Gordon Brown's comment on Russia after the EU meeting of heads of government on Monday was terse. “It can't be business as usual - indeed, it cannot be business as usual.”

Yes, Prime Minister - but it all depends on what you mean by business.

In the real world of Russian business it is certainly true, as Michael Cuthbert, of Clifford Chance, puts it, that “the froth has gone off.”

But, as many Western lawyers in Moscow pointed out this week, this is more due to the credit crunch than events in Georgia. The economies of the Russian bear and the European Union are too interdependent for a little local difficulty such as South Ossetia to make a big difference.

This was borne out by the melting away of the proposal for EU sanctions against Russia after the events in Georgia. “Sanctions? Of course not! It was laughable to suggest that such sanctions would ever be imposed,” Andrei Yakovlev, of Norton Rose, said.

All the big name law firms, both American and English, are now active in Russia and they have observed at first hand the resurgence in Russian self-confidence and self-righteousness, not least among the many Russian lawyers that they themselves now employ in droves.

One western lawyer, referring to his colleagues, said: “The West does not appreciate quite how much Putin's policies are popular across all of Russian society.”

Clearly the kind of work undertaken now by Western law firms, however, is strikingly different from when they first opened offices in Russia in the 1990s.

As Yakovlev points out, Russia now has the wealth to start investing in its own industries, without necessarily relying so much, as in the past, on Western funding.

This has been reinforced by the new “federal law on foreign investment”, effective since May, which, as Peter Pettibone, of Hogan & Hartson, explains, has had the effect of tightening restrictions on foreign investment across a wide range of companies deemed to have “strategic importance for state security”.

The result is that any notion of Westerners having more than 50 per cent control of joint ventures is now off the agenda.

The recent controversy over TNK-BP, which came after the enforced sale of Shell's Sakhalin-2 interest to Gazprom last year, highlights that the Russians will no longer tolerate these kinds of deals.

But as Allen Hanen, of Herbert Smith, emphasises, this does not mean that Russia can go it alone without help from outside its borders. “They won't be able to realise their ambitions by themselves,” he says. “In terms of technology, knowhow and investment, the Russians still need the foreign investors.”

Meanwhile, the lure for foreign investors, Hanen says, despite the difficulties, is that the profits to be made in Russia are still very attractive, and probably more so than those to be made in the United States or Western Europe. There is also a realignment taking place within the wider economic world. “For example, we have increasing trade between Russia and China,” Yakovlev says. “This is very significant for us as a firm and we have just appointed a lawyer from Hong Kong to relocate to Moscow to develop our Russian-China practice.”

For the time being, English law will still be important as these new structures develop. So while, for example, there is increasing merger and acquisition activity involving Russian-on-Russian takeovers, the Russian holding company is likely to be based in Cyprus and hence have the need for international law.

Were the Russian Government to insist that all such deals should be done under Russian law then, as Cuthbert observes, that would mark a serious and damaging change in direction. “But I don't think there is any chance of that happening,” he adds crisply.

As it is, Clifford Chance is intent on further expansion of its Moscow office. The firm is currently employing about 150 lawyers in Russia, and Cuthbert anticipates that a further 20 will be added by the spring of next year. Initial public offering (IPO) work is still very strong and is expected to continue to be so.

Likewise Hanen confirms that Herbert Smith is “as busy as ever”. He says: “I don't know whether we are getting a bigger share of the market or it's just that activity levels are remaining very high, but we are certainly working on a number of deals, with lots more in the pipeline.”

For Paul Melling, of Baker & McKenzie, an old Russia hand who has been in Moscow since the tanks rolled on to the streets in 1991, Russia continues to offers enormous market opportunities.

Although he is taken aback by quite how sour relations have become between Russia and the West, he still shrugs his shoulders, saying: “Well, this is Russia.”

Meanwhile, he is encouraged by the gradual improvement in the quality of the Russian courts (albeit from a very low base). Although most Western lawyers would prefer not to find themselves in court in Russia, where “telephone justice” (that is, a call from the Kremlin to the judge) will trump any legal arguments, there is a recognition that in Moscow and St Petersburg the quality of judges has improved dramatically.

As Melling puts it: “In 98 per cent of cases you will get a judgment based on law rather than a bribe or political interference.”

So, yes, the rules may have changed. But it is business as usual.

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