How the political agenda is changing the form of the legal business

The transformation of the legal services market has accelerated dramatically in the last year. If its panorama was first determined by the conflict between companies over certain assets, and in general in a single country, today international political trends are increasingly driven by demand. In particular, the introduction of a transboundary carbon tax and, more generally, climate regulation, transnational taxes (column 2), a strict confiscation policy, and many others. Vedomosti was wondering what form the legal services would take.

Strengthening the ESG agenda and the emergence of new branches of law, such as climate regulation, both globally and nationally, have encouraged large companies to begin serious preparations for the realities of the future. Almost all Russian giants have already announced their intention to launch green projects. Starting with energy companies such as Rosneft, the company will update its development strategy in line with the climate agenda, ending with technology; for example, Yandex and Mail.ru Group started to report on ESG achievements for the first time.

Sustainable development projects or ESGs are considered to be one of the main drivers of economic growth – leaders in both developed and Russian countries are talking about this.

“Necessary <...> Low carbon development should be a source of growth and diversification for the economy, not a barrier to it, “said Economic Development Minister Maxim Reshetnikov at the 26th United Nations Conference on Climate Change (COP26) in Glasgow.

New trends in the economy are defining the legal market accents and are already actively changing. And not just in the context of the growing demand for legal aid for new ESG initiatives.

A fast growing market

Increasing specialization is needed to launch traditional investment projects, which are often ideologically at odds with the climate agenda.

While the green economy is strengthening, major U.S. law firms are offering more services to support primary sector projects, Reuters wrote in August, citing data from a Law Students for Climate Accountability report on global activist movements. largest law firms in terms of the green agenda). In fact, in 2020, the amount of projects supported by lawyers from the top 100 companies in the mining and energy sector was $ 50 billion more than in 2019, according to the report. The union takes into account data on the five-year period, if any, from 2015-2019. the total cost of these projects was $ 1.31 trillion, then in 2016-2020. It grew to $ 1.36 trillion. In addition, the number of lawsuits related to the mining industry business increased by 83 in 2020 (from 358 in 2016-2020), according to activists.

“At the beginning of my career, I felt more like a national lawyer,” recalls Andrey Gusev Borenius, a law firm partner. Customers first appreciated the knowledge of Russian regulations, and applied that specialization, he continued. There are now more and more inquiries under international law; in this case, it is not so much a matter of competence but of customer trust. This is a really growing new market, with the development of which “legal elites” should have no problem — regulation around the world is very similar, and not just in countries with a homogeneous legal system, such as continental or Anglo-for example. Saxon, Gusev summed it up.

The modern regulatory environment is developing very fast, now it is more important for legal advisers, more than ever, to be aware of global trends, agreed partner and head of KPMG Law Russia and CIS Irina Narysheva. In addition, it allows specialists to be at the forefront of growing trends: demand is growing not only from businesses, but also from the state, which is in the active phase of completing new legislation, he added. In particular, the KPMG participates in the Council of Experts for the Improvement of Corporate Law under the Ministry of the Economy, which allows not only individual invoices but also initiatives to complete the roadmap for adapting the legal system in general.

However, the impact of the ESG is still weak in practice, said Sergei Kovalev Kovalev, managing partner of Tugushi and the Bar Association. But in the future, the new demands will obviously be on new and regular projects related to climate change, which will have to be adapted to the new standards, he added.

For example, requests for adjustment of practices and corporate contracts to ensure ESG standards are met, but Gusev acknowledged that the process will begin to be actively developed within two years. The acceleration of the market is increasingly affected by the climate, not so much the global fiscal agenda, he added.

First of all, this is taking away the business of offshore companies because the conditions are worse and their discredit. The EU systematically adopts such measures, known as directives. For example, the last, fifth, approved in 2018, severely tightened the conditions for transparency of ownership. In addition, the OECD introduced tax reform, which entails an increase in the tax burden on large transnational corporations (columns 1 and 2). Alexander Shokhin, president of the Russian Union of Industrialists and Entrepreneurs, told Vedomosti that about 50 Russian companies are at risk of such regulation.

In addition to direct international initiatives, the actions of national authorities also have an impact on the formation of new markets for lawyers. Russia is also beginning to take active steps towards desoffshorization – in 2020, a campaign was announced to tighten capital requirements abroad: revising double taxation (DTT) avoidance agreements with well-known Russian business jurisdictions. to optimize taxes. They have already reviewed the DTTs with Cyprus, Malta and Luxembourg, they intend to denounce the agreement with the Netherlands, they have started negotiations for the Swiss adjustment.

At the moment, many specialists are structuring their farms to deal with the erosion of the tax base of the BEPS (OECD campaign – Vedomosti) and to ensure resistance to the discount requirements of many countries, Gusev said. According to the column regulations, the company expects to start making more and more structuring requests soon, but this is not yet the case.

The ongoing confiscation course helps to increase business interest in renovating the “offshore Russian” business headquarters, enabling foreign companies to move to Russia in a special administrative region (SAR), added Denis, partner of Egorov Puginsky Afanasiev. & Partners (EPAM) Arkhipov.

However, the active growth of the legal business market to adapt to columns 1 and 2 will begin within two years, Gusev believes. “I anticipate situations that will make requests for structuring within the framework of the Column regulations presented by a large group, but so far it has not reached the orders of the actual customers,” he said.

Right platform

Another new market for lawyers is the “platform law”, added the director of the University’s Institute of Business Law. OE Kutafina (Moscow State Academy of Law) Sergey Fomin. This is a non-national legal phenomenon, with Google, Amazon, AliExpress, etc. the right created by the owners of such platforms and which operates in a cross-border context, the expert explained. The standards, codes, and forms developed by large transnational corporations are often of equal importance – specialists in “platform law” are increasingly in demand. In addition, on both sides – both as a developer of this cross-border corporate legislation and as an advisor to the participants in these platforms, Fomin said.

Extensive digitization reinforces the importance of developing competencies in the field of digital economy regulation, agreed Arkampov of EPAM. As an example, the well-known case of FAS against Yandex and the consequent need to regulate the stock market.

In March, FAS Russia approved an agreement on the interaction between Gett and Citymobil taxi-aggregators, as EPAM partner Valery Eremenko recalled. Under the terms of the partnership, Citymobil drivers will travel under Gett’s orders in the economic segment, which will allow Gett to use a new aggregator model and focus on corporate and premium segments – support services were provided for this project. At the hands of EPAM, Eremenko said.

Law departments have an ever-widening list of operational challenges as digital transformation and regulatory change accelerate, according to a January 2021 survey of EY Law Practice and Harvard Law School by 2,000 CEOs in 17 industries and 22 countries in January 2021. In particular, digitalisation has been at the top of the list of priority areas for the transformation of the legal business.

At the same time, 50% of law firms reported that, according to survey data, the numbers have not changed in the last 12 months. And one in three notices that the technologies needed to improve their work are not being applied in their company.

Given that the simplest functions of economics and tax analysis will be gradually automated in law enforcement, the number of specialists in the field of consulting will be reduced and their activities themselves will be complicated, said Anton Ivanov, scientific director. HSE Law School, for sure. This will require specialists to be highly qualified to solve problems in non-obvious conditions and to take into account cross-sectoral factors, especially humanitarian ones, he added.

Consultants and auditors use many new technologies, agreed Alexander Ivlev, managing partner of EY in the CIS countries. There are many blockchain-based solutions for many sectors that use high-tech products for AI, robots for tax audits, etc., he noted. For example, over the next three years, EY expects to invest $ 10 billion more in technology worldwide.

The law is really more and more complex, institutions, paradigms, new constants appear in it, old constants begin to fall, the concept of the presumption of innocence has also eroded due to digital traceability, continued the Vice President of the Federal Chamber. Lawyers Elena Avakyan. The digital agenda is changing the market and the standards of the profession, but it is unlikely to die in the near future – all issues, especially justice, cannot be left to the machines, he concluded.

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