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The recent revival (2013-2014) of privatization in Croatia is, paradoxically, not driven by the country’s recent membership in the European Union, but instead by a simple desire to save the state budget. The budget deficit was (and still is) so huge that the current Government has been forced to put its crown jewels on the table and try to sell them as fast and as efficiently as possible.   

The insurance company sale was closed on April 22, 2014 and the new owner of 39.05% of shares is Adris – the largest Croatian tobacco producer. The sale price had the largest premium on share in Croatia ever (the market price was around USD 700 and the purchase price was around USD 1350) which makes the premium on share 87.4% (the average premium was around 46.5%). Also, the new owner is obliged to make a capital increase of around USD 150 million, whereupon Adris will hold a majority stake (60%), and the State will remain able  to affect only a few major shareholders’ decisions (by holding 28%). Intriguingly, Adris won the tender in competition with a potential strategic investor – the Polish insurance company PZU, which, though being more skilled in the relevant industry, was not ready to offer such a huge premium. Even more interestingly, Adris has in the past five years invested significant amounts of cash in the tourism and agriculture sectors, and is now entering a fourth, completely different industry sector! These moves raise the eyebrows of insurance experts who are concerned about whether the company will be able to, in  light of its potential over-stretching, preserve its market-share. 

The tender for sale of Postanska banka was a different story. Initially, plenty of interest was shown by important players from the regional banking market who lined-up for the tender. However, over  time – and after due diligence – interest started to dim, and at the end, only Erste & Steiermaerskishe Bank and OTP Bank remained in the race. In December 2013 only Erste & Steiermaerskishe Bank submitted a binding offer  –  and it was around USD 37 million lower than the non-binding offer (USD 180 million). The Government decided to reject this offer as inadequate because the offered share-price was 24.5% lower than the market price at the time. Since then, the Government has been striving to find another model (or another buyer) for the bank.

Finally, the largest and the most important privatization (formally called “monetization”) regards a 12500-kilometer network of motorways across the country. The State engaged various advisers who, at the end, concluded that a concession model would best fit the needs and expectations of the State and potential investors. The level of expectations is fairly high – the Government expects to receive around USD 4.2 billion for a 30-50 year concession. Though this number is widely considered as unrealistic, the line-up of bidding consortiums is impressive, and 4.2 billion may not be unreachable after all. Companies such as Goldman Sachs/Vinci, Macquarie, Cintra, and Strabag deserve high respect and promise tough competition and an interesting auction for the winning prize. However, despite the interest of consortiums armed with an army of top international and local law firms and financial advisers, the tender process hit a snag. Reportedly, due to internal disagreements and other administrative problems, the data room is still empty,  no other transactional documentations have been offered for review (such as, in particular, the concession agreement), and there are no firm indications when the process will be started in earnest. Such postponements of process (which in this case started in autumn 2013), usually bring a “the magic has gone” sentiment to the bidders, and passion for the deal evaporates rapidly. 

With public perception of the monetization as a sale of national pride, and upcoming parliamentary elections in 2015, the current Government has less and less time to successfully close this demanding deal. On the other hand, if there are no proceeds from this privatization, what will save the budget and how will the gaps be closed? Will the inevitable need for money be more important than the political future of the current coalition government? 

There are only a few jewels left to be offered instead. One of those is ACI, the largest network of more than 20 marinas on the Croatian Adriatic. The sign that something may be cooking with ACI is the recent announcement that strategic legal, financial, and operational due diligence of the company has been initiated. Then there is the Croatian Electricity Company (HEP). Only Only the production segment of the company can actually be sold under the law, but one may ask if even this is realistic at all, since HEP is the largest state-owned contributor to the state budget.      

By Damir Topic, Senior Partner, Divjak, Topic & Bahtijarevic Law Firm

This Article was originally published in Issue 3 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

In 2004, 65% of the capital of the incumbent telco Bulgarian Telecommunications Company (VIVACOM) was sold to Viva Ventures Holding by the Bulgarian Government in a privatization procedure. In 2005, a public offering of the remaining shares was launched with 34.78% of the company’s capital being offered on the Bulgarian Stock Exchange. During the next few years the company went through several major restructurings, in the process becoming, it claimed, a “leader in developing modern telecommunication services.”   

The existence of a preferential share in the Articles of Association of VIVACOM entailed the limitation of certain significant rights of the shareholders, related both to resolutions of the General Meetings of Shareholders and to decisions of the company’s boards. The preferential share could only be held by the Ministry of Transport, Information Technologies and Communications, a State body, or another representative of the State. The golden share entitled the State to veto a broad range of decisions of the Managing Board, such as resolutions on the disposal of assets of strategic importance for the business of the company, approval of employee support programs, execution or amendment of agreements between VIVACOM and any of its shareholders, persons with an interest in a shareholder, or affiliated parties to the shareholders. The special rights of the State also included the right to veto resolutions regarding amendment of the company’s name, its place of business and address, its term of existence, the scope of its activity, the share classes, number, and percentage of the State’s shares, to name but a few.

In the past two years VIVACOM has undergone a major transformation in that it changed its capital owner and the State’s special rights were obliterated. The Articles of Association stipulated that the preferential share could be redeemed (buy-back) at par value, at the option of its owner or the company, by serving a 14-day prior written notice to the other party. The transfer was possible only upon meeting the investment commitments according to the Privatization Agreement. The holder of the golden share was obliged to accept the company’s offer to redeem the preferential share subject to provisions of the law and the Shareholders Agreement executed between Viva Ventures Holding, the Ministry of Transport, Information Technologies and Communications and VIVACOM back in 2004. Considering that the preferential share played its historical role, the Ministry of Transport, Information Technologies and Communications proposed that the Council of Ministers adopt a decision in favor of revoking  the State’s special rights materialized by the golden share.

Hence, in September 2013 the General Meeting of the Shareholders voted to revoke the special rights of the golden share. They also agreed upon delisting the company from the stock exchange and changing the company’s name from BTC AD to BTC EAD, as a result of the acquisition of all shares of the company by the majority shareholder Viva Telecom Bulgaria EAD. Thus, VIVACOM is no longer a publicly traded company and the State is not entitled to exercise any special rights as regards the management of the company.

Two major consequences stem from this resolution. First, the State has finally come in line with the prescriptions of the European Commission and the case law of the Court of Justice of the European Union in that special rights – while not completely ruled out – should be employed only in special cases and to the extent that they do not distort the free movement of capital. Second, VIVACOM has made the final step towards being a completely independent private entity whose development is shaped by standards set by the company itself.

It is not exaggerating to say that by virtue of revoking its special rights, the State removed the last obstacle to the independent development of the company subject to the rules of free-market competition and regulation. Over the years, the preferential share proved itself an effective tool for restraining the impulses of private investors and protecting public interests. Ultimately, every privatized company should emerge from the shadow cast by the State. In this regard, the revocation of the preferential share was the final step for the incumbent VIVACOM.     

By Sergey Penev, Managing Partner, and Ivo Emanuilov, Associate, Penev Attorneys at Law

This Article was originally published in Issue 3 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

During the early 2000s, the Hungarian Government strongly supported the implementation of public-private partnership programs (PPPs) in Hungary. At that time, PPPs were considered to be instrumental in the revival and the required upward surge of the Hungarian economy. Thus, Hungary took the lead in the implementation of PPPs in the CEE region.   

We saw a number of successfully completed projects in the infrastructure, education, cultural, and healthcare sectors as well as in judicial execution. The most successful projects were the motorway projects (for example, the M6 motorway stretching from Budapest to the southern borders of Hungary), student dormitories, cultural centers, and prisons. 

As PPPs became more popular in Hungary an ever greater number of State and Municipal projects  were intended to be implemented in this scheme. This artificial promotion of the PPPs proved to be unsustainable when the global financial crisis arrived in Hungary at the end of 2008. Realizing the serious contagious effects of the crisis on the Hungarian economy, the Government of the time suspended all ongoing PPPs.

In 2010, there were general elections in Hungary and the new right-wing Government (winning 2/3 majority in the Parliament) cancelled all ongoing and future PPP projects. Furthermore, they declared all PPP projects to be among the biggest failures of the previous left-wing Government, and accused the program of significantly undermining the growth potential of the Hungarian economy. This approach completely accorded with the economic program of the new Government. They announced their intention to strengthen the state’s position and to minimize the participation and influence of the private sector in the economy. They were of the view that the global crisis was a consequence of the failure of the efficient operation of the markets, which could only be cured if the state became a key player by acquiring a dominant position. They started nationalizing the key sectors of the Hungarian economy (for example, the energy sector) and increasing the weight and influence of state institutions.

As part of its first actions, the State Budget Agency investigated the financial and legal background of all completed PPP projects. The most important conclusion published by the State Budget Agency was that PPPs in Hungary were extremely expensive and imposed significant burdens on the central budget and the budget of local municipalities. The report also asserted that the operation of certain municipalities and state institutions was limited by the maintenance of PPPs. As a result, the report concluded, the Government should provide relief to those municipalities and state institutions.

The Government initiated a complete revision of the contractual framework of all completed and existing PPPs. They announced that they were considering the termination of all PPP contracts and the takeover of the projects by the state. They proposed to establish a separate fund in the central state budget to cover the termination costs of PPP contracts but, as far as we know, this action has never been implemented.

Currently, we are only aware of a few projects that have been terminated. The contracts of the most important projects (for example the M6 motorway project) were left unchanged and appear to be running smoothly. Some of the terminated PPP contracts are subject to ongoing legal proceedings launched by private investors challenging the right of the state to terminate their contracts and/or the amount of compensation offered by the state.

In our view it would not be appropriate to judge all PPPs in the same manner. It is fair to say that there are a number of projects which are probably rightly considered to be unnecessary, expensive, and not offering value for money. However, other projects are undeniably for the benefit of the country as a whole, since they provide value for money. We believe that it is uneconomical to terminate a project if it serves the needs of the people of Hungary and contributes to the development of our country. However, any PPP projects which do not fulfill these principal criteria and thus are not true PPPs should be revised and restructured as soon as possible.      

By Laszlo Hajdu, Partner, HP Legal | Hajdu & Pazsitka

This Article was originally published in Issue 3 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Since the last large-scale privatizations in the Czech Republic almost a decade ago, the sales of state-owned enterprises have been few and far between. The most recent headline privatization was the 2013 sale of a minority stake in the national airline CSA to Korean Air. The sale had become somewhat crucial as the government no longer wanted to support the loss-making airline. Despite the nominal price paid for the stake, the government successfully secured the future of the airline and potential new business for Prague Airport. With a new government in place since January 2014 there has been talk of privatizing some of the remaining state-owned assets. However, for the time being the government seems to want to hold on to the most profitable assets.   

Although the government secured the effective privatization of a majority of the economy, the country lacked an adequate legal framework to protect investors and secure a successful continuation of business. The Czechs have recently been painfully reminded of some of the failures of the past. A case in point is the privatization of coal mining company Mostecka uhelna spolecnost, which for many Czechs still symbolizes the dark-side of the “wild privatization” of the 90s. It took until late last year for five Czechs held responsible for “tunnelling” that company to be finally sentenced by a Swiss court, which seized USD 725 million from the accused in the process. 

Through some of its ministries the Czech government still controls various companies, including the famous Budvar brewery and companies in the weapon industry, but also more traditional state assets such as the Czech Post, the National Rail, and the key oil distribution and electricity transmission infrastructure. The Ministry of Finance alone owns a share of over 40% in 26 companies, including the CEZ energy producer, the Cesky Aeroholding aviation holding, and the CEPRO fuel distributor, representing a combined share value of about CZK 100 billion.

It has been the policy of successive governments to reduce the number of state-controlled companies, especially those without much strategic importance. But in recent years the actual number of state-owned companies is only slowly declining, and mostly as a result of either mergers or the liquidation of smaller companies.

The current government, which is a coalition between the Social Democrats, the Christian Democrats, and the central right Action of Dissatisfied Citizens, is not pursuing a very active privatization agenda. Although there have been rumors around private companies being interested in acquiring the Czech Post or some of the military equipment producers, it might take some time for such deals to come to fruition – if they do at all. 

However attractive it may be to sell off some of these assets, the annual incomes they generate currently make a significant contribution to the state budget. Czech Finance Minister Andrej Babis is trying to maximize the contribution to the state budget from state-owned companies, including the Czech Post, the National Forestry Company, and oil pipeline operators MERO and CEPRO. He publicly called for a full dividend pay-out by the CEZ energy company, in which the state holds about 70%. The proposed State budget for 2015 is based on a contribution of several billion crowns from state-run companies.

Moreover, in an effort to save some of the struggling coal mines nationalization is back on the agenda. A particular case is that of the OKD coal mining company, owned by New World Resources, a UK-listed coal miner based in the Czech Republic. OKD’s loss-making Paskov mine is threatened with closure by its owners, putting 3,000 jobs at risk. In the end the government has offered financial support to keep the mine open for three more years, but nationalization had been on the table as a serious alternative. The situation is politically sensitive as many hold current Prime Minister Bohuslav Sobotka, who was the Czech Finance Minister at the time of OKD’s privatization in 2004, responsible for selling the government’s stake in that company far below market value. The European Commission is currently investigating whether the sale was indeed undervalued and as such could be considered illegitimate state aid to the buyer. 

Although foreign investment into the Czech Republic is expected to pick up again over the coming years and many domestic investors have the funds to invest in acquisitions, it remains to be seen whether the Czech state will use these favorable conditions to put some of the remaining assets on the block. Current debates over past privatizations might make the government proceed with additional caution.      

By Lukas Janicek and Radim Kotlaba, Senior Associates, CMS Cameron McKenna

This Article was originally published in Issue 3 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Alexander Kotlyar is the Head of Legal & Compliance for Danfoss Russia, the Russian subsidiary of the Danfoss Group. Kotlyar joined Danfoss in 2012, after working as a Senior Lawyer with Schneider Electric for a little over a year. He began his career with Gruzovozoff LLC, where he moved up the ranks from a young in-house counsel to Deputy Head of Legal.

   

Alexander Kotlyar, Head of Legal & Compliance Department at Danfoss Russia

 CEELM: To start, please tell our readers a bit about yourself and your background leading up to your role with Danfoss Russia.

A.K.: After graduating from the International Law faculty of the Moscow Institute of International Law and Economy named after A.S. Griboedov, I worked in different companies gradually ‘growing up’ from the role of a sole lawyer, to a senior lawyer, then to a Deputy Head of Legal Department. The support of daily activity in various areas of business gave me a solid foundation of the legal profession.

Finally, in 2012 I applied for a position of Head of Legal Department in Danfoss Russia, the Russian subsidiary of the Danfoss Group, the world leader in the manufacturing of energy and heating solutions, refrigeration equipment, power electronics, and many other appliances well-known all over the world. Luckily I was chosen, and in 2013 I held the position of Head of Legal and Compliance Department, adding some interesting and valuable functions to my current role. 

 CEELM: You have worked as an in-house lawyer for over 14 years — much of which in senior/management positions. What best practices have you developed over the years in hiring and developing a strong in-house legal team?

A.K.: I always instruct my subordinates to keep in mind, as they draft or propose any terms and conditions, that the time may come where they will be forced to defend those provisions to counter-parties or judges. It’s critical that they keep this in mind as they work, and to focus on being reasonable, fair, and customer-oriented. 

 CEELM: According to Danfoss’ website, the company “is recognised as a global trendsetter. We passionately push boundaries on results and reputation.” How would you say this attitude is reflected within your in-house legal team?

A.K.: My team always tries to succeed in expectations. Even in our conservative area (I mean legal practice, in which it is rather complicated to set trends), together with daily routine we can take part in the elaboration of unexpected solutions assisting sales. For example, it was a significant relief for sales to use an electronic drafting of contracts – “just fill in the one-page table and click a button – and your contract is drafted.” 

 CEELM: When you need to outsource work to external counsel, what are the main criteria you use in picking the firms you work with?

A.K.: Relying on my past experience I already have a number of external counsels and law firms achieving excellent results for a reasonable price. Certainly, I also follow our corporate policy, which singles out companies with already approbated services. 

 CEELM: What types of work do you generally prefer outsourcing to external counsel and what types of legal matters do you prefer to handle in-house? Why?

A.K.: If possible, I prefer outsourcing IP rights lawsuits and mergers/acquisitions deals support: these do not require deep knowledge of interconnections inside the Group and the company, and providing counsel with necessary documents is quite sufficient – unlike the main activity, which requires keeping abreast of Group activities, and thus must be handled in-house. 

 CEELM: What would you say was the most complex project you worked on during your time at Danfoss?

A.K.: Currently we are rendering legal support to a manufacturing plant construction in Dzerzhinsk, Nizhniy Novgorod Area. The complexity of this project lies in the necessity of suggesting a reasonable balance between the interests of all participants (many of which are major stakeholders in their areas) while strongly protecting our interests – but such legal support is giving a feeling of involvement in the creation process from scratch. 

I would like to admit that every project is both interesting and complex in its own way. It is rather problematic to emphasize a specific one, because ordinary projects are not reflected in memory, whilst unique ones have their own aspects and particularities complicating a comparison. Notwithstanding this, we succeed in solving both ordinary and unique tasks equally.

 CEELM: Since you mentioned you prefer handling elements outside of IP and merger/acquisitions within your legal team, do you handle all aspects related to this new manufacturing plant in-house? 

A.K.: As for legal support at present – yes. But I would leave open the possibility of putting some matters to a tender, particularly if these matters by their specific nature require the involvement of specialists with a narrow focus.

 CEELM: What types of legal work related to this project end up being most time-consuming?

A.K.: I estimate obtaining internal consents and discussions with counter-parties related to the essential terms and conditions of contracts as most time-consuming..

 CEELM: From a regulatory stand-point, what would you identify the main recent or upcoming pieces of legislation that will impact your business?

A.K.: We are aligned with both Russian legislation and foreign applicable laws such as FCPA and Bribery Act. Moreover, we are an ethical company and do the best to prevent possible unethical steps, which can be made by our employees, as well as the breach of our Code of Conduct by suppliers, contractors and service providers. Constantly changing Russian legislation gives many challenges and promises much more in the future, but we know how to deal with them. 

 CEELM: Since you mentioned constantly changing legislation in your jurisdiction, what are the main resources you use to keep track of them? Do you follow direct sources from relevant regulatory bodies, attend seminars, read up on legal academic journals, interact with regulatory bodies directly, use external counsel, etc? 

A.K.: We do our best to use all sources you noted, but we prefer to attend seminars which open the floor to speeches of the regulatory bodies’ officers.

 CEELM: Looking back at your career, if you could go back to give one piece of advice to yourself fresh out of law school, what would it be?

A.K.: If that young guy, full of his own impressions and expectations, listened to me, I would advise him to risk more in looking for the job of his dreams. Who knows, I might have held this position much earlier…

Alexander Kotlyar is the Head of Legal & Compliance for Danfoss Russia, the Russian subsidiary of the Danfoss Group. Kotlyar joined Danfoss in 2012, after working as a Senior Lawyer with Schneider Electric for a little over a year. He began his career with Gruzovozoff LLC, where he moved up the ranks from a young in-house counsel to Deputy Head of Legal.

   

Alexander Kotlyar, Head of Legal & Compliance Department at Danfoss Russia

 CEELM: To start, please tell our readers a bit about yourself and your background leading up to your role with Danfoss Russia.

A.K.: After graduating from the International Law faculty of the Moscow Institute of International Law and Economy named after A.S. Griboedov, I worked in different companies gradually ‘growing up’ from the role of a sole lawyer, to a senior lawyer, then to a Deputy Head of Legal Department. The support of daily activity in various areas of business gave me a solid foundation of the legal profession.

Finally, in 2012 I applied for a position of Head of Legal Department in Danfoss Russia, the Russian subsidiary of the Danfoss Group, the world leader in the manufacturing of energy and heating solutions, refrigeration equipment, power electronics, and many other appliances well-known all over the world. Luckily I was chosen, and in 2013 I held the position of Head of Legal and Compliance Department, adding some interesting and valuable functions to my current role. 

 CEELM: You have worked as an in-house lawyer for over 14 years — much of which in senior/management positions. What best practices have you developed over the years in hiring and developing a strong in-house legal team?

A.K.: I always instruct my subordinates to keep in mind, as they draft or propose any terms and conditions, that the time may come where they will be forced to defend those provisions to counter-parties or judges. It’s critical that they keep this in mind as they work, and to focus on being reasonable, fair, and customer-oriented. 

 CEELM: According to Danfoss’ website, the company “is recognised as a global trendsetter. We passionately push boundaries on results and reputation.” How would you say this attitude is reflected within your in-house legal team?

A.K.: My team always tries to succeed in expectations. Even in our conservative area (I mean legal practice, in which it is rather complicated to set trends), together with daily routine we can take part in the elaboration of unexpected solutions assisting sales. For example, it was a significant relief for sales to use an electronic drafting of contracts – “just fill in the one-page table and click a button – and your contract is drafted.” 

 CEELM: When you need to outsource work to external counsel, what are the main criteria you use in picking the firms you work with?

A.K.: Relying on my past experience I already have a number of external counsels and law firms achieving excellent results for a reasonable price. Certainly, I also follow our corporate policy, which singles out companies with already approbated services. 

 CEELM: What types of work do you generally prefer outsourcing to external counsel and what types of legal matters do you prefer to handle in-house? Why?

A.K.: If possible, I prefer outsourcing IP rights lawsuits and mergers/acquisitions deals support: these do not require deep knowledge of interconnections inside the Group and the company, and providing counsel with necessary documents is quite sufficient – unlike the main activity, which requires keeping abreast of Group activities, and thus must be handled in-house. 

 CEELM: What would you say was the most complex project you worked on during your time at Danfoss?

A.K.: Currently we are rendering legal support to a manufacturing plant construction in Dzerzhinsk, Nizhniy Novgorod Area. The complexity of this project lies in the necessity of suggesting a reasonable balance between the interests of all participants (many of which are major stakeholders in their areas) while strongly protecting our interests – but such legal support is giving a feeling of involvement in the creation process from scratch. 

I would like to admit that every project is both interesting and complex in its own way. It is rather problematic to emphasize a specific one, because ordinary projects are not reflected in memory, whilst unique ones have their own aspects and particularities complicating a comparison. Notwithstanding this, we succeed in solving both ordinary and unique tasks equally.

 CEELM: Since you mentioned you prefer handling elements outside of IP and merger/acquisitions within your legal team, do you handle all aspects related to this new manufacturing plant in-house? 

A.K.: As for legal support at present – yes. But I would leave open the possibility of putting some matters to a tender, particularly if these matters by their specific nature require the involvement of specialists with a narrow focus.

 CEELM: What types of legal work related to this project end up being most time-consuming?

A.K.: I estimate obtaining internal consents and discussions with counter-parties related to the essential terms and conditions of contracts as most time-consuming..

 CEELM: From a regulatory stand-point, what would you identify the main recent or upcoming pieces of legislation that will impact your business?

A.K.: We are aligned with both Russian legislation and foreign applicable laws such as FCPA and Bribery Act. Moreover, we are an ethical company and do the best to prevent possible unethical steps, which can be made by our employees, as well as the breach of our Code of Conduct by suppliers, contractors and service providers. Constantly changing Russian legislation gives many challenges and promises much more in the future, but we know how to deal with them. 

 CEELM: Since you mentioned constantly changing legislation in your jurisdiction, what are the main resources you use to keep track of them? Do you follow direct sources from relevant regulatory bodies, attend seminars, read up on legal academic journals, interact with regulatory bodies directly, use external counsel, etc? 

A.K.: We do our best to use all sources you noted, but we prefer to attend seminars which open the floor to speeches of the regulatory bodies’ officers.

 CEELM: Looking back at your career, if you could go back to give one piece of advice to yourself fresh out of law school, what would it be?

A.K.: If that young guy, full of his own impressions and expectations, listened to me, I would advise him to risk more in looking for the job of his dreams. Who knows, I might have held this position much earlier…

Dmitry Popov is the Vice President Legal & Compliance in Russia for ABB. His in-house career began in 2002 at Nutricia Advanced Medical Nutrition, where he worked as General Counsel. He then spent a little under a year with Renaissance Insurance as its General Counsel and Vice President. Following 3 years in private practice with Baker & McKenzie, he joined ABB in 2010.

   

Dmitry Popov, Vice President Legal & Compliance for Russia at ABB

 CEELM: To start, please tell us a bit about your career leading up to your current role with ABB.

D.P.: My background is in fact a technical one with the first university I attended focusing on engineering. I did start studying for my law degree in parallel with the first one, which led to me graduating from both universities in 1997. My very first job in the legal world was in the Prosecutor’s Office but I found early on that it was much more interesting to work on civil cases rather than in criminal law, which I personally hate but which was almost mandatory for a career there. I then decided to leave the office and started working with a very small law firm. 

I soon realized what a great asset my dual qualification represented. My technical background helped me understand technically complicated contracts, meaning I could support my clients much better. A telecommunications company, for example, is always going to be serviced better by a lawyer who understands not just the law but also the technology, and, importantly, the core business behind a contract. 

Later on, I started my own small law practice in Nizhny Novgorod – a city where I was living at the time. I then came to the conclusion that all the interesting law work is really done in Moscow so I decided to relocate the city, where I worked for a large European company for 5 years. Within it, I started as an in-house counsel and moved my way up the ranks gradually to the position of General Counsel. After this experience I worked briefly for Renaissance Insurance after which I received an offer from Baker & McKenzie. 

I have to say, what followed were probably the most exciting years of my professional life. When I joined the international firm, I expressed a strong wish to work on challenging/unusual cases, which have solutions neither in law, nor in court practice, and the firm offered a great platform to expose me to such projects.  

In 2010, when the crisis hit firms, I realized that my dream of becoming a partner within 3 years of joining the firm might be a bit of a stretch, not because the firm was hurting necessarily, but because the capacity to assimilate more lawyers within the partnership ranks at the time did not look so evident. As a result, I accepted an offer from ABB to join the company – though I do not exclude the possibility of returning to the firm as a partner one day [laughs]. 

I was also attracted by the idea of joining ABB because I knew they had very good Contracts and Corporate departments – but such important (for a large-industry company) areas as antitrust, regulatory (including customs and tax), IP, and litigation were not covered at the level which I believed sufficient. In light of my specialization with Baker, I thought those would be gaps I could definitely plug into and take upon myself the challenge of building up. In fact, looking back, I take pride in the fact that I built a small law firm with different practice areas within the company over the years, including a two-person litigation team that now is capable of handling large/complex litigations in-house. The same applies with other practice areas such as IP or antitrust, and even some M&A. Having said that, I must say how much I appreciate the very professional support from ABB headquarters. 

 CEELM: Do you see this approach as a trend in the market?

D.P.: Indeed, I do. I think it makes sense for it to be a growing trend actually since it offers both the advantage of working with lawyers who know the business inside-out and it tends also to save money. Further, from my experience with Baker & McKenzie as well as from my communication with other consultants I understand that now in Russia we have a new generation of lawyers who are highly professional in their core law areas.  

 CEELM: You have worked both in-house and spent a considerable time in private practice — which do you prefer and why?

D.P.: I would say they are two very different worlds but that I find both to be quite interesting. I would say that one of the main differences is that, as an external consultant, you are most often able to only give advice as to a solution. It is rare that an external lawyer would be allowed in the actual business side of implementing a solution, and it would require a long relationship to establish a strong level of trust before that could happen. I will say, it is also up to the attitude of the General Counsel to get involved if he/she wants to be a part of the actual solution implementation. By that I mean to say that I see two types of General Counsel: there is the “9 to 6 GC”, who really only acts as a communication tool between external counsel and the Board, and the “real GCs” who take advice and handle problems themselves.

 CEELM: When you used to work as a Senior Associate, what practice area(s) did you specialize in? Does that specialization help you directly in your current role?

D.P.: The reality is that for a General Counsel to be effective, he/she needs to understand all the legal spheres related to his/her business from real estate to IP to antitrust, tax, etc. I personally used to specialize primarily in antitrust as well as corporate law but that does not mean that I never externalize this type of work. Even if I feel that the greater part of my team is “fluent” in antitrust issues, which is mandatory with all my lawyers, I still would sometimes, for example, invite external lawyers to sit down with my team and update us on some of the recent updates taking place in relevant legislation – and in Russia, there’s often quite a few of them. There is also the element of building up internal cases – a sort of  “externally-powered internal legitimacy” provided by the expert opinion of an outside consultant. 

 CEELM: Since we mentioned external counsel, when you do decide to outsource legal work, what are the main criteria you use in choosing law firms?

D.P.: It really does depend considerably on the transaction. If I have a specific question I tend to know a lot of good lawyers – and I am referring here to specific individuals, irrespective of the colors of their brand – in Russia and would know who is best to ask for input. 

If I had to pick one criteria, I value a law firm that “monitors” what we do on a regular basis as a business. For example, now that we are building a new plant, when we looked for external counsel for a specific real estate matter, it was important for us that the counsel knows already how we work and how we like things done – in terms of internal processes and such. This saves both time and money as we waste neither on answering question and clarifying what we need and how we need it, although “long term relations” is never the main criteria. 

And if I have a complex project which may involve several areas of law, I choose between law firms who are strong in all those areas, and in this case the “best individual professional” approach does not play a main role.

 CEELM: What are your main sources of information about the capabilities of any specific law firm: Law firm websites, legal directories, network/referrals, direct contacts, their track records?

D.P.: There are two main ways which I developed when I realized I was slowly becoming overly-dependent on a handful of lawyers. The first is attending legal seminars of law firms since it gives me a great opportunity to both update my knowledge and to asses that of the external counsel I am listening to (as well as assessing his business acuity). 

The other can simply be summed up as “GCs network”. Granted, we interact considerably less than external counsel who get to meet regularly (even across each other at a table in a deal or in courts), but we do nevertheless. I’ve even exchanged best practices on how to handle various regulatory bodies with a direct competitor so exchanging impressions/referrals on external counsel is definitely a useful tool. Disclaimer: in full compliance with antitrust law, nothing to deal with the disclosure of the commercially sensitive information [laughing]

 CEELM: How does a regular day in the office look like for you? What takes up the most time of your day?

D.P.: Two broad things end up taking up the greatest part of my day. The first is managing the legal department to make sure it runs smoothly and in an organized manner. This means managing 9 lawyers out of a full staff of 18 (we include in the legal team other technical staff such as archives or contract managers), their daily tasks and long term projects, their interactions with other business units, and so on. It also means working constantly to streamline processes which involve the legal team so as to eliminate unnecessary red-tape to ensure the legal team operates as a facilitator, rather than a “sales prevention team” for the overall business. 

The second aspect is hard to describe more specifically than simply calling it “general business troubleshooting.” Things always come up and reacting to them on the spot means distractions from other projects and a lot of time invested in them.

 CEELM: On a lighter note, what is your favorite item in your office and why?

D.P.: I have a small model car – a Jaguar XK – which is my favorite car in the world. Obviously, I hope to one day own the car itself, not just a model of it. My team members’ favorite item, however, is my table hockey. We actually have a legal department tournament twice a year. The prize is obviously something small, such as show tickets, but they all love it and it is an excellent team builder.

Dmitry Popov is the Vice President Legal & Compliance in Russia for ABB. His in-house career began in 2002 at Nutricia Advanced Medical Nutrition, where he worked as General Counsel. He then spent a little under a year with Renaissance Insurance as its General Counsel and Vice President. Following 3 years in private practice with Baker & McKenzie, he joined ABB in 2010.

   

Dmitry Popov, Vice President Legal & Compliance for Russia at ABB

 CEELM: To start, please tell us a bit about your career leading up to your current role with ABB.

D.P.: My background is in fact a technical one with the first university I attended focusing on engineering. I did start studying for my law degree in parallel with the first one, which led to me graduating from both universities in 1997. My very first job in the legal world was in the Prosecutor’s Office but I found early on that it was much more interesting to work on civil cases rather than in criminal law, which I personally hate but which was almost mandatory for a career there. I then decided to leave the office and started working with a very small law firm. 

I soon realized what a great asset my dual qualification represented. My technical background helped me understand technically complicated contracts, meaning I could support my clients much better. A telecommunications company, for example, is always going to be serviced better by a lawyer who understands not just the law but also the technology, and, importantly, the core business behind a contract. 

Later on, I started my own small law practice in Nizhny Novgorod – a city where I was living at the time. I then came to the conclusion that all the interesting law work is really done in Moscow so I decided to relocate the city, where I worked for a large European company for 5 years. Within it, I started as an in-house counsel and moved my way up the ranks gradually to the position of General Counsel. After this experience I worked briefly for Renaissance Insurance after which I received an offer from Baker & McKenzie. 

I have to say, what followed were probably the most exciting years of my professional life. When I joined the international firm, I expressed a strong wish to work on challenging/unusual cases, which have solutions neither in law, nor in court practice, and the firm offered a great platform to expose me to such projects.  

In 2010, when the crisis hit firms, I realized that my dream of becoming a partner within 3 years of joining the firm might be a bit of a stretch, not because the firm was hurting necessarily, but because the capacity to assimilate more lawyers within the partnership ranks at the time did not look so evident. As a result, I accepted an offer from ABB to join the company – though I do not exclude the possibility of returning to the firm as a partner one day [laughs]. 

I was also attracted by the idea of joining ABB because I knew they had very good Contracts and Corporate departments – but such important (for a large-industry company) areas as antitrust, regulatory (including customs and tax), IP, and litigation were not covered at the level which I believed sufficient. In light of my specialization with Baker, I thought those would be gaps I could definitely plug into and take upon myself the challenge of building up. In fact, looking back, I take pride in the fact that I built a small law firm with different practice areas within the company over the years, including a two-person litigation team that now is capable of handling large/complex litigations in-house. The same applies with other practice areas such as IP or antitrust, and even some M&A. Having said that, I must say how much I appreciate the very professional support from ABB headquarters. 

 CEELM: Do you see this approach as a trend in the market?

D.P.: Indeed, I do. I think it makes sense for it to be a growing trend actually since it offers both the advantage of working with lawyers who know the business inside-out and it tends also to save money. Further, from my experience with Baker & McKenzie as well as from my communication with other consultants I understand that now in Russia we have a new generation of lawyers who are highly professional in their core law areas.  

 CEELM: You have worked both in-house and spent a considerable time in private practice — which do you prefer and why?

D.P.: I would say they are two very different worlds but that I find both to be quite interesting. I would say that one of the main differences is that, as an external consultant, you are most often able to only give advice as to a solution. It is rare that an external lawyer would be allowed in the actual business side of implementing a solution, and it would require a long relationship to establish a strong level of trust before that could happen. I will say, it is also up to the attitude of the General Counsel to get involved if he/she wants to be a part of the actual solution implementation. By that I mean to say that I see two types of General Counsel: there is the “9 to 6 GC”, who really only acts as a communication tool between external counsel and the Board, and the “real GCs” who take advice and handle problems themselves.

 CEELM: When you used to work as a Senior Associate, what practice area(s) did you specialize in? Does that specialization help you directly in your current role?

D.P.: The reality is that for a General Counsel to be effective, he/she needs to understand all the legal spheres related to his/her business from real estate to IP to antitrust, tax, etc. I personally used to specialize primarily in antitrust as well as corporate law but that does not mean that I never externalize this type of work. Even if I feel that the greater part of my team is “fluent” in antitrust issues, which is mandatory with all my lawyers, I still would sometimes, for example, invite external lawyers to sit down with my team and update us on some of the recent updates taking place in relevant legislation – and in Russia, there’s often quite a few of them. There is also the element of building up internal cases – a sort of  “externally-powered internal legitimacy” provided by the expert opinion of an outside consultant. 

 CEELM: Since we mentioned external counsel, when you do decide to outsource legal work, what are the main criteria you use in choosing law firms?

D.P.: It really does depend considerably on the transaction. If I have a specific question I tend to know a lot of good lawyers – and I am referring here to specific individuals, irrespective of the colors of their brand – in Russia and would know who is best to ask for input. 

If I had to pick one criteria, I value a law firm that “monitors” what we do on a regular basis as a business. For example, now that we are building a new plant, when we looked for external counsel for a specific real estate matter, it was important for us that the counsel knows already how we work and how we like things done – in terms of internal processes and such. This saves both time and money as we waste neither on answering question and clarifying what we need and how we need it, although “long term relations” is never the main criteria. 

And if I have a complex project which may involve several areas of law, I choose between law firms who are strong in all those areas, and in this case the “best individual professional” approach does not play a main role.

 CEELM: What are your main sources of information about the capabilities of any specific law firm: Law firm websites, legal directories, network/referrals, direct contacts, their track records?

D.P.: There are two main ways which I developed when I realized I was slowly becoming overly-dependent on a handful of lawyers. The first is attending legal seminars of law firms since it gives me a great opportunity to both update my knowledge and to asses that of the external counsel I am listening to (as well as assessing his business acuity). 

The other can simply be summed up as “GCs network”. Granted, we interact considerably less than external counsel who get to meet regularly (even across each other at a table in a deal or in courts), but we do nevertheless. I’ve even exchanged best practices on how to handle various regulatory bodies with a direct competitor so exchanging impressions/referrals on external counsel is definitely a useful tool. Disclaimer: in full compliance with antitrust law, nothing to deal with the disclosure of the commercially sensitive information [laughing]

 CEELM: How does a regular day in the office look like for you? What takes up the most time of your day?

D.P.: Two broad things end up taking up the greatest part of my day. The first is managing the legal department to make sure it runs smoothly and in an organized manner. This means managing 9 lawyers out of a full staff of 18 (we include in the legal team other technical staff such as archives or contract managers), their daily tasks and long term projects, their interactions with other business units, and so on. It also means working constantly to streamline processes which involve the legal team so as to eliminate unnecessary red-tape to ensure the legal team operates as a facilitator, rather than a “sales prevention team” for the overall business. 

The second aspect is hard to describe more specifically than simply calling it “general business troubleshooting.” Things always come up and reacting to them on the spot means distractions from other projects and a lot of time invested in them.

 CEELM: On a lighter note, what is your favorite item in your office and why?

D.P.: I have a small model car – a Jaguar XK – which is my favorite car in the world. Obviously, I hope to one day own the car itself, not just a model of it. My team members’ favorite item, however, is my table hockey. We actually have a legal department tournament twice a year. The prize is obviously something small, such as show tickets, but they all love it and it is an excellent team builder.

Anna Gritsevskaya is the Legal Director for Russia at PPF Life Insurance (formerly Generali PPF). She has spent over 11 years in the Insurance sector, holding Head of Legal and Compliance positions in a number of foreign-owned insurance companies in Russia including Allianz, Aviva, Fortis, and Generali PPF.

   

Anna Gritsevskaya, Legal Director Russia at PPF Life Insurance

 CEELM: To start, please tell us a bit about yourself and your career leading up to your role with PPF Life Insurance.

A.G.: I was born in Moscow and graduated from the Moscow State University Law Department. To tell you the truth, I never wanted to work as a lawyer and saw myself as a future law scholar. I was strongly encouraged by my professors to devote myself to legal science. However, the times were rough in Russia in early 90s, so I started working in a corporate rather than academic environment. Completely by accident I joined a Russian insurance company in 1995 and have been in the insurance industry ever since. 

 CEELM: Your current role is that of Legal Director for Russia. In your own words, how would you define the role of a Legal Director/General Counsel?

A.G.: Perhaps, my role is best described by the name of my position [smiles]. I do counseling – I advise the company’s management and the employees on most complicated and tricky legal issues. In other words, I am responsible for the peace of mind of the management. But I am also a manager myself and, as such, I have to organize the work of my department and supervise many insurance matters including product design, claims handling, and litigation. Corporate, employment, and various other general legal issues come on top.  

 CEELM: You have been working in the Finance sector for over 11 years in senior in-house roles. What excites you about the industry the most?

A.G.: As I said, it was by accident that I started working in insurance. But I have never regretted it.  Insurance is a service industry, where the client is always right. As a result, I have the challenging task of keeping the balance between the need to satisfy the client to the maximum possible extent and the need to protect the interests of my company. At the same time, the legal framework for insurance in Russia is rather general, so insurance lawyers often have to make decisions with little or no guidance at all. It means responsibility but it also drives me a lot!

 CEELM: What does a typical day look like for you as the Head of Legal of an insurance business in Russia? What takes up the most of your time in the office?

A.G.: I usually start with accessing the scope of work, defining priorities, and distributing assignments among the team members. As the day unfolds, I supervise the performance of tasks by my staff, consult with my colleagues from other departments to learn their needs for legal advice, prepare reports for the management team, and deal with urgent matters. A fair share of my time is taken by meetings on many different topics, brainstorming sessions, project management, or review meetings where I am often required to give legal advice on the spot. You will not believe how varied the topics of required legal advice are sometimes [smiles]! 

 CEELM: According to urban myth, unlike lawyers in private practice, in-house counsel wrap up at 5 pm on the dot. How accurate is this impression?

A.G.: I believe this is not a matter of where the person works. It depends on the person’s ability to manage his or her time properly. My day is always planned ahead. I try to spend my working hours on work-related matters only and encourage and train my staff to organize their time in the same way.  I do not believe in long hours at the office desk. Certainly, there may be cases when it is necessary but then it is a crisis and everybody should mobilize.

 CEELM: How is your in-house team designed? Do you specialize your individual lawyers on specific areas or are they all generalists? 

A.G.: I have 8 people on my team. Each of them has his/her own area of main responsibility but I try to give them tasks beyond their usual routine. I strongly believe that lawyers must have a wider vision – a sense of law if you want. I think one cannot become a good lawyer without working on different tasks and always learning something new. As a result, I try giving assignments to my staff beyond their comfort zones to develop and to train them. To be fair to the members of my team they understand this and look for new challenges themselves. 

 CEELM: If you need to outsource legal work, what criteria do you use in choosing your external counsel?

A.G.: I work in a company that is a member of an international group of companies. The group has preferred legal advisors that it usually uses in various countries. In case I pick external counsels I expect them to be very responsive, practical, straight-to-the-point and … brief!  I am prepared to accept a higher cost but it must present real value for money.

 CEELM: There is a great deal of hype in Russia at the moment over the various sanctions imposed on the market. Do they affect your business in any way? If yes, how?

A.G.: As a matter of policy we do not comment on political topics. However, I need to correct you in a sense that no sanctions have been imposed on the Russian insurance industry. All our reserves are invested in Russia and we meet our obligations towards regulators and our clients in full.

 CEELM: On a lighter note, what is your favorite thing to do after a long day at the office?

A.G.: First of all, I try to not make my day in the office longer than I need to. What is my pastime? I have been practicing Yoga for many years. Together with regular sessions in the gym it helps tremendously to free my brain and to strengthen my spirit, to have a clear mind, to relax. My son has grown up so I have more time for myself. I like traveling, exploring new hidden places especially in Europe. I read a lot of books in English and even take English lessons to practice my spoken language (we usually speak Russian in the office). I also have two sphinx cats – they amuse me a lot! 

Anna Gritsevskaya is the Legal Director for Russia at PPF Life Insurance (formerly Generali PPF). She has spent over 11 years in the Insurance sector, holding Head of Legal and Compliance positions in a number of foreign-owned insurance companies in Russia including Allianz, Aviva, Fortis, and Generali PPF.

   

Anna Gritsevskaya, Legal Director Russia at PPF Life Insurance

 CEELM: To start, please tell us a bit about yourself and your career leading up to your role with PPF Life Insurance.

A.G.: I was born in Moscow and graduated from the Moscow State University Law Department. To tell you the truth, I never wanted to work as a lawyer and saw myself as a future law scholar. I was strongly encouraged by my professors to devote myself to legal science. However, the times were rough in Russia in early 90s, so I started working in a corporate rather than academic environment. Completely by accident I joined a Russian insurance company in 1995 and have been in the insurance industry ever since. 

 CEELM: Your current role is that of Legal Director for Russia. In your own words, how would you define the role of a Legal Director/General Counsel?

A.G.: Perhaps, my role is best described by the name of my position [smiles]. I do counseling – I advise the company’s management and the employees on most complicated and tricky legal issues. In other words, I am responsible for the peace of mind of the management. But I am also a manager myself and, as such, I have to organize the work of my department and supervise many insurance matters including product design, claims handling, and litigation. Corporate, employment, and various other general legal issues come on top.  

 CEELM: You have been working in the Finance sector for over 11 years in senior in-house roles. What excites you about the industry the most?

A.G.: As I said, it was by accident that I started working in insurance. But I have never regretted it.  Insurance is a service industry, where the client is always right. As a result, I have the challenging task of keeping the balance between the need to satisfy the client to the maximum possible extent and the need to protect the interests of my company. At the same time, the legal framework for insurance in Russia is rather general, so insurance lawyers often have to make decisions with little or no guidance at all. It means responsibility but it also drives me a lot!

 CEELM: What does a typical day look like for you as the Head of Legal of an insurance business in Russia? What takes up the most of your time in the office?

A.G.: I usually start with accessing the scope of work, defining priorities, and distributing assignments among the team members. As the day unfolds, I supervise the performance of tasks by my staff, consult with my colleagues from other departments to learn their needs for legal advice, prepare reports for the management team, and deal with urgent matters. A fair share of my time is taken by meetings on many different topics, brainstorming sessions, project management, or review meetings where I am often required to give legal advice on the spot. You will not believe how varied the topics of required legal advice are sometimes [smiles]! 

 CEELM: According to urban myth, unlike lawyers in private practice, in-house counsel wrap up at 5 pm on the dot. How accurate is this impression?

A.G.: I believe this is not a matter of where the person works. It depends on the person’s ability to manage his or her time properly. My day is always planned ahead. I try to spend my working hours on work-related matters only and encourage and train my staff to organize their time in the same way.  I do not believe in long hours at the office desk. Certainly, there may be cases when it is necessary but then it is a crisis and everybody should mobilize.

 CEELM: How is your in-house team designed? Do you specialize your individual lawyers on specific areas or are they all generalists? 

A.G.: I have 8 people on my team. Each of them has his/her own area of main responsibility but I try to give them tasks beyond their usual routine. I strongly believe that lawyers must have a wider vision – a sense of law if you want. I think one cannot become a good lawyer without working on different tasks and always learning something new. As a result, I try giving assignments to my staff beyond their comfort zones to develop and to train them. To be fair to the members of my team they understand this and look for new challenges themselves. 

 CEELM: If you need to outsource legal work, what criteria do you use in choosing your external counsel?

A.G.: I work in a company that is a member of an international group of companies. The group has preferred legal advisors that it usually uses in various countries. In case I pick external counsels I expect them to be very responsive, practical, straight-to-the-point and … brief!  I am prepared to accept a higher cost but it must present real value for money.

 CEELM: There is a great deal of hype in Russia at the moment over the various sanctions imposed on the market. Do they affect your business in any way? If yes, how?

A.G.: As a matter of policy we do not comment on political topics. However, I need to correct you in a sense that no sanctions have been imposed on the Russian insurance industry. All our reserves are invested in Russia and we meet our obligations towards regulators and our clients in full.

 CEELM: On a lighter note, what is your favorite thing to do after a long day at the office?

A.G.: First of all, I try to not make my day in the office longer than I need to. What is my pastime? I have been practicing Yoga for many years. Together with regular sessions in the gym it helps tremendously to free my brain and to strengthen my spirit, to have a clear mind, to relax. My son has grown up so I have more time for myself. I like traveling, exploring new hidden places especially in Europe. I read a lot of books in English and even take English lessons to practice my spoken language (we usually speak Russian in the office). I also have two sphinx cats – they amuse me a lot!