LAW FIRM DIRECTORY

Industry Sectors

Quartet in the Economy

The most promising sectors of the Ukrainian economy include agriculture, IT, energy and pharmaceuticals. However, they are also characterized by chronic problems: political and economic uncertainty, corruption and administrative obstacles to regular business activities that generate the bulk of applications for legal aid

VITALY DUDIN

The State Statistics Service of Ukraine reported the decline of industry in September by 16.4% compared to the same month in 2013. International institutions, including the International Monetary Fund, forecast the decline in Ukrainian GDP, predicting a continuation of this trend over the next few years.

Disappointing forecasts about the economy are connected not only with the armed conflict. The issue here is structural crisis. The predominantly resource-based Ukrainian economy and focus on foreign markets have also played a negative role. Measures to stimulate domestic demand have failed. The actual closing of the Russian border has for many Ukrainian commodity items, including raw materials and engineering products, hastily introduced earlier promises to refocus on Europe.

However, positive trends are observed only in certain sectors of the economy. For law firms this results in the need to adapt services provided by lawyers to the sectoral needs of their clients.

“The focus of recent years results in the fact that the legal services market is increasingly concentrated on a complex sectoral approach to a client's business, and not on the support of individual practices”, explains Oleksandr Martynenko, Senior Partner at the international law firm CMS. In his opinion, at the present time the agribusiness, energy and IT are the rapidly developing sectors of the economy. Experts also regard pharmaceuticals and the retail sector as quite dynamic. 

HOPE FOR AGRICULTURE

The agro-industrial complex is one of the few areas which has a positive balance in international trade. As reported, since the beginning of the year there has been a decline in imports, while the volume of products exported by the agricultural sector has not decreased, but, on the contrary, increased. Experts believe that the main factors that positively affect the dynamics of agriculture are favorable weather conditions, increase in financial support to agricultural producers by the banking sector and the boosting of public support programs for individual areas of livestock.

Despite major political twists and turns, both previous and current leaders of the country stated the need to develop Ukraine as an agrarian state. Grain exports long exceed domestic consumption. Among recent trends we see are an increase in competition on foreign markets of products in the processing sector. Ukraine remains the world’s leading exporter of sunflower oil.

Although it must be said that earlier opinions about trends in agribusiness industry were much more optimistic. The beginning of the year was marked by expectations of an improvement in the Ukrainian investment climate and the state of affairs in the agricultural sector. The landmark deal was in late 2013: Cargill, an international manufacturer and supplier of food products, acquired a 5% stake in the largest Ukrainian agro holdings, UkrLandFarming, and it officially began to act as a shareholder already in 2014. The value of the deal is US200 million. It gave reasons for experts to talk about revival of the market, as foreign companies rarely bought anything in Ukraine in recent years.

The agrarian market is characterized by a high degree of monopolization. The total level of concentration in the agricultural sector is lower than in industry. “However, analysis of its trends reveals a definite increase of share held by 10 and 20 of the largest enterprises along with a slight decrease in the total share of 50, 100, 150 and 200 enterprises, which indicates a certain strengthening in monopolization of the agricultural market”, was stated in the report of the Antimonopoly Committee of Ukraine for 2013.

The main market players are the large agricultural holdings. Their growth has been made possible due to their entering European stock markets and attracting credit and investment capital. It is known that Myronivsky Hliboproduct PJSC is the second company in Ukraine to place an IPO. It became the first Ukrainian agricultural company to be listed on the London Stock Exchange.

The new management of the Ukrainian Agrarian Policy and Food Ministry promised to help small producers, but so far it looks more like a wish. “We will switch the focus from large agricultural holdings, which can cope themselves, also by attracting foreign capital to support small and medium-sized agribusiness, as it is the basis for the preservation and development of rural areas”, The Uryadovyi Kurier newspaper quoted Minister Igor Shvayka as saying about plans for the near future.

Among achievements the Ministry’s leaders see steps towards deregulation, including the abolition of compulsory certification of each batch of imported products of animal origin. However, the Ministry promises not to allow exemptions during controls on the safety of food products. Thus, in the second half of the year the EU project “Improvement of Food Safety Control in Ukraine” was launched.

Further impetus to the agricultural sector is given by the prospect of European integration and use of benefits of a free trade area with the EU (although Ukrainian products are also in demand in China). Unilateral opening of borders for the movement of Ukrainian goods positively affected the Ukrainian market of agricultural products. On the agenda of farmers is the question of adaptation to new quality standards in accordance with the Association Agreement with the EU. This process will require not only increased spending in the short term, but also consultations with qualified lawyers.

One of the most promising areas for lawyers in the agricultural sector will be connected with the harmonizing the legislation of Ukraine and the EU, in particular it will result in changing standardization and certification rules for food products, the rules for obtaining licenses and permits for the import of fertilizers and plant-protecting agents, the rules for obtaining quotas on exports of food products, and mandatory animal identification will be introduced, underlines Kyrylo Levterov, Partner at OMP Law Offices. “A growing number of lease agreements require to be signed anew and so the subsequent resort to state registrars for registration of lease rights. Next year no significant changes in the registration procedure of land lease rights are expected”, says the lawyer. However, a rise in transactions related to the purchase of agricultural business is expected, which, in turn, activates the appropriate registration not only of land lease rights, but also of the rights to other assets, e.g. to the property of former collective agricultural enterprises (farms, elevators, office buildings, etc.), Kyrylo Levterov believes. 

IT: TEN YEARS SQUEEZED INTO THREE

The information technology industry also demonstrates positive dynamics. However, despite the achievements, overall forecasts are cautious, moreover, the analyst from IDC expected a drop in the IT market by 25% in April of this year due to the lower purchasing power of both the state and private clients. This is due to reduced sales of equipment (servers, laptops, PCs, printers). Among electronic products only increased for mobile devices is observed. Though software developers can count on success. As reported by consulting firm Gartner, which specializes in 1T-market services, Ukraine is among the top 30 leading countries in IT outsourcing in the world. According to World Bank estimates, by 2015 our country can reach sixth place in the world by IT-export.

Nevertheless, it is impossible to say that the state facilitates development of the market. Moreover, the Ukrainian Finance Ministry announced its intentions to abolish privileges for “IT people”. Thus, the text of a program listing the reforms of the new Cabinet of Ministers of Ukraine contained the phrase “elimination of tax preferences for business entities in the information technology industry”. As you know, from 2012 a special tax regime for a period of 10 years was introduced for Ukrainian IT-companies. The changes included the abolition of VAT on transactions for the supply of software products and a reduction in income tax for companies to 5%. The special regime has been in operation for less than three years, but the officers of the Ministry of Finance decided to abolish all the benefits that are not connected with production under state orders.

IT-businessmen are emphasizing more and more often the need to create a transparent environment for work rather than provide any preferences. Furthermore, an increase in demand on the part of our state for the services of software companies could be the impetus for development. After all, the negative trends consist of the excessive orientation of “IT people” on the external market. IT companies believe that the state could involve them in the development of software for the introduction of so-called e-government, cyber security systems, administrative services and e-procurement.

Daniel Getmantsev, Honorary President of Jurimex Law Firm, considers legal practices focused on IT-market as having good prospects: “IT technologies are our tomorrow”. The relevant issues include taxation and protection of intellectual property, and the value of the tax practice is increasing every year. With regard to tax incentives, the lawyer’s position is clear: they cannot be cancelled. “Those with whom we work use these incentives widely. Surely, it is undesirable to cancel them for economic reasons. Perhaps they need to be improved, but not cancelled”, says Mr. Getmantsev. He is also confident that the current mechanism for granting incentives excludes corruption risks. 

HEALTH FOR SALE

The pharmaceutical market in Ukraine shows 15%-20% growth per year (the second highest level among CIS states). The industry includes production of pharmaceuticals and medical products, wholesale and retail trade, specialized storage and distribution through an established distribution network (chemist’s shops, pharmacies, etc.). At the same time, Ukraine imports 70% of raw materials for the production of medical products, as noted by auditors from Baker Tilly. The experts at the company believe the high cost of raw materials in the cost of production to be the main problem of the branch along with the lack of incentives for developing new original products and increasing exports.

The industryis characterized by increasedattention on the part of the governmentacting asbothregulatorandproduct customer.The stateregularly holds tenders forthe purchase of medicines, but corruption chargesare also heard regularly, because a limited numberof entities have access to procurement. The impossibility to eradicatecorruption schemesin the pharmaceutical market was amongthe complaints to be made at the already dismissedUkrainian Health Minister OlegMusiy.

The pharmaceutical businessresponded ambiguously to approval on August 12of amendments to the Law “On Medicines”, whichpermitted the importing ofunregisteredmedicinesin Ukraineifthey goto the ATO zone. Domestic producersbelieve that itcan increase the scale offraudand smugglingin the market.

At the same time,the new management ofthe StateService of Ukraine onmedicinespromises tofurther weaken control over distribution: a reduction in inspectionsand simplification of the forms ofdocuments submittedto obtain atrade license (in terms offinancial and technical baseandthe qualifications of staff) are expected. “It will significantly simplify theprocess of obtaining licensesand copiesof them when opening pharmacies”, the press service reports.

Practice Leaders.Agribusiness

Leading FIRMS
1 Law Offices of OMP
2 Asters
3 Avellum Partners
4 AstapovLawyers
5 MORIS GROUP
OTHER NOTABLE PRACTITIONERS*
Oleg ALYOSHIN
(Vasil Kisil & Partners)
Eugene BLINOV
(AstapovLawyers International Law Group)
Glib BONDAR
(Avellum Partners)
Alexander BORODKIN
(Vasil Kisil & Partners)
Yuliya CHERNYKH
(ARBITRADE)
Ihor MEHEDYNYUK
(Dentons)
Ihor MELNYK
(IMG Partners)
Denys MYRGORODSKY
(Law Firm Dynasty)
Mykola ORLOV
(Law Offices of OMP)
Andriy ROMANCHUK
(Moris Group)
Oleksandr SHYSHKANOV
(Jurimex Law Firm)
Mykola STETSENKO
(Avellum Partners)
Aminat SULEYMANOVA
(AGA Partners)
Andrii ZABLOTSKYI
(Volkov & Partners)

* — Listed in alphabetical order.

Practice Leaders (by Ukrainian Law Firms 2014)

Practice Leaders. Medicine & Healthcare / Pharmaceuticals

Leading FIRMS
1 Arzinger
2 Legal Alliance Company
3 Marchenko Danevych
4 Law Offices of OMP
5 Asters
Leading INDIVIDUALS
1 Borys DANEVYCH
(Marchenko Danevych)
2 Illya KOSTIN
(Legal Alliance Company)
3 Timur BONDARYEV
(Arzinger)
4 Lana SINICHKINA
(Arzinger)
5 Mykola ORLOV
(Law Offices of OMP)
OTHER NOTABLE PRACTITIONERS*
Oleksii BEZHEVETS
(Legal Alliance Company)
Andriy GORBATENKO
(Legal Alliance Company)
Irina KIRICHENKO
(Ilyashev & Partners)
Mariana MARCHUK
(Baker & McKenzie-CIS, Limited)
Oleksandr PADALKA
(Sayenko Kharenko)
Victoria PTASHNYK
(Droit Law Firm)
Mykhailo SPASOV
(Vox Legum Law Firm)

* — Listed in alphabetical order.

Practice Leaders (by Ukrainian Law Firms 2014)

Practice Leaders. IT & Communications

Leading FIRMS
1 CMS Cameron McKenna
2 Sayenko Kharenko
3 Asters
4 Egorov Puginsky Afanasiev & Partners
5 Juscutum Attorneys
Leading INDIVIDUALS
1 1. Olexander MARTINENKO
(CMS Cameron McKenna)
2 Nazar CHERNYAVSKY
(Sayenko Kharenko)
3 Oleksiy DIDKOVSKIY
(Asters)
4 Artem AFIAN
(Juscutum Attorneys)
5 Taras KYSLYY
(Egorov Puginsky Afanasiev & Partners)
OTHER NOTABLE PRACTITIONERS
Yevgen BLOK
(Integrites)
Dmytro GADOMSKY
(Juscutum Attorneys Association)
Yuriy KRAINIAK
(Jurimex Law Firm)
Dmytro KUKHNYUK
(Melnyk, Kukhnyuk & Partners)
Oleksandr MAMUNYA
(Aequo)
Natalia MESHCHERIAKOVA
(AstapovLawyers International Law Group)
Oleksandr PADALKA
(Sayenko Kharenko)
Natalia PAKHOMOVSKA
(DLA Piper Ukraine)
Julia SEMENIY
(Asters)
Vadym SHESTAKOV
(Marchenko Danevych)
Anton ZINCHUK
(ILF (INYURPOLIS Law Firm))

* — Listed in alphabetical order.

Practice Leaders (by Ukrainian Law Firms 2014)