Law Firms, Corporations Face a New Front in a New Cold War

In the mid-1980s, I left home to attend the U.S. Naval Academy, in no small part to join the ranks of men and women who served as part of an American effort to contain the expansion of the 20th century’s Russian empire, the Soviet Union.

The strategy of that time focused primarily on America’s military options. Now, 35 years later, I find myself at a private law firm but advising corporate clients as a part of a similar effort to contain Russian aggression.

Today, the U.S. finds itself confronted by a new Russian aggression that harks back to that Cold War. But this new Cold War features a more profound role for commercial entities, reflective of increasing economic globalization.

Many actors in the private sector, which I now counsel as an attorney, have joined in opposition to Russia’s incursion in ways previously unthinkable. And many more, including law firms and their clients, will be faced with hard business decisions about whether to act.

In the earlier Cold War era, the America government opposed the Soviets with a global containment strategy that bankrupted and exhausted the Soviets. The tools utilized to implement that strategy were primarily public sector initiatives—the U.S. acted against the U.S.S.R., but private, corporate entities played a negligible role.

Russia’s invasion of Ukraine has prompted government responses: military aid, sanctions, condemnation, and diplomacy. These are standard Cold War tactics. For example, President Biden’s announcement that he was closing American airspace to Russian flights will ring familiar to any Caribbean traveler who has flown around Cuban airspace to reach Jamaica.

New Private Sector Responses

But the options in challenging this new Russian belligerence are far broader and involve the private sector in a new and significant way through corporate sanctions. For example, tech companies such as Microsoft and Apple are actively assisting Ukraine or limiting or denying services to Russia. All three major American cellular phone providers are reducing or eliminating fees to make calls to Ukraine.

Disney paused release of its theatrical films, a seemingly token gesture until one considers Nikita Khrushchev’s anger at being barred from Disneyland. The McDonald’s near Red Square is closed.

Similarly, Shell, BP and ExxonMobil are taking steps to end their relationships with Russian entities, and GM has halted shipments to Russia.

Private corporate entities are being challenged by an increasingly visible and active consumer base utilizing their newfound voice through social media with increasing effectiveness. Through social media platforms, the public is more informed and is more actively monitoring real-time events. In turn, they are voicing their concerns to corporations and demanding action in ways unseen in the prior Cold War.

This marks a meaningful new front in the pushback against rogue states. Motivated by philosophy or commercial interests, companies are faced with the need either to act or prepare to explain their inaction.

Impact on Attorney and Law Firms

The impact on attorneys and law firms will likewise be sweeping. Private sanctions and divestitures are being taken by a variety of large U.S. and international law firms, while those who refrain from doing so will face negative publicity and pressure for their involvement with the Russian state or state-supported actors.

Those law firms with similarly situated clients, whether companies or oligarchs, face difficult ethical, legal, and moral choices. As attorneys, we face issues not only of our own client bases, who may have direct connections to the Russian state, but also issues of how we advise clients who have contractual or other legal obligations to Russian entities or individuals.

Importantly, firms and attorneys can also impact the other side of the conflict by assisting Ukraine. This process has begun already—firms are donating funds, committing to pro bono efforts, and using their European offices to assist refugees. These efforts, which firms consistently engage in during crises or natural disasters, are just as important in potentially deterring Russian aggression and in the traditional Cold War battle for “hearts and minds.”

While there is no knowing how or when the invasion of Ukraine will end, the issues for attorneys surrounding this new Cold War are just beginning.

A military “victory” for Russia would likely signal a lengthy sanctions regime in which it will be extremely difficult for corporate actors to reverse course and continue business in Russia. In addition, the introduction and effectiveness of the concept of these corporate sanctions and the social pressure on companies to use them may very well spill over into other areas, such as human rights.

During the Cold War era, similar sanctions and corporate divestiture hastened the demise of apartheid in South Africa. If the marshaling of resources against Putin is effective, who is to say that that there would not be a call for a similar cross-industry initiative in response to other ongoing or future conflicts?

As business owners, advisers, and now new age Cold Warriors, attorneys will have a major role to play in shaping this budding world order as never before.

This article does not necessarily reflect the opinion of The Bureau of National Affairs, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

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Peter Gwynne is an attorney with Perry Guha LLP in New York City and specializes in corporate litigation. He served for 10 years in the U.S. Navy.