Recent social and political events have all had an impact on all sectors of the Ukrainian economy. The legal services market was no exception, and over the course of the year it was also affected by considerable fluctuations. However, the impact of the crisis was distributed very unevenly between practices and law firms, enabling certain market players to even strengthen their position on the market
This year the legal services market underwent substantive changes both in the demand and range of popular services, as well as in the structure of its participants. The decrease in demand within certain spheres of law has naturally led to stronger competition among law firms, some of which were, unfortunately, unable to win.
Roman Marchenko, Senior Partner at Ilyashev & PartnersLaw Firm,stresses that that any change in the intensity of entrepreneurial activities creates a direct proportional impact on the legal market. “The present-day economic situation remains quite stressful. Big companies, as well as representatives of small and medium-size business experience certain difficulties with scale. The legal services market is no exception to this rule. It is obvious that big legal firms are more stable and have certain financial safety margin due to support from the big business that they represent. Mid-size and small-size law firms are walking a rockier path”, Roman Marchenko says, sharing his observations.
“The current Ukrainian legal services market features intense competition set against a general slump in market volume and the necessity to adopt a complex approach towards client service in strategic industrial sectors,” says Alexandr Martynenko, Senior Partner at International Law Firm CMS. Oleg Makarov, Managing Partner at Vasil Kisil & Partners, also sees a considerable decrease in the size of the legal services market – by a minimum of 40%. “Minor growth at the start of 2012 was followed by a sharp downfall which surpassed even the profound crisis of 2009 and accompanied by a sharp decrease in providers of legal services”, the expert underlines.
Valentin Gvozdiy, the Managing Partner of Gvozdiy & Oberkovych Law Firm, made the following observations: “certain owners of legal companies were depressed by certain disappointment caused by the current ongoing events in the country, long-running expectations of effective reforms and further shrinking of high-quality legal services”. As Mr. Gvozdiy confessed, such companies have chosen to sit on the fence and be inactive till the end of the year, or as far as their resources suffice.
According to the views of experts, among the key events in 2014 which irrevocably changed the legal services market are: annexation of Crimea, beginning of the Anti-Terrorist Operation in the Luhansk and Donetsk Regions and conclusion of the Ukraine–European Union Association Agreement. “The most important factors of instability are annexation of Crimea and an open armed conflict in the East of the country, which led to deterioration in forecasts for the development of the investment climate, which were already less than optimistic. One of the challenges is a certain slump on the energy market and capital outflow from Ukraine. However, Ukraine still remains one of the developing countries in Central and Eastern Europe with huge potential and the signing of the Association Agreement proves this”, Alexandr Martynenko says in his comments.
“Annexation of Crimea and warfare in the Donetsk and Luhansk Regions have undoubtedly affected the work of legal companies. For example, our company established a representative office in Crimea to protect the interests of the occupied territory. First and foremost, the issue here is the interests of our clients: Ukrainian and foreign banks which can lose their mortgaged property as a result of annexation. Hostilities in Eastern Ukraine have led to a change of jurisdiction in certain judicial disputes. It needs to be understood that acquiring a court resolution is only the first step towards settlement of the client’s problem as the court’s verdict must be enforced in practice. Of course, it is impossible to enforce a court resolution on territory controlled by terrorists. That is why the situation around real protection and restoration of rights on the territory of the ATO remains unresolved”, Roman Marchenko stresses. The Managing Partner of Aequo Law Firm, Denys Lysenko, puts the onus on the concurrent operation of Ukrainian and Russian legislation in Crimea and the legal clashes connected to this.
Oleg Makarov names the Top-5 events that are essential for the legal market. Among them are: return to the 2004 version of the Constitution of Ukraine and adoption of anti-corruption laws, including the Law “On cleansing the authorities”. Olexander Martynenko positively views the adoption of a great number of new laws, “which should have been adopted as early as 10 years ago and which could create transparent rules”. He is convinced that future judicial reform will create new tendencies on the legal services market.
Moreover, lawyers are actively taking advantage of opportunities to influence events in the country: Oleg Makarov notes the exiting of some market participants to the Ukrainian Parliament and the civil service, while Denys Lysenko emphasizes the active participation of practicing lawyers in volunteer work and other types of public activities.
“Today, Ukraine needs our support in the competent implementation of reforms, as well as for improving its image on the world stage”, says the Partner of Sayenko Kharenko Law Firm, Volodymyr Sayenko. Lawyers of Sayenko Kharenko Law Firm have taken an active social position by promoting legislative initiatives and developing concepts on restructuring certain spheres. As Mr. Sayenko pointed out: “In particular, one of our firm’s counsels presented a concept of corporate law reforms which was created and promoted very actively by our firm. We have been also contributing to the elaboration of legislation on lustration. Our employees often provide comments on hot topics regarding life in the country in the mass media too. Of particular success was competent analysis of the current situation in Ukraine by the Head of the Government Relations Practice, Andy Hunder, on a British TV channel”.
Due to current political and economic issues the issue of admission of Ukrainian lawyers to an exam called the Qualified Lawyers Transfer Scheme (QLTS) to obtain the status of Solicitor in England and Wales slightly faded out, although it potentially gives Ukrainian lawyers the possibility to full-scale practice in London, one of the key financial centers. Anna Babych, a Partner at Aequo Law Firm says: “It was an achievement of the National Association of Ukrainian Attorneys that Ukrainian lawyers now have the possibility to practice as attorneys in England and Wales. So, on June 13, 2014 Solicitors Regulation Authority (SRA) included Ukraine in the list of jurisdictions that meet the requirements of transfer schemes for qualified lawyers (solicitors) in other jurisdictions (Qualified Lawyers Transfer Scheme; QLTS). QLTS is a scheme created for solicitors of other jurisdictions that includes examination tests for obtaining the right to practice as a solicitor in England and Wales. This gives Ukrainian attorneys the possibility to receive a solicitor’s qualification under a more simplified procedure compared to the standard one. Now Ukrainian attorneys have the possibility to become recognized solicitors in England and Wales provided that they pass the QLTS exam. This leverage opens new horizons for the professional development of Ukrainian attorneys, allowing their clients to receive complex legal support”.
The overall unstable situation influenced the human resources issue too: in 2014 we can highlight quite many interesting and unpredictable HR solutions related both to the transfer of lawyers between law firms and active migration to government service and politics. Without doubt, the most notable was the exit of five partners and their team of lawyers from Vasil Kisil & Partners Law Firm and the birth of a new Law Firm called Aequo.
Earlier, two Partners of Vasil Kisil & Partners Law Firm also left the company: Alexey Filatov was appointed to the post of Deputy Head of the Presidential Administration and Yaroslav Tesliuk became Head of the Legal Department at NJS Naftogaz. A Partner of JSC Arzinger, Vitalii Kasko, was appointed to the post of Deputy Prosecutor-General of Ukraine. Alexey Reznikov, a Partner at Legal Bureau Egorov, Puginsky, Afanasiev & Partners become the Secretary of Kyiv State Council and one of the Deputies to the Mayor of Kyiv. Agia Akhundova, Managing Partner at AK Legal Traditions, was appointed first Deputy Head of the State Enforcement Service. Sergey Koziakov, Managing Partner at AF Sergei Koziakov and Partners, was elected a member of the High Judicial Qualifications Commission of Ukraine under the quota of the Ministry of Justice of Ukraine. Another anticipated appointment has not yet been implemented - in April of this year the Cabinet of Ministers of Ukraine submitted the candidacy of Antonina Yagolnik, a Partner at the International Legal Group Astapov Lawyers for consideration by the Ukrainian Parliament to appoint her to the post of Chairman of the Antimonopoly Committee of Ukraine.
Pre-term parliamentary elections have not only changed the configuration of the supreme legislative body, but also directly influenced the legal services market, because several leaders of the profession have received the chance to fulfill themselves as legislators. Sergey Alekseev, a Partner at Alekseev, Boyarchuk and Partners Law Firm, has become a People’s Deputy in Parliament from the Petro Poroshenko Bloc. Political Party Samopomich will be represented in Parliament by, amongst others, Elena Sotnik, a Partner at AG Solodko and Partners, Ruslan Sydorovych, Managing Partner of JSC Sydorovych and Partners, Victoria Ptashnyk, a Partner at Droit Law Firm, as well by Irina Sysoenko, Director of the Babich, Sysoenko and Partners Law Firm.
As to partnership transitions and promotions, we should first of all note the increase in the number of partners at Asters Law Firm - from February 28, 2014 five employees of the Firm received partner status: Advisor Svetlana Chepurnaya and four Senior Associates, namely Eugene Kravtsov, Eugene Porada, Andrey Pozhidaev and Konstiantyn Soliar. Shortly after they were joined by Julia Semeniy, a former Partner at Konnov and Sozanovsky Law Firm. At the same time, Oleksandr Padalka ceased to be a Partner at Asters and took up a similar posting at Sayenko Kharenkoko Law Firm.
The team of LCF Law Group was supplemented by Vladimir Derevyanchuk as an advisor. He had previously headed the legal bureau Derevyanchuk and Partners. Law companies Danevych Law Firm and Ulysses merged late last year under the brand name of Marchenko Danevych. At the same time, Anna Zorya (a Partner at Ulysses) gained partnership status at Arzinger. We should also mention the recent withdrawal of Wolfram Rehbock from partnership at Arzinger.
The actual closure of the Kiev office of US law firm Chadbourne & Parke resulted in Adam Mytsyk joining the Kiev office of Dentons – an international law firm - as a Partner in the Corporate Law Practice. Olga Vorozhbit, who headed the practice of dispute resolution in the Kiev office of Chadbourne & Parke LLP, joined International Law Firm CMS Cameron McKenna as a Partner.
Giving his opinion on the position of international law firms on the Ukrainian legal services market, Valentin Gvozdiy draws attention to the fact that they become dependent on the cautious stance of their head offices – “staying with a minimum workload they are staying afloat, waiting for further orders from their head offices”. Roman Marchenko says that the market knows of examples when offices of international law firms are moving to a four-day working week.
Litigation and tax practices are the leading practices on the Ukrainian legal market today. Criminal law practice has also strengthened its position and is developing successfully. This, in particular, was described by Oleg Makarov: “Strengthening the position of criminal law practice and practice related to the European Court of Human Rights was, of course, triggered by political events in Ukraine and the tragic events that took place on Independence Square in the winter of 2014. The demand for lawyers in this field is greater than ever before”.
Valentin Gvozdiy holds a similar opinion: “Litigation practice and legal support of criminal cases are the most sought-after sectors of legal work. Today, those firms where these practices are traditionally strong have an edge over their competitors. Firms which previously focused on corporate legal affairs are now trying to fill the gap and ‘ramp up’ their criminal law practice. That is why most vacancies are focused on experienced attorneys and lawyers specializing in litigation. Resolving administrative and commercial disputes is still trendy. Lustration of the ranks of power in light of the adoption of the ‘On lustration’ may attract a lot of clients from yesterday’s state officials”.
Denis Lysenko points to the significant decrease in the activity of foreign investors and, consequently, to a reduction in the market volume of transactional practices. At the same time, in some sectors there is steady demand from Ukrainian companies for legal services, particularly concerning business restructuring and redistribution of property. The mentioned factor also contributes to the growth of projects in the area of dispute resolution. “In general, the litigation practice has not suffered in the current situation: litigation services are in demand, especially regarding commercial disputes related to real estate, as well as disputes related to failing to perform contractual and financial obligations, as well as tax disputes resulting from significant changes that took place in tax legislation in early 2014”, Mr. Lysenko states.
The condition of transaction practices, especially banking and finance law, is evaluated as unsatisfactory.
“The practice of banking and finance has virtually exhausted itself due to the pre-default state of Ukraine, low liquidity of bank assets and financial capital in general as a result of profound macroeconomic stagnation. In our opinion, this trend has grown into bank disputes or disputes related to problematic external loans”, says Oleg Makarov. According to Denis Lysenko, the rapid decline in transaction work in banking practice is only partially compensated by the increase of debt restructuring projects due to the turbulence of the currency market and changes in economic conditions.
Oleg Makarov notes a stepping up in the tendencies related to business restructuring and disputes over troubled assets (remaining in the ATO-area or annexed territory of Crimea). Roman Marchenko considers disputes arising from credit relationships as one of the priorities of judicial practice.
“The Ukrainian legal services market is evolving from general M&A practices to sector specialization. A flexible approach to complex customer needs in sectors with the most dynamic development ensures the growth of the budgetary figures of law firms that manage to structure their services in a timely and strategic manner with a focus on the market’s requirements”, Alexander Martynenko says. But talking specifically about practices, he also mentions the dispute resolution practice (including arbitration) as among the most sought-after practices. “The reforms that will be conducted will lead to a series of disagreements and court disputes, including in the tax sphere. Provision of legal services related to compliance matters is also gaining momentum, revealing questions of compliance with legislation and internal procedures”, says Mr Martynenko.
Market participants expect a certain revival of the market due to the need to implement tasks posed by European integration. “Our expected approaching towards EU markets and signing of the Association Agreement between Ukraine and the EU has raised many questions and put an additional load onto lawyers. Of particular interest to Ukrainian businesses are the methods of increasing transparency and compliance control, development and compliance control over internal policies related to corruption and money laundering”, says Valentin Gvozdiy. As Oleg Makarov forecasts: “It is expected that the mentioned ratification of the Association Agreement between Ukraine and the EU and its coming into force will lead to the establishment of positive trends such as revival of the practice of international trade law, strengthening of the practice of mergers and acquisitions, and reinforcement of corporate practices related to cross-border transactions”.
WHAT IS ON THE HORIZON
It is difficult to make predictions in the current situation as everything will depend on how things will move in the Donbas region of Ukraine and, consequently, on the general economic state of the country. However, all the experts who we interviewed prefer to stick to an optimistic view and speak about the inalterability of the previously chosen strategy.
“Our strategy remains the same in terms of loyalty to the values, principles and mission of the Vasil Kisil & Partners Law Firm. Our constant objectives are to retain and strengthen our leading position on the Ukrainian market. As to external strategic development, we continue to serve large international and Ukrainian customers, strengthen relationships with international law firms and partners around the world. In light of our country’s integration with the European Union it is extremely important to maintain good relations with colleagues in Europe,” Oleg Makarov says, sharing his plans.
“We need to take the path of evolutionary development. We are responsible for 95 people working in the company today and cannot afford to dismiss people ‘in droves’, as our colleagues sometimes do. Therefore, we prioritize systematic development and strengthening those of our practices which will be most in demand in the near future”, says Roman Marchenko.
The Head of the young Aequo Law Firm declares intentions in the medium term perspective to become one of the top five law firms in the country. With this purpose in mind the firm intends to systematically develop key practices and implement programs aimed at improving service quality and Aequo’s brand awareness in 2015.
Valentin Gvozdiy believes that in times of crisis companies should mobilize even more, hone their professional skills, establish business contacts and “sharpen the mind” in the search for new challenges. However, he notes that the sights of ambitious top managers of Ukrainian law firms are set on new markets: “Colleagues discuss the opening of representative offices of some Ukrainian legal brands on stable markets in Western Europe and in the wealthy countries of Asia and the Middle East”.
The Most Recognition Law Firms of Ukraine
|1||Vasil Kisil & Partners||229|
|4||Baker & McKenzie||93|
|8||Egorov Puginsky Afanasiev & Partners||37|
|12||DLA PIPER UKRAINE||13|
|13||Gvozdiy & Oberkovych||12|
|15||Squire Patton Boggs - Salcom||10|
The Most Recognition Law Firms of Ukraine by Practice Areas
|4||Baker & McKenzie||45|
|5||Vasil Kisil & Partners||40|
|Banking & finance|
|3||Baker & McKenzie||66|
|Real Estate & Land|
|2||DLA Pirer Ukraine||79|
|3||Baker & McKenzie||77|
|4||Vasil Kisil & Partners||58|
|1||Doubinsky & Osharova||188|
|2||Pakharenko & Partners||104|
|3||Baker & McKenzie||51|
|4||Vasil Kisil & Partners||40|
|5||Konnov & Sozanovsky||38|
|3||Vasil Kisil & Partners||77|
|4||Baker & McKenzie||70|
|2||Vasil Kisil & Partners||84|
|4||Baker & McKenzie||66|
|2||Ilyashev & Partners||113|
|3||Vasil Kisil & Partners||96|
|4||Egorov Puginsky Afanasiev & Partners||85|
|3||Egorov Puginsky Afanasiev & Partners||80|
|5||Vasil Kisil & Partners||49|
|Restructuring & Insolvency|
|4||Vasil Kisil & Partners||43|
|5||Ilyashev & Partners||36|
|3||Vasil Kisil & Partners||43|
|2||Vasil Kisil & Partners||80|
|4||Sergei Koziakov & Partners||54|
|5||Egorov Puginsky Afanasiev & Partners||42|
|5||Baker & McKenzie||30|
|4||OMP Law Firm||28|
|4||Baker & McKenzie||27|
|5||Ilyashev & Partners||21|
|Media & Entertainment|
|1||Konnov & Sozanovsky||54|
|4||Egorov Puginsky Afanasiev & Partners||30|