U.S. Lawyers Teach Soviets How to Be Capitalists
This is the way the Russian Revolution ends--not on the bloody barricades but in a lawyer’s office.
A delegation of big-time Communists just spent four days in Washington working out the plans for the new capitalist Russian Republic. Their advisers were most unlikely: the partners at the august law firm of Arnold & Porter, whose partners often command a healthy free-market rate of several hundred dollars an hour.
The American lawyers explained, among other things, that paper promises are swapped at a commodities exchange; it isn’t simply a place where you go to trade bushels of wheat for barrels of oil.
If Russia doesn’t allow mortgages on land and mineral rights, they told the visitors, nobody will want to build hotels or finance oil drilling.
The Soviets are so eager for foreign investment that the Americans had to warn them against giving away too much. “If you have too many tax benefits for foreigners, then domestic entrepreneurs can’t compete,” said Jeffrey A. Burt, an Arnold & Porter partner. “You can’t run after foreigners too hard for joint ventures. It’s necessary to consider the interests of domestic enterprises.”
The 30-member delegation was headed by six senior deputies of the legislature of the Russian Republic, where more than half the population of the Soviet Union lives.
Under the leadership of its charismatic president, Boris Yeltsin, the republic--home, also, to two-thirds of Soviet industry--has been at the vanguard of economic change in the U.S.S.R. Its legislators, accompanied by a retinue of economists, lawyers and translators, had traveled to Washington to seek guidance in writing the laws that will guide Russia’s new market economy.
“Could these people do it, given 70 years of ideology?” Burt said he had wondered. “But we found them quite insightful and up to the task.”
It was the making of a brave new world, with briefcases, yellow legal pads, pens and computers as the weapons.
Unthinkable ideas for Russia--such as bankruptcy and individual or corporate mortgages--were being wrestled into the new laws. “Such concepts simply couldn’t exist because there was no other form of property besides state-owned property,” said Andrei Makarov, a noted Moscow defense attorney who participated in the meetings, sponsored by the private Soros Foundation.
Bankruptcy had been impossible “because the state was not prepared to declare itself or any part bankrupt,” Makarov noted. “The issue at hand is to create good laws to govern the transition to the free market economy,” Makarov said Tuesday in a phone interview from New York, where the Russians were resting before returning home.
At Arnold & Porter’s quietly elegant Washington offices, no one was rude enough to cite Marx or Lenin, and the catch phrases of dialectical materialism were never uttered. The group spent Friday through Monday in task forces grappling with 23 proposed laws covering money and banking, government budget and debt, securities, property liability and bankruptcy, commodities exchanges and foreign investment.
“Russia will find its own way, consistent with its legal traditions and practices, but two centuries of Western experience creating systems of laws to permit markets to function can be useful,” said William D. Rogers, another partner at Arnold & Porter.
As Washington’s largest law firm, Arnold & Porter has maintained its political influence since its founding by Abe Fortas, later a Supreme Court justice, and two other influential New Deal-era Democrats.
Americans and Russians knew they were making history.
“God, it was exciting,” said John Quinn of Arnold & Porter. “Not in the 15 years I’ve practiced law have I participated in anything as dramatic and consequential.” At the end of the meeting he told the Soviets, “As somebody who reached the age of 41 in this country, I grew up believing one day we would be at war with each other, and it would be a nuclear war.”
Said Quinn: “The most thrilling thing in this whole process was the implicit sense that their children and mine will work together in friendship and not grow up in fear. . . .
“Here we were sitting in the conference rooms of a temple of American capitalism, a Washington law firm like ours, talking with people about the best way to make a government work,” said Quinn. “It was almost as though the whole blackboard had been wiped clean.”
Arnold & Porter spent more than 1,000 hours preparing a 133-page report for the Russians in advance of the meeting. The firm did the preparatory work pro bono, the lawyer’s Latin phrase for “on the house.”
For the four-day meeting itself, the law firm charged less than $50,000, according to Antonina Bouis, executive director of the Soros Foundation, which supports development of democratic activities in the Soviet Union and Poland, Czechoslovakia, Romania and Bulgaria.
The foundation’s money for the peaceful subversion of the remnants of communism comes from the Wall Street profit of George Soros, who made his fortune as a mutual fund money manager in the bull market of the 1980s.
