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Hans Albers – senior director and associate general counsel EMEA at Juniper Networks International BV– on the challenges and pitfalls of doing business in Russia.

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  • No one will be surprised if I say that doing business in Russia is complicated and that a European lawyer supporting their company faces some interesting challenges!

    Russian colleagues will always tell you that in Russia “things are done differently”. On hearing that most lawyers will immediately wonder whether they are euphemistically referring to corruption, but it is far more complicated than that. Because what they are really talking about is “blat” or… the use of personal, informal networks that are used for obtaining certain goods and services and the way they will always try to circumvent formal procedures.

    In the days of the old Soviet Union, when almost everything was in short supply, this was the only way to get things done but keep in mind that this is still very much part of the Russian mindset and the way they like to do things. I have a come across this numerous times over the past few years – especially when it comes to dealing with matters like export and import licenses, customs duties and shipments. However, it’s important to note that according to recent data, 90% of all bribes paid are dealing with clearing these kinds of ‘obstacles’.

    Let me give you an example, which happened not that long ago: in our business we had changed the way we were exporting our goods to Russia which meant we now had to handle customs clearance ourselves. This immediately meant shipments came to a halt because our paperwork was wrong and misleading, according to the authorities. They needed copies of underlying purchase orders and contracts, which we – of course – duly supplied. We also made sure they were signed and stamped because the authorities do like their stamps; it makes it look official, I guess.
    Anyway, we altered our processes and things went fine for a few weeks but they then changed the rules again. The shipment papers now needed to state the size and weight of every box. I am using this example as a way of demonstrating that you constantly need to be aware of how the administrative process can change at will. The sceptic in me believes this is mainly done to facilitate (or even) encourage bribes. That’s one way to beat the system but it’s most certainly not acceptable if you want to comply with the law, regardless of whether that’s the US Foreign Corrupt Practices Act, the UK Bribery Act or local anti-corruption laws.

    It goes without saying that you will need good contacts to try and figure out how best to comply with changing rules. If you are patient and try to work it out, you can solve the issue and move on whilst staying well clear of any bribes. As I said, my Russian colleagues would – however – always tell me that we didn’t understand how things were done; that things were ‘done differently’ and we got it all wrong but without getting into a lot of detail about what we were doing incorrectly!

    My advice is to keep asking a lot of questions so you get a full understanding of the issue but be aware that you will not always get a consistent answer. This made me – as a Western European lawyer – nervous and certainly suspicious. It always gave me the feeling that I was not getting the full story and that more was involved.

    To sum up, historically the Russians may have had (or maybe still have…) good reasons to keep the authorities a bit in the dark on how they make money in their businesses and where they keep the proceeds. My recommendation is really to be aware of that fact and that some unusual practices may exists under the surface.

    The onus should be on you to ask lots of questions and keep asking until you are satisfied and have the whole story.

    http://www.juniper.net

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