Although January was “a little bit quiet in the market” in Russia, February was more promising, according to Eric Michailov, Partner at White & Case Moscow, who reports seeing more deals and new investors coming into the country. “I am particularly optimistic — even more so than I would have been six or twelve months ago,” he says. “Business is good. Not great — it is not a full easy go — but pretty good.”
Despite the ongoing sanctions levied by the West against Russia, Michailov sees a positive trend among investors coming not only from China and Middle East, as it was in the early years of the sanctions, but now also again from Western Europe and North America. On the question of what’s behind that change, he refers to the stabilized conditions in the country. “I think they have seen that the situation in Russia is the new normal. Everyone understands sanctions and how they work, and so after a couple years of readjustment, Russian deal-making is increasing again.” He says: “I anticipate it will be so next year as well.”
The majority of investors, both local and foreign, are focusing on e-commerce, real estate, and infrastructure, with the natural resources sector losing ground after a number of large recent transactions. Today, Michailov says, all Internet-based businesses, both finance and retail, are growing rapidly, and thus attracting investors, as in these fields Russia’s technology is of prime quality and offers auspicious platforms in the field. “Investors are taking a look at any business right now with an ‘I’ in front of it, or anything related to block chain,” he says.
The sector has drawn the attention of the government too. Although there have been no recent significant legislative changes in the area in Russia, the country’s Ministry of Finance has proposed a bill on Initial Coin Offerings that Michailov defined as “quite sophisticated.” The draft law, which was introduced on January 25, 2018, aims to regulate and define the scope of cryptocurrency actions. The bill is expected to come into force this year after it passes the Russian State Duma and Federation Council.
Although there is a lot of talk about cryptocurrency in Russia, Michailov does not expect it to have a significant impact on law firm M&A and corporate work anytime soon, but he agrees that, once it is appropriately regulated and widely practiced, “it will be an interesting experience.”
A proposed reform of the professional legal services market — which White & Case, as a member of the working group, is helping prepare —may be more immediately significant to the country’s high end legal services market, although Michailov says he is unsure of the final outcome. “I anticipate there will be an impact,” he says. “But what kind of impact? International law firms have been regulated equally with Russian law firms in the past twenty years. I do not know if this will change or not.” The draft concept of the professional legal services market was released by the Russian Ministry of Justice on October 24, 2017.
Although the presidential elections are coming up in a few weeks, Michailov says “this shouldn’t impact transactions in Russia.” The only thing he says is needed from the election is certainty for the coming several years. In his words: “I hope that it will be business as usual after March.”
