Category: Russia

Bardugov Alexander is the Head of Legal of Banca Intesa in Moscow, a role which he has held since 2013. He first joined Banca Intesa in 2004 as a Junior Legal Counsel, gradually progressing to Head of Sector for Banking Operations Legal Support in 2008, Head of Legal Support for Retail and SME in 2009, and Head of Business Legal Support in 2010.

CEELM: Let’s start with what it is that you are managing precisely. How large is your team and how is it structured?

ALEXANDER: We’re a team of 25 lawyers in total, with some working in our Moscow office and some spread across the country. Russia is rather large, and that spread was necessary to comfortably manage the time differences we need to deal with. 

We have three main areas: Business Support, Litigation, and Corporate Governance. In addition to these we also have one lawyer in charge of labor disputes. 

CEELM: I assume the last one is the smallest. Which one is the largest?

ALEXANDER: Indeed, the labor disputes “team” is the smallest –  but it does not mean that it is less important. The Business Support squad is the largest one. 

CEELM: Do they all report to you directly?

ALEXANDER: Each of these directions has a specific head and the members of each report to them first and foremost. Of course though, if there is a crisis, I may decide to take a direct reporting line. 

CEELM: What is your preferred approach? Do you prefer hiring young lawyers and grooming them or bringing experienced professionals on board?

ALEXANDER: If we can afford it time-wise we’ll bring on young lawyers and help them grow in our structure. I myself first came to the bank in 2004 as a young lawyer, and some of the most important members of my team have been working here for about ten years. There are times, though, when we need to hire a senior lawyer, such as when we identify a gap in knowledge we need for complex matters. Another resource we might feel we have a deficiency in is time – sometimes it simply takes a long time to grow a lawyer and we have a human capital gap. 

That said, our lawyers are subject to regular assessments and those that show the potential for it are promoted internally, or even offered to come and join us in the HQ if they are based elsewhere in the country. 

CEELM: You mentioned some of your lawyers have been with you for over a decade. What are the most useful tools you’ve identified in terms of retention?

ALEXANDER: Simply put, I try to create an atmosphere and workflow that allows lawyers to feel that they are a part of something big and something important. 

I also try to be constantly thinking about equity and fairness in the relationships between employer and the employees and I try to give them a balance between the work they have on their plates and their own lives. That, of course, is done while keeping in mind that sometimes we simply need to put in real effort and dedication. 

CEELM: How specifically do you foster that feeling of belonging to “something big and important”?

ALEXANDER: I do my best to task lawyers with not just routine work but also legally interesting matters that help them see they do more than just boring work. I try to expose them to projects that illustrate to them that they are at the forefront of the legal work – not just within our company, but beyond. For example, I rotate the biggest deals that land on our table between different lawyers so that each has a part in each big deal. I do this because I try to motivate them with the understanding that legal work is something that is both critical to the company’s operations and challenging in terms of both legal knowledge and creativity.

We also try to identify new skills that are not yet being tapped into within our team. For example, we tried to implement a level of automatization in our legal work for the deals of our bank, and for this project I tasked a colleague I knew had some relevant experience to step in. We ended up implementing the automatization without external input at the end of the day – a great instance of killing two birds with one stone, as she was engaged and excited to take ownership of the project and we kept costs considerably lower than they could have been. And indeed, she was very glad to have such a project and she took a great deal of care of it and was very engaged. You could see her satisfaction going through the roof, and at the end of the day we had a new automatization platform with electronic signatures set up, etc. 

CEELM: What other motivation tools have you found worked well for your team?

ALEXANDER: If I am invited to any events – especially those aimed at awarding in-house teams for excellence – I try to take a colleague with me to show him/her that our team is recognized in the market in various ways for the legal work we carry out. That’s something really useful in my mind – to use those opportunities to show the perception from outside of the team as well.

Another non-material tool I found that works wonders is our tradition of electing the best employee of the year within our company. I was thrilled when some of our lawyers had the honor of receiving this, not just because of their excitement, but also because it showed everyone on our team that we’re not just an invisible back-office function – rather, we’re an integrated part of the whole team. 

And, of course, it’s not purely non-material tools that we have at our disposal. For example, we work constantly to improve our work and make it more effective and efficient. Ideas that can help our team be more effective are always appreciated and we encourage team members to put them forward. If anyone has an idea that is implemented and is successful, that person has the right to expect a motivational bonus. 

CEELM: One of the common complaints with hiring new people for the in-house legal function – whether junior lawyers or senior lawyers coming from private practice – is their lack of business acumen. How do you overcome that?

ALEXANDER: We choose a mentor for this person. We quite rarely hire people that require a lot of additional specific legal education, but we try to give them a mentor to induct them into the working side of our business and our operations. That usually does the trick for us.

CEELM: What do you believe is the biggest challenge you are facing in terms of managing your in-house legal team?

ALEXANDER: There is a saying: “Being together is not to look at each other, but to look in one direction.” It’s about having all of your people in the legal team reach a common understanding with all the colleagues from the other functions and make them all look forward and look at specific situations with the same approach. The ideal is for that to happen instantly and naturally and not just have to push everyone each time to do so. We need to build that common ground in terms of understanding and evaluating situations. I supposed this is, in a general business-strategy sense, the biggest challenge. 

CEELM: Looking towards the future, what are the main things you believe will impact your team?

ALEXANDER: I think anyone would have a hard time predicting exactly what is going to happen. From my point of view, the main focus is on the new tools we have at our disposal. We will definitely continue to move towards digitalization of our work in general, it will greatly help us. However, I don’t believe legal work can be automated enough to replace standard legal analysis – but it can be digitalized to run much much faster. 

As such, one of our main goals is reworking our processes and work environment to “get more time.” For example, we aim to use automatization to “extract” additional time – which can then be reallocated to other projects, personal life, constant growth, etc. Why is time important? Because a lawyer needs some time to go through new information about laws, best practices, etc. If he/she is overloaded with the daily work routine, these are missed opportunities which will bring us to stagnation. By extracting time, people will be able to find time for their own growth, and that is another challenge we need to keep an eye out for in terms of managing our legal team.   

This Article was originally published in Issue 6.3 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Artyom Podshibyakin is the Head of Legal and Compliance of INDITEX Russia, Belarus, and Kazakhstan. Prior to joining INDITEX over a decade ago, Podshibyakin was a Senior Lawyer with IKEA MOS Retail and Property.

CEELM:  How would you define the role of a General Counsel today?

ARTYOM: The role here in Russia is in many ways similar to what you find all over the globe. A General Counsel is the person who is responsible to the company’s shareholders and management for ensuring the company is going the right way, in terms of predicting and working with legal risk at every level of the organizational structure. 

I refer to Russia in particular because one thing common in this country is that GCs tend to have a few additional tasks by default. Specifically, it is not uncommon to have Heads of Legal also be in charge of governmental relations, and compliance also tends to fall within their areas of responsibility. Of course, there are examples where these are separate functions, but that’s not really the norm.

CEELM:  How is role different today than what a GC would have been expected to handle in the past? 

ARTYOM: I see General Counsel dealing with more and more tasks which are increasingly further away from pure legal advice and compliance. I already mentioned that taking on compliance as well is commonplace here, but corporate governance matters are also increasingly added to the GC’s plate. 

And that’s not even going into everything that has to do with legal technology. If you want to keep up with your peers and deliver the best results you 100% need to start using the different legal tech solutions that are being made available – otherwise your value-to-cost ratio will significantly drop relative to your peers.

CEELM:  What are some of the tech solutions you’re using already or keeping an eye out for?

ARTYOM: A good example is Kira, which is dedicated to contract analysis. It is utilized more in the US and EU (there’s no Russian version yet), but it’s a perfect example of a tool that makes a lawyer much more productive. 

Another example is software used to track court rulings. In Russia, 99% of court practice is publicly available, but how does one go about searching for something specific among the tons of documents? The “Casebook” software – which allows users to track particular cases and see the decisions at different court levels – has been developed to address this need. They even have a ruling prediction tool for cases where there is no decision yet. It literally tells you there is, say, an 80% chance the plaintiff will win in case X as a result of analyzing a particular judge’s track record and his and others’ past rulings in similar types of cases. It’s practical, and it actually works. Of course, I wouldn’t rely on it 100% since there are many things that can influence a decision.

Bots are also increasingly being used. We are working on our own, by the way: one that gives employees very sharp and concise advice related to consumer law.

CEELM: Do you feel these tools make the life of a GC easier or more complex?

ARTYOM: For sure, technology is not something that lawyers are used to incorporating into their work so there is a need to adapt – to learn something quite different. In many cases though, the General Counsel needs to take charge of these projects, even though, of course, the bot itself is usually developed by someone else. The GC needs to dig in and fully pilot the design of the bot –you cannot simply send an e-mail about it to a developer and it get done. The end product definitely makes handling the legal work easier, but getting to that stage turns a GC into an IT project leader.

CEELM: Why build your own, when there is already a plethora of solutions on the market?

ARTYOM: Yes, the number of solutions has been increasing, and I am 100% sure that to develop your own solution is not always the most efficient option. Quite the contrary, in many cases it can turn out that implementing an out-of-the-box, pre-built option is better. But we’re not writing our own up from scratch code either; we use a high-level bot constructor. You do not need to be a programmer to develop a bot with this tool. That does not mean you don’t need to put on your IT project leader hat and oversee proper deployment. 

CEELM:  What about the skill set a GC is expected to master? How is it evolving?

ARTYOM: The biggest demand is for business skills. In many cases these days, management passes on tasks that are no longer purely legal. For example, “go out and manage our trademark portfolio,” doesn’t just imply legal work, but also a thorough understanding of the company in this regard: how are the trademarks being used and what are the upcoming threats or opportunities? Then, at the end of the day, when management sees you are doing a good job at it, it often decides that your legal team, or part of it, is now a business unit that takes this function on. This is why increasingly you will see GCs leading functions beyond the classic legal ones, which requires a whole new set of skills. On the one hand that is burdensome for the lawyer, but on the other, it allows him or her to develop as a true corporate businessperson within the company – even if only to start understanding basic concepts related to the company’s economics, finance, ops, and so on. 

CEELM:  What’s on the horizon? What do you believe will bring about the biggest changes in terms of the GC role?

ARTYOM: I’m sure we’ll continue to hear of more and more things connected to artificial intelligence. Imagine a scenario in the near future when your CEO comes to you and asks you to look at a new digital twin of your power plant, say, and figure out the legal or IP matters related to it – but you have to tell him you have no clue what that algorithm means. The CEO will naturally turn to others, as you are outdated as his GC. That’s why I have been working constantly to understand more about AI and, for instance, digital twins as digital models of otherwise very expensive and complicated equipment such as a unit in the plant, using neural networks and machine learning. The complexities of these models is just one example of what I believe a GC needs to stay on top of. 

Another example is the ever-evolving topic of the ethics of artificial intelligence. We should start from a wide approach and there are interesting conversations already taking place that we should keep up with, such as those related to driverless driving liability in case of accidents, etc. Ultimately, I think science is always an important are of knowledge that a GC should stay apprised of.

CEELM: So what tools do GCs have at their disposal to do that? What are you using the most?

ARTYOM: There are already a lot of interesting conferences organized on these areas of interest – not just for lawyers but all sorts of business people. These are invaluable resources, and of course there are a lot of industry publications as well, but, ultimately, these days, one only has to open up YouTube to find a wide range of free lectures on these topics. 

And your most important tool: Your attitude. You need to be ready for changes and be flexible – that’s really what matters the most. As soon as you become rigid, things will start going south, and both you and your company will stop being competitive. 

This Article was originally published in Issue 6.3 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Almost 20 years ago, the Russian Government decided to develop a renewable energy sector and promote renewable energy projects in the country. These efforts brought huge investments and complex technologies to the Russian renewable energy sector, which now features major global industry players like Vestas, Fortum, Siemens, Enel, and Lagerwey.

The legal framework for this progress was set up in 2009, when the Russian Government approved the State Policy on Energy Efficiency (the “Policy”). It subsequently adopted the National Strategy for the Development of Renewable Energy, which became the basis for adopting more specific regulations. 

By establishing this new legal regime, Russia replaced the “premium scheme,” in which the government had proposed to motivate industry players through premium payments, with the “capacity supply scheme,” involving a pre-determined price paid by consumers to the capacity supplier. This price is based on the beneficial fixed tariff, which the supplier, subject to meeting the Russian localization requirements, can use for 15 years. This structure guarantees the return of the investment used for building and operating a renewable power generating facility within a certain margin (12-14%).

This legal regime covers photovoltaic, wind, small-sized hydro, and waste treatment power sources generating more than 5MW of renewable power. The capacity volumes are offered to potential suppliers at annual tenders, which are conducted for each type of power generating facility.

As mentioned above, the localization rules, aimed at expanding local production in the renewables sector, significantly impact the economics of renewable energy projects. These rules determine a certain percentage of the elements and components (or spare parts) of the energy generating facility that are to be produced in Russia. The bidder shall commit in its bid application to a certain degree of localization, and if it fails to reach that level, the price for its power supply will be significantly lower.

The winners of each tender must then conclude long-term energy supply agreements (CSAs), under which a capacity supplier must build its renewable energy generating facility within a certain timeframe and supply capacity into the Russian power system, where large industrial consumers will buy it. The mandatory CSA form is established by law and cannot be amended. 

Specific timeframes for executing the renewable energy projects are determined by the deadlines indicated in the respective CSAs. A failure to meet a deadline will attract a contractual penalty that will automatically be debited from the supplier’s account.

Potential suppliers usually create joint ventures involving global Russian corporations, foreign investors or technology owners, and local companies. The last of these are responsible for handling local issues during the development of the project. The use of such JV structures enables the creation of a strong team that can effectively resolve all issues that could arise during the implementation of the CSAs.

The existing structure is based on the Policy, which runs till 2024. When all the 2019 tenders are concluded, 95% of the targeted power generation capacity in the solar and wind sectors will be awarded to the tender winners. Therefore, down the road, this market is expected to receive new regulations to govern its activities beyond 2024. 

The current framework has generated much controversy. Large industrial consumers have objected to the extension of the Policy, instead calling for the adoption of alternative measures for supporting the renewable energy sector. The main reasons for their dissatisfaction are the price of the power capacity and the increase in the costs of implementing the Policy. However, from the other side, some key investors in the Russian renewable energy sector (such as Rusnano and Renova) have requested that the Policy be extended until 2035. These companies believe the Russian renewable energy sector is still too young to function under the general competitive rules of the Russian energy market applicable to the other sectors.

While the outcome of this dispute is unclear, the Market Council, which is the sector regulator, is working on a cross-solution based on the concept of Russian green certificates aimed at supplementing the existing structure. By selling these green certificates, consumers could reduce their total amount of payments for energy under the current support mechanisms, while for the power suppliers, the green certificates could be a source of return on their investments. 

Consequently, the Russian renwable energy market awaits future changes in the legal regime, which will provide a new impulse to further develop the industry. 

By Thomas Heidemann, Partner, and Anastasia Makarova, Senior Associate, CMS Russia

This Article was originally published in Issue 6.4 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

In recent years, Russia has experienced intense development in its automotive industry. After the dissolution of the Soviet Union and the subsequent deep economic crisis, it quickly became apparent that the Russia’s automotive industry was unable to meet the needs of the newly developing automotive market in Russia. National producers lost market share to foreign manufacturers despite high import custom rates. Russian consumers were not willing to buy technically outdated national products and were looking for foreign brands.

In this situation, the Russian government made the decision to incentivize foreign manufacturers to localize production in Russia by granting customs and VAT incentives in exchange for localization commitments. This legislation, known as “industrial assembly,” has led to a localization success story in the automotive industry in Russia: a significant number of the major international manufacturers as well as many suppliers to the international OEMs are today producing in Russia. 

The boom years came to an end with the financial crisis in 2008, followed by the Russian economic crisis that began in 2014. Russia has reacted with various supporting programs to subsidize local producers. The industry crisis hit bottom in 2016 and is now back to growth from a relatively low level. 

Nevertheless, it has become obvious that the system of industrial assembly based on customs advantages is no longer workable for the future as it is non-compliant with the WTO standards Russia is obliged to adhere to. In joining the WTO in 2012, Russia negotiated a long transition period for its customs incentive regime that protects localized manufacturers. This transition period expired in July 2018, however, and Russia still has to find an incentive scheme to replace the industrial assembly regime. 

Governmental Policies and Current Developments

The Russian government has outlined its ideas for future development in its strategic plan for developing the automotive industry in Russia by 2025. The main focus is on introducing innovative technologies and incentivizing export. 

The instrument of choice to replace the industrial assembly regime seems to be the so-called “special investment contract” (SPIC). A SPIC can be entered into between an investor and the Russian administration in order to set the specific conditions of an investment. As SPIC regulations are expected to be significantly amended, the administration introduced a memorandum on SPIC and refused to sign new SPIC arrangements in the first half of 2018. Later, as it became clear that amending SPIC regulations would take more time, new SPIC arrangements were offered to investors. In the automotive sector, a significant number of new SPIC arrangements have been entered into. In general, OEM’s are committing to certain investments by setting up new production facilities or modernizing existing production lines. 

New SPIC regulations will come into place starting in 2020. New rules will presumably require tender procedures for entrance into SPICs. In addition, produced goods will be required to be suitable for competition in the world market or be unique in the Russian market. The main criteria will no longer simply be the creation of industrial products (of any kind), but the creation of new technologies in Russia

All incentives being discussed are subject to certain localization requirements. Under the industrial assembly regime, regulation No. 719 set out the specific percentages of the level of localization of production that are required. Now this regime will be replaced by a system establishing scores for certain localization measures and requiring a certain level of scores to recognize the produced cars as Russian. The scoring system is still under discussion, however, and it is not clear if it will come into force in its current version. 

Export incentivation mainly takes the form of reimbursements of transportation costs to local manufacturers. Discussions are under way to tighten the support and not provide manufacturers with lower localization rates access to such state subsidies, but no clear picture can be drawn at the moment. In addition, it appears that the Russian export initiative is not supported by other member countries of the Eurasian Economic Union, as they also would prefer localized production in their respective countries. 

Outlook

The automotive industry in Russia is back to growth after long years of recession. Nevertheless, due to the country’s accession to the WTO, Russia is forced to replace its existing incentive scheme with new schemes. This replacement is proving to be difficult and it is still unclear which solution will be finally adopted. The current recourse to SPIC arrangements is not necessarily the final solution.

By Thomas Heidemann, Partner, CMS Russia

This Article was originally published in Issue 6.2 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.