"Here everyone knows each other, it's appropriate to say that they turn to a lawyer like to a family doctor, regarding all issues" ANDRIY KOSTIUK, PARTNER AT PAVLENKO & PARTNERS, ATTORNEYS AT LAW, DESCRIBES "LEGAL" LVIV
— How would you outline "legal" Lviv?
— The business environment of Lviv is rather narrow. Persons personifying jurisprudence become recognizable, everyone understands perfectly well the worth of every person, their character and qualities. Firms very often grow in tandem with their clients, from small to large.
Here everyone knows each other, it's appropriate to say that they turn to a lawyer like to a family doctor, regarding all issues: from acquiring a competitor's business to divorce.
But this also has the reverse effect: to achieve a high level of confidentiality and to avoid conflicts of interest (which, for example, is not a reason to be scared in Kyiv), clients turn to lawyers in other regions when handling individual matters.
In our city alone there are five higher educational institutions involved in the training of lawyers. The increase in the number of lawyers in the market has provoked a fall in the payment of their labor, which provides an opportunity for clients to hire highly professional in-house staff. Domestic lawyers of high category companies can solve unorthodox issues independently.
Another trend is in-house law firms. The legal departments of large companies create their own "pocket" law firms that serve one client and receive a salary, but at the same time enjoy the guarantees of an attorney. This trend is promoted by the consolidation of the so-called attorney's monopoly at constitutional level: only an attorney will be able to represent interests in court.
As for notarially certified agreements, the scope of legal advice is pitiful. In 99% of cases, these functions are performed by a notary. Attorneys are attracted to projects by the high value of the property to be acquired or by the participation of a foreign element.
Another trend is non-traditional competitors to the legal business, namely consulting firms. All the ‘Big Four’ companies (auditors) have official legal advisory units.
— Lviv is, among other things, known for rapid development of its IT cluster. Do these trends influence the practice of your firm?
— In Lviv, there are two generations of IT companies. The first generation is outsourcers with large systems and large number of employees. First, they grow to a certain level, then their random status as private entrepreneurs needs structuring, and they apply to us to address these issues. Such firms have been our clients for more than ten years.
The other generation is freelancers who "hide" in ICO, tokens and bitcoins, but they would rather turn to similar startups as they are on the same greenfield. You need to be aware that crypto industry projects are a completely new, fashionable topic, and it entails many risks of fraud.
This is exactly how the IT business cluster in Lviv was formed over the past few years. Outsourcing IT companies have been around for more than 20 years. For our city, there is nothing new in this – just an integral development conditioned by objective circumstances: we have strong technical universities, which also train IT specialists. There is a sufficient base of potential employees of IT companies.
— What practices are most requested by your clients?
— The judicial practice is predominant in the region. The tax practice and the practice of structuring and restructuring of loans are also relevant (by the way, it became more active after 2014).
— Is competition among law firms in your region strong? How can you achieve an increase in the number of orders? Is the cost of legal services a competitive advantage?
— The competition is certainly strong. It's an open secret that the Lviv legal market, unlike the Kyiv one, is more limited. The number of companies in need of corporate lawyers and highly-qualified attorneys is small. In addition, the market already has a new generation of Lviv law companies, whose partners are 10–15 years younger than me. We also feel competition from them. This is a live and normal process, lawyers are growing up.
New law firms enter the market with dumping conditions of work, and redistribution of the client base begins. However, this is not the way we would like to go, because under this approach the quality of services suffers. Accordingly, if the economy does not grow in arithmetic progression, then the scope of legal services cannot increase either.
There is a trend on the market towards reduction in the cost of legal services. The hryvnia went through a process of huge devaluation. Many law firms set quotes for their services in hryvnia. Even though tariffs doubled, the hryvnia, as we know, fell by 3.5–4 times. Earlier, the hourly rate was 150 US dollars, which was equal to 1,000 hryvnias. Now, if the rate is even 2,000 hryvnias, then it is clearly not 150 US dollars, as you understand.
Is the cost of legal services a competitive advantage? For some, it possibly is. But only for those who are not all confident of the need for legal services: they simply explore the market, reflect on the prospects and calculate the risks. If clients really need the services of a trial attorney, or have decided to sell their business, or are ready to spend several million dollars to acquire a company, say, in Ukraine, then it is unlikely that they will save 5–10% entrusting the solution of their problems to unknown persons. They will seek competent advisors with a good reputation.
— Is the influence of a number of valid international agreements to which Ukraine is a party pervasive in the Lviv legal market?
— We are a border region. This means that we have a larger number of entities carrying out export and import operations than in other regions. Consequently, some companies have affiliates abroad. The development of this process depends on the geographical position of the region rather than on international agreements signed by Ukraine. The change in customs tariffs on car registration affects people and their activities much more than the Association Agreement with the EU.
Western companies looking for personnel for outsourcing (by the way, some new factories were opened in our country) are showing increased interest. Manufacturers of spare parts for cars are looking for opportunities to transfer part of their production to Ukraine. First of all, this is due to low wages, in contrast to Germany or even Poland and Slovakia. There are also companies which, using the borderline position of this region, are moving towards creating technoparks or mastering logistics.
— On what basis do you interact with law firms from other cities (primarily from Kyiv)? Do clients come to you on the recommendation of fellow lawyers? Is outsourcing developed?
— Outsourcing is poorly developed, firms are generally afraid of unfair competition from outsourcers. Clients come rather on the recommendation of colleagues from other regions, but not from Kyiv, as they say that "Kyiv clients would rather do this on their own".