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legal expertise, but also in public relations and government affairs experts familiar with Russia's business scene. "You prob- ably wouldn't spend $30,000 finding out about the background of your potential partner if you were going to Nebraska," he says. "But in Russia you need to do that. You also need to understand how the busi- ness in that sector has evolved, and who are the big players. You have to hire dedi- cated people to figure this out. And a lot of companies don't do this because the up- front costs can be huge. But what they fail to analyze is the cost benefit. Yes it costs you $100,000 more than what you would normally spend, but you're looking at the biggest consumer market in Europe. The profitability is greater." Naumovski says that over a 29-year- career of working in Russia for various companies, he has been solicited for bribes but has never paid. He says com- panies don't need envelopes of money to succeed there, just patience and persever- ance. "What I say to my employees and colleagues is, 'We're here, we're working in Russia, we'll speak Russian to each other, but we'll behave like Canadians," he says. "That's something I've personally done over all this time frame." Refusing to pay bribes hasn't hurt Kinross in the eyes of Russia's national leadership. The company and its CEO have for the past several years occupied a prized seat, along with 40 other inter- national firms, on the country's Foreign Investment Advisory Council, chaired by the now President Vladimir Putin. Naumovski says Kinross's success is due in part to its careful nurturing of gov- ernment and political relationships — at the highest levels in Moscow, and also with local authorities in the regions where it operates. This underscores another important truth about the Motherland: For all the free market changes that have taken place since Soviet times, Russia remains, per- haps more than any other major econo- my, a predominantly government culture. Good partnerships with bureaucrats, pro- vincial governors, and with the myriad state agencies they control are essential to success for foreign investors. "The impor- tance of government in Russia cannot be overstated," says Naumovski. "It's key to everything that happens. Whether you're operating in a small, remote district of the country or whether you're in Moscow, you really have to accept and be able to relate to government in its particular role." One of the most important decisions any in-house Canadian lawyer will make for a company investing in Russia is hir- ing a team of good Russian lawyers who can help navigate not only the country's burgeoning civil law codes, but also the thickets of government relations. In Mos- cow there is now a competitive field of domestic law firms to choose from, as well as numerous large-scale, global firms with offices there employing teams of Russian lawyers familiar with the local landscape. "It's important to track down very good international legal advice," says O'Rourke. "Find a firm that has experi- ence conducting east-west transactions out of Russia. They in turn will either r When it Appeals Opinions and Risk Management Mergers & Acquisitions Claims against Professionals and Fiduciaries Directors' and Officers' Duties and Liabilities Class Actions eally matters. Toronto: 416 867 3076 London: 519 672 4510 www.lerners.ca Lerners-1/2_IH_Aug_11.indd 1 INHOUSE APRIL 2012 • 8/16/11 8:42:12 AM 23

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