Sergey Pepeliaev: “A law firm should never be like a cobbler wearing the worst shoes”

Corporate structure

- What are the main areas of legal services offered by Pepeliaev Group? Which area do you believe to be the most important and most popular one?

- The company has traditionally been known on the market for its tax practice. The whole venture sprang up from tax advisory. At present, out of 160 lawyers working at Pepeliaev Group, 85 specialise in taxation. All our other practice areas are smaller in terms of lawyers. The quality of their services is, however, as high as that of the tax practice. In particular, our customs practice is very strong. It is headed by a former head of the Legal Department of the Federal Customs Service. We also have excellent practice areas in antimonopoly regulation, employment law, dispute resolution and mediation, and administrative law defence of business.
The demand for services largely depends on the general situation in business and even politics. For example, beginning from last year, the practice of antimonopoly regulation has been growing by leaps and bounds. The point is that the Federal Antimonopoly Service is extremely active at present. For this reason, we have developed new and appealing products for our clients. Specifically, we offer antimonopoly audits. Our lawyers perform virtually the same audits for clients as the antimonopoly authority would perform. Our task is to identify risks and give recommendations in advance. Another service is support of a client during an audit performed by the antimonopoly authority. It is very efficient when a lawyer who specialises in antimonopoly law and has repeatedly participated in such audits is present, together with the client’s in-house counsel, when the antimonopoly authority demands documents or explanations or performs other actions. In this case, the lawyer can react in a prompt manner and give advice on how to respond to these actions so as to comply with the law and observe the company’s interests.

At the end of law year, services offered by the practice of administrative law defence of business were in great demand due to fire-fighting compliance audits phased in at clubs and restaurants. For example, owing to the fire in a Perm club, the State Fire-Fighting Service began to close down clubs and restaurants with a vengeance ahead of New Year’s Eve. In view of this situation, we managed to offer our clients urgent assistance in contesting unsubstantiated resolutions.

Clients have also had a lot of questions about administrative liability for violation of currency legislation. Retailers had a number of questions concerning the Law on Trade and they continue to have questions in connection with the Customs Union.

- It would be interesting to know how a law firm organises its own legal support. Is it provided by the same lawyers who work with clients? Or do you have a specialised in-house counsel?

- By all means, it is very important for a law firm not to wind up like a cobbler wearing the worst shoes. Therefore, we devote considerable attention to well-defined and well-coordinated back office operations. We have five in-house lawyers. They do not participate in providing services to clients and are solely engaged in company affairs. In the first place, they work on contracts with clients and everything relating to this, i.e., confidentiality agreements, guarantee commitments, etc. For example, with the help of our in-house lawyers, we have managed to build a well-defined contractual work and conflict interest check to make the process as quick and smooth for clients as possible. Moreover, many foreign clients check internally their service providers in terms of business transparency, compliance with international standards, etc. I would like to note that there has never been a case when our company would fail such a check.

Secondly, our in-house lawyers are in charge of formalising Pepeliaev Group’s participation in various organisations. For example, our company is a member of two global legal networks, namely Terra Lex (a major association of law firms bound by certain business standards) and Taxand (association of law firms with well-developed tax practices). Our in-house lawyers have to respond promptly to enquiries received from the associations, ensure timely payment of membership fees, record commissions, etc.

Thirdly, our in-house legal counsel is in charge of maintaining economic contracts. As any other company, we purchase supplies, lease premises, etc. Needless to say, there is claim settlement work. As a case in point, a client might delay payment due to internal lack of coordination. In order to save the precious time of front-office lawyers, back-office lawyers are in charge of resolving such day-to-day issues.

The specifics of working for a law firm

- Many companies engage outsource specialists even if they have their own in-house legal counsel. What is the advantage of outsourcing a lawyer from a law firm?

- The point is that a lawyer working at a law firm has more opportunities to exchange information in his/her professional sphere and specialises in a particular area. For example, our tax lawyers specialise in taxation of specific industries: oil & gas, pharmaceuticals sector, banking business, production, etc. They have extensive court practice in their area of specialisation; they associate with colleagues from professional community and other companies. Thus, they always know what is going on in a certain market, which audits have been started, and what is to be expected from the actions of tax authorities.

Our company has built an infrastructure that enables every lawyer to always stay alert. We have a large library. Our librarians not only collect all legal books that come out, they also form, for lawyers of a specific practice area, lists of articles on topical issues in the relevant industry published during a month. There is also an analytical service. This service selects material in a similar manner and prepares reviews of court practice and draft laws. At a regular company, a lawyer would find it difficult to cope with all this without assistants, while it costs a pretty penny to hire additional employees.

Moreover, our specialists increase their professional level on a regular basis. There is a rule at our company: in order to advance to the next professional level (for example, for an associate to become a senior associate), in additional to the required experience, the person must take certain hours of internal trainings. In total, there are over 60 classes per year. Also there are partner courses. Each partner must deliver at least one training session for associates during a year. There are courses delivered by outsource specialists: judges, university lecturers and leading international experts. For example, at present, we are arranging a course to be delivered by a known specialist in international taxation, a professor from the Georgetown University, Washington, D.C.
Apart from extensive practical experience, our lawyers have thorough theoretical knowledge. Almost 30 lawyers at our company hold PhD and doctor of science degrees in law. Almost all our tax practice lawyers deliver lectures and one specialist works as department chair at the faculty of law at the Moscow State University.
Summarising the above, companies hire consultants when they need expert review in a narrow field and when they need additional resources to implement large-scale projects. For example, during the implementation of investment projects or construction of large production complexes, many specialists from various fields are required: corporate law, real estate, customs law, tax law, etc. Only a large law firm can provide these resources.

- Taking into consideration the narrow specialisation of your lawyers, how do you provide integrated legal support to a client?

- Our task is to make working with us convenient for a client, so that the client could solve all its legal issues in a prompt manner. It is easy to work with a person whom you already know and with whom you have already done business. Therefore, we assign a manager to each client. Lawyers themselves act as managers. The task of the manager is to listen to the client and understand the issue, find the right lawyer who specialises in this area and control the process of rendering services afterwards. In addition, this lawyer is in charge of timely billing the client. Needless to say, all technical work relating to billing is performed by our financial office. In order to issue an invoice, the lawyer needs to input timesheet data into special billing software on a daily basis.

- Tax law is an area especially known for collisions and gaps in law. How does your company develop a position on disputable issues?

- We accumulate all advisory memoranda and analytics in an internal digital archive. For example, written advice forwarded to clients by our lawyers is entered into this system without any client names. When a lawyer is working on an issue, he/she must first learn the advice we have already rendered on similar issues. If the lawyer disagrees with the advice given earlier, for example, owing to a change in court practice or law, he/she may express his/her own opinion. In this case, we get together, discuss the issue and elaborate a common approach in light of the new circumstances.

- In other words, during the discussion, you must elaborate a uniform opinion that will be something like an “official position of Pepeliaev Group”?

- Not really. The purpose of this discussion is to collect all the opinions existing on a specific issue, so that lawyers would know all the sharp corners. The task of a lawyer, when drafting a client memorandum, is to highlight all existing risks when resolving the issue. We do not conduct business for a client and do not take decisions for it. Our task is to reveal the whole range of risks and opportunities to the fullest extent possible. Moreover, if we induce our lawyers to hold a uniform position on a certain issue, we might miss a remarkably fresh idea. We would like to avoid this situation because a fresh idea can later lead, for example, to a grand victory in court.

- Let’s assume that a client turns to your company with a case known a priori to be a losing one due to unfavourable court practice. On the other hand, there is an opportunity to create a new precedent. Would you take up such a case?

- If you look at the attorney ethic rules that were effective in Czarist Russia or the modern Code of Attorney Professional Ethics, you will learn that a lawyer should never take up cases which are a priori known to be defeated in court. The lawyer must advise the client immediately that there is no chance to win such a case. Sometimes, however, even after such a warning, a client insists, that we take up its case. The question is why the client needs this and will the reputation of our company suffer or not? Therefore, such dilemmas are solved on a case-by-case basis. For example, after we won a highly complicated case for the Bolshevik confectionary factory, its manager wanted to know whether it was possible to recover expenses incurred from the defeated party, namely, the tax authority. We explained that, although the Constitution provided for this possibility, there was no positive court practice (the former Arbitration Procedure Code did not stipulate such a rule). Therefore, if we filed such an application with an arbitration court, we were certain to lose. We also explained to the client that having lost the case, it would be possible to apply to the Constitutional Court and try to solve this issue there. The client chose to take the risk. As a result, we made it to the Constitutional Court, which handed down the well-known Ruling No. 22-O dated 20 February 2002. This Ruling laid the foundation for the court practice of recovering considerable, though not the entire, legal costs from the defeated party.

Requirements on lawyers: high level of expertise and professional diligence

- How do you monitor the work of lawyers and the quality of their services?

- All outgoing documents are supervised by partners and heads of the various practice areas. The managers know employees very well; they know whose memoranda they have to check thoroughly, because the lawyer has not been with the company long enough, and whom they can trust more. As for quality assessment, there is employee performance evaluation twice a year. Each lawyer is evaluated by his/her direct supervisor, colleagues and back-office specialists to check whether he/she meets the plan, observes project timeframes and issues invoices on time; and whether the lawyer is proactive in marketing (this means writing articles and books, participating in conferences, round tables and committees on legal issues), etc. In addition, we conduct client surveys and questionnaires.

- What plans do your lawyers have to meet?

- As in any other law firm, our lawyers must work for a certain amount of hours and bill these hours to clients. The higher the position of a lawyer, the fewer hours he/she has to bill, since a substantial part of his/her time is dedicated to administrative and marketing work to promote his/her practice area and division. At the same time, we do not try to meet extremely high targets because we understand that an expert-level company should never strive to run a conveyer belt that churns out standardised legal solutions. We have a lot of projects that are not simply complicated, but unique, which no other firm takes up. For example, we represented the interests of constituent entities of Russia in budgetary disputes reviewed by the Supreme Court. Another example is our dispute resolution and mediation practice, which was one of the first in Russia to enforce a judgment passed by a foreign court. Our experts are also active in legislative drafting, are members of various expert panels which draft laws for the Russian Government and committees of the State Duma and the Federation Council.

- How do you sel ect new employees to maintain a high level of professional expertise?

- Virtually all our partners have grown up within the company. At present, new lawyers come to work at various positions requiring different skill sets. Sometimes we invite renowned and very experienced specialists. Before hiring, we carefully screen experienced specialists from top-notch Russian and foreign law firms and the real sector of the economy. They have to pass a rigorous multi-stage selection process, which involves testing and sometimes preparing an assignment. We examine the projects, in which the lawyer has taken part, which problems he/she has resolved and what his/her achievements are. It is important for us that he/she should be a true expert in the relevant field. We greatly appreciate if a lawyer is a member of professional associations, is experienced in delivering speeches at legal conferences and has many publications. This shows that the candidate is truly committed. Such requirements do not, however, stand in the way of those who would like to pursue a career with us. For example, we can offer jobs to students who have taken internships with us if we liked the way they worked and they can join our company after they graduate from university.

- Is it difficult for a lawyer who came from the real sector (in-house legal counsel of a company) to adjust to advisory work?

- It usually takes these people some time to adjust to the specific features involved in working with clients, as well as the billing and monitoring system. This is not fatal, however. I cannot say that lawyers from the real sector are that much different from lawyers advising clients, and that it is impossible to shift from one sphere to the other. We have several lawyers who used to work as in-house counsel and proved to be very good in advisory services.

Interviewed by Evgenia Yakovleva,
Leading Expert of The Corporate Lawyer magazine

Pepeliaev Group is the leading Russian law firm providing a full range of legal services. The company has over 160 lawyers working at two offices in Moscow and St. Petersburg. They render legal support to clients all around Russia and abroad. The list of regular clients includes over 800 large Russian and foreign companies. According to a rating organised by “The Lawyer European 100”, Pepeliaev Group was rated among the top 100 “most successful law firms on the European continent” in 2010 and in the top ten leaders among European law firms in terms of work efficiency and income per partner.

Sergey Pepeliaev was born in 1964 in Berezniki, Perm Region. In 1987, he graduated from the faculty of law of the Lomonosov Moscow State University. In 1991, he defended a dissertation to receive a PhD degree. He worked for major audit companies FBK and KPMG. From 1995, Sergey Pepeliaev worked as a senior research specialist at the Institute of State and Law of the Russian Academy of Sciences. Fr om 2002, Sergey Pepeliaev is the managing partner of the law firm Pepeliaev Group. He received the ranking “Best Lawyer of the Year 2010 in Russia” in dispute resolution. According to Chambers Europe 2010, Sergey Pepeliaev is the best specialist in Russia in taxation. He is an expert of the State Duma Committee for Budget and Taxes and is a member of the Scientific and Expert Board at the Federation Council Committee for Legal and Judicial Issues. Sergey Pepeliaev is a member of the Board of the Moscow Region Chamber of Attorneys and the Board of Trustees of the Fund for Assisting the Kremlin Museums.