War and World. Test for Values and Dignity

Research 2022

Welcome to the twentieth anniversary edition of Ukrainian Law Firms. A Handbook for Foreign Clients. It is a milestone edition. This current research was relaunched at the beginning of July once we had received valuable feedback from the legal and business communities.

The project has several important functions, among others, to present the landscape of the Ukrainian legal market by practice areas and industries.

As many lawyers have joined the Armed Forces of Ukraine andor found themselves in difficult life situations, we have taken the decision to focus our attention on describing the work projects for clients for the research period – 2021, but without the usual ranking tables. This is our response to the new realities of war and the urgent, strong call for unity around our common goals – the close, imminent victory of Ukraine and its economic and social recovery.

The plans for the country’s post-war rebuilding are being widely considered at both state and corporate levels. Thus, our English language analytics outlining the expertise of legal teams in Ukraine may become a powerful source of market intelligence for speeding up the rebooting of economic activity in Ukraine. Answering the question why 2021?  Well, it was a busy year for a whole range of projects that can present a wide spectrum of expertise on the market.

The research process differed from that of previous years. A number of surveys were prepared before 24 February 2022, and include more insightful details about personalities, strengths and recognized achievements (often verified throughout polls and interviews). Since we announced the ULF relaunch the traditional research tools have become irrelevant. In addition, law firms have experienced dramatic changes in their teams. Law firms and solo practitioners referred to in submissions were also mentioned in the respective practices.

The contents of surveys were complimented with standalone chapters – Capital Markets, FinTech, Gaming & Gambling.

We also systematized publishable deals in Tables 1-3.

The dramatic changes in legal teams are not public. Information available on promotions, transfers and departures, is present throughout each survey. 

Law Firms in Wartime

The unprovoked Russian invasion of Ukraine has caused a global disruption within  the legal industry. In the space of about three weeks 26 international law firms had announced they were closing their Russian offices. Even after the annexation of Crimea in 2014 in the environment of western sanctions and increased compliance requirements, the Russian market remained very attractive, and provided high margin projects. Some firms had been in Russia for over 30 years, and the share of revenues coming from Russia was quite substantial in their global revenues chart.

The Ukrainian economy and the legal market are going through the toughest crisis in their history. After the first shock from the Russian aggression on 24 February 2022, many Ukrainian law firms announced they had stopped advising Russian clients and terminated providing services under their representation contracts. Those few firms that had offices in Moscow announced their departure from the Russian market.

The legal community is, in one way or another, contributing to fighting the enemy and overcoming consequences of the military invasion by:

  • Employees and partners joining the Ukrainian army and territorial defense units;
  • Donating to armed forces directly and participating in fundraising efforts;
  • Extending funding for medicine, equipment and military staff;
  • Volunteering with charities or sheltering refugees;
  • Helping clients and Ukrainian communities to gather and properly document evidence of war damages and potential war crimes;
  • Conducting pro-bono legislative drafting.

In February – March for security reasons, many Kyiv-based firms relocated a large part of their staff to western Ukraine or even overseas. The offices of international law firms offered relocation to other offices of their networks.

As a result, the headcount of law firms fell. Many lawyers and administrative employees joined the Armed Forces of Ukraine, some of them went abroad and/or started working online on a secondment basis, while others left on unpaid leave.

This has already led to a “brain drain” in Ukraine, and the foreseeable problem of their return. On the one hand, in future we may face the deficit of mid-level associates. On the other, law firms might get the very valuable expertise of those lawyers who come back from abroad.

Right in March law firms faced a severe non-payment crisis, as well as a dramatic reduction in monthly income and a new caseload. The average workload of legal teams in March and April was only about 10-20%. It reached up to 25-30% in May. This autumn we have seen certain signs of recovery – the workload reached up to 50% on average. But we should bear in mind that the number of local staff decreased by 30-50%.

Naturally, the level of compensations has also dropped. Many law firms confirmed they were forced to cut salaries and bonuses. For the time being, compensation consists of basic income plus part of actual production as some practices have work, while other practices have temporarily halted their operations. So-called “reserve funds” were only maintained by large and mid-sized law firms and covered a period of approximately 3-4 months.

The situation is better for boutique firms working for international clients, especially those whose focus was technology and IT.

Law firms that had big cash gaps found themselves in obviously more complicated financial circumstances. Cost management shifted into crisis mode, canceling marketing and PR expenses.

The war and news from the battlefield dramatically reduced the flow of corporate news. Communication activities moved into the client relationship area without previous publicity and external PR. In parallel, firms talked about their reorganized teams and new legal services.

The social responsibility of law firms to their own teams is a stress test for morality, corporate culture and the notorious long-term motto – “our people are our value”. Leadership in wartime requires real care on the part of employers, prompt financial decisions, multifaceted support, transparent internal communication. Social tensions after nine months of war are unavoidable.

Starting from September we observed the recovery of the efforts of law firms in business development, especially those aimed at obtaining work from foreign clients, as well as establishing connections with a view to further economic recovery. Another interesting question concerns the possible entry of international law firms and independent firms from EU member states once Ukraine has gained victory.

Practices and Industries

The war has a global reach, with the severe reshaping of supply chains and investment flows, commodities and energy price growth, decline in energy intensive sectors, growth in business expenses and decline in the purchasing power of end customers.

No practice area or industry has been left untouched by war-driven disruptions. The ambitious investment projects of both Ukrainian and international business have been suspended. As for operational activity, in addition to security and safety challenges, business seeks assistance with navigation of sanctions and new laws.

M&A transactions were suspended, some cancelled. This spring some regional multijurisdictional deals with assets in Ukraine, as well as intragroup transactions, took place. Notably, as the Antimonopoly Committee of Ukraine did not operate, merger clearance requirements in terms of the mentioned deals were ignored. Since the time that the competition regulator renewed its activity, the workload of merger control filing is estimated around 30-40% compared to 2021.

The value of assets has fallen dramatically in line with the extremely high risks due to military actions, limited warranties and the indemnities of sellers.

Major M&A activity was focused on the sale of non-core assets by professional investors. Another attractive field where deals are still taking place is the IT sector, as there is no physical asset binding them to a certain territory.

As for pending corporate law work, the market was active due to the relocation of business and production facilities to the western regions of Ukraine, incorporation, internal and cross-border corporate structuring.

As foreign states and international financial organizations continue to provide finance to Ukraine, there are sovereign finance deals, as well as restructuring of existing cross-border debts.

With the introduction of martial law, there are numerous changes in employment and tax regulations, which means these practice areas have incoming work. The most typical queries are mobilization of employees, relocation, staff reductions, salary suspensions and employment contract suspensions, etc.

The situation with protection of intellectual property rights is better overall than in transactional practices. The traditional IP rights prosecution workload is still in place, which makes this a more secure area of law, especially when work comes from international clients beyond the shores of Ukraine.

This summer traditionally strong agrarian companies in Ukraine ordered reports from military experts so as to analyze the map of the war and plan their sensitive business season.

Due to the fact that Ukraine’s Black Sea ports have been occupied and blockaded, traditional maritime routes for commodity exports have not been available. Since the “Grain Initiative” took place on 22 July, the maritime-focused law firms of Odesa received enquiries from clients seeking legal assistance with their operations in three ports involved – Odesa, Pivdenny and Chornomorsk. Three other ports on the Danube River (Izmail, Reni, Ust-Dunaisk) became fully operational for shipping (after Snake Ireland was taken from Russian occupiers by Ukrainian forces), without limitation of commodities nomenclature. Here, lawyers are experiencing requests regarding accidents that occurred during months of war, cargo claims, freight, lay time and demurrages.

Furthermore, the war revealed the critical importance of qualified Ukrainian sailors, especially senior officers, for the global shipping industry. Vessel owners from abroad and their legal counsel played a crucial role in allowing sailors to cross the border this autumn.

Logically, many arbitration hearings involving Ukraine were suspended and postponed because of the war. First, there is no guarantee that the subject of arbitration will not be destroyed during military actions, as Russian occupants are intentionally destroying industrial assets and infrastructure. Another reason was the technical organization of arbitration hearings, access to files and the availability of witnesses.

Many businesses have initiated consultations on collecting evidence of damages and compensation of losses for any future tribunal proceedings against Russian actors. So, we do expect claims against the Russian state, settlements in trade in commodities, contract breach settlements.

At the state-to-state level, there are calls in the legal community for a new Nuremberg-style tribunal, so that Putin and his political supporters and generals can be prosecuted for their war crimes in Ukraine.

Legislative drafting is another busy field. According to market sources, in many cases it is performed on a pro-bono basis or funded by grants.

The post-war recovery of the Ukrainian economy should bring legal firms lots of work. In particular, compensation of damages and losses through various legal mechanisms, public-private partnerships for the recovery of our infrastructure, support of financing extended by foreign states and international financial organizations, construction, transport and logistics. Several international donor conferences have been held to discuss a so-called “Marshall Plan” for Ukraine. Its architecture, administration and enforcement mechanisms may determine the scope and speed of our country’s reconstruction.

In the meantime, let’s continue working on all our fronts to bring our victory closer.