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Interview with Daniele Iacona, Attorney at Law with Schoenherr in Romania and Head of the firm’s Italian Desk for the Region.

   

“Eastern European law firms were used to obtaining mandates based only on marketing activities, but recent years have increased the importance of Business Development. Better commercial awareness of clients’ business and more value-added services are probably the key best practices.”

D.I.: Long story. During my law faculty in Bologna I received a few scholarships to study abroad (Spain, Australia and Brazil) and after that I applied for a new exotic country: Romania. The original internship program was for three months. I’m still around.

 CEELM: You built an interesting practice within Schoenherr, a dedicated Italian Desk. Aside from the natural fit for you, did you believe there was a strong demand for such a practice in the country, or did you build that demand?

D.I.: We knew that there were a lot of Italian companies doing business or interested in doing business in the CEE region and we wanted to try to take advantage of that. I am an Italian lawyer with Italian know-how and with knowledge of the region. This – combined with the fact that I speak Italian and Romanian and have experience working for other law firms in Romania and abroad – made it a logical decision for us to set up an Italian desk with me as its head. Speaking Italian is especially important as many Italian clients prefer to operate in their own language. In recent years I’ve  started working with non-Italian companies as well.

D.I.: At the moment as an Italian desk we are active in Romania, Serbia, Bulgaria, Czech Republic, and Turkey. In 2014 we expect to develop this concept, together with local partners, in other CEE countries as well.

D.I.: Italians are mainly focused on energy projects in the Balkan countries. We have also been very active advising several Italian companies on corporate restructuring issues. Some of our other projects involve NTT Data Group, a Japanese-listed company which acquired an IT company in Romania, and Energreen Investment, a Luxemburg-fund focused on energy projects in CEE.

D.I.: I am involved in other CEE markets also if I try to delegate. Team spirit is a key aspect in our firm. My time is often limited but I do my best in order to properly balance work and personal life.

D.I.: Business development is, mostly, a natural attitude/skill which you possess or not, in my mind, but knowledge-wise I think it is still possible to learn the basic tools and practices. Eastern European law firms were used to obtaining mandates based only on marketing activities, but recent years have increased the importance of Business Development. Better commercial awareness of clients’ business and more value-added services are probably the key best practices.

D.I.: That would vary based on the seniority level of that lawyer. For young associates I usually recommend that they start learning about the potential clients they are “chasing” and about the industry as a whole. First step, spend more time reading up on the news to understand patterns. Build your personal brand by writing articles and attending events. Learn to socialize – read a few psychology books, force yourself to network more at any events you attend, and learn foreign languages. Last but not least, never stop learning and get a life outside the office both because you need to decompress and because you never know where your next opportunity will come from.

D.I.: Often lawyers do not like to make “sales” and, if they have to do it, it is obvious that they do not like it. BD is a medium-long term process, composed of several steps, which have to be respected. Speeding up the process is not recommended, and this is a common mistake, not just in Romania.

D.I.: Like other foreign investors, Italians are more prudent in this period. Romania’s financial instability, caused mainly by the imminent elections, has resulted in a slow-down. This has led us to turn our attention to other countries, such as Turkey, Poland and Slovenia. However, according to international economic forecasts, a few strategic sectors (e.g. agriculture, IT, Retail, etc.) should register a return of a stable level of investments to Romania, and Romania should again be one of the main destinations of foreign investments in the region, including Italian.

D.I.: I will keep working hard around CEE. Our ultimate goal is to become a landmark for Italian businesses and the firm of choice for Italian investors active throughout CEE.

Interview with Perry Zizzi, Partner at Clifford Chance Badea in Bucharest.

   

Perry Zizzi

 CEELM: To start, how and where did your legal career begin – and how did you end up in Romania?

P.Z.: My career began in 1995, with a top international law firm in New York. It was a great starting point, in the frenzy of a global financial hub with infinite perspectives for a young corporate lawyer. In the 1990s, I did a lot of work in Latin America, mostly finance and M&A. In 2000, I moved to Europe, first to London and later to Paris. Without realizing it, my profession was taking me east, at a time when former communist emerging markets were becoming hotspots for foreign investors. 

Advising on projects in Moldova and Montenegro, as well as my eastern European studies at university, led me to accept an offer to be based in Bucharest and cover the region. This seemed an intriguing proposition at the time, as Romania was reaching a turning point in terms of economic and business development. 

Between 2004 and 2006, I split my time between Prague and Bucharest, and since I moved to Europe, I have advised on matters throughout Central and Eastern Europe (including Poland, Czech Republic, Slovakia, Hungary, Romania, Bulgaria, Moldova, Russia, Ukraine, Turkey, Montenegro, Serbia, and Croatia). 

Somehow, my next move seemed a natural development for my career, as I joined the Romanian office of the largest law firm in the world – Clifford Chance Badea – as Partner, in 2007.

 CEELM: What is your role, exactly, in Clifford Chance Badea? Does being an expat in the Bucharest office involve different responsibilities than the Romanian partners?

P.Z.: I see my role as a balance between my legal expertise (being hands-on on projects I coordinate) and managerial responsibilities. Being an expat gives me a perspective that has been valuable to foreign investors from Western Europe and North America in particular. I mostly advise large multinationals active in the region. Most recently, I have spent a lot of time in our Kiev office, supporting a shale gas project. 

 CEELM: What were the main challenges you faced when starting to work in Romania, and are those the same challenges you face today?

P.Z.: Definitely, the legal profession in Romania has significantly evolved over the past 11 years. Our own attorneys are educated at top schools and undergo continuous training within Clifford Chance to be able to keep up with a rapidly changing international legal environment. We encourage our attorneys to do secondments in other Clifford Chance offices and we have welcomed attorneys on secondment from London and other offices.

The pool of investors is, obviously, larger now. When I first came here, Romania was mostly the target of small investors from the eastern Mediterranean, such as Greece, Israel and Turkey, with a few large multinationals and some manufacturing by mainly Italian SMEs in the west. While Romania has evolved as a society and market economy, investors have become more sophisticated and aligned to international business standards and best practices. We now see more emphasis on corporate governance, for example. 

On the other hand, concerns remain about corruption and predictability of the judiciary system. 

 CEELM: How do you think your career was influenced by the decision to move outside of the US?

P.Z.: Practicing in this region is certainly more challenging. I always say that if you get 5 Romanian lawyers in a room, you can get 10 different opinions. The law tends to be unclear, with large gaps and inconsistencies that are difficult to reconcile. By contrast, in the US, the law is much more settled on the “big picture” issues, and lack of clarity in the law tends to relate to very specific controversies on narrowly defined issues.

Much of my work, however, would be the same whether I am sitting in London or New York or in Bucharest. That’s because a lot of it involves working with local counsel to structure transactions and negotiate documentation. In this case, the “local counsel” simply sits a bit closer to my desk than if I were in a big money center. 

 CEELM: What have you identified, over the years, as the unique cultural aspects to keep in mind as an expat working in Romania?

P.Z.: Romania is split between two extremes. On one hand, there is an old mindset, the legacy of the former regime. It is the mindset of “No, it cannot be done.” On the other, it’s the new generation of dynamic, open-minded and customer-oriented people who represent – I hope – the future of Romania. 

However, there is often even among those with this forward-looking mindset an instinct to mistrust foreign investors. The paradigm is that of the business person who believes that if a counter-party is happy with the outcome of negotiations, then he himself must have gotten a raw deal and missed something. 

 CEELM: In general terms, how do you think the lawyers in Romania compare with those in the more established legal markets of the UK or US? Have you seen improvement in the market since you arrived? Are there particular areas they need to improve even more?

P.Z.: The best of the Romanian legal profession is sophisticated, skilled, and experienced, and can easily match peers from any country. Clifford Chance lawyers are among the top of their profession, and our office is no exception, with a strong portfolio and top rankings in legal directories. 

Litigation/dispute resolution remains underexploited by most large international firms in Romania. Many strictly local practitioners merely stumble from hearing to hearing, using tactics but lacking strategy. Investors are increasingly looking to international law firms to fill the gap and bring more sophisticated approaches to this area of law.  

 CEELM: On the lighter side, what is your favorite spot in Bucharest and why? What about the rest of the country?

P.Z.: I cannot imagine living anywhere in Romania except Bucharest. It is  crazy, chaotic, frustrating yet alive and buzzing with activity, more interesting than many other major cities in Europe (think Brussels: a snoozefest!). As for the rest of the country, the Fagaras Mountains are breathtaking and Brasov is stunning (if still a bit lacking in quality restaurants, bars and hotels).

What is the word that best describes the Romanian legal market this spring? Some may say “apathy”, and others may say “business as usual”. Very few people – if any – will say “excitement”. After all, the renewable energy boom is pretty much over (with the corresponding legal work that kept many firms going through the crisis drying up), banks are still recovering from the crisis malaise (translation: banks are still lending very little), the skyline is not yet punctured by construction cranes everywhere you look, the public sector is as slow as it has ever been, and last time I checked, Romania had not yet become a hotbed of M&A activity.

   

Marian Dinu, Country Managing Partner, DLA Piper

Add to this a couple of high-profile withdrawals of international firms from the Romanian legal market and the picture appears rather discouraging: the market is not going very well, it seems. Coming back to the one word description of the current status, perhaps the best such word would be “fatigue”, as that felt by people coming out of a long, long winter.

But the analogy is appropriate in more than one way. Even the longest winter is followed by spring. And spring is coming to Romania, not only in terms of the sunny and warm weather, Easter holidays and so on, but also in terms of the economy. At the beginning of this year, Romania was able to place a reasonably priced 30-year bond in the international markets. One billion dollars worth, in fact. Some obviously believe that Romania has a long-term future. One of the fund managers I spoke to recently was very bullish on Romania: the boom is around the corner, he said. He was talking about the economy in general, not the legal market in particular. However, the legal market does form an integral part of the economy and is likely to experience similar trends, albeit with the usual volatility dampers: inertia in terms of pricing, capacity constraints, etc. If the fund manager is right about the economy in general, we should also see in the legal market a surge in client demand, improved pricing, and a scramble for resources (meaning good lawyers to put on cases).

Are there any signs that this may come true? Judging by the level of activity in my own firm, and by the number and quality of requests for proposals we get, yes, there are. Judging by the continued pressure on pricing, it seems that very few people are noticing it. Or, if they are noticing, few people believe that these are really signs that spring is coming, rather than weird flukes of the weather (after all, with all this global warming, weather patterns are being distorted, right?). However, there is a danger in not noticing. Spring may come and go sooner than you think. When it goes, it is replaced by the blazing-hot summer, when overheating is the main concern. Spring is the time to do some work around the house: to dust things off, check the air conditioning, plant seeds or seedlings in the garden, turn the sprinklers on, paint the main door, etc. Can you plant in the summer? You can, but most likely things do not take root. 

What does all this spring metaphor mean for lawyers and their clients operating in the Romanian market? 

For lawyers, I would say this means making sure that your organization is in good shape, in terms of the right level of expertise, capacity to deliver quality legal work and a good service to clients. Although the received wisdom will have you believe that all you need to do these days to survive in the very competitive Romanian legal market is to offer clients a lower price than your competitors, I think that it is becoming clear where this model breaks down. Low price in itself is not enough. Clients like low prices, but not at the expense of quality and service. Low prices can induce a vicious circle of pressure to lower the costs, low morale, low quality. Law firms in Romania have been remarkably good at coping with the crisis without significant downsizing. It is not the time to give up, not just yet. On the contrary, it is time to do that spring-time work.

For clients, the spring-time metaphor means that it is time to start building relationships with firms that do provide quality and service. When the boom-time comes, these may become scarce commodities. 

By Marian Dinu, Country Managing Partner, DLA Piper

Confidence and creativity underpin success. Babe Ruth, the famous American baseball player, was once accused by a policeman of driving the wrong way up a one-way street. Ruth explained, inarguably, that he was only going one way. Operating on similar principles, the Brazilian Brandi Partners’ expansion into Europe and CEE goes against the tide of foreign firms expanding into Brazil. And, like Ruth, the firm seems to be confident in its direction.

 

Charles-Henri Roy, Partner, Brandi Partners: “We are building up the brand, this is the idea, and the exciting thing: to build something new, from scratch, and we are all very excited about the project.”

History and Background

In 2010 French lawyer Guillaume Dolidon found his plans to fully serve his Latin American clients stymied by a controversial Brazilian Bar Association rule forbidding foreign firms from tying up with Brazilian counterparts. Reversing his field, Dolidon suggested to friend and Brazilian lawyer Arthur Brandi that the French bar imposed no such prohibition on foreign lawyers, and proposed that instead of Dolidon bringing his brand to Brazil, Brandi should bring his to Paris. Brandi Partners’ office in the City of Lights opened in September, 2012. 

Seeing no reason to stop, within months Brandi Partners had opened offices in Dubai, Milan, and Istanbul as well.

Despite its size and reach, Partners at Brandi Partners all reject the suggestion that they are a “traditional law firm,” and they refer to themselves as an “association”, an “alliance”, or a “network” – and the firm’s marketing material describes Brandi Partners as an “international organization.” They happily point out that there are no global partners or shared profits across offices – and that same marketing material claims that “there is no governance, no hierarchy and we are free of nationality.”

Thus, as Dolidon and his counterparts around the world see it, they can share best practices and information and a productive client referral network, while allowing their members to stay wholly independent and avoid the administrative costs and challenges inherent in full integration. 

The model has attracted firms and lawyers in a number of markets eager to take advantage of the international referral network and international brand while retaining full independence. And the firm is looking, more and more, towards CEE. 

Expanding in CEE 

In February 2013, Turkish lawyers Stephane Gurhan and Belgin Ozdilmen – who had worked briefly with Dolidon at Sherman & Sterling in Paris in 2009 – agreed to align their Turkish law firm with Brandi Partners. A year later the firm expanded its Russian capabilities by hiring CMS Bureau Francis Lefebvre Partner Charles-Henri Roy to head up the new Moscow office with Partner Marc Solovei, who had coordinated Brandi Partners’ Russia/CIS practice from Paris since 2012 after spending many years in Moscow with Gide Loyrette Nouel.

The Partners in Istanbul and Moscow are confident in the brand. Ozdilmen, in Istanbul, says that they weighed the pros and cons before joining Brandi Partners – but “actually there were a lot of pros.” She explained that “in Turkey labels are very important. We have a more international image aspect now thanks to Brandi Partners, [and clients] are more interested in our law firm.” The firm’s model was a strong selling point. “Actually, it is why we chose Brandi Partners,” Ozdilmen says, “because we kept our independence, and at the same time we have increased our network.” And times are good – the office in Istanbul had 5 lawyers when it joined Brandi Partners, currently has 7, and hopes to grow to 10-12 by the end of the year.

 

Guillaume Dolidon, Founding Partner, Brandi Partners

Roy, in Moscow, was also attracted by Brandi’s “network of independent lawyers.” He explains that, after 10-12 years with an international firm, he wanted to do something new – but felt that, without an international brand, he’d be unable to compete against the major players for major clients. “This was the main idea of this partnership, to have something where we are all independent, like a ‘brand’ I would say, and then we can use it or not use it, as we want, as an international ‘association.’”

The initial results, in Russia, have been encouraging. Roy concedes that “it’s still very early …. but from the feedback I have from the clients it’s something interesting. I see that I have already clients from the network that are interested in Russia .… It’s a market that still has plenty of interest from new brands, from producers, from industry, there are many people still interested in Russia.”

Roy says that in growing the Moscow office – he expects to expand the Moscow office’s litigation capabilities soon, and hopes to grow to 20 overall – he focuses primarily on finding lawyers “with a clear focus on values shared by our lawyers individually in order to team up for our clients.”

The firm’s successful and rapid growth encourages the partners to think about other markets. Dolidon says he expects to see a number of offices join the firm in coming years, and expresses particular interest in adding an office in Poland and northern Africa. Roy also mentions Poland, the Czech Republic, and Kazakhstan as potential steps in the plan “to create a Brandi network in CEE and CIS.” 

Ultimately, the firm is willing to consider options anywhere. Roy says, “the idea is more to find the best lawyers, who are willing to work independently and who are entrepreneurs, to develop their own own law firm, to use the brand of Brandi if they need.”

The firm’s – sorry, the “international organization’s” – rapid growth in recent years, then, can be seen as a reflection of Dolidon’s conviction that clients are far less concerned with internal organization and particular structures of the law firms advising them than they are with obtaining effective, timely, and appropriately-priced service. Whether Brandi Partners will be able to provide that kind of service over the years and across all markets may not have been definitively answered yet. But in swimming against the tide of firms moving from Europe into South America, they’ve already shown initiative and determination. Woody Allen once said that “80 percent of success in life is showing up.” Brandi Partners, it is clear, has shown up. The rest is up to them.

The Montenegrin Law on Protection of Competition (“Competition Act”) came into force in 2012. The provisions of the law on restrictive agreements and abuse of dominance are modeled after Articles 101 and 102 of the Treaty on the Functioning of the European Union. This article presents a brief overview of the provisions on merger control. 

The law provides that the Montenegrin Agency for Protection of Competition must be notified  of any merger between undertakings or acquisitions of sole or joint control over an undertaking  if at least one of two alternative thresholds is met: (i) the aggregate annual turnover of the undertakings concerned generated on the Montenegrin market exceeds EUR 5 million; or (ii) the combined aggregate annual worldwide turnover of the undertakings concerned exceeds EUR 20 million, out of which at least one of the undertakings concerned achieved EUR 1 million in the Montenegrin market (turnover data in each case from the year preceding the concentration). Even foreign-to-foreign transactions are subject to the duty to communicate concentration to the Montenegrin authority if the relevant thresholds are met, unless one ventures into a jurisdictional argument. According to its Article 2, the Competition Act applies to all acts and practices undertaken in Montenegro, as well as “acts and practices which have resulted as a consequence of acts and practices undertaken outside its territory which have as their object or effect distortion of competition on the territory of Montenegro.” It should be noted, though, that the jurisdictional defense has not yet been verified before the Agency or the Montenegrin court.

Notification of concentration has to take place within 15 days following the earlier of: (i) the execution of the agreement; (ii) announcement of a public bid; or (iii) acquisition of control. A request to approve concentration can also be filed based on a letter of intent or a similar document demonstrating the parties’ serious intention to proceed towards concentration. 

The Ministry of Economy has issued an instruction on the content of and the manner of submitting a concentration notification. Unfortunately, the guidelines overcomplicate the content of a fully-pledged notice. For example, parties are instructed to provide: (i) information on competitors from the neighboring countries who are not directly or indirectly present on the Montenegrin market; (ii) information in possession of the applicants on all undertakings that have entered or exited the relevant market and on all concentrations in the relevant market, in each case for the period of 3 years prior to the concentration; (iii) information on horizontal agreements between the undertakings concerned or their affiliates in and outside Montenegro; (iv) information on projected market shares of the undertakings concerned over a period of 3 years following the implementation of concentration; (v) assessment of other markets which are closely linked to and/or interdependent with the relevant market or products from other markets that are purchased by the same group of customers, together with the estimated impact of the concentration on those other markets; and (vi) assessment of relevant markets where affiliates of the undertakings concerned have been present in the past three years (including the current year when the concentration is taking place).

A simplified notification is allowed under the following strict circumstances: (i) when the combined market share of the undertakings concerned on the relevant market is less than 10%, (15% on a vertically integrated market); or (ii) when joint control is converted to sole control by the undertaking that previously controlled the target jointly with another undertaking; or (iii) if the undertakings concerned are not present anywhere in the world on the same relevant product market, the same vertically integrated market, or closely connected markets. 

The Agency has 105 working days from the date of receipt of a complete application to render a decision on an unconditional approval of concentration, 125 working days for a decision on a conditional approval, and 130 working days for a decision prohibiting the concentration. ?here is a presumption that approval is granted if the Agency fails to render its decision within any of the mentioned deadlines. It is, however, unclear how the presumption can work in the presence of these different deadlines. For example, if the Agency initiates phase II proceedings but does not render any decision within 105 working days, will it be considered that unconditional approval is granted even though the Agency has 125 working days to render a conditional approval and 130 working days to prohibit concentration?

The Law prescribes fines ranging from EUR 4,000 to EUR 40,000 for a failure to notify the Agency of the concentration on time. Failure to suspend the concentration pending the Agency’s approval can be sanctioned with a fine ranging from 1 to 10% of the infringer’s annual turnover in the year preceding the infringement. However, the Montenegrin Competition Authority is not itself authorized to issue fines but may only initiate misdemeanor proceedings before the authority competent for misdemeanors. Given that the misdemeanor authorities are not best equipped to understand competition law matters, it is likely that the fines will remain a paper tiger.

By Tijana Kojovic, Partner, and Igor Nikolic, Associate, BDK Advokati/Attorneys at Law

This Article was originally published in Issue 2 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

The governing legislation in the Republic of Macedonia regarding competition matters is the Law on the Protection of Competition (Official Gazette of the Republic of Macedonia no.145/2010 and no. 136/2011) and the Law on Control of State Aid (Official Gazette of the Republic of Macedonia, no.145/2010). The laws are based on the EU competition law and state aid law, encompassing standard competition law institutions: restrictive agreements and practices, abuse of dominant position and control of concentrations, and regulation of state aid.

NThe mandate of the Commission for the Protection of Competition is also set by the governing laws, which also prescribe certain specific procedural rules, besides the rules on general administrative procedure. 

Restrictive Agreements and Practices

Restrictive agreements and practices are defined in Article 7 of the Law on the Protection of Competition, which is in line with Article 101 of the Treaty on the Functioning of the European Union (TFEU).

With regard to restrictive agreements, in the Macedonian legal framework the system of block exemption and individual exemption apply, so that if a block exemption is not available to the parties, they may apply to the Commission for an individual exemption. 

The law also contains the “de minimis” rule, which is applicable in situations where  total market share does not exceed 10% for horizontal agreements, or 15% for vertical agreements. If it is not possible to determine whether the agreement is horizontal or vertical, the threshold of 10% applies. 

Recent Developments and Case Law Practice

A recent case regarding the alleged fixing of prices in the pharmaceutical sector involved two major pharmaceutical companies found by the Commission to have  inappropriately agreed to set prices for certain products. The two companies  appealed the Commission’s ruling in the Administrative Court of the Republic of Macedonia, arguing that the Commission had not established the existence of the prohibited price-fixing agreements because the criteria for the economic and legal approach and the conditions set out by the law were not fulfilled.

The companies argues that the market had guided their behavior without setting a specific price upon which they should focus. In order for them to to determine basic market parameters, the companies set a “trial price,” without any communication between one another. As a result, the companies were not aware of the so-called “monopoly price”; rather they were led by the market to behavior which was like but different from a restrictive practice – in other words, the prices offered by the two companies were set by the market and the establishment of the maximum price of the drugs by the Macedonian Bureau of Drugs. 

Agreeing with this argument, the Court found that the Commission had failed to establish the existence of an agreement (written or oral) regarding the fixing of  prices. Instead, the Court found, the companies’ parallel pricing represented rational behavior. The characteristics of an oligopolistic market produce a great likelihood that companies will offer similar prices: a small number of bidders, high entry barriers, non-significant differences in the product, and easy detection of price changes. An oligopolistic market does not allow a company to minimize or maximize prices by itself due to the fact that it will cause spiral minimization/maximization by the other companies. In the current case it was found to be irrational to sanction the companies’ behavior because the problem was natural in the particular structure of the market – a condition that may not exist in normal circumstances. That the parallelism in the present case had undeniable benefits for society was also important. 

These arguments were supported by the plaintiffs’ submission of theoretical and case law from the European Commission and the European Court of Justice.

After assessing the facts, the Administrative Court determined that the two companies had not fixed their prices; rather, their behavior was the result of typical rational behavior in an oligopolistic market and was not preconditioned by their previous dealings. In addition, the decision of the Commission was found contrary to the principles of objectivity of the proceedings, especially due to the lack of concrete evidence and documents in support of a finding that there had been a restrictive practice between the two companies. Accordingly, the Commission’s decision was annulled. The Commission filed an appeal against the decision of the Administrative Court; however, the Supreme Administrative court in the appeal procedure upheld the decision of the Administrative Court. 

By Valentin Pepeljugoski, Managing Partner, and Ana Pepeljugoska, Junior Adviser, Law Office Pepeljugoski

This Article was originally published in Issue 2 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.