The below article contains extracts from the Lexology Insights 2019 Moscow law firm compensation, benefits and billing report. The full report contains compensation, benefit and billing benchmarking data for all levels of fee-earners and business support staff.  

A summary of the full report can be found here. To purchase the report or for more details contact Gwilym Davies at GDavies@GlobeBMG.com or call +44 (0) 20 7940 6858.

Legal market trends and conditions – Russia (Moscow)

Moscow continues to present a uniquely challenging market for international law firms; maintaining a thriving presence in post-sanctions Russia has become a test of stamina and dedication for even the most successful outfits.

International law firms recently managed to survive an existential threat in the shape of the Ministry of Justice’s 2017 “Concept for Regulation of Professional Legal Support Market” – a draft document which, although now shelved, contained a proposal to prohibit the operations of foreign law firms in Russia. Despite this, there has been little let-up in the resilience required to survive and prosper in today’s Russian market. Protracted US and European sanctions – and the Russian government’s counter-measures – have succeeded in reducing new US and European investment in Russia to minimal levels, forced many companies out of the country altogether and effectively barred international firms from representing many Russian companies and individuals. Meanwhile, those US and European companies that remain committed to Russian investment are increasingly finding themselves mired in the red tape of new regulatory and compliance laws contrived to make life as difficult as possible for them. Asian and Middle-Eastern investment – seen by the Russian government as less hostile – is increasingly taking the place of US and European; while Russian state-owned entities now dominate the transactional markets, much to the detriment of most international law firms.

Aware of the growing regulatory pressure on foreign businesses, many international law firms committed to the region have been busying trying to localise business operations in preparation for further potential legislative threats. Expat lawyers – who once made up a significant portion of the local legal community – are becoming an increasingly rare sight in Moscow, with a growing number of international firms having phased them out entirely from headcounts in Russia. Management teams and business entity titles are also changing as firms seek to localise to a degree which they hope will move them out of the line of fire of any possible further anti-US/European regulatory crackdowns.

Despite these challenging circumstances, 2018 still represented a year of relative success for a number of the surveyed firms in terms of revenue and profit growth. However, such growth was often driven by external factors, such as shifting currency exchange rates – another wild variable that firms have had to contend with in recent years, although one which has stabilised somewhat in the past year. Unfortunately, even those firms that enjoyed relative success of late seem unable to look to the medium term with anything other than pessimism, since there remains no discernible end in sight to the economic and geopolitical issues that continue to dog the international legal services market in Moscow.

Compensation and human resources trends – Russia (Moscow)

Provided that lawyers meet performance targets, they will typically advance up a seniority level in lockstep compensation grids annually. The average annual salary increase for a lawyer advancing up a level on a lockstep grid in Moscow during the first 14 years of practice is 15% (including any jump from paralegal or trainee to associate status). For associates (not including associate trainees/paralegals), the average annual salary increase is 12% during the first 11 years of associate status.

Headcount growth – Russia (Moscow)

Fee-earners

  • Mean annual headcount turnover: 12%
  • Percentage of firms surveyed that increased fee-earner headcount during the past year: 40%
  • Mean percentage growth in fee-earner headcount (among firms that grew): 8.6%
  • Mean net percentage change in fee-earner headcount (among all firms): -0.4%
  • Median net percentage change in fee-earner headcount (among all firms): 0%

Support staff

  • Mean annual headcount turnover: 7%
  • Percentage of firms surveyed that increased support staff headcount during the past year: 0%
  • Mean percentage growth in support staff headcount (among firms that grew): n/a
  • Mean net percentage change in support staff headcount (among all firms): -5.4%
  • Median net percentage change in support staff headcount (among all firms): -2.6%

Billing trends – Russia (Moscow)

Based on the latest Moscow survey, like-for-like average hourly billing rates among associates of the same level at the firms surveyed tended to increase by an average of 5% over the past year (in US dollars). It remains fairly standard for individual associates’ billing rates to increase annually, based on increasing seniority. The average annual step increase is 9% during the first 11 years of professional practice (after any period spent as an associate trainee/paralegal).