Martin Solc: Challenges lie ahead for Russia’s legal market
The 8th Commonwealth of Independent States (CIS) Local Counsel Forum, which was attended by legal market representatives of the CIS and Europe, was held in Kiev, Ukraine, last week. The International Bar Association (IBA) was represented by its Secretary General Martin Solc, who is also a partner of Kocian Solc Balastik (KSB), one of the largest law firms in the Czech Republic. In the interview to RAPSI Mr. Solc spoke about the impending changes in the global legal market, as well as some uniquely Russian legal trends.
Vladimir Yaduta: IBA is known for its long-standing relationship with members of Russia’s legal profession, and the Association has played an active role in the work of the St. Petersburg International Legal Forum (SPILF). What is your opinion of the Russian legal market, and what are your expectations about its capacity and development?
Martin Solc: The question falls into several layers. First of all, IBA’s presence in the world of law is growing here in terms of contacts with Bar Associations in the CIS and the participation of IBA in various events, such as the St. Petersburg Forum where it has indeed played quite an important role. That’s one issue. Another one is that the number of IBA members that come from this part of the world is growing as well, and I encourage participants of this conference to join in. Finally, there’s a third layer which concerns the latest developments in the Russian market and how it looks in general from the outside. I’m not an expert here, but when I was in Moscow 15 years ago the local legal market looked scattered, with business mixed in various ways. The market was not quite legible; it was difficult to tell which firms could be relied upon to work with their international and foreign counterparts. That has changed to a great extent. The market has evolved to fit a more international standard. There are well established firms that are working diligently on the quality of service because they’ve invested too much into their brand, so they do not want it to be destroyed with one single mistake. The market has grown more sophisticated, and I am pleased with the speed at which is has developed.
Yaduta: Has IBA played a special role or it was more a self-regulation? How is IBA dealing with the national Bar Associations?
Solc: It is my personal belief that there are very few things that you can reasonably influence from outside. IBA operates through its Russian members. It’s very simple to come from other part of the globe and start pressing and dominating. Dmitry Afanasiev from Egorov, Puginsky, Afanasiev, & Partners (EPAM) was absolutely right in his opening remark today saying that many claim understanding, but very few understand. That is why IBA projects very much depend on the priorities of its members here. IBA is encouraging the dialog on the Rule of Law situation in Russia, and of course, it is a very sensitive issue. The dialog per se helps to improve the situation. This kind of dialog is something IBA has great experience in and where the Association can offer its help. There are a lot of gaps which draw attention. In many countries of the region the profession is regulated in a very strange way. We heard this morning that Ukraine is a country where part of the profession is not regulated at all.
Yaduta: That is the problem Russia faces as well…
Solc: In some countries within CIS the profession is split, there are counsels, legal advisors, advocates, and I think that’s not the way it should be. But at some point in history it was also the case in France. In my country – the Czech Republic – it went till the early 1990s. We can share the experience and learn from the errors the others had on their way.
Yaduta: What are the challenges IBA and the legal market on a whole face nowadays?
Solc: There are some challenges which are linked to economic developments. And that’s not just something temporary, the market has changed. I was in New York a couple of weeks ago and met with people who are responsible for external legal services to global institutions. The way they now see legal services is miles away from the traditional vision of the legal profession. So it has become a highly commoditized industry from the point of view of some major clients. And that’s another great challenge for the profession. It may come sooner or later to my country or here, and that’s a matter of time. I’ve seen it before when some processes sprang in New York and London and were spreading sooner or later to other parts of the globe.
Then there is another set of challenges which are linked to technologies. When I first entered the profession we used to contact with clients over the phone and they expected to get the documents they needed in like three days. Nowadays I don’t know a client who would be so generous. Time is shrinking and we are still expected to provide good advice and take care of how the traditional values of the profession fit in; for example, how safe our clients’ data can be in all these virtual conference rooms, etc.
But there are a number of other challenges as well. Some of them are linked to globalization, others to the shifting of values.
Yaduta: And what about outsourcing? Does it create problems for the global legal market?
Solc: There is nothing wrong with outsourcing as such, but there is a problem with the way it’s sometimes handled. When you need the work to be done round the clock then it might be a good idea to outsource that work to New Zealand, for example. So the idea is not fundamentally wrong. You now see huge back offices in India as well with huge offices of lawyers there. And I wonder where the ethical standards of the business are, how secure it is to share client data with the back office as the counterpart may actually do the same. I am not sure whether there are sufficient safeguards of conflict check on the outsourcing side. I think we need to revise the ethical standards of the profession to take into account such elements as outsourcing, new IT solutions, etc. But that doesn’t mean we should abruptly say that’s not what we even want to explore. I think that’s unwise.
Yaduta: So, we just need flexibility?
Solc: We need flexibility, but we need to be strict when it comes to [following] the rules.
Yaduta: Which markets are booming in these drastically changing circumstances? Are there any shifts in the leaders of the market? Or will New York and London maintain their dominant positions?
Solc: Let‘s speak first about the client side of the legal services market. The largest long-term change is the growing influence of Asia. The statistics that show the proportion of volume of deals with Asian element back 5 years ago and forecasts for the next 5, 10 years reflect an enormous shift. However, that doesn’t mean that Europe is dying. That means that the European market is steady, with no significant growth while work related to Asia is just roaring. And nothing changes with the fact that the Chinese economy is slowing down. I think all of the European countries would be enthusiastic if their economies had undergone the sort of rapid growth followed by the slow-down that China has dealt with.
Looking at the clients' side of the market in Europe, I would not describe it as booming. To reinstate client confidence in Europe I believe there needs to be some clarity on where Europe is going.
And on the providers’ side, firms located in the business hubs in the English speaking countries continue to dominate. It is not surprising since English is more and more the language of cross-border business and legal relationships. But it is not only New York and London. You should add for example Singapore, Hong-Kong, Sydney. Besides, we all see the growth of large law firms in BRIC countries and other rapidly growing world economies.
Yaduta: Where does Russia stand here? How successfully has it integrated into the global market so far?
Solc: It depends a great deal on where Russia wants to go, and which direction it would like to choose. Sometimes I wonder whether there’s a bit of homework to be done in terms of defining which direction Russia should follow. In my view there’s still level of isolation that’s not impossible to overcome, it’s not a feature of the system. You know, law does not consist merely of law firms and the sophistication of the leading law firms, it’s also the quality and functionality of laws, the quality of the judiciary, decreasing bureaucracy, and increasing flexibility within the system. There’s still a challenge for Russia in this context. I’ve seen a huge change here, but it would be slightly optimistic to say the task is complete.