Michael Malloy, the Head of Intellectual Property and Technology for Russia at DLA Piper, first came to Russia in 1990, and he moved there for good in 1994. At DLA, where Malloy has been since 2008, he specializes in intellectual property and technology issues, and his work includes franchising, corporate law, media law, and technology transfers.
Run us through your background, and how you got to your current post.
M.M.: I am an American lawyer originally from Florida. I had an obsession with crafting an international career and started my legal career in Washington, DC. I started out in insurance litigation with a great firm in DC. I knew I needed to develop good lawyering skills and working on huge case litigation in a big firm was a great way to get started. Keeping my eyes on my goal of international practice, after a couple of years at that first firm, I jumped ship to another DC firm with more of an international focus.
This was back in the early 1990s when a lot of American law firms were looking to expand internationally and specifically into Russia and Eastern Europe, so there was a lot of interest in this part of the world, but few people knew what to do here! Bill Clinton came along in 1992 and ruined my job at that firm – he appointed my boss to a prestigious ambassadorial post and with that, the firm’s budding Russian practice ended. Faced with going back to domestic practice if I were to have stayed, I realized that the time was right to get over to Russia.
I started out managing a small consultancy in Moscow to get my foot in the door of the market and later went back to legal practice, this time with KPMG and Arthur Andersen where I focused on tax, corporate law, and market entry. There were two important trends at that time: the expansion of international businesses into Russia and the prospect of the big accounting firms taking on legal practice. At the time it made a lot of sense and I wanted to be on the cutting edge. I was recruited as a “real lawyer” into the Arthur Andersen legal practice and for over six years was involved. Andersen was a first rate organization and was developing a very good legal business, but then Enron came along and ruined everything.
This was actually a great thing for me. It inspired me to think out of the box about where to take my legal practice. I had noticed something interesting (this is back in 2001): IP and technology were certainly the most promising things going on commercially, but it seemed that technical specialists and commercial people had some trouble understanding each other. This applied to IP lawyers and commercial lawyers as well. It seemed that yet again I had noticed an opportunity and I decided that having been a commercial lawyer, getting into IP and Technology would be a really interesting direction for my career.
Taking this strategy forward, I joined the Moscow office of an excellent Canadian IP powerhouse: Gowlings. In the years with Gowlings, I learned a tremendous amount about IP and how to handle IP in a commercial context, but as my skills grew, I wanted to find a platform for a broader client base.
While doing a hotel franchise deal opposite the DLA Piper team, I realized that DLA Piper very well could be exactly the platform I was looking for, with technical excellence and a genuine global reach. I gave DLA a call and they shared the vision – an IP and technology practice with a commercial accent. I joined DLA Piper to lead the Intellectual Property and Technology practice group in 2008 and have been here since!
Was it always your goal to work abroad?
M.M.: It has always been my goal to have an international practice. I initially expected that I would work outside of the US for a few years and bring that experience home for an international practice, but things didn’t work out that way. I came to Russia more than 20 years ago and am still here!
Tell us briefly about your practice, and how you built it up over the years.
I have a really broad practice involving intellectual property, technology, and a lot of commercial work and negotiation. This negotiation aspect of the practice goes beyond the usual negotiation one might expect on a deal–by-deal basis. We have a significant number of clients who, after trying to finalize their transactions in Russia, call us in to close the deals.
In building up my practice, I have followed two principles: first, recruit and develop great people – nobody can do this alone, especially as a foreign guy in a foreign land; and second, never say no – there are too many lawyers in Russia who just say “it cannot be done” (the Dr. No Syndrome), but I have always tried to find ways to make things work.
I have considered practice development as a long-term strategy: 1) build the team; 2) build capability; and 3) build reputation. It all has to be based upon substance and built from the ground up.
Do you find Russian clients enthusiastic about working with foreign lawyers, or – all things considered (and especially in the current climate) – do they prefer working with local lawyers?
M.M.: This will depend upon the client and what they need, but as a general matter, if it is purely domestic work for a Russian client, it is almost always better to have one of our Russian lawyers lead the project. Generally speaking, though, as almost all of my Russian clients have some international activity or prospects, they are generally more than happy to work with foreign lawyers – provided that the foreign lawyers actually add value. In some ways, with Russian clients, I feel that as a foreign lawyer, I need to meet a higher standard to really add value.
Following up on that, how has the current political climate affected your practice, or your life in Moscow outside the office?
M.M.: The effect of the political climate has had nearly no effect on my life in Moscow other than the food imports. The quality of pepperoni on pizzas has suffered due to the sanctions.
There are obviously many differences between the Russian and American judicial systems and legal markets. What idiosyncrasies or differences stand out the most?
M.M.: I could (and still may) write a book on this question, but I will focus on three things.
First, Americans have a deep obsession with documentation. For the same transaction, an American might bring a 100-page agreement while the Russian party expects something around ten pages. My experience has been that Americans expect to have everything under the sun nailed down in a document so that the document is the embodiment of the agreement.
Russians, however, seem to rely more upon the relationship and what has been actually discussed and agreed between the parties. I have found over the years that Russians are very reliable when it comes to issues which have been discussed and agreed in the relationship while Americans tend to rely upon what has been written in an agreement document.
Here’s an example from franchise deals: Many franchise deals have a development schedule where the parties agree that the franchisee will open a number of units over a period of time. To an American, the development schedule is a rock solid binding obligation, so if the franchisee opens 11 units when 12 are written in the development schedule, the franchisee is in material breach of the agreement. To the Russian side, though, the development schedule is a goal to be strived for, but they realize that sometimes things don’t work out as planned. The Russian is looking at the relationship – “we are in this together” – rather than numbers written on a schedule.
I have seen this come up many times where the American side (usually the franchisor) is frustrated by a “material breach” while the Russian side (usually the franchisee) does not see it that way. In discussions, the Russians will often remark that it was never actually discussed that the development schedule was a critical part of the deal while the Americans point at the (usually very long and complicated) agreement.
The most important advice I can give to international people doing business in Russia is to respect the relationship and actually discuss every important issue – you cannot rely upon things “hidden” in the agreements.
Second, Americans and Europeans often have too great an expectation of certainty or specificity in the rules. We need to keep in mind that Russian legislation, the legal profession, and enforcement mechanisms have only been in place for a short time – since the end of the Soviet Union. Because of this, legislation is not always perfected, so the rules may not be written as well as they will be, and practices and precedents have not been fully established yet. In working with Russian law, one must accept that there is a different level of uncertainty than you can expect in more mature systems. This is temporary, of course, but building a legal system takes time.
Third is that enforcement of rights through the legal system is difficult. Americans expect a legal system where it is possible to achieve effective enforcement of rights through court actions (although it can be expensive and can take time), but that is not really the case for many commercial disputes (especially for breach of contract) in Russia. While claims move through the Russian courts more quickly than they do in the US, the process is radically different, and evidentiary rules place a very heavy burden on a claimant to the extent that cases which might be easy wins in the US are frustratingly difficult in Russia. I often have to counsel American clients that having something in the agreement document does not really mean that it will be easy to enforce. I tell them to go back to my first point that the best enforcement is avoiding the problem and that can be done only through the relationship.
How about the cultures? What differences strike you as most resonant and significant?
M.M.: Russia is a deceptive place for a lot of foreigners coming from the US and Europe. At first glance, Russia seems to run pretty much the same way one might expect in the USA or Europe – the cars, buildings, fashions, etc., all look a bit different but well within the norms one would expect. Business people act like they do in Europe, and many Russians have excellent foreign language skills, so initial interactions are also within the expected norms. This leads Americans and Europeans to expect that Russians think and operate just like “we” do and that there is no significant cultural difference to worry about.
That’s a big mistake. Russia has a very distinct culture and ways of doing things, and it is important to understand that.
My personal favorite difference between Russian and American culture is that we have different axioms. Every culture has its own unproven beliefs upon which a lot is invested. Russians have their own, too, but they don’t share those of the Americans. Being in Russia and with Russians has required me to question and consider these American axioms.
Here’s an example. In the US, we have deeply rooted belief that democracy is “good” and we don’t even question it. We take it as a universal truth. In fact, we justify a lot of actions on defending, promoting, or expanding democracy at home and abroad based upon this axiom. Russians, however, are not conditioned into this axiom and are mentally and emotionally able to earnestly question whether democracy is “good.”
What particular value do you think a senior expatriate lawyer in your role adds – both to a firm and to its clients?
M.M.: There should be three things a senior expatriate lawyer adds to the firm and its clients: 1) Cross-cultural understanding – the ability to help international clients understand how things are done in Russia in terms that they can understand – and the mirror opposite: helping Russians understand international counterparts; 2) Technical skill and judgment – this is probably applicable for any senior lawyer, but there is the added twist of the international component to be able to expand that judgment from experience in the local market and from abroad; and 3) Translating – not language so much as concepts and approaches. While there are lots of Dr. No lawyers who say things cannot be done in Russia, my experience is that with appropriate flexibility and by working together, it is possible to effect nearly (not all) everything parties want to achieve in a relationship. The key to this is to understand where each side is coming from.
I often view my role as being a bridge – I have to understand both sides of the river and find a way to bring people from each side to the other.
Outside of Russia, which CEE country do you enjoy visiting the most?
M.M.: Czech Republic. I love the architecture and vibe of Prague.
What’s your favorite place in Moscow?
M.M.: There is a groovy café called Ukuleleshnaya on Pokrovka. It is a café and club which also sells ukuleles. They also have great live music events. I have a band in Moscow and we play there often, so I like this place from a customer’s and performer’s point of view!
This Article was originally published in Issue 3.5 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.