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The legal market in Russia is split in two, both in terms of the law firms and of the law. Global law brands dominate big-ticket Russian transactions and the most successful of these combine UK law practitioners with a deep understanding of the Russian market with highly reputed Russian law lawyers....

The legal market in Russia is split in two, both in terms of the law firms and of the law.

Global law brands dominate big-ticket Russian transactions and the most successful of these combine UK law practitioners with a deep understanding of the Russian market with highly reputed Russian law lawyers.

There is also a parallel market of domestic Russian law firms that often handle work as local counsel to international firms, sometimes even on Russian law aspects of deals that are led by the Russian offices of global firms. The one notable exception to this has been the merger between Berwin Leighton Paisner and Goltsblat to form Goltsblat BLP. The completely global-Russian enterprise is a first in the market and has generally been considered as very successful.

The other dual market is in legal systems, as UK law governs large parts of many big-ticket transactions often working with Russian law governed aspects. As a legal counsel of a global bank points out, experience in balancing both counts for a lot: "It is much harder to get deals across the line as the law in UK has to co-mingle with Russian law".

A recent trend noted by a number of partners, which stems from a wide-scale revision and updating of the legal system in Russia through the new Civil Code and a growing prominence of Russian banks in financing as Western banks have pulled back, is an increase in the use of Russian law. For instance, Russian law was recently used for the first time in a syndicated loan. However in many transactions the global dominates the domestic. As one partner argues, "it is a completely global market and it does not matter where you are based".

CONTEXT AND TRENDS
The most significant trend in the banking market has been the retreat of international banks; as one lawyer observes: "We have seen a real pull back by the major Western banks in their lending activities". The void left by the banks has been filled by Russian banks, international financial institutions (IFIs) and foreign banks....

CONTEXT AND TRENDS

The most significant trend in the banking market has been the retreat of international banks; as one lawyer observes: "We have seen a real pull back by the major Western banks in their lending activities". The void left by the banks has been filled by Russian banks, international financial institutions (IFIs) and foreign banks.

The key Russian players in 2011/2012 were VTB Bank and VTB Capital, Sberbank, Vnesheconombank (VEB) and Gazprombank. The European Bank for Reconstruction and Development (EBRD) and other IFIs have also been very active in particular in the mid-market and when it comes to equity investments into Russian banks.

"Russian banks have stepped up now and now make up 50% of the market, it's not going to be an easy next couple of years so we expect active expansion by the Russian banks," says one lawyer.

Lawyers have also noted an increased presence of Japanese banks, although the proportion of work they handle is still comparatively small.

In general, the market in mid-2012 was seeing a considerable slow down and, says one lawyer, "there is no syndicated market at the moment. There used to be regular syndications with 13 or more banks but that has fallen away, so there is some club lending and quite a few bilateral facilities". One of the additional tricky problems, explains a local lawyer, is that borrowers want to borrow in dollars, while lenders want to lend in euros. This has engendered a number of dual currency dollar/euro loans.

This tough market was not anticipated. "This time last year there was a real buzz in the air… do we have a big enough team?" says one lawyer, referring to some of the large deals of 2011, for example the $2 billion syndicated facility to Rosneft and the $3 billion plus loans to Metalloinvest (celebrated by a dinner hosted in Dubai) and VTB Bank. "Then there was a completely different environment and by September 2011 it felt like a different world".

MAJOR LATERAL HIRES

David Scott
From: Baker & McKenzie
To: Retirement

Irina Mashlenko
From: Allen & Overy (Moscow)
To: Allen & Overy (New York)

MAJOR LEGISLATION CHANGES

Central Securities Depository Law
Passed February 2012

RISING STARS

Allen & Overy
Igor Gorchakov

Freshfields Bruckaus Deringer
Dmitry Surikov

Linklaters
Dmitry Suschev

CONTEXT AND TRENDS
"The Russian capital markets are plugged into the global market, so equity is very, very problematic and on the debt side we are pricing deals and second tier issuers are having more difficulties," says a lawyer, adding that "lots of windows opening and closing and seasoned high quality issuers are increasingly tapping new markets". This is a balanced description, where others simply describe the market as "pretty dire", however firms have kept busy and other practitioners say the market is "not like 2008 and 2009 but fairly robust"....

CONTEXT AND TRENDS

"The Russian capital markets are plugged into the global market, so equity is very, very problematic and on the debt side we are pricing deals and second tier issuers are having more difficulties," says a lawyer, adding that "lots of windows opening and closing and seasoned high quality issuers are increasingly tapping new markets".

This is a balanced description, where others simply describe the market as "pretty dire", however firms have kept busy and other practitioners say the market is "not like 2008 and 2009 but fairly robust".

Most agree that there is volatility on the debt market, which creates long periods of preparatory work with a sudden flurry of transactions as windows open up. The equity markets have been quiet: "not seen much, not one single successful Russian IPO to date in 2012, which means six months of no deals," says a partner. But firms are seeing potential in equity deals either from Russian privatisations or from the appetite of Russian private owners who are only being "held hostage to the world capital markets".

The market saw two crucial developments: the merger of MICEX and RTS (full integration has not yet been reached) and the creation of a nationwide depository system. "There was no system for recording all the shares, it was all done by each company's administration, and this will also allow Euroclear to open an account in the Russian clearing system," says a partner.

On the debt side, according to one lawyer there is "a huge amount of liquidity on the Russian market and issuers taking on domestic debt with Russian bonds. Usually international firms aren't involved in these but 2009 legislation allows for issuances of foreign companies in Russia," explains the lawyer, referring to an issuance by the European Bank for Reconstruction and Development (EBRD) and the first direct bond placement by semi-Russian owned Uranium 1.

On the equity side, 2011 saw a trend for Russian issuers to go offshore. There was a lot of re-domiciliation work and straightforward listings of global depository receipts in London. This latter line of work may be under question as in 2012 the UK Listing Authority was looking at tightening rules.

MAJOR LATERAL HIRES

Harvey Nugent
From: Freshfields Bruckhaus Deringer
To: n/a

Igor Gorchakov
From: Baker & McKenzie
To: Allen & Overy

Cameron Half
From: Morgan Stanley
To: Allen & Overy

Simeon Radcliff
From: Clifford Chance (Moscow)
To: Clifford Chance (London)

Carter Brod
From: White & Case
To: Dewey & LeBoeuf (now Morgan Lewis & Bockius)

Leo Batalov
From: Dewey & LeBoeuf
To: Orrick Herrington & Sutcliffe

Dmitry Gubarev
From: Dewey & LeBoeuf
To: Orrick Herrington & Sutcliffe

Alexandra Schukina
From: Skadden Arps Slate Meagher & Flom
To: White & Case

MAJOR LEGISLATION CHANGES

Civil Code
Pending

Tax Code amendments
Effective January 2012

Central Securities Depository Law
Passed 2012

RISING STARS

Allen & Overy
Alexandra Fasakhova

Clifford Chance
Tamer Amara

Freshfields Bruckhaus Deringer
Dmitry Surikov

Linklaters
Andrei Murygin

CONTEXT AND TRENDS
The Russian M&A market has been fairly steady but, as one lawyer says, "people who are claiming super business are either lucky or they are fibbing". Firms have noted an increase of investment from China, India and South Africa as well as a flow of activity from countries such as Kazakhstan....

CONTEXT AND TRENDS

The Russian M&A market has been fairly steady but, as one lawyer says, "people who are claiming super business are either lucky or they are fibbing".

Firms have noted an increase of investment from China, India and South Africa as well as a flow of activity from countries such as Kazakhstan. Domestically, the "traditional key sectors are oil & gas, financial services, natural resources and recently telecoms and pharmaceuticals, which have been getting a bigger piece of the pie". However in 2011 the financial sector grabbed headlines with large deals involving Sberbank and VTB Bank, the MICEX/RTS merger and development of the Moscow financial centre.

One trend noted was that the domestic players have been driving activity more than international players. "Increasingly the big players in the Russian market are Russian players," says a lawyer, adding that "international investors are more careful where to put their money but here for Russian companies funding is less of an issue".

Others note the Russian market is at a stage now where it is one of the more significant M&A markets and that it is "getting more and more sophisticated," and that private equity has also been gaining momentum: "home grown funds that are very savvy and know the market, are now co-investing with Western funds", says one partner.

The elections of 2012 also had an impact on the market, although commentators pointed out that such a slowdown did not usually occur. The reasons given by one lawyer was an atmosphere of "gloomy politics" and "lack of consensus over President Putin".

A final development of note is the "voluminous" Civil Code, which represents a "major overhaul" of the legal regime, in the words of one lawyer. "It will affect the way deals are carved out; a much bigger role will be given to notaries and there will be an introduction to the common law concepts like indemnities and warranties and this might encourage the use of Russian law," says another partner.

MAJOR LATERAL HIRES

David Griston
From: Clifford Chance (Moscow)
To: Clifford Chance (Amsterdam)

Steffen Kauffman
From: White & Case
To: DLA Piper

John Goodwin
From: Linklaters (Moscow)
To: Linklaters (London)

Oleg Berger
From: Dewey & LeBoeuf
To: Morgan Lewis & Bockius

Vasilisa Strizh
From: Dewey & LeBoeuf
To: Morgan Lewis & Bockius

Brian Zimbler
From: Dewey & LeBoeuf
To: Morgan Lewis & Bockius

Jonathan Langley
From: White & Case (London)
To: White & Case (Moscow)

Harvey Nugent
From: Freshfields Bruckhaus Deringer
To: n/a

MAJOR LEGISLATION CHANGES

Civil Code
Pending

RISING STARS

Cleary Gottlieb Steen & Hamilton
Yulia Solomakhina

Allen & Overy
Anton Konnov

Baker Botts
Melinda Rishkofski

CONTEXT AND TRENDS
Project finance has largely been at the mercy of the same powers at work in the general banking sector. "There is an increase in importance of Russian banks in lending as Western banks retreat," says a partner; the key Russian banks being VTB Bank and VTB Capital, Sberbank, Vnesheconombank (VEB) and Gazprombank....

CONTEXT AND TRENDS

Project finance has largely been at the mercy of the same powers at work in the general banking sector. "There is an increase in importance of Russian banks in lending as Western banks retreat," says a partner; the key Russian banks being VTB Bank and VTB Capital, Sberbank, Vnesheconombank (VEB) and Gazprombank. "Also Japanese banks have access to dollars while due to the huge credit restraints by the crisis and Basel III requirements Western banks are focussing on their own markets".

Firms are hoping for an uptick in projects and as the deals show there is no shortage of mega deals in the pipeline, although getting the deals to move forward seems to be the key problem. One example of a mega deal being quoted is the ambitious Schtokman gas project, which proposed the construction of a detachable gas platform located in the Baring Sea.

Firms have been working on a number of substantial public-private partnership (PPP) projects for airports and transport infrastructure. One of the key deals in this area is the €2.9 billion Western High Speed Diameter in St Petersburg. On a federal level one partner notes that the federal road company has been developing concessions and in mid-2012 announced 15 projects in roads and tunnels.

Effort is being made to make the sector more attractive in the light of hesitant lenders. "There may be a possible change in legislation for the concessions law at a federal level to increase flexibility and on the state side governments are becoming more educated and learning how to make projects more bankable".

As with other areas, the Civil Code will have an impact on financing, most notably in terms of the effect security package, but it is hoped it will make the environment more attractive for international financing as it is "tidying some awkward laws," for example it is "currently not possible to take security over a bank account and you can't have a central player building security (pledge manager) on behalf of a group of stake holders," says a lawyer. A project finance law is also under consideration.

MAJOR LATERAL HIRES

Igor Gorchakov
From: Baker & McKenzie
To: Allen & Overy

David Griston
From: Clifford Chance (Moscow)
To: Clifford Chance (Amsterdam)

Alexander Currie
From: Herbert Smith Freehills (Moscow)
To: Herbert Smith Freehills (UAE)

Oli Charlesworth
From: Akin Gump Strauss Hauer & Feld
To: Norton Rose

MAJOR LEGISLATION CHANGES

Civil Code
Pending

Project Finance Law
Under consideration

RISING STARS

Freshfields Bruckhaus Deringer
Fedor Teselkin

Morgan Lewis & Bockius
Alexander Marchenko

Norton Rose
Theodorous Zafiropoulos

CONTEXT AND TRENDS
As was pointed out last year, the market has been more occupied with refinancings than core restructuring and insolvency work. "The giant restructurings of 2009 have petered out," says one lawyer, and "companies like Rusal have stabilised"....

CONTEXT AND TRENDS

As was pointed out last year, the market has been more occupied with refinancings than core restructuring and insolvency work. "The giant restructurings of 2009 have petered out," says one lawyer, and "companies like Rusal have stabilised". The result in the last 24 months is that this type of work has "dried up a bit".

2011 saw a number of transactions relating to the agricultural industry, where a grain ban from Russia following a drought put a heavy load onto grain producers. One such deal saw the restructuring of a $60 million facility to Russian grain producer Nastyusha. There was significant activity for business related to Ukraine.

Examples of such deals include the Ukrainian based steel company Interpipe Group, which restructured of 21 facilities totalling $667 million, and one of Ukraine's largest producers of hard coking coal Donetsksteel Iron and Steel Works, which has to restructure $850 million of debt with BNP Paribas, UniCredit Bank, ING Bank, Citi, Raiffeisen Bank International and Sumitomo Mitsui Banking Corporation.

Another active sector was in relation to airplane leases, while individual deals across the board also surfaced, such as the restructuring involving real estate company Mirax Group, which restructured $400 million of a public debt.

"Russia doesn't have a London approach to restructuring where at a sensible point in time in advance you negotiate with banks to restructure facilities or settle, we don't really see that," explains one local partner, adding that "it's either denial… or a 'gloves off' situation where you switch to injunctions and suing in offshore courts, and there is an 'ambulance approach' from the state".

MAJOR LATERAL HIRES

Igor Gorchakov
From: Baker & McKenzie
To: Allen & Overy

Irina Maschlenko
From: Allen & Overy (Moscow)
To: Allen & Overy (New York)

Oleg Arkhipov
From: Hannes Snellman
To: Goltsblat BLP

MAJOR LEGISLATION CHANGES

Civil Code
Pending

RISING STARS

Linklaters
Dmitry Suschev