If Russia's 1998 economic crash put foreign industry -- and the legal services supporting it -- in the emergency ward, the bandages are finally beginning to come off.The ongoing economic recovery is looking buoyant: gross domestic product is growing at 7%, largely as a result of the increase in oil prices from $10 to $34 in the past year.

Furthermore, the devaluation of the rouble means that foreign businesses setting up shop in Russia are now able to buy or rent premises and pay staff in the local currency for peanuts in international terms.But the crisis that hit two years ago is still wreaking damage.

Daniel Gogek, the head of City firm Lovells' Moscow office, says foreign investor confidence has not yet fully returned to Russia.

But a growing number of Russian smaller and medium-sized companies are now taking advantage of fund investment, he says.Mr Gogek has advised on a number of transactions involving the US/Russian Investment Fund, a US-organised fund mandated to invest in Russian business, and others for the European Bank of Reconstruction and Redevelopment.Valentina Gluhovskaya, the first female managing partner of a western firm's office in Russia -- she has headed up Norton Rose in Moscow since May -- says the oil, gas, minerals, general trading and property markets are on the upturn.

There are also, she says, 'some symptoms that securities are gaining ground again'.Calvin Walker, head of Allen & Overy's Moscow office, says the booming revenues accruing to Russian oil and gas giants -- such as Allen & Overy clients Lucoil and Gazprom -- has given these companies the opportunity to raise loan finance.

Oil giant TNK this week signed a loan agreement for $350 million with the US EXIMBank.The return of confidence is also connected to new business structures, according to Mr Walker.

He says: 'Before the crash, foreign investors were taking huge risks on their investments.

Now it's more common to use innovatory pre-export financing methods.'Pre-export financing broadly means that an investor's loan is paid back from the proceeds of export profits.

This ensures that -- unless the investment totally fails -- the investor receives a guaranteed pay-back.Another business scheme, Mr Walker says, is a relatively new product sharing agreement format.

This involves investment by foreign investors being specifically sanctioned by the Russian parliament.

This satisfies the investor that the venture will not be crippled by bureaucratic or corrupt demands for licences as the project gets under way.

In November, the rules for these sharing agreements are due to be simplified, which should, he believes, augment market interest further.Ms Gluhovskaya says another critical factor in the recovery of the market is the political stability that has been achieved by Vladimir Putin's government.

She explains that the figures for state reserves, which have risen from $12 billion last year to $25 billion, do much to restore confidence in the market.

She adds that rumours of proposed amendments to the hard currency regulations are a good sign that the government may actually change these bureaucratic hindrances on foreign investment.John Hammond, head of CMS Cameron McKenna says that, with a dispute resol ution and insurance based business in the city, Camerons has not run out of work during the bad times.

He says the firm has been very successful in the Russian courts, bringing actions against the Russian tax police: 'They have an 80% defeat rate in the courts,' he explains.If the crash caused problems for the English firms stationed in Moscow, its fallout appears to have struck the US firms in the city at least as badly.

Since 1998, Baker & Botts has virtually pulled out, leaving a shell office; Steptoe & Johnson sold its Moscow practice to Squire Sanders & Dempsey; Patterson Bellknap has closed and sold its practice to Hogan & Hartson; Mayer Brown & Platt has also closed.Mr Gogek accredits this to the difference in approach between the US and UK firms.

He says: 'They tend to open them up where there's a market, not with a long-term strategy in mind; even if times get difficult the English firms try to ride it out.'However, German firms are also beginning to appear on the Moscow scene.

Of all the European countries, Germany invested most heavily in Russia over the last ten years and so suffered most as a result from the 1998 crash -- but equally, it is eager to help restabilise the economy.

A number of German firms, spearheaded by Norr Stiefenhofer Lutz and BBLP Beiten Burkhardt Mittl & Wegener have appeared.

Mr Walker says German business links are helped by a close relationship between Chancellor Gerhard Schroeder and Mr Putin: 'Don't forget, Mr Putin used to live in East Germany in his spying days.'Recruitment no longer seems a problem in Moscow.

Mr Gogek explains why this has become easier: 'Before the crisis, the market for lawyers was very tight -- it was definitely a lawyers' market.

But following the crash, with firms no longer expanding rapidly and with the American closures, it has now reverted to a firms' market.' Lovells recently hired six lawyers in Moscow.Mr Walker says that recruiting from England can be difficult as Russia suffers from a negative image.

The more risk-taking type of lawyer is attracted to it.

'It's not ideal for a lawyer with a young family, or someone used to the morning commute from Wimbledon,' he adds.

But Mr Hammond says there is no shortage of English lawyers who want the chance to work in Russia.Rumours about the lack of profitability of foreign law firm offices in Moscow have been rife for some time.

Mr Gogek says Lovells has been lucky to remain busy throughout the crisis, but acknowledges that the last six months have seen some problems with work dropping off.The upturn is beginning to show now he says, with German supermarket giant Metro investing £100 million in a chain of supermarkets, and Mr Gogek says he is also currently advising a cigarette filter manufacturer investing in the Russian market for the first time.Mr Walker says that, having cut Allen & Overy's Moscow office by one-third following the crash, the firm is now recovering staff levels, taking on two Russian lawyers in September.With so much said about the lack of probity of Russian businessmen, how do foreign firms approach the difficult issue of vetting their clients? Mr Gogek says working for large funds helps because these are administered by foreign banks who carry out most of the vetting work themselves, before referring the client over to the lawyers.Mr Walker says many of his clients are international because Russian companies frequently cannot satisfy the rigorous British money laundering checks.

When taking new Russian clients, he adds: 'We take payment up front.'At Norton Rose, Ms Gluhovskaya sa ys most of the firm's client base consists of long-standing and well-trusted clients from the firm's international offices; and this avoids much vetting required for new Russian clients.

Meanwhile, at Camerons John Hammond says that there are few vetting difficulties when working for Russia's bigger household names.The danger of life in modern Russia is more than just the stuff of apocryphal tales: in 1996, the head of City firm Sinclair Roche & Temperley's Moscow office was shot dead in a mafia gun battle at a St Petersburg hotel, where he was an innocent bystander.

So how do lawyers find living in Moscow?'There is a gap between perception and reality,' says Mr Gogek, explaining: 'Compared to the West's perception of the dangers of Moscow life here can actually be quite tame and boring.' However, Mr Gogek acknowledges that the risks do frighten investors and they ask questions about the authorities: 'Are they fair? Will they deliver on their promises? Will the courts be fair? Will a local business partner with whom one has fallen out get the local authorities to pull a stunt?'Mr Walker says that the biggest danger -- apart from being stung by the police for occasional $2 bribes -- is the traffic.

He says: 'I've seen a few bodies of people run over on the roads -- the traffic is lethal.' Chris Viner, corporate partner, also with Norton Rose's Moscow office, agrees: 'The terrorist bomb in Moscow's Pushkin Square this August was no different from the Canary Wharf bombing in London a few years back.

There are parts of Moscow -- as there are parts of New York and London -- which you avoid at certain times.'