LittleLaw Looks At… Geopolitical Pressures Impacting Law Firms
May 31, 2022
4 min read
What’s going on here?
Law firms are being impacted by a range of geopolitical pressures that could change the way they do business in the future.
What pressures are impacting law firms?
Whilst law firms have always felt the effects of geopolitical and social events worldwide, pressures have mounted and are forcing law firms to take action. Key events including Russia’s invasion of Ukraine, US-China tensions, and a growing awareness of ESG (Environmental, Social, and Governance) factors are just some examples among many.¹
In the past, law firms – especially large commercial law firms – have tended to stay away from taking a political stance, helping any client through their legal issues. However, the expectations of how law firms should act are shifting, and law firms are increasingly expected to take more definitive stances.2
In addition to the growing external pressures, younger generations of lawyers seem to be more likely to demand that firms take action – with new generations come new ways of thinking. As younger lawyers move up through the company, getting into management positions, such demands could grow.3
How are law firms responding?
A key example of this mindset shift is demonstrated in how law firms have responded to Russia’s invasion of Ukraine. Many firms swiftly announced that they would be pulling out of the Russian market.
But not all firms responded in the same way. Whist some firms such as White & Case fully exited the Russian market,4 others took a slightly different approach. For instance, Clifford Chance closed its Moscow office and transferred all its Russian work to a new, independent firm called Bortkevicha & Partners.5 Dentons, DLA Piper, and Baker McKenzie all made similar decisions. Though the “spin-off” approach has been criticised by some for being more for show than to take a political stance, others argue that it protects those who have no responsibility for the war in Ukraine and would otherwise face significant financial and material losses.6 It is important to note that some firms simply chose to make no changes, and continue to operate in Russia.7
What are the implications of this?
One factor that has influenced how law firms have responded to Russia’s invasion of Ukraine is their respective business models. In particular, law firms operating a “Swiss Verein” model (where profit sharing is limited, but firms operate under a shared name) find it easier to split off into separate companies due to the financial independence of their offices.8 This flexibility also gives firms the option to reunite later on if they wish. Whilst this is not easy in terms of legal, financial, and administrative obligations, it is easier than firms that operate under a “one-firm” model, which have more extensive profit-sharing structures.
In the future, then, could firms look to more flexible business models to better manage potential geopolitical pressures? This is one possible way among many to ensure firms can respond to crises – Russia’s invasion of Ukraine is unlikely to be the last crisis that firms will take a stance on. But at the same time, clients expect stability from the law firms they work with – such decisions will never be easy.
LittleLaw's verdict: Choose the law firm that’s right for you!
There are two key schools of thought about whether law firms should be politically neutral. Whilst some argue that firms should avoid taking a political stance so as not to offend clients, others posit that firms must remain up-to-date with changing social and political dialogue.9 Whether law firms should take a firm stance or not remains up for debate.
But in the end, no matter how firms choose to respond to the pressures they face, it is clear that they are aware of the way the world is changing. Such a climate demands a response one way or another – even lack of action is perceived as taking a certain stance.
Report written by Selena Falcone
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- Reena SenGupta, “Law firms challenged to take political stance on clients” (Financial Times, 13 May 2022).
- Matt Reynolds, “Is there a way back for international law firms in Russia?” (ABA Journal, 18 May 2022).
- John Malpas, “Clifford Chance’s Moscow office to launch as independent firm with some job losses” (The Global Legal Post, 29 April 2022).
- Joe Patrice, “Law Firm Leaving Russia Has A Bit Of Trouble Describing Its Russian Spin-Off”(Above The Law, 25 April 2022).
- Scott Cummings, “Why Are So Many Big U.S. Law Firms Still Doing Work that Boosts Russia?” (Slate, 1 April 2022).
- David Thomas and Jacqueline Thomsen, “Law firm giants leave mini-firms behind with Moscow spin-offs”, (Reuters, 16 March 2022).
- Cindy M. Huss, “Political Neutrality: Smart or Dangerous?” (ICLE Community, 16 October 2017).