Pushing the Limits
As business life becomes more and more compli cated, the need for legal advisers in those areas where a company has to face certain challenges is huge. The business environment for companies has changed in all spheres by comparison with the way things were 10-15 years ago. That is why qualified legal advice for directing the company’s strategy is not just important but a crucial condition with respect to doing business abroad.
Continuing the tradition of acquainting our readers with the latest information about the legal market, it gives the research team great pleasure to represent the sixth edition of our guide: Ukrainian Law Firms 2008. A Handbook for Foreign Clients.
In preparing this issue, the researchers tried to provide for a comprehensive vision – a fundamental publication that, on the one hand, covers legislative hidden agendas, while on the other hand, provides a practical view of legal practice which turned into the so-called “mixture of factual information and commentary”.
Working closely with law firms, we paid special attention to a practical approach which was based on the independent opinions of different legal practitioners who cooperated in researching the Ukrainian market. The market research and surveys essentially rely on answers to questionnaires sent out to law firms as well as information collected from personal meetings, interviews, telephone calls, different print and on-line media, various public sources, etc. This year we prepared a lot of material on deals and cases, different types of legal advice and projects. We designed our traditional surveys, including available detailed information, on indicative practice, paying attention to analysis of transactions. Of course, we are not pretending that the collected data is complete (some law firms are not allowed by their clients to disclose information) but we have made reasonable efforts to analyze and confirm collected data and statistics.
It should be stressed that fewer and fewer companies are refusing to provide information as a contribution to this research. On the contrary, some of them have even submitted confirmation documentation as a way of demonstrating their involvement in significant deals and cases.
Ukrainian Law Firms 2008. A Handbook for Foreign Clients presents material in alphabetical order and is structured in accordance with the branches of law practice. The publication offers a quite unique opportunity to have easy and powerful access to up-to-date and invaluable information.
The very beginning of 2007 was marked by the establishment of the Zamorska & Partners law firm. The mana ging partner, Tatiana Zamorska, was employed by Arthur Andersen and KPMG and noted foreign investment, tax, financial services, corporate law and real estate to be the core practices of the company.
In December 2007 the Sergiy Tyurin & Partners law firm was established. The name of the former partner with Gvozdiy & Oberkovych attorneys at law is known in the legal community through recognition in corporate law and acti vity within the framework of the Ukrainian Bar Association (UBA). Svitlana Trofimchuk, who headed the Barrister law firm, became another partner of the recently established firm.
Looking back on 2007, one of the most eye-catching trends is the rapid expansion of the activity of international law firms present on the Ukrainian legal market.
Firstly, some international law companies substantially increased the number of lawyers. For example, in December 2007 the Kiev office of Beiten Burkhardt had 47 lawyers compared with 17 legal staff in 2006, Baker & McKenzie consists of 74 lawyers (in 2006 – 51), while Gide Loyrette Nouel’s team grew from 10 to 25 and that of Arzinger & Partners from 27 to 40 lawyers.
Secondly, a distinguishing feature of the market in the last few years has been the development of tax and legal departments in the so-called “Big 4” companies – PricewaterhouseCoopers, Ernst & Young, Deloitte and KPMG.
Thirdly, 2007 was an especially rich year in terms of establishment of representative offices of international law firms in Ukraine. Two law firms from Germany – Rodl & Partner and Norr Stiefenhofer Lutz – have already announced their presence here. Both companies have stressed legal support for foreign investors as the main focus of their activity in Ukraine.
In October CMS Cameron McKenna LLP opened its office in Kiev. It should be noted in this regard that establishment of the Kiev office was only a matter of time as the firm has strong recognized positions in Central and Eastern Europe.
In 1999 CMS Cameron McKenna was a founder of the European alliance of independent law firms CMS, which consists of 9 members: CMS Adonnino Ascoli & Cavasola Scamoni (Italy), CMS Albi ana & Su rez de Lezo (Spain), CMS Bureau Francis Lefebvre (France), CMS DeBacker (Belgium), CMS Derks Star Busmann (Netherlands), CMS von Erlach Henrici (Switzerland), CMS Cameron McKenna LLP (Great Britain), CMS Hasche Sigle (Germany), CMS Reich-Rohrwig Hainz (Austria). Besides, Austrian CMS Reich-Rohrwig Hainz has been present in Ukraine since 2006. The headquarters of CMS alliance is located in Brussels and works to coordinate interaction between members.
The firm’s strategy presumes employment of prominent legal practitioners who are recognized as specialists in their practice areas. Olexander Martinenko (former partner of the Kiev office of Baker & McKenzie), Adam Mycyk (former partner of the Ukrainian office of Chadbourne & Parke LLP), Oleksiy Levenets and Christina Maciw (partners of Levenets Maciw & Partners) and Daniel Bilak (previously employed at Sergiy Koziakov & Partners).
The Philadelphia law firm of Marks & Sokolov LLC, which already has an office in Moscow, opened its branch office in the capital of Ukraine. The office will operate under the name of Marks, Sokolov & Burd LLC and is headed by managing director Gene Burd. The declared dimensions of the firm’s activity consist of legal counsel in foreign trade, corporate law and international arbitration abroad.
Following the strategy of “being closer to clients” legal businesses, whether domestic or international, continue to move to the regions.
In May 2007 Lavrynovych & Partners opened its branch office in Chicago, USA. Such a decisive step was aimed at providing legal support for Ukrainian companies operating in the United States as compared with ensuring the required assistance to American clients doing business in Ukraine.
Another local practice, AstpovLawyers, has opened a representative office in Russia.
In early October Arzinger & Partners opened a new branch office in Lvov for legal support to clients with businesses located in Western Ukraine. This decision is quite understandable. On the one hand, the number of international law firms in Western Ukraine is quite limited. On the other hand, the interest of potential investors in the Euro-2012 football championships, namely in Lvov, the capital of the Western part of the country, arouses interest and room for consideration.
PricewaterhouseCoopers Ukraine decided to expand in the Eastern part of the country by opening a second office in Donetsk. It said that its “presence in Donetsk Region will improve the ability to serve clients in a timely manner”.
A steady trend of partnership changes and new appointments was clearly observed within local practices and international law firms.
Sayenko Kharenko increased the number of its partners in 2007 with the addition of Sergey Ignatovsky, who was previously with the Kiev office of law firm Arzinger & Partners. Mr. Ignatovsky has more than 10 years of experience in a wide range of complex commercial international and domestic litigation matters and focuses on litigating high stake disputes related to corporate governance issues, unfair competition, intellectual property, taxation, securities, bankruptcy and debt recovery.
Volodymyr Baibarza joined Magister & Partners as a partner in M&A and corporate practice. Before joining the firm, Mr. Baibarza was an international partner with Chadbourne & Parke’s Kiev office and has been practicing law for more than 25 years. His legal expertise includes a broad range of corporate matters, mergers and acquisitions, foreign investments, real estate and construction, international commercial and finance transactions, telecommunications and antitrust matters.
Gina Berg, who has headed the office of Gvozdiy & Oberkovych attorneys at law in Chicago, has become the firm’s international partner.
The end of 2007 was marked by lots of talk surrounding the partnership structure and management of Shevchenko Didkovskiy & Partners. On 1 January 2008 the firm announced changes in this respect. Igor Shevchenko, co-founder and ma naging partner of the firm has left the legal practice and partnership staff and focused on the management of the Forum of Young Ukrainian Leaders. Partner Rysbek Toktomushev has also given up legal practice and his work in the firm and occupied the post of general director of Investment Company Eurasia-Ukraine. Senior associates Iryna Pokanay, Igor Svechkar and Svitlana Poroschuk were elected partners.
Yulia Navrotskaya-Bizyun, practicing investment, corporate, tax, antitrust law, and Aleksey Vronskiy, who had occupied the post of chief of the legal department at NC Alliance Ukraine LLC, were elected partners in Vronskiy, Vronskaya & Partners.
Moreover, on 1 January 2008 Stanislav Skrypnyk became a partner in Lavrynovych & Partners.
The most notable expansion of partnership staff took place at Konnov & Sozanovsky attorneys at law. Five senior lawyers, Yevgeniya Derbal, Borys Lobovyk, Helen Popko, Alexey Pustovit and Juliya Semeniy, all became partners.
As regards international law firms, here are some practical instances. DLA Piper Ukraine admitted new partner Oleksandr Kurdydyk.
The Kiev office of Baker & McKenzie extended the number of partners to 7 persons. Glib Bondar, Lina Nemchenko, Oksana Simonova and Hennadiy Voytsitskyi all became partners on 1 July 2007.
The international law firm Beiten Burkhardt elected new partners at its partners meeting. The Kiev office has received three salary partners: Dr. Julian Ries, Marina Tegypko and Oleg Zagnitko.
Ernst & Young announced that Jorge Intriago has joined its tax and legal department as a partner.
From 1 January 2008 the Kiev office of international law firm Salans expanded its partnership staff with the arrival of Volodymyr Monastyrskyy (commercial and civil law matters)in the Kiev office. In particular, he specialises in corporate/M&A, real estate, secured financing, nonstate pension business, tax and employment matters and Ihor Mehedenyuk (securities, corporate/M&A and contract issues).
The management development of law firms is accompanied not only by the challenges of the market but internal processes in each individual firm. The year of 2007 was especially notable as regards restructuring and announced rebranding by the country’s prominent law firms.
The structure of the Salkom law firm recently underwent some major changes. The firm now has three senior partners and three partners who simultaneously act as directors of the departments for contract law (Alexey Kot), corporate law (Yuriy Leonov) and litigation (Andrey Kuznetsov).
Serious reform of internal business relations was undertaken at the central office of the Inyuropolis law firm in Kharkov, where a partnership system was introduced. As a result, the firm received seven partners – Tetyana Gavrysh (managing partner), Olena Kibenko (senior partner), Oleksiy Kharytonov, Sergiy Silchenko, Yaroslava Onika (partners), Olena Khytrova and Andriy Maltsev (junior partners).
In December Magister & Partners announced its rebranding. From 1 March 2008 the firm’s title will be changed to “Magisters” and its new logo will be presented. The strengthening of the brand is required by the strategy of international expansion – establishment of new offices on the territory of CIS countries and in the West.
The Pravis law firm headed by Igor Golovan experienced restructuring and re-branding. It entailed the establishing of the new title of Golovan & Partners with two offices in Donetsk and Kiev.
It is apparent that in today’s legal business practice, corporate social responsibility (CSR) is becoming an essential part of its development and feedback with the social sphere. What is really necessary to recognize is that CSR undertakings are becoming more and more socially significant. Of course, CSR actions within a firm are hardly likely to be widely announced. However, publicly disseminated information touched the education field in the main. For example, DLA Piper Ukraine conducted its All-Ukrainian scholarship competition for student lawyers, Magister & Partners made their contribution via the firm’s social project – the Philip C. Jessup International Law Moot Court Competition, which has been held for the last five years. Arzinger & Partners and Ilyashev & Partners were sponsors of the Kiev stage of the European Law Moot Competition, while Konnov & Sozanovsky once again acted as a sponsor of the participation of the Kiev National Taras Shevchenko University team in the annual Willem C. Vis International Commercial Arbitration.
The issue of whether the Ukrainian legal market is one of the most dynamic on the territory of the CIS is not a subject of discussion here. However, over the last few years the market has realized that the number of international law firms in Ukraine is quite insignificant compared with the number in Russia. As we can see from the above, 2007 was a boom period for establishment of international legal businesses and considerable investments, to a great extent, facilitated the further development of this trend.
According to the opinions of polled lawyers-employers, “international expansion” shocked owners of domestic practices with the stick-slip nature of the rise in lawyers salaries. Notwithstanding the positive consequences for professionals who are in demand and essential, Ukrainian employers were not ready for this rise in salaries. Hence, lawyers acknowledged in investment projects and handling cross-border deals are in greater demand than ever before.
Eventually, the expected intensification of competition among legal practices is likely to result not only in improvement of the quality of supplied services but in new configurations among market players and change in the general situation. Summing up the considerations concerning possible strategies for domestic law offices over the next few years in respect of the prospect of foreign pressure, mergers between Ukrainian practices and competition based on lower fees is envisaged.
At the same time, being an integral part of Ukrainian market, legal services follow general trends. In this regard, the boom in Kiev is accompanied by depressive and even deteriorative development in the regions. The solving of this problem lies in the political field, namely regional incentives and facilitating investment projects in the regions and not only in the capital.
After lengthy isolation from external competition and dominance of the “insider economy”, the economic growth of the few was determined predominantly by the increasing flow of foreign investment coming into the country. The further liberalization of the economy provoked facilitation of the acquisition of assets, cross-border finance and project management of varying scale. Traditionally linked with general development of the economy, the reaction of the Ukrainian legal market was to supply new services in an intricate and comprehensive manner.
Ukrainian business began to realize the importance of international standards first and foremost when it faced the problem of new investment opportunities.
Within the framework of the research we have made an attempt to provide for a summary list of existing business transactions for 2007 with the highest level of their itemization. At the same time, it should be emphasized that the tables are not compiled in terms of ranking but are informative data.
The growing demand for IPO and operations on the debt market gained further momentum in 2007. Analyzing Table 1 (see page 18), we should note the record number of initial public offerings compared with previous years. Herewith, the Warsaw Stock Exchange (WSE) became more and more attractive for Ukrainian enterprises. The IPO of Kernel Holding S.A., the Luxembourg holding company of the No.1 producer and marketer of bottled sunflower oil in Ukraine and a leading exporter of sunflower oil, protein meal and grain, is the second WSE listing of an agribusiness company from Ukraine. The first was the 2006 IPO of sugar producer Astarta-Kiev. Ferrexpo Plc, an iron ore giant, became the first full UK listing for a company from Ukraine and only the second issue from the CIS to achieve a Main Market listing on the London Stock Exchange. This is the largest IPO from Ukraine.
As existing evidence shows, an IPO is an expensive undertaking and only representatives of big business can afford such large expenses. This is due to the need to follow international standards of corporate governance and audit. This is the reason why so-called pre-IPO due diligence is becoming more and more common in legal practice.
As can be seen from Table 1, 2007 was a boom year for Eurobond issues by the private sector, predominantly by banks.
Financial exerts are predicting the diversification of finance instruments. Of course, the latter is linked to adoption of appropriate legislation. The absence of the latter prevents Ukrainian and foreign companies from applying new financial techniques, like derivatives, for example.
Syndicated loan facilities, which are traditionally considered to be an alternative to debt securities offerings enjoyed a significant amount and increase in 2007 (see Table 2 on pages 15-16). So, we predict that the legal practice of local and international legal practices will expand due to clients attracting finance.
The corporate landscape of providing legal advice is carried out via a truly wide spectrum of services. Nevertheless, adviceon M&A is quite often the most common type of service provided. As shown below, the situation with asset acquisition in the country is enjoying a remarkably high level of activity.
In accordance with the calculations of Concorde Capital, the size of the Ukrainian M&A market doubled in 2007 and exceeded USD 10 billion. The breakdown of the Ukrainian M&A market by sectors is as follows: banking — 42%, metallurgy — 41%, food industry — 8%, real estate and development — 3%.
These estimates include only deals with foreign investors and exclude the M&As of Ukrainian assets, in particular, the merger between Metinvest (USD 20 billion) and Smart Holding (USD 5 billion).
Table 3 (see page 17) consists of available data on M&A in Ukraine, including advice provided by law firms on Ukrainian law.
The concern of strategic investors in the Ukrainian retailing banking sector was vividly observed in 2007. The banking sector was the leader of the M&A market in 2007 and averaged out at 42% of the total volume. As the table shows, there is a strong trend towards full integration of the banking institutions of the UniCredit Group in Ukraine. Moreover, Swiss, Greek, German, Georgian, French, Russian, etc., financial and banking groups are coming to the Ukrainian retail banking sector. At the same time, experts emphasize that the process of consolidation in the sector is close to completion.
M&A of a multi-jurisdictional nature conditioned the demand for legal assistance in antitrust. Table 4 (see page 18) shows that the trend towards consolidation of multinational corporations worldwide is the most striking one.
Transactions on the Ukrainian real estate market are less transparent to the public. As can be seen from the previous tables, there were certain deals in the real estate, finance and M&A sectors. The factual legal assistance of those deals encompasses a wide variety of services. For example, pre-acquisition due diligence, etc. “Pure” real estate, construction and land operations are included in a separate list (Table 5 on page 19) and despite the shortage of available information, enable the conclusion to be made that regional legal practices carried out significant projects in the sphere.
At the same time, the center of development of industries continues to be centralized in Kiev and Kiev Region, and a large number of projects remain confidential.
Energy security has become a challenge for our country and gas price shocks have forced the adoption of strategic initiatives by the government in this sphere. As regards investments into the sector, the two main areas are, geological research, followed by the electricity market.
The coming Euro-2012 football championships, to be staged in Ukraine and Poland, placed implementation of infrastructure projects on the agenda. The event is obviously a reason for the significant rise in the investment attractiveness of Ukraine. The active participation of the European Bank for Reconstruction and Development and the European Investment Bank is greatly expected due to their traditional involvement in funding development of infrastructure.
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