21 January 2016

All last year and the beginning of the current tough one, law firms are trying to adapt to the adverse economic conditions. It did not at all. Ironically, won not only the ones who set the task in whatever was not to lose the conquered niches as those who are looking for opportunities for growth and development of the company.

Systemic problems of the Russian economy started to affect the real sector, trade and services, which is the main clients of law firms. Of course, the legal business does not require a multimillion-dollar investments in fixed and working capital. However, if due to the financial crisis and lack of credit in the market suffers business clients, law firms profits can also be reduced.

However, credit markets eventually recover. At the same time there is another systemic problem that threatens the legal services market. In recent years, large corporations are trying to use the law to support their transactions resources and expertise of its legal department. In a crisis, the economy of the corporation, for obvious reasons are to save on legal outsourcing and will try to extend this to a larger number of businesses.
Anonymity different partners of law firms talk about how one customer consultants simply refused to pay and is now almost a year, they are suing him. In another case, a large region, speaking clients on infrastructure projects, cut the budget by 10%. In the third — the client honestly admitted that he ran out of money, so the project had to be suspended. Tighten the timing of signing new contracts and the extension of the old. In general, most law firms have felt the breath of the crisis.

However, we believe that no consultants to corporations and medium-sized businesses in any case, can not do. Consultants law firms get more diverse and qualitatively different experience compared to inhausami. Waste technology services allow competently manage labor costs, because the solution of similar problems of different clients Notorious hand consultant will spend less time than the first time faced with a case arising inhaus. In addition, external consultants have deep expertise in narrow fields of activity of business structures, while inhaus have to be versatile lawyer, as accompanies the activities of the employer in all its diversity: from the registration of the amendments to the statute of disputes on collecting receivables. Only the law firm can afford to hire and pay for a well-specialists, such as mortgage securitization, mergers and acquisitions in the oil industry, the listing of the securities and so on. In the context of non-legal practice of an internal company lawyer that depth is simply impossible to achieve.
Another competitive advantage of external consultants as compared to the corporate legal department — flexible change of the range of services in accordance with the rapidly changing economic environment. For example, the company is in financial difficulties and forced to engage in the restructuring of assets and debts. For hiring a specialist will take some time, while the law firm of a complete package of services can be obtained within one to two weeks after sending the request.

The crisis offers

A typical law firm today reminds Leaning Tower of Pisa: construction dangerously tilted and seems about to collapse, but actually in this position will last a long time. Of course, the services demanded by customers during the economic boom, now irrelevant. But in an unstable economy, the lawyers have more work in other areas. Problems often customers are converted into substantial fees of legal advisors.
«Since the beginning of 2015 in the international law firm Dentons especially rapidly developing practice in litigation and arbitration,« — says the situation in the company’s managing partner of the Moscow office of the international law firm Dentons Florian Schneider. It touched jurisprudence Dentons in almost all areas: disputes in the field of criminal law, intellectual property, tax, labor law, competition law. «In the second half of 2015, we expect growth in demand for services practice in bankruptcy and restructuring, as well as for legal services in connection with projects of Russian companies in the Asia-Pacific and Asian investors in the CIS countries, especially for projects with Chinese, Korean, Japanese and Indian companies «, — says confidently managing partner Dentons.

In managing partner of the law office KIAP lawyer Andrew Korelskogo similar observation: «The growth of non-payments in almost all economic sectors and at different scales now provides up to 50% of customer inquiries for our judicial practice." «We understand that some of them grow in the future for us in support of the bankruptcy case, and now the number of such cases exceeded the performance of last year», — continues the lawyer.
«The search for new projects in the fields of legal consulting sought to include a mandatory item in the survival strategy of the law firm in the crisis and consider it as an increase in its share in this market», — says Roman Belanov, attorney law firm «Hrenov and partners.»

Andrew Korelskiy expects a new wave of raids, trying to pick up for next to nothing all that is bad and has prospects for a rebound after two or three years, if the situation is normalized with Ukraine and will gradually soften sanctions. And in the regions and redistribution of property in metropolitan areas has already begun and is likely to peak in the fall.
There are also incorporating

Meanwhile, some market participants legal consulting luckier: they have a lot of new customers and new orders from old.
The inclusion of the Russian Crimea and Sevastopol put in an uncertain legal status of a significant number of entrepreneurs who suddenly find themselves caught up in the Russian jurisdiction. Some law firms, such AstapovLawyers International Law Group, it has brought a new range of projects.

According to Oleg Malskyy, Partner AstapovLawyers, yesterday Ukrainian companies had to refocus internal procedures and relationships with partners and the government to the Ukrainian law on the Russian. Projects touched virtually all areas of legal services ranging from assistance in business registration, re-registration of property to legal aid on taxation and labor law, contract customers adapt their business partners, assistance in obtaining licenses and permits to conduct certain activities. Re-open the Russian market for legal services to clients of law firms have made it possible to offer them to 30 new products.
The second wave of projects began with the growth of tension in Russian-Ukrainian relations, as representative offices and branches of the Russian companies in Ukraine require professional consultant, and then, apparently mattered presence of AstapovLawyers office in Moscow, said Oleg Malskyy.

But there were also losses. On condition of anonymity, one of the partners of the national Ukrainian law firm told «Kommersant» that some Ukrainian law firms have been forced to withdraw from the contract with the companies associated with Russia, even if a consultant associated with a customer years of successful cooperation. The reasons for this failure — a conflict of interest, because many Ukrainian law firms are actively involved in the development of the new Ukrainian state, and because of the conflict with Russia, a number of large Russian companies with state participation are seen as unfriendly to the new authorities in Kiev.
We get up at anchor customers

Despite the fact that in some firms have already been reducing, the legal market has not yet experienced serious shocks. Of course, law firms, all who are engaged in the provision of services largely depend on the customers, their well-being and plans. The crisis is forcing industry and commerce to tighten their belts. Companies are reluctant to part with their money, suspend investment programs, development plans, abandon ventures, delaying the improvement of internal processes — the projects to participation which often involve external lawyers. Current activities if the company did not have serious problems that threaten its business, successfully served inhausami.

In contrast to the common US and European practice, we have a legal support of business not often completely eliminated outsourcing. «In Russia, the law firm, as a rule, entrust the solution of complex, non-traditional, specific issues that require expert knowledge or unusual labor-intensive projects,« — says Nadezhda Orlova, a partner «FBK right.»

In the legal business has historically come to the rescue anchor customers — and at the initial stage of development of the law firm, and the crisis too. You must survive not one at the expense of another, and seek a compromise in the price of services, on the one hand, not to lose their quality, and on the other — do not operate at a loss, because it is, in turn, may lead to the bankruptcy of a consulting partner.
In a crisis, an important role and acquire the quality of services, the importance of understanding the client’s current needs and how they will change depending on the economic situation in the country, and on commodity markets client.

Managing Partner of the Moscow office Dentons said: «In times of crisis, of particular importance to the lawyer law firm acquire the skills of business development and building effective relationships with the customer. Successful in the staff deserve a promotion to higher career grades.»

A major crisis in the legal business — it is a crisis in relations with customers. General practice demonstrates that a strong relationship between the client and the consultant can last for decades. Consultant understands and satisfies the needs of the client, follows him around the world, opening offices in the regions of client companies. «The best strategy for a law firm — holding their positions, to demonstrate to customers and willingness to meet together through hard times,« — says partner «FBK Pravo» Nadezhda Orlova.

In a crisis, it often happens that a client can not be on time, if not pay for the services of his lawyer. Some law firms provide these customers by installments, others are trying to reduce the number of free legal aid. «There shall come into force not only personal relations partner with clients, but also some financial analyst», — says Andrey Korelskiy. For example, knowing that a wholesale importer of rare orchid species crisis in Russia will not survive under any circumstances, you need time to stop consulting without generating new losses, which are likely to be in the line of creditors in the bankruptcy register your former client. Therefore, we should very clearly identify with any of the customers you’re ready to go minefield of the crisis, even if the client’s business is already wounded, but the chances of survival are, either the client has «an economic corpse», but still did not leave attempts to escape, then it is necessary to do everything, adequately to «bury» (bankrupt or eliminate) this business is that it is not destroyed, and those who are close, including you. It is sometimes difficult decision, but necessary for the salvation of the law firm, concluded Mr. Korelskiy.

The consequence of the fall of the ruble in the currency markets was the increase of the competitive capacity of Russian law firms working for the fees in the Russian currency.
Interestingly, the lowest interest in the transition to service Russian law firms exhibit under state control large corporations and public authorities. The actual rejection of a possible «import substitution» they justify the higher quality of services of foreign firms. However, a more plausible explanation, which consists in the fact that foreigners easier to knock the budget, and a thick, printed on coated paper report with colorful pictures and loud brand is often one of the attributes of «progressives effective manager» in the civil service. Needless to say that these reports are usually nobody reads, and the management of state companies is the view of the results of the project consultant for the beautifully designed presentation — «cartoons," as expressed by the managing partner of one of the Russian law firm.

You can also note the reduction in the number of joint work of Russian and foreign law firms on projects, as well as the transfer of clients from the skilled work of the international law firms to Russian.
Given the collapse of the ruble rate foreign lawyers denominated in foreign currency, in rubles increased by almost half. Therefore, Russian and often international clients looking for opportunities to place orders with Russian lawyers that their ruble rate prudently reviewed did not. It should be noted that the lawyers of the leading national companies often do not yield to international colleagues, gaining a lot of experience over the years of the existence of an open legal market. Now the difference between a purely Russian and international companies increasingly blurred, senior lawyers and partners are moving in the one or the other side. In this situation, customers are losing interest in what to pay for the brand, as Russian consultants demonstrate high customer orientation, have the necessary qualifications and ensure proper quality of service.
However, some of our sources in large corporations indicated that their international legal advisers began to show greater flexibility in pricing. Russian office of international consultants are ready to fix the cost of its services in rubles, and suggestions on the general budget of the project can be quite competitive compared to similar offers Russian law firms.

Markedly in the market and was washing out the foreigners from the Russian offices of international law firms. Ten years ago, the overwhelming majority of partners and senior associates about half of them were graduates of Western law schools of the country of origin of the international law firm. Now the majority of partners and almost all senior lawyers — the Russians and immigrants from the CIS countries have graduated from the Russian law schools. Quality of service is not affected and, in general, adjusted for regional specificities, corresponds to the brand’s reputation.
Financial Mathematics

In the market of professional services to businesses common joke that lawyers always bad with numbers. In part, this is acceptable: a good lawyer is not always, or rather, very rarely is a good financier.
The same applies to management, if we are talking about managing partner, general manager or president of law firms. They tend to deal with a rather broad managerial and administrative functionality. And it is often the heads of law firms continue to practice law, participating in client projects as the leaders of a group of consultants or lawyers. At the same time in a small company, for example, up to ten people, with a relatively small turnover presence of the CFO in the state will look a bit strange, since the effectiveness and impact of such a position is still higher than in large law firms with significant cash flow. In small companies with this role have to cope managing partner and chief accountant.

In a large company CFO — a separate post. Its mission — to promote the managing partner or the board of partners in financial planning, decision-making related to the conservation and investing free cash flow of the company, the creation of reserves for different occasions, especially during economic crises, when the time to create a financial cushion allows the law firm easier to transfer decline in business activity of customers, and therefore the reduction in the number of projects and revenues.