CIS Corporate Counsel: Nikolay Isaakov
OAO Lukoil's general counsel in Russia shares his thoughts with Who's Who Legal on life as an in-house practitioner and the relationship of his company with external counsel.
Nikolay Isaakov
Position: General Counsel
Company: OAO Lukoil (Lukoil Overseas Holding Ltd)
Sector: Oil and Gas
Number of employees: Headquarters in Russia– 300. Fifteen in legal department.
One of the world’s leading vertically integrated oil and gas companies, OAO Lukoil is the second-largest private oil company worldwide by proven hydrocarbon reserves. Holding approximately 1 per cent of global oil reserves and 2.4 per cent of global oil production, Lukoil is responsible for 18.6 per cent of total Russian oil production and 18.9 per cent of total Russian oil refining.
Lukoil Overseas Holding Ltd is a wholly-owned subsidiary of OAO Lukoil, in charge of upstream oil activities outside Russia. With international exploration and production projects in Kazakhstan, Egypt, Azerbaijan, Uzbekistan, Saudi Arabia, Colombia, Venezuela, Ivory Coast, Ghana and Iraq it is certainly a very busy time for Lukoil Overseas, and this shows little sign of ease as Russia sends record amounts of oil to Asia. According to figures released by its Ministry of Economy, Trade and Industry, Japan imported an unprecedented amount of Russian oil in 2010, reaching 241,000 barrels a day, a 61 per cent increase on last year’s figures. In May, South Korean imports reached 179,000 barrels a day. This places a heavy demand the invaluable expertise of in-house counsel as Russia’s major play in the world energy markets goes from strength to strength.
After a decade in the oil and gas departments of international firms, the move to an in-house oil and gas role was a natural progression for the subsidiary’s general counsel, Nikolay Isaakov: “I wanted to be working purely on oil and gas projects, from start to finish, rather than being constrained to the time limits set by clients.” And the relocation has been a happy one, “I really enjoy being able to handle a project in its entirety. Working in-house, I have the opportunity to work not only as a lawyer, but a manager too”. With a broad range of people involved in implementation of a new venture, from economists to engineers, Isaakov explains, “Lawyers are much more than lawyers. We’re always dealing with business development issues such oil arrangements. This is just part of the wider skill set that is required, which in itself is very rewarding.”
The role is not without its challenges. With crude oil exports under the exclusive jurisdiction of the state-owned Transneft, bottlenecks in the Transneft system prevent the country’s oil capacity from meeting oil producers’ export ambitions. The Russian government and Transneft are striving to improve the export infrastructure as a result but competition from the Middle East remains strong. According to figures released by Bloomberg, in June 2010 total Middle East output overshadowed Russian production with 19.9 million versus 10.3 million barrels apiece.
This does not daunt Isaakov, however, who explains that it’s all par for the course: “We’re always facing challenges and finding new ways to overcome them.” At the helm of Lukoil Overseas’ legal team, Isaakov provides an insight in to what really matters when enlisting outside counsel on a project, what secures repeat instruction for firms and shares a few of the upsides of life working in-house.
Q&A
Where were you previously employed?
I joined Lukoil Overseas in December 2001. Between 1993 and 2001, I worked at Mayer, Brown & Platt (as it then was) and Baker & McKenzie in various locations, including Bishkek, Almaty, Moscow and Houston, focusing on subsoil law, M&A and corporate matters.
How big is your company’s legal department?
Lukoil Overseas’ legal department consists of around 15 lawyers headquartered in Moscow. There are approximately twice as many in our regional operations, which comprise Azerbaijan, Kazakhstan, Uzbekistan, UAE, Saudi Arabia, Ghana, Colombia, Amsterdam and Vienna.
What percentage of your work is performed by in-house lawyers?
It’s really difficult to say – it depends on the nature of the project. Percentages may vary from between 30 per cent and 50 per cent in litigation or project financing, up to between 60 per cent and 90 per cent for certain M&A, EPC, JV or similar transactions.
What are the advantages of doing work in-house and how is life as an in-house counsel different from that of a private practitioner?
While the work is still demanding, the hours are quite different – there is no longer the need to be in the office until midnight every other day which makes for a better work/life balance. As in-house counsel, you have the opportunity to receive a unique experience in your field of work because you’re involved in the project from start to finish. I am not constrained to working on the project within limited time frames defined by clients, because I am the client. We’re always looking to maximise the work that we undertake in-house. It’s great to be part of that.
What qualities make a good in-house lawyer?
It’s a combination. Legal skills first and foremost, but initiative, pro-activeness and an ability manage people and complex projects are also very important.
Is the role of the in-house lawyer changing?
Absolutely: we’re becoming increasingly specialised in a range of legal practice areas, but particularly in the negotiation of production share agreements. Anti-monopoly regulation in the jurisdiction in which you are working is becoming increasingly familiar – a healthy knowledge of competition law is really important. We’re negotiating more and more with governments of other countries too and this is another of the reasons why I moved in-house.
When will you enlist the advice of external advisers?
Typically, when the project is governed by another jurisdiction – most are multi-jurisdictional in nature, so international firms can really add value here. It’s much more efficient to be able to turn to one firm to resolve issues that might involve and be governed by a host of other countries’ regulation. Sometimes, the project’s nature makes it necessary, for example there may be external financing issues that we would turn to legal firms for advice with. Litigation, of course, is a significant area where we look to outside counsel.
Do you see yourself hiring the firm primarily, or the individual?
We predominantly hire the firm, however, for a relatively small number of cases in a specific jurisdiction, such as establishing a branch office in Egypt or Algeria, we would look to retain an individual.
What common behaviour from an external adviser or their firm do you find least acceptable?
External advisers ought to be much better qualified in the selected area of law than my colleagues and I, and fulfilling the assignment within the agreed time frame and fixed cap (if any), is a must.
Do you have a regular external corporate firm?
We do. We use Akin Gump Strauss Hauer & Feld, Baker & McKenzie, Clifford Chance, SNR Denton, DLA Piper and Macleod Dixon.
What makes you continue to use their services? How do you maintain good relationships with outside counsel?
Quality is the number one factor. We have found SNR Denton to be extremely experienced and effective, and are always more than happy with the work they do. We tend to use different firms for different matters, for example, we use Akin Gump Strauss Hauer & Feld for a lot of M&A advice and Baker & McKenzie have really impressed us for arbitration. There are some excellent individuals at these firms whose performance has stood out.
When we retain a firm for a certain task, I want to be aware of that firm’s business ethos too – their corporate culture and customs. I prefer to use lawyers whose expertise I can trust from previous experience. The ability to rely on their expertise and deep knowledge of our business really adds value to a project and we usually prefer to utilise long-term relationships we have established with law firms as a result.
What makes the CIS region “a good place to do business”?
The market is really growing. There are terrific opportunities here for new and successful businesses. It’s a really exciting time and one that I enjoy being a part of.