.

Yuri Pustovit, Managing Partner of Advocates Bureau Yug discusses the latest trends shaping the legal profession and the challenges and opportunities facing lawyers today.

Yuri, has the massive personnel shortage in Russia affected law firms? And how do law firms intend to address this problem?

The shortage of qualified personnel in the legal profession has always been acute. However, it has worsened recently as a significant number of highly qualified lawyers left the country due to the announced mobilization and the departure of international law firms from Russia. Everyone is solving this problem in their own way, for example, by working with leading law schools and inviting successful students in their final years of university for internships, by openly poaching good specialists from competitors, by merging law firms, by attracting teams of specialists from competing firms, or by entering into temporary partnership agreements with friendly competitors for the duration of projects when there is a shortage of their specialists and deadlines are pressing.

Recruitment agencies report that the new generation entering the workforce has different expectations. They prioritize work-life balance, travel, and personal development over traditional career paths. Does this observation align with your experience in the legal field? And does this present a challenge for law firms, given the demanding nature of legal work?

Indeed, younger professionals today have a different perspective. They have had to navigate their careers during unprecedented times, such as the pandemic. Many of these individuals have adapted to remote work and may be hesitant to return to a traditional office setting. While the legal profession is inherently personal and requires face-to-face interactions, law firms are increasingly adopting remote work models. Achieving a work-life balance is a perennial goal for professionals of all ages. However, the younger generation may be more inclined to prioritize personal fulfillment, which can lead to higher turnover rates.

Early in their careers, young lawyers often work long hours and perform tasks that may not be intellectually stimulating. This can be a challenging period as they develop the necessary skills and experience. Additionally, the realities of working in a law firm, such as hierarchical structures and imperfect legal systems, can sometimes clash with idealistic expectations. These factors can lead to disillusionment and a desire to pursue other career paths.

Demands of the 2020s

The evolving economic landscape in our country has created a demand for new types of legal services. What are businesses seeking most urgently today? And how are these demands reshaping the way law firms train their employees?

Businesses, as always, crave clear and stable regulatory environments. While these rules may not always be ideal, they provide a necessary framework. Unfortunately, the frequency of regulatory changes has increased significantly in recent years, resulting in shorter planning horizons and hindering business growth. The high refinancing rate has further compounded these challenges.

Current high-demand legal services include sanctions compliance, supply chain maintenance, facilitating payments with counterparties in unfriendly jurisdictions, business re-domiciliation, and foreign law advice. International arbitration has shifted from Western centers to hubs like Dubai and Singapore, increasing the demand for specialists in these areas. There is also a growing need for professionals skilled in getting licenses to unblock assets frozen in unfriendly states. Moreover, obtaining government approvals for transactions has become increasingly sought-after.

Criminal law risks for businesses remain prevalent, often necessitating the involvement of criminal defense attorneys in structuring civil law transactions or corporate procedures. The risk of asset nationalization has become particularly acute. When conducting legal due diligence on transactions, we now go beyond examining statutory limitations periods and delve into the entire history of the asset, a process often complicated by the absence of necessary documentation. Transactions involving assets previously owned by government officials or individuals subject to anti-corruption laws require special attention, given the recent Constitutional Court ruling dd. 31.10/2024 extends the statute of limitations for challenging such transactions indefinitely.

Regarding talent development, the shift in business focus towards the South and East has increased the demand for specialists in these jurisdictions and their respective international arbitration centers.

What new forms of work have had to be mastered in recent times? Are lawyers keeping up with the emerging needs of businesses today?

One significant change has been the increased use of virtual court proceedings. While in-person attendance is still preferred, remote hearings have provided numerous advantages. Russian legislation has been at the forefront of ensuring efficient and accessible remote litigation. As businesses still face new challenges and restrictions, lawyers must remain adaptable. We are constantly learning and evolving to meet the needs of our clients.

Is a risk assessment truly the most in-demand legal service for businesses? What does this kind of work require from a lawyer?

While there has been a slight increase in demand for legal risk assessments, it is not the most sought-after service. Risk assessments are more commonly associated with investment activities, and we have observed a slowdown in investment in Russia. Current transactions often involve asset acquisition from Western companies, and there is a trend towards market consolidation among key players. When preparing a legal risk assessment, lawyers must meticulously analyze the entire history of an asset, regardless of statutory limitations periods. They must also exercise caution in their conclusions to avoid exposing themselves and their firms to liability.

The landscape has changed drastically

Has the departure of foreign companies and their network offices made it easier for regional law firms to compete? Has the market expanded for them? And to what extent were such companies represented in the region?

The exit of international law firms from Russia has had little impact on regional firms, as the former were primarily concentrated in Moscow and St. Petersburg. Moreover, many of these firms have rebranded, maintaining their presence in Russia under a new name and continuing to serve existing and new clients.

In many sectors, not just the legal one, the presence of foreign players has been a catalyst for quality improvement. How are domestic law firms maintaining high standards today?

Youre right that international law firms introduced higher standards to the Russian market. Since the early 1990s, Russian lawyers who worked for these firms gained invaluable experience in international practices. Subsequently, these professionals started their own firms or joined Russian law firms, creating international practices. This has made Russian firms more competitive both domestically and internationally. It s also worth noting that not all international law firms have completely left Russia. Many have rebranded and severed formal ties with their parent companies, giving rise to a new category of firms known as New Law Firms. They have expanded their practice areas and now serve Russian clients they couldn t work with as international firms. This has intensified competition between Russian and New Law Firms, ultimately driving up the quality of services.

The period since the beginning of the special military operation has been a watershed moment for the legal services market. How would you describe the current stage of development and the challenges facing regional firms?

Since the collapse of the Soviet Union, Russian businesses and lawyers have become deeply integrated into the international legal system. This has resulted in a significant Russian business presence in key offshore jurisdictions, numerous international agreements, and a substantial influence of international law on Russian domestic law. Russian businesses have been actively acquiring assets in Western Europe. However, the imposition of thousands of sanctions and the subsequent reluctance of Western lawyers to work with Russian companies have created significant challenges.

Russian lawyers now face the daunting task of protecting their clients rights in hostile jurisdictions where most lawyers refuse to work with them. It is difficult for Russian companies to even pay state fees for filing lawsuits in Western European courts. One of the key challenges for the legal community is maintaining communication channels and cooperation with lawyers in unfriendly countries. Everyone understands that this situation is temporary and that burning bridges is not in anyone s best interest.

Power to work

From an outsider s perspective, lawyers seem to be the most legally protected individuals since defending clients in court is their profession. However, we often hear news of lawyers being convicted. Does professional knowledge not offer sufficient protection, or are unexpected interpretations of the law always a possibility?

Unfortunately, I must admit that the legal profession has become one of the most high-risk occupations in our country. Sometimes, perfectly legal actions by lawyers are presented by law enforcement agencies as criminal offenses. The logic of these accusations and the evidence presented are often shockingly flawed. This harmful practice must be stopped, or we risk losing highly qualified professionals from the field. In complex legal projects, clients may struggle to find lawyers, or lawyers may avoid categorical legal opinions, using numerous disclaimers to protect themselves from liability but offering little help to their clients.

How does the legal community interact with the state today? What does it need from the government?

The legal community interacts with the state in various ways, from participating in expert and advisory councils to engaging in lawmaking and assessing the regulatory impact on businesses. I want to highlight the recent increase in cases of obstruction of a lawyers professional activities, which is unacceptable. We need to introduce criminal liability for such actions by amending the criminal code to protect lawyers who are conscientiously defending their clients rights. The Ministry of Justice of Russia developed such amendments and proposed them for discussion back in 2020. Subsequently, in October 2024, the Federal Bar Association of Russia designed a bill on criminal liability for violating the right to qualified legal assistance. However, these changes to the criminal code have not yet been made. Additionally, the state should continue to guarantee the independence of lawyers and protect attorney-client privilege. Ultimately, government officials themselves often become our clients and can personally experience the consequences of these illegal actions by the state.

Shifting Focus to Asia

With economic ties shifting towards Asia, how do legal systems in these countries differ from those in the West? What adaptations are necessary? How is this affecting the structure of law firms? For instance, given the increased focus on Asia, are lawyers now considering learning languages like Chinese, Arabic, or Farsi?

As a Russian lawyer, I can t speak in detail about Asian legal systems. However, based on my experience working with Asian clients compared to European and Russian clients, I can say that there are significant cultural differences in business styles, decision-making processes, and adherence to agreements. Many of my colleagues have established practice areas focused on specific Asian countries and have translated their corporate websites into languages like Chinese, Farsi, and others. While these developments are promising, they are not yet widespread.

Are there international legal forums accessible to Russian lawyers? Are there any such forums held within Russia? What geographic regions do these forums cover?

Russian lawyers can still attend most international legal forums. We continue to be actively invited to these events, including as speakers, and maintain memberships in international organizations like the IBA and AIJA. However, anti-Russian sentiment is often present at these events, which can be discouraging. This, combined with visa issues, payment challenges, and the lack of direct flights, makes participation difficult.

Within Russia, international legal forums have become less common since the special military operation began. Although we occasionally encounter colleagues from unfriendly countries at Russian legal forums, these instances are rare. Before 2022, colleagues who had stopped visiting Russia after 2014 used to gather at an international legal forum in Belarus, but that practice has also ceased.