— Mr. Marquaire, information was recently published on the internet, on the website of the Franco-Russian Chamber of Commerce, about the activities of CMS, along with your commentary, in which you say - I quote – “We predict a high level of business activity in the M&A (Mergers & Acquisitions) sector, because the situation in Russia is beginning to stabilize…” So you think the situation in the Russian economy is stabilizing?
— Yes, certainly. The investment climate in Russia today is more stable and calm than it was, say, two or three years ago. And on the whole, I think the Russian economy is now in a better position.
— In other words, in these conditions, the risks of investing in Russia are justified?
— I would say they are more justified than they were before. Prices have settled at a sensible level, which has created a unique opportunity for European investors to invest in the Russian market. And I must say that Europe is showing that it has the appetite for such investments. Of course, the approaches vary from one country to another. In some, they prefer to be cautious and wait. But France, for example, has been investing in Russia and is continuing to do so. The same can be said of Italy and some other European countries.
— Can you give any specific examples?
— I won’t name any actual firms, but I can point out the sectors in greater demand. Quite a lot of investments are being made in retail trade, which may sound rather unexpected. But if you look at real estate prices, now is the right time to buy new shops and warehouses.
Furthermore, the output of agricultural produce is growing rapidly in Russia. Food processing and the output of food products are in very high demand and developing further. And investments are going there. I know of several joint ventures in the process of being organized. Also, the Russian high-tech sector is developing with its traditional confidence. There are plenty of good companies in Russia. Therefore joint ventures are set up, and the process of mergers and takeovers takes place. As a whole, the market is redeveloping.
— But there is still tension in relations with the West. It is known that some companies have even decided to wind up their activities in Moscow and Russia. Do you have any of these among your clients?
— Only a few. Maybe three or four clients. And even they have not left altogether they have only partially reduced their activities. Most of them intend to stay in the Russian market. I cannot say that I have recently encountered clients who have given up investing in Russia because of political problems and international tension. Yes, some are behaving cautiously and thinking twice before taking any kind of steps, but on the whole, Russia shall not be considered a country in which it is dangerous to invest. This is not an easy place to conduct business, partly because of sanctions, but it is not a place where the political risks are so great as to be a barrier to investment.
— You mentioned sanctions. Do you feel any influence from them in your work?
— Of course, as do many Russian businesses. In connection with sanctions, we have all lived through two phases, you might say. At first there was a reduction in activity. People did not know how to carry on working. They felt a certain shock from the introduction of sanctions. Plus the fact that the rouble was highly volatile at that time. Now, the situation has stabilized. People have become used to it, and are finding ways out of the situation.
When I hear Western politicians say that Russia is suffering badly from sanctions, I want to tell them that this is not so. Russians have one outstanding ability. They are very inventive and good at adapting. And that is their strong point.
— In Russia today, the emphasis is on import replacement. For foreign firms, this means localizing production too. How interesting and economically attractive do they find this?
— We are experiencing a strong tendency towards building manufacturing facilities in Russia. The rules of the game have changed. Russia wants to create strong production capacity of its own, and this means localization. And foreign investors are realizing that if they want to continue selling their products here – and this is a big market, one in which you want to keep your share – you will have to manufacture here. The trend towards localization did not start yesterday. It already existed in agriculture and the motor vehicle industry. Now it has become general. Brasil, China and India (to cite a few) have already taken steps to localize production. Naturally, Russia is going the same way too. Many of our clients are more and more inclined to take this decision.
— How many clients do you have in Russia?
— Around six hundred active clients. If you only consider those using our services now, there is more than a hundred.
— More than 50 qualified lawyers work in CMS’s Moscow office. Are they mostly foreigners or Russians?
— We only have six foreigners.
CMS is an international alliance of independent law firms from European countries (Austria. Belgium, the United Kingdom, Germany, Spain, Italy, the Netherlands, France and Switzerland). The alliance was founded in 1999. The company has 61 offices in 35 countries around the world and employs a total of 3200 lawyers.
According to the publication Am Law 2015 Global 100, CMS holds second place for global coverage among the major international law firms providing a full range of services. In 2015, the company’s financial turnover was in excess of one billion euros.
Law firms belonging to CMS have been working in Russia since 1992. From 1st January 2009, the Moscow offices of three law firms of the alliance (the French, British and German) have been merged in a single legal entity, CMS Russia. The legal status of CMS in Russia is that of a representative office of CMS International B.V., registered in the Netherlands.
— The CMS alliance represents the interests of many leading international corporations in the traditional list of the 500 biggest European companies according to the Financial Times (FT European 500) and that of the 500 biggest American ones according to Fortune magazine (Fortune 500). In Russia you have also been consultants to the most important players – the VTB, Russian Railways, the Renaissance Capital Fund, GidroOGK... But do you also work with small and medium businesses?
— We do. These firms have very interesting projects. They are relatively small companies, but very dynamic from the investing point of view. Producers of dairy products and foodstuffs, and also retail chains. I won’t give names, but we currently have, for example, a fruit grower from Morocco who wants to start a business in Russia. Of course, we have more in the medium business category. After all, entering the Russian market involves certain costs.
— But you said that prices are more favourable in terms of currency.
— If you want to do everything right, you have to deal with experienced people, and their services cost money. We are talking about people who know the market well, have been working here for a long time and can tell you about the practical aspects of business.
I can say from my own experience that many if not most foreign investors consider at first that developing markets are virtually all the same. I know, they think, how things are done in Brazil and in India, so why should Russia be any different? Not at all. Here we all do it our way. And you could say the same of any other country. And those who “know everything in advance” usually don’t get very far. Two big retail chains in the USA and in Europe – I won’t name them – decided that with their international experience, and the size of the Russian market, they had won from the beginning. The result was that it didn’t go well and eventually they left the market... You have to understand the rules of the game in a specific country, both the written and unwritten ones. Only when you have a good understanding of the situation is it time to invest funds. In that case, you can reckon on a high income from your investments.
1. Form your own opinion of Russia.
Forget everything you have read about it in the western newspapers previously and on the way here.
2. Listen more.
Socialize, converse a lot, meet people. You will need an understanding of what is going on. You can’t manage without it.
3. Don’t let yourself get nervous.
And don’t expect everything to work out for you right away.
4. Constantly monitor your business.
At least until you get to know all the special features and trends here.
5. Always remain optimistic.
In Russia, even the very worst often turns out for the best.
— So there are certain purely Russian rules for conducting business? Our law is different from European law?
— On paper, your legal system differs little from the French or German. It is a feature of it that it is always changing. But for the better. Today’s business climate in Russia, from the point of view of the laws, is more or less comparable with other developed countries. The system works. Of course, the legal practice is not yet far enough developed to be completely stable. Time is needed. But from one point of view at least, I think your legal system is excellent: it works quickly.
— In what sense?
— In a court dispute, we can reach the supreme cassation level in only 18 months.
— That’s considered quick?
— In France, for example, such a process can drag on for five to seven years.
— From what you say, one might still get the impression that it is not that easy for a Western businessman to open his own business in Moscow...
— If you have bureaucratic procedures in mind, Russian bureaucracy is not much different from European. But the difference is that the situation in Russia is improving. In 10 years of working in Moscow, I have observed significant improvements in the administrative system. There are fewer problems for business, everything is not yet ideal, but a huge process is going on.
— In your career, you have worked in Europe, America, Asia and the Middle East. And now 10 years in Moscow? Was this a conscious choice?
— Oh, it’s a long story. And it covers much more than 10 years. As a young man, I read Jules Verne’s novel “Michel Strogoff: the Courier of the Czar”, and came to imagine Russia as an enormous country of adventures. I came here first in the latter days of the USSR. At that time I was working in a large French company which sold equipment for oil and gas industry enterprises. And I spent time not only in Moscow, but also in the provinces. I very much liked Saratov for example. I was enchanted with Russia.
And when, returningfrom Houston and having thereafter turned around three mid-cap companies in France, in the 2000’s, the firm’s management said they were looking for someone for the Russian office, I did not hesitate for a moment! I said yes at once. But when I flew back to Moscow in 2006, I had a shock. Everything had changed. It was a completely different city. Plenty of cars, restaurants, supermarkets, advertising everywhere, neons etc… far from the dark, quiet Moscow I had known before.. Though there were still some elements of the Wild West here at that time. But gradually everything became organized. If you compared Moscow 10 years ago to the great world capitals, it had not yet reached their level. But today it is ahead of them in many ways. It is a beautiful city. There is more life here. It is becoming cleaner. The infrastructure and transport are improving. Take for example the latest innovation: the passenger service on the Maloye Ring Railway and how it connects to the Metro network. It’s very convenient, and solves some serious problems. I feel at home here. I could not have said that when I came here in 2006, but today I can.
— Does everything suit you? Or is there still something lacking?
— I don’t really know what to say... I personally feel that Moscow does not have enough good restaurants with Russian cuisine, which I love. There are very few of them. And to be honest, I don’t understand why. There are other national cuisines and many establishments with an international menu. But as for good Russian food... Still, you can always find what you want in Moscow these days. True, there is no French cheese now. But my fellow countrymen have already appeared here, along with Swiss and Italians, and they are beginning to produce their cheese here. Things are not that bad.
— Does your family live in Moscow too?
— Part of it. My sons are adults now, they work and live on their own. I am here with my wife and youngest daughter.
— What do you do in Moscow other than work? How do you spend your leisure time?
— My daughter is only four, so we don’t go out into the world very often. But we make quite frequent trips out of the city. There are some very beautiful places in the area around Moscow. And I’m keen on sport too. I ride a bicycle along the riverside, from Muzeon on to Luzhniki and to Presnaya
— The CMS website says you know French, English and Russia. Did you learn Russian here?
— Yes, I started studying it when I arrived. But I must confess that I don’t speak it very well.
— You are clearly being modest. But in general, can a foreign businessman get by in Moscow without knowing Russian?
— In principle, you can live in Moscow without knowing Russian. But I consider that Russian is essential for anyone coming here to work. Now, even in the management of international and foreign companies working in Moscow, more and more of the top managers are Russians. When you meet them you ought, as a minimum, to understand what they say.