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Amid the tempestuous waters created by the global economy, changing regulations and geopolitical risk, the Russian legal services market is staying afloat. But what does the next stage of the voyage entail? Deloitte Legal surveyed the industry to find out what’s rocking the boat, and what the future holds for Russian legal departments, firms and practices.
The Russian legal services market can be considered somewhat mature, albeit relatively young and atypically structured. Its success has largely been based on a solid competitive edge, firm regional representation and consistent demand. Even so, this success is not impervious to the challenges the world at large is facing – arguably, the biggest one being digital transformation. Even the sturdiest foundation risks cracking if key figures are unwilling to embrace technological opportunities. In Russia, the market appears poised at the edge of change but seemingly unsure of taking the next step.
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Deloitte drilled down into this and other key issues in a study of legal firms and the legal departments of major Russian companies, conducting interviews and combing survey responses for insights. We found some contradictions between the opinions of legal firms and the companies that contract them. We also discovered a need for more individualised solutions to ease the transition into greater adoption of automation and legal technology (Legal Tech). There are many positive signs, but no guarantee that industry players will follow them.
Russia’s legal services market is primarily served by large Russian legal firms, global law firms and the legal departments of major companies. The latter group of respondents expressed a growing pessimism about financial growth, as well as a boost in staff numbers. They were somewhat more positive about the outlook for profit, with half of survey respondents saying they expect growth.
Legal firm respondents also expect profit to grow, stemming from more clients (not a rise in prices). This cautious optimism exists despite the continuing geopolitical risks affecting some of their key clients: the Russian divisions of international companies. However, like legal departments, firms that were interviewed and surveyed also said they do not expect the number of their lawyers to increase.
All contributors to Russia’s legal services market that were interviewed and surveyed agreed that tax advisory is a service in great demand. So why is it only offered by half the legal firms Deloitte surveyed? These firms spend most of their time supporting the resolution of complex problems, often regarding corporate law, mergers and acquisitions, and international commercial arbitration; these firms may be missing a key opportunity by not meeting requests for tax advisory services.
Legal departments and firms also agreed that working with each other does not always mean smooth sailing. Their collaboration often occurs when companies with their own legal teams lack certain resources or specialisation. However, they seem to have varying perceptions of precisely what causes problems when they work together. Legal firms argue that the peculiarities of the Russian legal system get in the way, while their clients maintain that quality and cost of services can make them wary of collaboration. By each party understanding the other’s point of view, it could be possible for them to focus on fixing the sources of frustration and thereby foster better working relationships.
Then, of course, there’s technology. The market shows awareness of how automating their business processes could bring benefits, but a reticence when it comes to implementing these technological solutions. Cost, especially to get started, was cited as an obstacle. Also, introducing advanced IT solutions is considered a higher priority. Moreover, there are some processes that just can’t easily be automated because of how the Russian laws are set up; investing in technology for certain systems – whether sophisticated or even basic – simply seems futile because it would not help. What’s likely needed is a more individual approach, one that is not currently offered by Legal Tech solutions.
The challenges to Russia’s legal services market are clear. Now it’s up to market players to gauge whether they’re willing to move forward in the face of uncertainty.
Read the full report, Russian Legal Services Market: Coaxing progress from uncertainty, for more.