Moderation in the future
The legal market is in a state of reformatting of practices. This trend is due to the emergence of new institutions and active sectoral development (agricultural sector, energy). We can observe increased interest in Ukraine from foreign investors. Regional markets have begun slow though steady development
While the regional legal market did not increase last year, its development can be evaluated with muted optimism in 2017.
Regional business (especially in border areas) was characterized by an outflow of specialists abroad though, at the same time, we can see increased interest in regional markets from foreign investors. Talking about "internal outflows", the problem of the shortage of judicial personnel is still a pressing one, though judicial reform has already shown its first benefits and the new Supreme Court has acquired credibility.
The regional focus is shifting. The creation of new institutions is making the market reformat the practices. The following traditional directions are popular: judicial, tax practices and business protection; the agricultural sector is actively developing. Stimulation of big business to implement compliance policies has set certain trends for the legal market.
Moreover, the legal market was "rejuvenated". This trend will affect the alignment of forces in the next two or three years. But we won’t look into the future just yet. Let's look at the legal map of Ukraine of 2017. And we’ll begin with the south-west.
BITTERNESS OF ZAKARPATTIA
The legal market of Zakarpattia is predetermined considerably by its neighborhood with four countries: Poland, Slovakia, Hungary and Romania. Increases in salaries due to higher taxation of salaries and mass labor migration has significantly influenced the region’s legal market. "Therefore, legal services became secondary and less important for business, than the fight for personnel and survival", Rostyslav Pazyna, managing partner at Collegium Law Firm, says.
According to the commentator, another important factor is the shortage of judges. Moreover, a judicial remedy becomes meaningless because of its bad timing. "Lengthy court processes, together with high legal fees, led to an outflow of cases from courts and ten-fold reduction of orders for maintenance of new processes", Mr. Pazyna estimated.
Such regional trends have predetermined the rapid promotion of the practice on employment abroad. Rostyslav Pazyna also observes certain development of mediation. The market of bankruptcy practices and loan penalties retains its volume. But at the same time, the relevance of practices of criminal trial, tax and land disputes has fallen.
WORLD DISCOVERS LVIV
The country’s cultural capital — Lviv — pleases with the market stabilization and availability of prerequisites for its growth. Lawyers associate this with improvement in the region’s investment attractiveness.
Thus, we can see an increase in interest in the region from foreign investors, which generates a revival of project support in general: from registration to capacity launch. Anton Podilchak, managing partner at Advice Group, says that such projects are uniquely multifunctional and include corporate aspects, M&A, tax planning, personnel tasks, land issues and real estate, contractual relations and regulation of cooperation with international financial institutions, licensing and certification and construction practices.
According to Serhiy Matviyiv, managing partner of Matviyiv & Partners, the favorable investment climate in the region has contributed to the development of employment services for foreigners "on a turn-key basis".
"It is interesting to observe how the customs law practice is growing. Business has finally felt the need and correctness of applying zero tolerance of corruption, as well as the efficiency of high-quality judicial protection", Mr. Podilchak says, sharing his observations.
Serhiy Matviyiv indicates the creation of start-up law firms among the last "fashionable trends" in Lviv Region, which, unfortunately, are not ready yet to serve business in the proper way. At the same time, such companies became players on the market and take part in forming pricing policy through the use of dumping. "Young players are not always ready to provide the required quality of services, – Serhiy Matviyiv says. — At the same time, the founders of such companies often continue to work with the in-house of other companies or employees of the other law firms. This results in a client's attention deployment."
Mr. Matviyiv believes that the legal market of Lviv finds itself in a state of practice reformatting. Companies are looking for profitable practices in connection with reforms of different spheres, as 2017 turned out to be quite generous for fundamental legislative changes, which were also implemented this year. "The new institution of private bailiffs has opened a new area of activity for experts, and some employees of law firms have changed their activity in favor of the new institution", Serhiy Matviyiv adds.
Anton Podilchak pays attention to the fact that major players are interested in compliance. "The activities of the European Court of Justice and the United States Department of Justice are encouraging big business to implement the policies of compliance and internal investigations regarding possible ‘white collar’ crimes," he emphasizes, adding that internal investigations became the "season’s stars".
"Optimism regarding judicial reform and positive changes in the state have met the expectations of foreign companies in the formation of new judicial practice in the fight against ‘grey’ imports and protection of intellectual property, – Anton Podilchak sums up. — In general, we can speak of the market’s stabilization and the beginning of marginal growth."
Serhiy Matviyiv observes the active development of the agricultural sector throughout Ukraine and especially in Lviv Region. He notes that the provision of legal support and in criminal issues related to unauthorized seizure of land plots and arbitrariness is becoming widespread in this sphere. This trend is also due to the ineffective work of law-enforcement agencies, which do not stand for protecting the interests of large agrarians and do not oppose arbitrariness of local semi-legal farming.
Mr. Matviyiv calls the emergence of companies specializing in medical law as a positive and interesting trend of the regional market. According to him, several landmark criminal trials were completed in 2017, as a result of which health care institutions and medical workers were brought to responsibility. That is, there was a request in this area, and the legal market responded to it properly. Companies began to offer services in the protection of medical institutions, workers and patients. Serhiy Matviyiv says that this niche was actually free up to this moment, and predicts development of this practice in the future. We can also observe the development of energy law, as dictated by significant reforms in the energy sector.
PEARL IN THE SEA
The practice of the law of the sea remains in steady demand and is one of the leading ones in Odesa Region. This permanent trend is due to geographical location.
Yuriy Sergeyev, managing partner at Sergeyevs’ Law Office, notes the rise in the number of projects in sea transport and infrastructure, in mediation in employment of seamen abroad, as well as increased requests from clients to check the compliance of activities of their companies with the legislation of foreign countries and international rules, as well as to ensure protection of business and assets.
In turn, Volodymyr Zubar, managing partner at Jurline Law Firm, talks of the existence of a steady trend to create new local law firms. According to him, major law firms of Odesa have retained their positions on the market. "The rise in the number of small and medium-sized law firms will certainly affect the balance of power in the region in the next two or three years", he believes. Moreover, the practice of job sharing of internal lawyers and external consultants is being formed on the market. "Today, there are many examples, when a client uses the services of several law firms simultaneously, having his own internal legal service" Mr. Zubar says in comments. He also notes the rise in the number of clients ready to pay hourly rates to lawyers, and this applies to both legal entities and individuals.
Lawyers also note an increase in pressure on business from regulatory authorities to one of regional trends (although not positive ones). Yuriy Sergeyev notes frequent cases of searches and other investigative actions. We can observe the trend of active development of judicial practice and practice of criminal law. "Business requires timely, competent and appropriate protection", Mr. Sergeyev underlines.
It is reasonable that the criminal law practice is becoming so popular. Volodymyr Zubar also pays attention to special activity in the region shown by law-enforcement agencies. For example, they face illegal attempts by law-enforcement agencies to arrest and seize grain in port terminals every year.
At the same time, Mr. Zubar notes the rise in the number of cases investigated by bodies of the National Anti-Corruption Bureau. International arbitration is of topical interest. "This year, we had several cases in London arbitration, where the interests of the parties were represented by Ukrainian lawyers," the head of Jurline informs. According to him, the number of cases in intellectual property and cases subordinated to Ukrainian economic courts has decreased. "We expect that the judicial department’s work will change with the end of judicial reform", Volodymyr Zubar forecasts.
According to Yuriy Sergeyev's version, the support for business, labor, tax and criminal law practices were the most popular. This is due to the emergence and implementation of new investment projects in the region (for example, on processing of domestic solid waste), a need for greater tax efficiency and requests for authorization documents. "Recent changes in legislation on inspections of business entities by the Labor Inspectorate, as well as the rising number of illegal tax assessment notices from the State Fiscal Service of Ukraine had a significant impact", Mr. Sergeyev says summing up.
TRIBUTARIES OF THE RIVER DNIPRO
The country’s industrial capital, Dnipro (formerly Dnipropetrovsk), is remarkable for its stability. In general, the legal market of Dnipro Region has preserved the trends of previous years.
Oleksiy Savchuk, managing partner at Assyria Law Firm, notes that the main share in practice of his lawyers association still belongs to corporate, tax disputes and criminal legal protection of business. We can also observe a rise in the number of foreign clients from Europe and North America seeking legal assistance in connection with investment in Ukraine or legal support for operations connected with import. "But we cannot yet speak of this as a trend," Mr. Savchuk believes.
And according to Yevvhen Smirnov, managing partner of Smirnov, Tarasevich & Partner, continuing reorganization of the internal structures of law firms aimed at expanding the sector of services provided, without the possibility of narrow specialization preservation of practices at regional level, became the main trend. "In an effort to preserve profitability, law firms study and carefully determine the most profitable economic fields in the region, and then attract and retain clients from this environment, focusing on their needs and specifics of the business", he explains. Thus, the specialization of law firms is usually formed not on a branch of law, but on the business area where the legal services are provided.
Services in support of transactions on acquisition and alienation of corporate rights, especially in the agricultural sector, were the most popular in 2017. "Foreign investors acquire with pleasure agricultural enterprises that have a considerable volume of long-term land lease agreements for agricultural purposes", Mr. Smirnov says in comments. According to him, the feature of foreign investments in the agricultural sector is the fact that investors who do not have offices in Ukraine most often seek legal support of investments and subsequent business from regional law companies. Since the volumes of residential property construction have considerably increased, those legal services, aimed at supporting general contractor agreements and other legal relations connected with execution of title and authorization documents, found themselves in demand.
Yevhen Smirnov also points out a negative trend. "Despite universal statements by state agencies regarding prevention of raiders of agrarian enterprises and its combating, the protection of business in the agricultural sector did not lose its relevance in 2017 with new schemes of raiders focused both on enterprises as a whole and on the land banks of enterprises which are in long-term lease", he emphasizes.
Lawyers note that due to changes in legislation, directions in practices appeared that had not existed before. "This is consulting clients about checks by the State Employment Service and appealing against penalties imposed by this body. The new categories of cases, such as appealing against decisions of the State Fiscal Service on refusal to register tax invoices and appealing against the actions of state registrars through judicial authorities became rather mass in nature", Oleksiy Savchuk adds.
Yevhen Smirnov is at one with his colleague: "There is a certain trend to increase demand for support of inspections conducted by the ecological inspectorate and inspectorate of the State Employment Service of Ukraine with subsequent judicial appeal of citations and penalties." According to him, 2017 saw a fall in demand for judicial practice in economic disputes on debt collection and in tax disputes.
The legal business in eastern Ukraine is also assessed with muted optimism. Maksym Sheverdin, managing partner at Sheverdin & Partners, describes the legal market of Kharkiv. According to him, the medium-sized business sector has realized the need for high-quality legal services and addresses external advisors more often (either constantly or on specific issues). He refers criminal and judicial practices to the most popular in this year, which has already become a tradition. In such case, introduction of exclusive representation of clients in courts by lawyers as a result of judicial reform became one of major factors in this direction. As the so-called lawyer monopoly for representation in courts is being introduced gradually (in courts of cassation from 2017, of appeal — from 2018, and in courts of first instance in 2019), the market will react gradually too. This will make a business provide its in-house lawyers with certificates to practice law or apply to external lawyers and associations. "Therefore, I believe that the future belongs to lawyer associations and bureaus on the legal markets, especially in judicial practice", Maksym Sheverdin predicts.
Another practice, which has been actively developing on the legal market recently relates to wealth management. "Wealth management is a complex of consulting services covering all aspects of the financial life of a private client with a large fortune, including financial investments, taxation, planning, legal issues, corporate rights management, etc.", the commentator says in his definition. In his opinion, this is not the time to speak about wealth management as a full separate practice (it is rather a synthesis of various specializations), but such services are already in demand, especially in Kyiv. "However, the owners of big capital began to appeal to lawyers in the regions on issues of wealth management", Maksym Sheverdin notes.
As we can see, the regional market made its start from the bottom and is developing. But this is not a regional peculiarity, rather an all-Ukrainian trend. After four years of turmoil, the national market seems to be starting its recovery.