Canadian firms keen on investing in Russia ought to tread extra carefully to avoid stepping on legal landmines, says the Canadian lawyer for the imprisoned former head of Russian oil and gas giant Yukos.
"I think there's quite a degree of long-term risk (for energy companies) associated with making those types of investments," Robert Amsterdam said in an interview following a speech at a Fraser Institute luncheon in Calgary last week. "The tax situation on hydrocarbons alone in Russia is changing every day and you'd have to try to negotiate one hell of a deal to justify the types of risks that are going on.
"I haven't seen a stampede to Russia by anyone" despite the country's immense energy wealth, he added. "I think you'd call it the 'Yukos effect'; there's been a tremendous cooling off because of what has happened."
The Toronto lawyer, who helped represent Mikhail Khodorkovsky in what he calls a show trial, said the risks are very real when operating under a system where the "rule of law is nonexistent" and where corruption is part of the political structure.
Whether to enter the volatile Russian market is a decision that must be made by individual companies.
Amsterdam - who has worked on and off in Russia since 1975 - said that it may depend on the size of a company. If it's a small firm that is making a capital investment, it might be a foolhardy decision; if it's a sector-leading multinational firm, then staying out of Russia could be a mistake.
"It really depends on who you are," he said.
Khodorkovsky will soon begin serving an eight-year sentence after Yukos was charged with fraud and tax evasion, a charge the billionaire has said was politically motivated. Khodorkovsky will appeal his conviction to the European Court of Human Rights.
Two weeks ago, Amsterdam was expelled from Russia following a late-night visit in his hotel room from security officials shortly after a Moscow court upheld his client's conviction. He left Moscow after officials cancelled his visa and gave him less than 24 hours to flee the country.
Amsterdam also took aim at Petro-Canada's deal with Russian energy giant Gazprom.
The two companies signed a memorandum of understanding last fall to look into the feasibility of building the $1.2- to $1.5-billion US plant on the Baltic Sea. He is sour on the deal because, he said, there is "a huge political impetus" behind it.
"It's being shepherded by both governments and I think in and of itself that's a cause for concern, because Gazprom is an instrument of Russian foreign policy. It's not transparent. It doesn't adhere to normal laws of corporate governance, and that presents Petro-Canada with a real challenge," he said.
Amsterdam accuses the Canadian government of being "opportunistic" by ignoring serious breaches in the Russian legal system and human-rights abuses perpetrated by the Kremlin to avoid making waves and harming Canadian business interests.
"We are denying what is happening in Russia because we are all engaged in a race, unfortunately, to the bottom in terms of dealing with many emerging markets. The rule of law has gone out the window," he told the audience.
Gazprom recently indicated that it might scuttle the deal with Petro-Canada.
Amsterdam warned that Canadian companies are not immune to trumped-up legal charges, and said if entrepreneurs decide to invest in Russian projects they must take measures to ensure that what happened to his client doesn't happen to them.
He said without the rule of law and with rampant corruption in Russia, there is a lack of predictability that can quickly turn into a lack of safety.
Among the steps Canadian companies can take when looking to invest in Russia, he added, are: Finding the right partner for the deal; having good legal counsel; and not relying on Russian legal advice.
"One of the things I find amusing about international work is so many (Canadian) law firms operate on the idea (that) the lawyer who knows the company doesn't get involved in the international activity.
"Your relationship with your lawyer is a capital asset, and especially if he is adept with his international activities. Involve him and then get the benefit of a Canadian legal opinion."
Amsterdam also urged the audience to pressure Ottawa to take concrete actions against Russian corruption and injustice by writing their MPs, or paying a visit to the foreign affairs department.
(John Ludwick can be reached at ludwick@businessedge.ca)
