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. Last Updated: 07/27/2016

New Advocacy Law Wins Few Local Advocates

VedomostiUnder the new advocacy law, lawyers admitted to the arbitration court are barred from working for commercial entities.
Russia's first real legislation regulating the legal profession has had top legal and consulting firms -- and even some advokaty, who nominally benefit -- up in arms since last year.

A challenger stepped forward only this week, as oil major Tymen Oil Co., or TNK, took the laws to court.

The advocacy law and the Arbitration Procedural Code give advokaty, or lawyers who have been admitted into a special chamber and are roughly equivalent to trial lawyers or barristers, and company employees the sole right to represent companies in arbitration court -- which in Russia is where economic or commercial cases are heard.

The new law defines an advokat's work as a nonprofit activity -- some say illogically -- and bars advokaty from working in commercial entities, such as law and consulting firms.

The legislation thus technically prevents, say, a firm that has seen its corporate clients through tax audits from representing them if they take their tax issues to court.

The law also prevents the in-house lawyers at a head office from representing subsidiaries or sister companies and vice versa.

For major companies like TNK, where lawyers at the head office tend to handle top dollar cases and lawyers at a subsidiary represent the parent and sister companies in their region, calling in an advokat from outside means the company must pay extra for someone less intimately acquainted with the case or the local court.

Natalya Kharitonova of Leks, a Tyumen consulting company that has signed one of the three complaints initiated by TNK and submitted it to the Constitutional Court, said the advocacy law and the article in the Arbitration Procedural Code violate the Constitution by depriving law firms of the right to engage in business activities and clients of the right to choose qualified legal defense.

Kharitonova would not comment on the complaints themselves, referring questions to executives, who could not be reached for comment.

The legislation "both narrows the right of legal firms and impinges on the interests of the consumers of legal services," said Sergei Nosov, a senior manager specializing in trial law at Ernst & Young.

Mikhail Barshchevsky, a well-known advokat who will defend the legislation against TNK's attack, said the new legislation is about respecting the judiciary and thus is a necessary step toward reforming the legal system and keeping those ignorant of the law from clogging the courts.

"People who are highly educated, have passed special exams and are members of an advokat collegium should be the ones representing others in court," business daily Vedomosti quoted Barshchevsky as saying.

But the law itself defeats the goal of keeping nonprofessionals out of court, opponents argue.

"Advokaty must have a legal education, but employees can be from the cleaning staff. A receptionist with no legal knowledge can represent the company in court," said Dmitry Kurochkin, a lawyer at Herbert Smith in Moscow.

He argued that a more effective measure would be to allow only lawyers with a diploma from an institution of higher learning to appear in court.

Others asked why, if the goal is to close the courtroom to nonprofessionals, have advokaty been handed over the more lucrative corporate arbitration cases and not individual arbitration cases or criminal cases.

"An advokat monopoly is not a novelty for foreign lawyers," said Yevgeny Reyzman, a partner at Baker & McKenzie. "Our concern is why this monopoly is so selective, why does it operate only in arbitration, economic, procedures?"

The law funnels litigation fees into trial lawyers' pockets, somewhat making up for the limitations puts on the profession, Kurochkin said.

"The law seems to be the result of Russian trial lawyers' lobbying to limit competition on the Russian legal services market," he said. "This law simply gives advokaty an extra source of income."

Not so, said Genri Reznik, one of the country's best-known advokaty, who has defended exiled tycoon Vladimir Gusinsky, former Sibur president Yakov Goldovsky and German journalist Klaus-Helge Donath, who was sued for criticizing a song praising President Vladimir Putin by the author.

"The status of advokat not only conveys the right to sell your services, it's a responsibility," Reznik said.

The law provides a stimulus for the best and brightest to become advokaty, he said, because the profession cannot compete with higher paid positions at commercial law firms because of the attendant responsibilities, including following a soon to be developed code of ethics, observing confidentiality and providing pro bono criminal work or contributions to others who represent those who can't pay for representation.

A number of advokaty have complained the legislation infringes on their rights.

"What bothers me most as an advokat is that the law prohibits me from working at a law firm," Leks' Kharitonova said.

Barshchevsky, Reznik and others say the legislation follows international practice, whether in defining the goal of the legal profession as providing high-quality, qualified legal advice, not making money, or in creating a monopoly of professionals. Opponents agree the law takes Western practices as a model, but they also say it fails.

"Russian lawmakers want to develop the market along the lines of the West but without taking into account Russian reality," Ernst & Young's Nosov said.

"In Russia, there is a single procedural norm for all constituent regions in the Federation and for the two types of court: arbitration [economic or commercial] and general jurisdiction. The legal system has no specifics that make a special admission system to certain courts or jurisdictions necessary," he said.

"The funny thing about the law is that it reads pretty Western but doesn't work that way," Reyzman said. "It seems the lawmaker was thinking of the structure of advocacy in Germany about 20 years ago. But that has changed severely because there has been a recognition that this is just not the way to do it."

He said the law makes structuring a full-service law or consulting firm harder, though hardly impossible.

Since the Arbitration Procedural Code and the advocacy law allow companies to be represented by their own employees, and the labor laws allow a person to work simultaneously for several companies, a lawyer could work in a consultancy firm and as an employee of another company for a set period.

Alternatively, although advokaty can't work for legal or consulting firms, they can form contract relationships with such firms -- as many former employees of law and consulting firms already have.

"The law is far from airtight," Nosov said.

In part, this may explain why no one else has taken the very political step of challenging the law.

Still nearly all welcomed TNK's initiative and hoped the Constitutional Court would accept the complaints, forcing lawmakers to amend legislation.

Kurochkin said, circumventing the law "is not honest, it's unnecessary."