The Regional Campaign
The trends of the Ukraine-wide legal market are confirmed at the regional level. Services focused on comprehensive business protection against encroachments by competitors, including raider attacks, are in permanent demand. Alongside development of the regional IT clusters in Lviv and Kharkiv, the demand for legal services rendered for IT business is growing
The Ukrainian regional legal market did not experience any special highs in 2016. However, there were no rapid falls either. By and large the trends of 2015 predetermined the legal market’s development in 2016: economic stagnation, the war in the east of Ukraine alternating with a fragile truce, corruption trends, understaffing in courts.
Furthermore, the personnel deficit in the judiciary only took a turn for the worse. There are more than 200 courts in Ukraine where 50% or more of judges do not work for various reasons: due to the end of the five-year term of powers, judges reaching 65 years of age, judges not taking their oath The most critical situation is in Vinnytsia Region – in 17 courts there are over 50% of judges who do not work. In this context, Dnipropetrovsk (16 problem courts) and Donetsk (15 courts) Regions are not far behind. The shortage of judges has a negative impact on the regional legal market: the time limits allowed for consideration of cases are being extended, while the quality of cases handled is falling.
Let's substantively analyze the state of the regional legal market. Let’s start from the West.
Just Lviv IT
"2016 proved to be nothing special for the economy in general and legal business in particular," — says Andrey Hrynchuk, lawyer and Managing Partner at Hrynchuk & Partners Law Firm, Lviv. — "The trends observed as early as 2015 had the same significant influence on the legal market last year. The moratorium on business inspections has significantly reduced the number of tax disputes. At the same time, it increased the price for those cases initiated by clients, whose turnover exceeds the permitted legal limit. The declarations of insolvency by some banks have raised already high interest in banking and loan disputes".
According to Andrey Hrynchuk, in Ukraine it is much safer for both business and personal freedom to import, rather than to manufacture. Thus, the "Ukrainian investment miracle" is once again postponed till next year, meaning that no heavy workload can be expected for those practices handling foreign investment and M&A transactions. "The construction and real estate sector has ensured a sufficient volume of work for professionals specializing in this practice area — some "domestic investors" got tired of "sitting on their money", managed to put up with the risks inherent in Russian aggression and proceeded with making the same investments as before — in real estate — of course, with the assistance and support of legal advisers," — says Mr. Hrynchuk.
"Typical for Lviv is image and economic role of the IT sector. It is most welcome, since clients are plentiful in the IT sector and there is lots of work for everyone — international structuring specialists, tax lawyers, intellectual property law experts, and, of course, experts in IT contract law. As a result, most law firms and legal practitioners do not hesitate to include IT business support in their service portfolio," — says the Chief Executive of Hrynchuk & Partners Law Firm in the context of the specifics of Lviv.
In the sphere of business legal support, the year 2016 was as complex for Ivano-Frankivsk as the previous two years, says the lawyer and Chief Executive of Lex Consulting LLC Volodymyr Kostiuk. He regards it as undisputed that the business environment in Ukraine is constantly deteriorating due to the difficult economic situation, tax burden, fall in the population’s purchasing power, high level of corruption, inflation, and the ongoing war in the east of the country. "This, in its turn, directly affects the legal market. In the current environment, businesses are still trying to optimize their costs, including those allocated to legal services", — says Mr. Kostiuk.
According to him, a significant part of business, wherever possible, chooses cheap services offered in the legal market. Their quality, however, leaves much to be desired. Nowadays, dumping is becoming a significant factor undermining the legal market.
"On the other hand, this situation encourages business to search for a better environment in EU countries. Thus, legal business support within European jurisdictions is proving to be a promising focus area", — says Volodymyr Kostiuk.
According to the Chief Executive at Lex Consulting, no significant changes have been observed in the range of popular practices. Litigation, resolution of loan disputes, legal support of criminal proceedings launched in the field of business, legal business support in EU member states are still promising focus areas.
Odessa in focus
No revolutionary changes have occurred on the Odessa regional market either. "In 2016, the Odessa legal market in overall terms continued the trends of the previous years. This is due to the current gap between large and small businesses that resulted from the reduction in medium-sized companies. The number of large solvent companies has decreased, while small-sized companies, as a rule, solve their legal issues with the help of in-house lawyers," Volodymyr Zubar, Managing Partner at Yurline Law Firm, says.
- law firms are focused on supporting small projects or individuals, including provision of legal services", Volodymyr Zubar adds.
The Chief Executive at Yurline Law Firm (Odessa) reports on the increased number of bar associations, which play an increasingly important role in the investigation of criminal proceedings. "Due to the reforms in law-enforcement agencies, the ranks of lawyers have been reinforced by former employees of law-enforcement agencies," — he said. By the way, judges may soon begin practicing law too, as judicial reform moves towards its climax.
"One of the strategic options available for the survival of large law firms is the establishment of close relations with law firms located in foreign countries, so that they can accompany international projects. Our lawyers are already engaged in providing legal support for cases at London courts of arbitration — LCIA, GAFTA, FOSFA — and it is becoming the norm", — says Mr. Zubar. For example, some of his employees spent more than 100 days on business trips last year.
In 2016, the division of activities between legal practice specialization in law areas and industries became even more distinct. For example, Mr. Zubar points out that litigation, corporate law, and legal support of foreign economic activity are traditionally popular in the region. "Among industries, I would like to emphasize the transport infrastructure (especially sea), agriculture and processing industry", — says Volodymyr Zubar.
According to him, criminal specialization is growing in popularity. At the same time, the demand for protection of intellectual property rights and support for projects in the construction industry has decreased.
News from Crimea
News from the Crimean Peninsula is getting even more infrequent in the press or other media of mainland Ukraine. While those scarce pieces of news that managed to break into the information space are rather distressing: searches, disappearance of residents of Crimea, arrests...
Almost nothing is known about the current state of the legal services market in Crimea, except for the spring news from last spring that 200 judges were dismissed by the Crimean Parliament for breach of oath.
"In the legal environment of the Crimea (where there is still no confidence what "under the law" is supposed to mean) a collision practice has originated and continues to develop at the junction of the jurisdictions of two states,” — says Olga Gornik, lawyer at the Simferopol Office of Ilyashev and Partners Law Firm. “In fact, all Crimean lawyers are involved in the process of its development", she adds.
According to Mrs. Gornik, the following are in-demand legal practices in Crimea: resolution of disputes, including those regarding the establishment of legal facts; registration of real estate and land belonging to citizens, resident legal entities and foreign entities; debt recovery and administration of loan debts by the Deposit Protection Fund, as well as the legal relations arising from them.
Olga Gornik also highlighted a number of factors affecting trends on the Crimean legal market. Firstly, representatives of the judiciary, who due to their professional activities are at the very beginning of establishing court practice in this specific region, are still studying the law of the Russian Federation. "Predictions that this sector could be stabilized in a relatively short time did not come true," says Mrs. Gornik.
Secondly, representatives of regional business treat Russian law firms with some caution. Thirdly, the integration of "legal Crimea" into Russia is complicated by the fact that many "mainland" representatives of the legal profession, owners of Moscow law firms (which are potential invaders of the legal market) consider Crimea to be a depressed region with a weak economy. "Russian regional law firms are more willing to cooperate by concluding partnership agreements with Crimean companies on joint business support for projects launched by clients from Crimea and Sevastopol. They may also be willing to make a subcontracting proposal of for certain types of services", — said the lawyer.
Fourthly, the factors affecting trends in the Crimean legal market include sanctions.
"Russian lawyers are learning the realities of the region and realize that things are not so simple and straightforward as they first thought. Keeping in mind the proverb "Whose region, his religion", it becomes obvious that everything is subject to adaptation", Olga Gornik sums up.
The sky over Dnipro
In 2016, the city of Dnipropetrovsk was renamed Dnipro. This is not the major legal news of the region, although there are certain legal implications stemming from renaming within the process of decommunization.
According to lawyers, the legal market of Dnipropetrovsk Region responded adequately last year to all the economic and political processes in Ukraine. "An additional factor affecting the overall economic situation in the region is its proximity to the ATO zone", — says Yevgeniy Smirnov, Managing Partner at Smirnov, Tarasevich and Partners Law Firm.
According to him, an active reformatting process inherent in every crisis is currently taking place in the regional market of legal services. "Due to severe competition, regional law firms were forced to get restructured and achieve a volume of legal services proportional to the customer's requests. At the same time, the majority of customers wanted a set of services aimed at attaining the desired goal, rather than ‘boutique’ narrow specialization," — says Yevgeniy Smirnov.
He emphasized that against the background of economic crisis in the steel industry, which used to be regarded as "engine of the progress" in the entire region, a remarkable recovery was observed in terms of rendering legal services in the agricultural sector, in which foreign investors are highly active, especially with regard to the grain market.
"Many businesses conduct comprehensive audits of their outstanding (sometimes long-forgotten) commitments and make every effort to resolve issues related to debt recovery through legal proceedings. However, legal services for comprehensive business protection against encroachment by competitors, including raider attacks, are still in demand," — says Mr. Smirnov on the topic of trends.
According to Yevgeniy Smirnov, growing popularity has been observed of those legal practices able to provide comprehensive services to clients, who try to introduce order in their affairs during a crisis: conduct audits of corporate relations, bring legal documentation related to real estate into compliance with the norms of current legislation, register documents confirming their intellectual property rights. "A vast amount of client requests involve legal services for risk assessment and subsequent legal support of transactions on acquisition of corporate rights of enterprises or real estate offered for sale during a crisis at reduced prices," — says the lawyer. According to him, there is still demand for legal support services in bankruptcy procedures, tax litigation, and protection of interests in criminal proceedings.
In his turn, the Chief Executive at Assyria Law Firm (Dnipro), Aleksey Savchuk, draws attention to legal assistance for business. Thus, in 2016, the workload for legal protection of business significantly increased. In particular, it includes the protection of clients against criminal prosecution on tax and other economic crimes, as well as counteracting attacks from corporate raiders. Besides, Mr. Savchuk pointed out the growing number of corporate disputes among farmers. "The increase in number of requests made by startup IT companies for legal support of their entry onto the markets of Europe and the USA can also be considered a trend", — he said.
Aleksey Savchuk emphasizes that after a significant decline in 2015 the practice of legal representation in business disputes did not show any high growth rates, which correlates with the general trend in the region. "As compared to the previous year, the number of tax disputes has decreased. Other practices remained approximately at the same level", — said the Chief Executive of Assyria.
"The growing trend, which emerged at the meeting point between businesses and law enforcement agencies as early as 2014, is rather encouraging, says Mr. Savchuk. — Whereas in the past representatives of medium-sized business used to solve issues through the "safe and proven method" (where lawyers were treated as intermediaries), now the situation is changing and customers are willing to pay for legal assistance. This is not because of increased civic consciousness (although I would prefer to think so), but the reason is economic efficiency: due to the frequent rotation of police officers and other changes within the system, nobody can guarantee that a once closed or ‘pending’ criminal case cannot one day be reopened." Against this background, increasing numbers of clients come to the conclusion that legal methods give better results and are objectively cheaper.
It is interesting that in Kharkiv there is a growing tendency towards increased demand for legal services as compared to previous years. This is the opinion of the Managing Partner at Vileon Law Firm (Kharkiv), Yuriy Vyshnevetskiy. As for other trends, they are quite similar throughout the region. Yuriy Vyshnevetskiy regards the practice of criminal defence as one of the most popular practices in 2016: "This is due to the establishment of new law-enforcement agencies, intensified activities on the part of state bodies in counteracting corruption, criminal prosecution of persons who used to hold positions in government authorities, and attempts to criminalize transactions previously considered to be legal."
"With the expansion of the regional IT market, the demand for legal services for IT business has also increased. The most popular services in the field of information technology include consulting on the choice of IT business model, development of schemes to protect intellectual property rights and trade secrets, contract drafting, legal support and assistance for business activities conducted by IT companies," — he notes in comments.
The crisis in the banking sector has affected the number of trials involving banking institutions, the Deposit Guarantee Fund and collection companies, as well as disputes relating to the sale of distressed assets. "Changes in legislation have contributed to a rise in the number of legal disputes relating to public procurement, public service, as well as disputes on challenging the actions of the State Labour Service of Ukraine", —Mr. Vyshnevetskiy concludes.
Wind from the East
When reviewing the annual performance of regional legal markets, it would be incorrect to pay no attention to the war-torn eastern part of the country. Lawyers are available in the ATO zone, but most of them are military servicemen. Natalia Meshcheriakova, who recently acted as an expert on "intellectual matters" in special publications is currently serving in the Armed Forces of Ukraine. She will now tell whether there are lawyers in the territories controlled by the occupation forces of the aggressor state.
"I must say that the illegal organization called the Donetsk People's Republic, in its attempt to imitate statehood, is overgrown with social and legal institutions (if one may call them so)," — says Natalia Meshcheriakova. — "The period between March and August 2016 was marked by the emergence of the so-called Bar of DPR. Accomplices of terrorists and criminals, who dared to encroach on the territorial integrity of Ukraine, generated a bunch of papers — the law, regulations, provisions and rules governing the establishment and operation of the so-called Bar of DPR. Let's have a look at the DPR’s register of lawyers. What we see are practicing lawyers of Ukraine, who took an oath and made a vow to observe in their activities the Constitution and laws of Ukraine! Their certificates entitling them to engage in advocacy are valid and they still enjoy all the rights of a lawyer, namely: to represent the interests of a client in Ukrainian courts, to collect evidence, and to submit requests to the state authorities. And it extends well beyond ethical issues. This is a question of national security".
According to Mrs. Meshcheriakova, her colleagues — Illia Kostin and Oleksii Bezhevets — are now addressing the question of depriving such lawyers of the right to practice law. "I hope for the best possible outcome of this difficult case, since the Donetsk Region Qualification and Disciplinary Bar Commission is already providing resistance to bringing the two members of the Bar Council in Donetsk Region, who have practicing certificates of DPR lawyers, to disciplinary responsibility", — she said.
"For my part, I can say that some of these lawyers travel freely through the checkpoints to Ukraine and back to the terrorist DPR. So you can meet them in Ukrainian courts," —Mrs. Meshcheriakova warns.
Natalia Meshcheriakova, female service member of the Armed Forces of Ukraine, reminds that the position of the DPR's so-called Minister of Justice is currently held by Elena Radomskaya, a lawyer of Ukraine, against whom the court has issued an arrest warrant with the aim of bringing her before a court — she is accused of having created a terrorist group or terrorist organization. "She has not been even disbarred, while her practising certificate, enabling her to engage in advocacy, has been suspended since late 2014 at her own request," —Natalia Meshcheriakova points out.
"There can be no justification for such lawyers even if they say that it is a matter of survival. Neither there can be two opinions. Conscious and active participation in the activities carried out by a terrorist formation, the DPR, assistance to the DPR in acquiring any forms and elements of statehood to officially become a state, as well as violation of the laws and Constitution of Ukraine shall be considered at the very latest aiding and abetting a terrorist organization ", — says Mrs. Meshcheriakova.
The development of the legal market is like walking over the abyss along a swinging rope bridge that swings from gusts of winds. It will be very difficult to get to the ground as long as the wind continues to blow from the east.