The Russian Legal Market: Past, Present, and Future
I started working in Russia in 1998 when I became a founding partner of EPAM. We worked together until 2001, when I founded Marks & Sokolov — the only American law firm still operating in Russia.
Bruce Marks: A Brief Biography
Bruce Marks is an American lawyer and former politician. He began his legal career in 1984 and was involved in politics for ten years. In returned to the practice of law in 1994. In 1998, he worked with Nikolai Egorov, Boris Puginsky, and Dmitry Afanasyev to co-found “Egorov, Puginsky, Afanasyev and Marks, L.L.C.”
In 2001, Marks founded Marks & Sokolov, which has represented major Russian companies and entities including Alrosa, DIA, Trust Bank, and Polyus Gold, as well as the Russian Federation. He currently represents Russian TV channels in litigation against Google.
Marks also represented Donald Trump’s campaigns in cases related to the U.S. presidential elections in 2016 and 2020.
Almost 30 years ago, there were very few foreign firms in Russia, and EPAM was the only small firm at the time with offices in both the U.S. and Russia. Since then, the Russian legal market has matured significantly.
Since February 2022, all Western law firms — except mine — have withdrawn from Russia. Several Russian firms have grown out of these former Western offices and are likely to remain independent, even after the Russia-Ukraine conflict ends.
Many local firms have developed into strong competitors. They train their people well, have strong leadership, and many of their attorneys speak English — a key advantage in international work. This has made the Russian legal market highly competitive.
At the same time, small boutique firms like Marks & Sokolov can effectively compete with large firms in specific areas. For example, in litigation, smaller firms are fully capable of handling complex cases against major opponents. The Google case is a good example — the Russian firm Art De Lex successfully represented its clients, while EPAM and Baker McKenzie were on the other side. Recently, Art de Lex obtained a judgment against Google International – represented by attorneys formerly with large Western firms — for more than $100 million.
A boutique law firm can be successful because of number of reasons. Number one – you can have enough quality lawyers to do the work. Number two – your rates can be lower; your overhead is lower. Number three – you have less conflicts, because you don’t have a lot of corporate transactions. And a large client may mean more to a small company, so the client will get more attention at a boutique firm. So, I think it’s still a very healthy opportunity for boutique firms, particularly in the litigation area.
Moreover, I think that Russian law firms will expand and have offices in areas where they could serve their clients. That would be potentially Kazakhstan, Azerbaijan or Armenia. I think a lot of Russian firms are creating presence in Dubai and perhaps Hong Kong.
I don’t think that you’re going to see Russian firms opening offices in Western Europe or in the United States anytime soon because of the geopolitical issues. It’s still going to be somewhat difficult for Russians to do business in some of European countries like Poland, the Baltic states, perhaps Germany and England. England has developed a very anti-Russian bias. Their sanctions are probably the least friendly and most oppressive, particularly when it concerns legal representation of Russian clients.
Consequences of sanctions
Our firm remains committed to the Russian market — more than half of our team are native Russian speakers, including our U.S.-based staff. We employ many attorneys from Russia and staff from Belarus.
Now sanctions is another service area for us, we do sanctions work. Sanctions generally have had no negative impact on us, because in the United States, there’s a general license that allows us to represent sanctioned entities in litigation and give them sanctions advice. But we can’t do this outside the United States for sanctioned clients, because we need another license, which is not easy to obtain.
The only thing that really impacted us is that in the middle of 2024, Raiffeisen stopped sending dollars outside of Russia and other Russian banks were sanctioned so we could not receive any payments through them. But we were very fortunate that we were able to open a bank account in a friendly country which facilitated the issue of payment for our services by our clients. I would have to say that payment problem was really the biggest problem that both we and our clients had, and we solved it, hopefully.
Also I realize I’m not going to get clients in Ukraine. I fully appreciate that. And it’s a business decision. But I don’t know whether there are any US companies that would refuse to hire us because we have an office in Russia. But there are such examples, and that’s why a lot of the large firms pulled out of the market.
I’m not pro sanctions at all, but I can understand why there are some sanctions. And I think that the travel bans and limitations on individuals using credit cards are very bad.
The easiest and the most effective way to challenge sanctions is to try to do it administratively through OFAC. It’s possible to do it in the courts, but it is extremely difficult. And in certain ways it is necessary to use contacts in a semi political way. But I would like as many sanctioned Russians as possible to pay attention to the interaction with OFAC: the sooner that you file your application, it’ll be closer to the top of the list when matters are resolved.
Difficulties and peculiarities of representation of Russian persons abroad
I’m an American lawyer who have been in this market for almost 30 years. Back when we started, you dealt directly with whoever controlled and owned the entity. Now the large Russian companies have legal departments, and you deal with the people in the legal departments.
Marks’s first case is on the side of the Russian company
In my first lawsuit we represented VSMPO and Avisma against a bunch of Americans who were accused of being crooks, including Bill Browder and Kenneth Dart.
By 1995, Mikhail Khodorkovsky’s Menatep group had acquired about 70% of Avisma’s shares. In 1997, the American billionaire Dart bought this package and exchanged it for a 30% stake in the titanium company VSMPO. After the merger, VSMPO, controlled by Vladislav Tetyukhin and Vyacheslav Brecht, sued Browder, Dart, and others accusing them of withdrawing profits through offshore companies: raw materials were bought at inflated prices, and products were sold at low prices. The damage from the scheme was estimated at $50 million, but Avisma demanded $150 million based on the US RICO law on Racketeering and Corruption.
It was portrayed as a “man bites dog” story in the Western media because the Russians were the good guys and the Americans were the bad guys. Ironically, it was filed just after the Bank of New York Russian money laundering scandal broke. Browder, Dart, and others inherited a money laundering scheme that had been set up by Mikhail Khodorkovsky through Menetep. I had a very different view of Khodorkovsky, than others in the West. And my recent work against the Yukos Oligarchs confirmed my view that their method of doing business was based on fraud and massive tax evasion.
There are no technical difficulties representing sanctioned Russian clients in the sense that there’s a license in the U.S. that allows us to do it and we found a route for payment. And no limits on representing non-sanctioned Russians. But there are two practical difficulties. Number one – I think that there is a bias against Russians in the American court proceedings. In investor dispute arbitrations we also see bias against the Russian Federation. Arbitrators typically come from Western Europe, sometimes there are even critical social media posts about Russia from them.
It’s difficult to overcome this bias, but that’s why you have appeals because it is more difficult for three judges to be biased together. Number two – if you’re a Russian claimant and you’re a sanctioned, you can file a lawsuit, you can get a judgment, but if you try to enforce the judgment the recovery is blocked. The solution to that is to file the lawsuit, and then have it stayed until hopefully sanctions are removed.
Also, it’s hard for our clients to travel to the United States, and not all lawyers and clients want to talk to you on the phone. I travel to meet with Art de Lex and clients in Moscow almost every two months so we can speak easily together. Moreover, even if you’re not a sanctioned individual, a lot of law firms won’t represent you in litigation in the United States. All these factors put Russian parties under an unfair disadvantage because of sanctions. So, I can understand the general concept of the articles 248.1 and 248.2 of Russian Arbitrazh Commercial Procedure Code (ACPC).
One of the issues of the application of such articles is when there was an arbitration clause or forum clause. And that’s the thing in the Google case. But in that case, I don’t think that there’s a legitimate argument against the application of articles 248.1 and 248.2 of the ACPC because Google decided to continue in the Russian market after the law was passed in 2020. Google assumed the risk that its forum clause would not be enforced. Further, the Russian media companies represented by Art de Lex got judgements in 2021, 2022 and 2023. And only years later Google tried to enforce its forum clause in the United States though the company could have filed for an anti-suit injunction in the United States right at the beginning of the suits. Moreover, in the case of Google, these were contracts of adhesion, that’s not a negotiated forum clause. Google should not get two bites at the apple or be able to sleep on its rights.
Google’s lawsuits in American and English courts
On January 22, the High Court of England and Wales banned Russia Today, Spas and Tsargrad from initiating new or continuing existing lawsuits against Google over the blocking of their YouTube channels. The court decided that such cases could only be considered in the United Kingdom. The US Court entered a similar order prohibiting enforcement of Judgments outside of Russia.
On January 24, Google Ireland Limited filed an application with the California court demanding that the Russian company OOO Google, its bankruptcy trustee and representatives be prohibited from participating in the bankruptcy case in the ASGM. On January 27, a U.S. court imposed preliminary measures prohibiting these individuals from representing interests in the Russian case on at least two counts — bringing to subsidiary responsibility and challenging the deal between the Russian debtor and GIL, told Vedomosti. A Russian media company which we represented as challenged this ruling.
But most importantly in these cases is that articles 248.1 and 248.2 of the ACPC were enacted in 2020. Google could have left Russia then, it had a choice.
It is obvious that Articles 248.1 and 248.2 of the ACPC were introduced to protect Russians. At the same time, there is a similar practice in other countries, and anti-suit injunctions have long existed in the common law jurisdictions. Its main aim is to protect the jurisdiction of American and English courts. For instance, there are circumstances where US courts won’t recognize judgments from foreign countries. We have, in certain circumstances, policies against forum selection clauses. And in Google case you have a US court that’s protecting US company from her own voluntary actions, because Google deliberately violated the Russian judgments.
In Google Ireland case we have so called dueling anti-suit junctions in Russia and in the US. The trustee of the Russian Google subsidiary bankruptcy is going to go ahead in Russia and litigate the case. That’s his job. And it’s egregious that the US Court would be interfering with the bankruptcy trustee litigating in his own country. He acts under the Russian court.
We can see that Russian media companies started to enforce the original judgements against Google in neutral countries like South Africa, Hungary, and Turkey before the US and UK injunctions.
We represent not only Russian companies, but also the Russian Federation in several proceedings in the United States. In one of the cases we represent the Russian Federation against a Ukrainian plaintiff.
Russia has historically protected its sovereignty and takes a very narrow view of the waiver of sovereign immunity. The Russian Federation in certain circumstances has resolved cases. But the overall policy is to fight the cases to protect its sovereignty. And I support that because Russia’s long-term public interest is at stake.
At the same time I can’t say that Russian business has the same approach. A lot of Russian businesspeople are practical, and they don’t view litigation as a right or wrong. They view it as a business problem. And they assess the pluses and minuses, and often will settle based on the economics.
Concerning litigation, I think we’re going to see a bit of a decline in proceedings involving Russian parties and Western companies. This is due to the fact that there is a gap in transactions — a lot of Western companies no longer operate in Russia. But at the same time Russia is expanding business with China and India. I expect dispute resolution by way of arbitration is going to continue. Because a lot of businesses are concerned about the lack of impartiality of certain legal systems, and trials in state courts can be quite expensive.