LAW FIRM DIRECTORY

Legal Market

Expert Committee

Market assessment

 

Oleksiy DIDKOVSKIY,

Managing Partner at Asters Law Firm

The Ukrainian legal market has not changed drastically over 2016. The increasing level of competition on the legal market, alongside the general stagnation of economic activities in the country, is following an established trend. Nevertheless, Ukraine remains a potentially promising country with regard to the legal business. To illustrate this statement we can mention Kinstellar's Kyiv office, which opened in 2016, and was rather an exception to the prevailing trend in recent years, when international law firms were shutting down their representative offices in our country.

With regard to full-cycle law firms, they feel more stable than some "legal boutiques" due to cooperation with international clients and representatives of large business, as well as the possibility of covering the decrease in work in some practices (e.g., mergers and acquisitions, real estate) with increased activity in others (dispute resolution, financial restructuring and bankruptcy).

With a slight delay, but the Ukrainian market continues to follow global development trends (e.g., increased competition with legal departments of the Big Four firms). Moreover, the Ukrainian legal market is "coming of age": Asters has already turned 21, while many law firms celebrated their 10th anniversary in 2016. In my opinion, the legal service business in Ukraine has already reached the Red Ocean stage of development and in such an environment the best competition tools are the quality of services and customer orientation.

Oleksandr MARTYNENKO

Senior Partner at CMS Cameron McKenna International Law Firm

The significant reduction in transaction projects is creating a general trend on the legal market this year. In this context, law firms have to employ additional compensatory tools by means of increasing the share of legal consulting assignments.

This process is complicated due to the conditions of economic stagnation, under which clients tend to employ ways to reduce their own expenses by entrusting the majority of legal support to in-house lawyers, or employing cheaper providers of legal services with an acceptable quality of services, or earnestly asking their lawyers for lower rates, write-offs, fee caps, more rigid/lower caps etc.

Accordingly, outside lawyers are forced to employ additional compensatory tools and try to either increase gross output or restructure their own practice in order to survive and not to lose their market share. For example, they penetrate new markets (both geographically and in practice fields), try to occupy a niche where competition is still not tough, and generate innovative offers on the market, etc. Basically, there is nothing new in this regard, just an ordinary conflict between extensive and intensive ways of development. In our case, it is development of legal practice. It just becomes more obvious against the background of economic recession/stagnation. Those don't following extensive or intensive ways, just struggle to survive by launching various models to economize. Some try moving in different directions simultaneously. In general terms, the market is on the move, which is good.

 

Serhiy Chorny
Managing Partner at Baker & McKenzie International Law Firm's Kyiv Office

Conditions for the legal service business have not undergone any drastic changes this year. The market is quite challenging since there is not that much work out there and competition is intense. In most cases clients worry about the cost of legal services, giving external lawyers only some projects, and even then with strictly limited budgets. We all are under price pressure. But at the same time law firms working in the field of judicial practice, debt restructuring and taxation were doing very well this year. In particular, law firms engaged in debt restructuring have substantially improved their financial status. Most of these projects are long-lasting and without fee caps, which means that lawyers can make good money by helping clients to solve their problems.

Otherwise, the situation hasn't changed. This year, just like in the previous one, law firms are doing much work pro bono, helping to draft new legislation. In particular, our firm does a lot of work on legislation on debt restructuring (both in the banking sector and for the banking sector).

 

Tetyana GavryshManaging Partner at ILF Law Firm

Business conditions have changed and keep changing dynamically. The market of oligarchic clans is starting to wane. Undoubtedly, players working in close coordination with the public sector will remain in the market, but the environment and competition are getting tougher and motivate the business community to play according to the market rules. Innovations in business management, including team leadership, customer relations and brand, are coming to the forefront. Another trend is worth mentioning: top managers of the legal service business apply for MBA programs and rely on creative agencies in their search for new content and self-identification in the quite abstract market of advisory services. I think that all these factors taken as a whole will lead to a serious battle and redistribution of influence in the legal market over the next three years. Standards for evaluating this influence will also change: the gross income factor will not be that critical, but the quality of law firms projects and dynamics of their development will become important.

 

Sergiy Oberkovych

 

Senior Partner at GOLAW Law Firm

The tough economic environment has certainly affected legal service businesses too, and circumstances call on law firms to be more proactive in their relations with existing clients and prospects, consolidate actual practices and retain and attract new talent.

Innovative approaches to work arrangement, as well as application of marketing technologies in order to get new customers, enhance customer loyalty and increase the volume of services provided have become a clear trend for law firms of 2016. Law firms that opened successful international and regional representative offices, and developed new practices, such as compliance and internal investigations, have gained a clear advantage.

 

Denis LYSENKO

Managing Partner at Aequo Law Firm

All things considered, 2016 showed increased competition on the local legal market, which, in my opinion, avoided stagnation despite reduced economic activity in the country. Some players have shown significant growth in revenue and seen a substantial increase in terms of quantity. Although international law firms demonstrate low interest in Ukraine, representative offices of international law firms that have already entered the local market have adapted to new working conditions and are interested in developing their practice. New firms have become more active and demonstrate a good momentum with regard to the number of projects and in general compete with the old ones, especially in the most active practices (including the judicial practice).

 

Impact of reforms

 

Vladimir SAYENKO

Partner at Sayenko Kharenko

As a rule, any reform usually has a positive impact on the legal market in the short term as businesses need help to adapt to new conditions and clarify disputed issues, etc. If we talk about the long term, successful implementation of reforms will undoubtedly have a positive impact on the business environment in Ukraine: state agencies will not throw a spanner in the works, judicial decisions will become more predictable and in-house lawyers will be able to solve current problems. We all realize that we have a long way to go before we get such an ideal situation. However, we can already see that orderly legal service business benefits from the reforms put into practice. With reduced corruption, clients will be able to resist the temptation to solve all their problems with the help of intermediaries, whom I don't even have the heart to call lawyers. Those who can provide clients with quality service at a reasonable price gain the advantage in a fair competition market. So, it's a win-win situation for everybody. Clearly, large system law firms operating exclusively in the legal field are most interested in the early implementation of reforms. In this regard the legal community is consolidated: law firms not only support the reforms, but oftentimes develop various initiatives too.

Evgen Kubko
Senior Partner at Salkom Law Firm (Squire Patton Boggs - Salkom International Association)

Any reforms, including but not limited to the judiciary, registration, anti-corruption, and government reforms, always influence the legal market. In the meantime, such influence can be either positive or negative, depending on the quality of the reform. However, there is a general trend that, initially, reforms, especially in these areas, always lead to market volatility, a spasmodic nature in the volume of legal services and differentiation (often spontaneous) of legal practices. Reforms of the judiciary in the future are sure to have a positive impact, as the need for highly skilled lawyers will rise.

In this context, complexity of legal services against the background of reforms will change, as, in addition to the risk elements of the transition period, economic and business processes, which are the target of legal influence, will also be complicated. Moreover, in terms of reform, the level of conflict in society is sure to increase, while new ways of resolving these conflicts haven’t been shaped in full. We can already observe two distinct trends: on the one hand, the working environment in the legal market is improving (there are new procedural possibilities, solutions to complex legal problems, etc.) and, on the other hand, the uncertainty in legal relations is increasing alongside changes in the reasonable balance (with regard to various characteristics) in the course of dealing with legal problems.

 

Yaroslav ROMANCHUK

Managing Partner at EUCON International Law Center

Developments over recent years have had, have and will continue to have a major impact on the legal market trends in the country as a whole.

Recent reforms in the judiciary, registration, anti-corruption spheres, public procurement with funds from the State Budget, on the one hand, provide ample opportunities for the development of legal practice and, on the other, require reformatting the activities of the law firm itself.

Lawyers have to study new rules and new legislation, it is necessary to generate new creative solutions and create a new practice.

And new amendments to the Tax Code, as well as a number of other legislative acts, adoption of the Labor Code are just around the corner... So, no rest for the wicked.

 

Oleksiy DIDKOVSKIY Managing Partner at Asters Law Firm

It is inevitable that substantial changes in legislation have a significant effect on the Ukrainian legal market. Essentially, the policy of deregulation in the sphere of economy, as declared by the government, aims to simplify business operations in the country, thus actually reducing the volume of work for lawyers. But in practice, frequent and not always consistent changes in the short term only complicate the lives of entrepreneurs, forcing them to rely on outside for addressing specific business challenges.

First of all, the legal market itself is influenced by the reform of the judiciary that is being introduced, transformation in the structure of the judiciary in Ukraine, as well as the introduction of a "lawyer monopoly". These changes will have significant influence on the legal service business in the country and we should get ready for them in advance.

The investment prospects of the country crucially depend on how quickly and successfully reforms are implemented. When these prospects become more evident for domestic and foreign investors, we can expect a speeding up in economic growth in general and the legal market in particular.

Serhiy ChornyManaging Partner at Baker & McKenzie International Law Firm's Kyiv Office

Out of all the reforms I would highlight two areas – judicial reform and combatting corruption. They will generate quite a bit of work for law firms, including international ones.

Anti-corruption policy compliance issues have become very topical for many clients, both Ukrainian and foreign. These issues include developing new regulations, as well as supporting investigation into particular offenses, thus providing work for law firms that have traditional practice of compliance.

Changes in the judicial sphere will force clients, particularly from corporate sector, to increasingly turn to lawyers. In the past large companies handled many court cases on their own. Now, with the introduction of the lawyer monopoly, they will have to enlist the help of law firms, as in-house lawyers may well be highly-trained law specialists, but not all of them are attorneys. Accordingly, all litigation will gradually be transferred to those who hold a license to practice law.

 

Fee policy

Evgen Kubko
Senior Partner at Salkom Law Firm (Squire Patton Boggs - Salkom International Association)

Fee policy depends on the business environment and level of development of the legal service business. A noticeable trend is that consumers of legal services are trying to reduce the cost of legal advice by entrusting difficult legal work to in-house legal departments without a reasonable basis. Identifying billing trends takes a longer period of time for market research, but today we can say that fees depending on maximum limits (so-called fee caps) currently predominate.

In addition, it is necessary to consider that the fee policy pursued by law firms and human rights institutions clashes with the fee policy pursued by the consumers of legal services. Finding the right balance between these opposing tendencies depends on economic, political, ethical, psychological and other factors, as well as on fee policy management skills. In general, we can assume that in the near future the fee component of the legal service business will begin to shift towards universally-accepted orderly approaches in this field. In other words, a kind of "European integration" will take place in fee policy too.

Sergiy Oberkovych

Senior Partner at GOLAW Law Firm

The competitive battle for solvent clients among the leading legal market players has increased substantially. They began to attract an increasing number of firms to their panel of legal advisers. The thrifty use of budgets for legal services has become significant even for large clients. Clients are primarily seeking real value for money.

Such a rational approach has also influenced formation of the fee policy by the top law firms, which have increasingly had to give up the comfort of hourly service fees and offer clients alternative financial conditions, including fee caps, fixed fees, success fees and extension of due dates. A number of losses in manpower and reputation suffered by some well-known players in the Ukrainian legal service business, as well as some not entirely justified confidence in the immutability of their leading positions, have lead to logical negative consequences and reduced earnings. Clients really do care about the impeccable reputation of legal advisors, their non-involvement in corruption allegations and scandals, absence of connection with odious politicians and non-use of undue influence, now euphemistically called "lobbying" or "GR", by referring their employees to public service.

 

 

Oleksiy DIDKOVSKIY Managing Partner at Asters Law Firm

The legal services business has revised its fee policy and has adapted itself to more flexible pricing. There is practically no advance payment in the market – more and more clients are insisting on the payment of a fixed amount upon completion of services. The hourly rate, a favorite among lawyers all over the world, is charged more and more rarely by law firms not only in Ukraine, but also in the whole world.

At the same time, representatives of the top tier of the legal service business in Ukraine can still adhere to a long-generated and elaborated fee policy in relation to each client – the service level guarantees that there will be no professional failures due to a lack of the necessary experience or the banal human factor. Risks associated with unskilled aid provided for serious business are not worth taking when trying to buy cheaper legal services.

Asters’ fee policy has become clearer, more transparent and specific. When taking on a case of a first time client or a new case of a returning client, we will write in every detail what, how, where and why will be done, how much it costs, and the reasons why. This approach facilitates client relations and contributes to improving our reputation, increasing the loyalty of clients, who can see and understand all the details of pricing policy.

 

Personnel issue

 

Vladimir SAYENKO

Partner at Sayenko Kharenko

The lack of skilled legal service personnel does not account at all for the lack of investment boom in Ukraine. During the years of Ukrainian independence, several generations of legal professionals have developed expertise and know-how to work with foreign investors. Rather, the low purchasing power of clients and high level of competition among law firms threaten to create a situation in the market, where really smart, enterprising lawyers will get tired of waiting for an investment boom and will redirect their energy to starting a business in more profitable sectors.

Oleksandr MARTYNENKO

Senior Partner at CMS Cameron McKenna International Law Firm

The staffing situation is not good enough. Universities do not guarantee high quality training of their graduates to satisfactory volumes. In addition, the geographical factor also has influence on this, thereby increasing the irregular quality training of young lawyers.

The situation is aggravated by general issues regarding the lack of regulation of the profession. There are no legislative requirements concerning occupational clearance, including requirements for a standardized test of aptitude as a preliminary and a prerequisite for admission to the legal profession. Neither are there any legislative requirements for lawyers to maintain a constant level of proficiency throughout their careers. For example, in the form of regular mandatory training for lawyers (a system of awarding practicing lawyers a required number of professional credits over each calendar year of their practice), or recurrent re-testing in order to determine whether the knowledge and skills of practicing lawyers correspond to the current conditions/requirements of the legal practice.

Thus, the business is not properly regulated. The lack of quality training of the young generation of lawyers is only a small part of a big problem.

 

Sergiy Oberkovych

Senior Partner at GOLAW Law Firm

The quality of legal education in Ukraine has, unfortunately, declined slightly and does not meet modern requirements for the profession. Due to the lack of appropriate reforms in the education system it is becoming increasingly difficult to find qualified staff with thorough knowledge and an analytical mindset. At the same time, more and more job seekers have unreasonably high remuneration expectations in relation to their level of proficiency and skills. With regard to employment, preference is still given to applicants educated in certain Ukrainian universities, holding an LLM degree awarded by a foreign law school, with excellent foreign  language skills.

 

Denis LYSENKO

Managing Partner at Aequo Law Firm

Unfortunately, the staffing situation on the legal market leaves much to be desired. The reasons for this are lack of systematic training in Ukrainian universities for private law practice and the decreasing quality of education due to the lack of reforms in the higher education system. However, a lot of talented young people in our country aspire to practical career development and key players on the legal market definitely develop their strategy so as to select and enlist such job seekers in their teams. As career advancement of young employees is on a just-in-time basis, it is extremely important to provide timely feedback and opportunities to master new practical skills (including soft skills) in the manner of experience exchange, guidance from partners and other more experienced lawyers.

Competitive environment

 

 

Alexey KOT

Managing Partner at Antika Law Firm

The Ukrainian legal services market remains highly competitive. With a more or less constant amount of work, if you take the total number of practices, the number of lawyers able to provide  client with quality performance of particular work is on the increase. Accordingly, to get a client in such circumstances, you need to offer more interesting solutions and conditions, predict changes in customer demand for legal services, and be able to find the right pattern of client interaction, in order to be able to meet the requirements for legal services in today's challenging environment.

 

Yaroslav ROMANCHUK

Managing Partner at EUCON International Law Center

It is good that we have a strong market competition; I think it will only intensify. What is most important is to ensure compliance with the "rules of the game" and that the competition is healthy and fair.

Competition always benefits the client, but it is important for the legal market not to devolve to unfair dumping which we can observe today, for example, in the practice of transfer pricing.

Only those companies can win the competition, which are always one step ahead, capable of adapting their legal service business to the rapidly changing world of technology, as well as fostering and retaining professional personnel.

 

Oleksandr MARTYNENKO

Senior Partner at CMS Cameron McKenna International Law Firm

The market involves competition and must balance supply and demand. Another issue is its quality.

For example, the electronics market can be saturated with poor quality products from unreliable manufacturers or high level devices from industry leaders, or combinations of the two in various proportions. Certainly, it is naive to expect that the legal market in this country will look like a high-tech products market from electronics leaders. However, our task is to strive for this and to develop the market in that direction, deviating as far as possible from the market standards of poor quality legal services.

For the time being the latter still dominates in unison with the absence of any professional responsibility standards/rules on the market (advocacy does not count, that is another story, and the situation there is not as tempting as it may seem to some) with respective market-based tools of competition. We need to get rid of them. Experience has proven that opening windows to the outside world and creating something like draft in the stagnant atmosphere of our professional apartment is quite an effective way of dealing with such "efficient" tools.

 

Development forecast

 

Denis LYSENKO

Managing Partner at Aequo Law Firm

In my opinion, we can expect 2017 (more precisely the second half of the year)to provide moderate growth in the total volume of work both in transactional practice and in litigation, against the background of further intensified competition with regard to price and quality. Regulatory practice, in which many law firms have found their niche, will play an important role. Industrial specialization of both key players and young and ambitious market participants is sure to increase. The interest of international law firms, which are not represented in Ukraine, will still be occasional, and rare exceptions (such as Kinstellar) rather confirm the rule. The time for for systemic market consolidation has not yet arrived.

 

 

Serhiy ChornyManaging Partner at Baker & McKenzie International Law Firm's Kyiv Office

There is some recovery in the economy now. It is, indeed, too early to even speak about the first signs of an investment boom. However, the outflow of investors has stopped and there is some activity on the domestic market, including small and medium M&A transactions. The legal market won’t see significant growth next year, competition will remain high, no new players are expected and existing market participants will maintain their current size and volume — I don’t think any of them are interested in attracting new employees.

Firms with a very diverse practice, including legal representation, debt restructuring support, tax consulting, will be successful. IP practice will continue to be profitable – because if properly organized, this practice generates income, regardless of market conditions. In real estate, no activity is expected, yet no recession is foreseen, which is also good.

Vladimir SAYENKO

Partner at Sayenko Kharenko

After the US election results were announced, I have become even more cautious than ever before about any forecasts. At the moment, I cannot see any prerequisites for radical changes on the legal market. In my opinion, most law firms will closely monitor the mood of clients and, following any change in demand, will demonstrate reasonable growth. At the same time, the market will remain highly competitive, affecting the cost of legal services and making our market less attractive for foreign players. For this very reason, the legal business may lose its appeal as a business, and more enterprising partners will find other areas to make the most of their talent.

Olga PROSYANYUK

Managing Partner at AVER LEX Attorneys Association

Firstly, one of the factors influencing the development of the market will be the introduction of the institution of lawyers monopoly, which is sure to affect relationships with clients.

Secondly, the continuing trend towards simplifying many processes and procedures in terms of legislation poses a risk of this situation being used by unscrupulous competitors, initiating made-up criminal proceedings, abuse on the part of officials at various levels right up to persecution of attorneys.

And, thirdly, pricing pressure on advisors from clients will intensify alongside rising demands for added business value, that is, the need for turnkey business solutions.

Mikhail ILYASHEV

Managing Partner at Ilyashev & Partners Law Firm

The size of the legal market will continue to decline. I do not think that any of the international players will choose to enter our market. At the same time, the tendency towards splitting up existing teams will continue.

With regard to the situation in individual practices, an increase should be expected in earnings in support of criminal proceedings, judicial and arbitration practice. All things considered, I should think that the bankruptcies peak in Ukraine has already passed. But we should expect an increase in practices associated with international trade, taking into account existing sanctions. Agriculture will remain the leader of the Ukrainian economy, and all the processes taking place there will require the involvement of lawyers – in this regard we are also waiting for an increase in work volumes.

Development forecast

Alexey KOT

Managing Partner at Antika Law Firm

Compared to last year the situation has not changed drastically. The legal market still  depends completely on economic phenomena and political developments in our country. Recently, the situation with business protection practices has been showing a noticeable trend to progress. Many firms are greatly oriented towards industrial specialisation,  which should not go without mention.

As for our firm, the practices that generate the bulk of work in the current year are still arbitration and litigation, antitrust investigations, energy efficiency, and energy conservation. Clients turn to our firm as a local advisor on Ukrainian law, and partners act as independent experts in Ukrainian law for the purposes of arbitration and litigation in foreign courts. In addition, over 2016, our project portfolio has retained its share of orders received from state-owned companies.

Olga PROSYANYUK

Managing Partner at AVER LEX Attorneys Association

Just as in the previous year, lawyers receive a steady income stream from judicial practice, working with bad assets, providing legal support in bankruptcy and restructuring procedures. The course towards European integration and Ukraine's commitments to the international community largely predetermine changes in the regulatory environment, as well as recent anti-corruption initiatives, creating demand for legal services. As for our key scope of activities, namely criminal law, we can observe not only a significant increase in the volume of work, but also the integrated nature of client requests, asking for consistent participation at both the strategic and tactical levels.