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London Lawyers Say ‘No Comment’ on Links to Rich Russian Clients

March 2, 2022, 2:01 PM

London’s lawyers have millions of reasons to keep quiet about Russia’s invasion of Ukraine.

City law firms have long enjoyed a lucrative business helping clients linked to Vladimir Putin’s regime to penetrate British society. Now the industry is under fierce pressure to re-evaluate those relationships as sanctions are imposed.

While a handful of London’s biggest firms have said they are walking away from work, most are staying quiet. Some are privately lobbying the government against imposing sanctions on their clients -- prompting fury among lawmakers.

Prime Minister Boris Johnson faced a barrage of questions on Wednesday from politicians about the role London’s lawyers play in enabling clients connected to Putin. Johnson was clear that if lawyers breach sanctions, they will face consequences.

“The legal profession -- everybody involved in assisting those who wish to hide money in London, assisting corrupt oligarchs -- have been set on notice that their actions are under scrutiny and where they break the law, if they break the law, if they undermine the interests of this country and advance the interests of Putin’s war machine, they will pay a price,” Johnson said.

That leaves the industry with an uncomfortable choice: do the risks of breaking sanctions and tightened anti-money laundering rules -- as well as the reputational damage involved -- outweigh the cost of dropping deep-pocketed clients. Litigants from Russia were involved in more commercial cases in London in the year through March 2021 than any other foreign country except the U.S., according to a report by Portland, a communications firm.

Here’s how the largest law firms have responded:

“For so long, these people, who have the deepest of pockets, have been able to pay lawyers to do whatever they want and to protect them,” said Susan Hawley, director at Spotlight on Corruption, a U.K. transparency group. “It poses some really serious ethical questions for the legal profession and those who have been lobbying on behalf of Russian oligarchs.”

The U.K.’s sanctions rules pose a particular threat to billings. The government has said in most cases lawyers can provide advice to, or act for, a designated person, but can’t be paid without first obtaining a government license.

Where sanctions prohibit specific actions, like restructurings or fundraisings, the rules require law firms to carefully consider whether their advice could help their client to dodge sanctions. Last week, the Solicitors Regulation Authority reminded firms that they risk prosecution or a fine if they breach these requirements.

“Solicitors are highly regulated and are not allowed to bring spurious objections,” said Stephanie Boyce, president of the Law Society, which represents solicitors in England and Wales. “If they challenge the government’s actions, it’s because they think the government is at risk of breaking its own rules.”

The industry stresses that everyone is entitled to legal representation. Boyce says it’s the job of solicitors to represent their clients -- whoever they may be -- so that the courts act fairly. That principle has paved the way for Russian oligarchs and state-owned companies to penetrate U.K. businesses, its property market and courtrooms.

In recent years, London courts saw Russian billionaires Mikhail Fridman and Petr Aven successfully sue Christopher Steele in a data-protection suit and Roman Abramovich secure a partial win and then settle a libel suit against the author of a book that claimed he was directed to buy Chelsea Football Club Ltd. by Putin.

Meanwhile, Vladimir Potanin, Russia’s wealthiest man, is facing one of the world’s biggest divorce claims in London’s family courts and two separate lawsuits involving VTB Bank are currently going through the city’s High Court, with the bank represented by Freshfields Bruckhaus Deringer and White & Case.

Read more: Sanctioned VTB Keeps Its Magic Circle Lawyers and Heads to Court

Hawley, however, says she believes the legal profession has been naive in its willingness to work with Russian clients.

“Some lawyers will be genuinely trying to protect Russians who may be at danger if they go back there,” she said. But “the government should be naming and shaming those law firms sending threatening letters to protect oligarchs linked to Putin’s regime.”

--With assistance from Katharine Gemmell, Jonathan Browning, Kitty Donaldson, Alex Morales, Christopher Opfer, Roy Strom, John Holland and Malathi Nayak.

To contact the reporter on this story:
Ellen Milligan in London at emilligan11@bloomberg.net

To contact the editors responsible for this story:
Jeremy Hodges at jhodges17@bloomberg.net

Edward Evans

© 2022 Bloomberg L.P. All rights reserved. Used with permission.