What’s happening in the Ukraine is a tragedy. We all feel horrible about the devastation being wrought upon the Ukrainian people and we’re all trying to do our part to make the horror stop. And the’s why US companies are extricating themselves from Russia. They’re trying to apply pressure any way they can. And large law firms are trying to do the same thing.
Laws firm who represented Russian interests in US courts, are trying to withdraw from representing those clients for the same reasons that big companies are walking away from their Russian operations. But note the key word I used there — trying. Law firms aren’t traditional businesses, and they can’t just dump their clients when the feel like it. No, lawyers have to comply with Rule 1.16 if they want to withdraw from representation, and that’s causing a real problem for firms who are trying to get out of Russia.
Rule 1.16 explains when a lawyer can ethically withdraw from representing a client. Subsection (a) talks about the instances where a lawyer is required to withdraw, and subsection (b) sets forth those instances where a lawyer is permitted to withdraw.
That latter section contains a variety of reasons that a law firm could rely upon to justify their withdrawal from the representation of Russian clients. Consider subsection (4). That allows a lawyer to dump a client when the client does something that, “the lawyer considers repugnant or with which the lawyer has a fundamental disagreement…” Rule 1.16(b)(4).
But these firms can’t just look at Rule 1.16(b) and say, “ok, you’re doing something repugnant…I’m out!” They can’t look at any part of subsection (b) and just decide they’re going to walk away. That’s because, practically, they have to get court approval to withdraw from a matter. And when the court looks at that application, the court’s going to ask whether Rule 1.16(b)(1) has been complied with. That section only allows withdrawal if it, “can be accomplished without material adverse effect on the interests of the client…” Rule 1.16(b)(1). And that’s where these firms in Russia are having a problem.
For instance, firms that are representing Russian banks in matters pending in US courts are trying to withdraw from their cases. Not only might the firm think that representing a Russian interests is something they don’t want to do, but these banks are also now on the sanctions list, which means that doing business with them could violate the law.
But the courts are resisting. In some instances firms have worked on matters for years and trials on those cases are imminent. Letting the law firm out so close to trial could cause great hardship on the clients. If a court in the US tells these firms that they can’t withdraw, then the ethics rules require them to listen. Rule 1.16(c) states that if a lawyer is ordered by a tribunal to continue representing a client, “a lawyer shall continue representation notwithstanding good cause for terminating the representation.” Rule 1.16(c).
Some international firms have an added issue. If they’re required to continue to continue to represent certain clients they could be doing so in violation of the law in other countries.
In the UK, for instance the Solicitor’s Regulation Authority reminded lawyers that, “the financial sanctions regime prevents law firms from doing business or acting for listed individuals, entities or ships…If an individual is on the sanctions list and subject to an asset freeze, firms may not deal with those funds or make resources available to that person…” They warned that “breaching the financial sanctions requirements can result in criminal prosecution or a fine.
How this will all play out is unknown. Law firms are going through it right now. There are arguments that the firms will make to try to get out — if a client is on the sanctions list the lawyer’s continued representation could mean that their services are being use used in furtherance of a crime in violation of 1.2(d). Or maybe a firm could argue that they’re being used by their sanctioned client to launder money in an effort to get around the sanctions, so they should be removed as counsel. But how do you do that without violating confidentiality? All I can tell you is that the firms are going to pull out all the stops to try to get the courts to let them out, and it’s a mess.