Recently the UK has imposed sanctions on Russia, following Russia’s invasion of Ukraine, in an attempt to place pressure on the Russian government in order for them to retreat their forces. How will these sanctions impact law firms with connections in Russia?
What is a sanction?
A sanction is essentially a penalty imposed by a country on another for political, military and social reasons. In relation to this event, economic sanctions have been imposed in an attempt to halt Russia’s invasion of Ukraine and force them to retreat.
What sanctions have been imposed?
Economic sanctions on Russia are coming in numerous forms from the West.
One form in which they’re being imposed is through sanctions on businesses :
Western leaders have frozen the assets of Russia’s central bank, limiting its ability to access $630bn (£470bn) of its dollar reserves.
The US, the EU and UK have also banned people and businesses from dealings with the Russian central bank, its finance ministry and its wealth fund.
Selected Russian banks will also be removed from the Swift messaging system, which enables the smooth transfer of money across borders. The ban will delay the payments Russia gets for exports of oil and gas.
Major Russian companies and the state will be stopped from raising finance or borrowing money on UK markets.
Asset freezes on VTB, Russia’s second largest bank, worth $145bn and Rostec, Russia’s defence giant.
The London Stock Exchange suspending 28 Russian companies from trading.
Stopping Russia raising sovereign debt in the UK.
Strict controls on exports to Russia have been placed, mainly of dual-use goods, that are used for commercial and military products.
Sanctions have also been imposed against individuals as well:
Putting strict limits on ‘golden passports’ that can allow wealthy Russians to become citizens by paying huge fees.
Sanctions against 195 Russian individuals, nine of whom have been added since the invasion began, with the aim of freezing their assets.
This includes Vladimir Putin himself, his foreign affairs minister Sergei Lavrov and defence minister Sergei Shoigu.
Sanctions on 571 members of the Duma and Federation Council (Russian parliament).
Imposing a £50,000 limit on bank accounts held by Russian nationals in the UK.
On top of the current sanctions in place, Russia is being isolated from sporting and music events (Eurovision) as well.
There are likely plans for further limitations to be placed upon Russia as well, all of which will increase the pressure on the Russian government to withdraw their forces from Ukraine.
Who do they impact?
Putin: Kremlin officials have stated that it is unlikely President Putin is directly affected by these sanctions as all of his assets are within Russia.
Russian Businesses: One by one, global businesses are cutting ties with Russian clients and businesses (with a prominent example being Apple). As evident the sanctions specifically target businesses with an aim to damage them, in turn forcing them to pressure the government.
Russian People: Russian people are already feeling the devastating impact of global sanctions. The value of the rouble has fallen by almost 30% since the invasion, leading to spiralling inflation and to the cost of all goods and services and borrowing money inside Russia rising. This is seriously impacting the population and social unrest increases daily. Protestors have been taking to the streets and are being arrested at numbers up to 10,000.
How does this tie in with law firms?
With larger scale law firms having clients and ties with businesses in Russia, many are having to rapidly respond to sanctions placing specific clients off limits and their threatened branches.
A vivid example of major international law firms with Russia offices are White & Case, Baker McKenzie and Morgan, Lewis & Bockius, who are attempting to respond as an intensifying sanctions web places those specific clients off-limits and threatens their business in Moscow.
Reasons other than sanctions for the cutting of ties with Russian clients and businesses relate to the issue of reputation. Law firms as well may be expected to take a side in this conflict and in a short term and temporary attempt to save face may suspend ties with clients.
Currently, it is unclear how much business law firms will lose from severing ties with prohibited clients and not all of the new sanctions have immediately gone into effect, giving firms time to end relationships.
Despite this, there may be an area of opportunity within this conflict as well for law firms. Many will likely find business advising other clients on navigating the sanctions as well. Thus law firms are unlikely to suffer severely under these circumstances.
By Innes Flett
Penultimate Year Law Student
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