Category: Belarus

“Politics are always challenging, in both Belarus and around the world, especially given the current state of affairs,” says Ulyana Kavalionak, Partner at BNT Attorneys in Minsk. According to Kavalionak, “even though the situation was more or less the same as everywhere else, the response of the Belarusian Government was not. We never had quarantine, and people were free to choose for themselves how they were going to tackle the pandemic.”

Of course, that doesn’t mean life continued as normal. According to Kavalionak, “many companies have transferred to home working, and the way we live has generally changed. Even without the country-wide lockdown, a lot of businesses were affected by the crisis. At the end of the day, most businesses had to cope with the problem on their own, given a late and insufficient response from the state.”

Kavalionak says that the ongoing presidential campaign is a hot topic in the country. “One of the most prolific competitors to the current president as well as several campaign aides are currently detained,” she reports. “Officially it was for reasons like corruption or money laundering or violation of the public peace. Some citizens took to the streets and those peaceful protesters were forcefully removed. Given all of that, it’s easy to see how heated the situation is.”

She describes the situation as bad for business, because “it’s important not to worsen the relations with the EU, as most of our clients come from there. Last year was great in that regard. We noticed a greater interest of business to come because of some liberalizations and also the fact that the EU and Minsk came closer together. This wasn’t only large corporations, but small and medium, too.” She sighs. “I really hope this turbulence ends soon, Belarus will have fair elections, and it doesn’t end up killing the whole thing.”

On the legislative front, Kavalionak says, there has for many years been talk about modernizing Belarus’s Labor Code, which she says is sometimes regarded as too rigid and difficult to live by, especially by foreign investors. “At the end of January this year the amendments to the Labor Code took effect, [and]among other things there was a new section dealing with remote work,” she says. “This happened just in time for the COVID-19 crisis and we had an opportunity to implement the new provisions in practice. This modernization is very welcome, but interesting questions still need to be answered in practice.”

In the meantime, Kavalionak reports, Belarus’s legal market is still going strong, as EU companies are continuing to invest in the country. “No two companies go through crises in completely the same ways, so advising them is always a challenge,” she says. “The no-quarantine situation helped us remain busy, with M&A projects leading the way. Even after the situation hit its peak, law firms were active on webinars, giving free materials to support new and existing clients.”

“If we sat down to have this interview some six months ago, I would have said that more liberalization and legislation practice coming from the EU would put Belarus on its map, with more development and investment,” Kavalionak concludes. “Today, this question becomes much harder, because we have to look at how this political crisis will end up. We hope that the economy will fix itself and that autumn and winter aren’t as difficult as predicted. I hope we can take all the new opportunities that have come with the crisis, and use them to make our lives better.”

Aleinikov & Partners has advised StringersHub on investment into the company by a group of angel investors and venture capital firms Insta Ventures and Starta Ventures. The total value of the seed round was USD 500,000.

According to Aleinikov & Partners, “since its foundation in 2017, StringersHub has been developing a marketplace that connects professional content creators with global media outlets. It allows them to draw from eyewitnesses to news events, as well as professional videographers around the world, for footage.“

Aleinikov & Partners did not reply to our inquiry on the matter.

Sorainen has advised ERGO Group on the sale of its Belarusian non-life subsidiary, ERGO Insurance Company, to the Euroins Insurance Group. BNT reportedly advised the Euronis Insurance Group.

The acquisition allows Euroins to enter the Belarusian insurance market and thus to continue its expansion in the region. In recent years Euroins has acquired insurance businesses in Bulgaria, Georgia, Romania, Russia, and Ukraine (where it acquired the former Ukrainian subsidiary of ERGO).

According to Sorainen, “the ERGO Group is an insurance group with its home market in Germany and representation in around 30 countries worldwide. The Belarusian operations of ERGO commenced in 2008 when Belarus-based BASO Insurance Company joined the group and implemented the ERGO brand.”

The Sorainen team was headed by Partner Maksim Salahub and included Managing Partner Tomas Kontautas, Senior Associates Viktoryia Mikhnevich, Ann Laevskaya, Alexey Fidek, and Maria Rodich, Associate Aliaksei Vashkevich, Oiver Amarik, Alesia Khadasevich, and Tatsiana Zubarava.

Sorainen has successfully represented Belomo, a Belarusian enterprise specializing in optomechanical and optoelectronic equipment, in arbitration before the International Court of Arbitration of the International Chamber of Commerce.

According to Sorainen, “due to non-payment by a foreign buyer for goods delivered and refusal by Belomo’s insurers TASK CJSC to pay the insurance indemnity due in connection with non-payment, Belomo was forced to launch arbitration proceedings at the ICC. Thanks to the application of the Expedited Procedure Rules, Sorainen was able to achieve a positive arbitral award in a very short term for international arbitration proceedings. An arbitral award was rendered on May 11, obliging the unconscionable buyer to pay the price of the goods delivered plus a contractual penalty plus the costs of arbitration, including legal costs, with interest on each of these amounts until actual payment in full.”

The Sorainen team consisted of Partner Alexey Anischenko, Advocate Kirill Laptev, and Legal Assistant Katsiaryna Hashko.

Sorainen has advised DEG on the acquisition of a stake in Belgips, a Belarusian manufacturer of gypsum-based building materials. Belgips was reportedly advised by Egorov Puginsky Afanasiev & Partners.

The acquisition followed Belgips’s implementation of an investment project involving the construction of a new highly automated and energy-efficient plant in Gatovo, Belarus. 

According to Sorainen, “DEG finances long-term private-sector investments in developing and emerging markets that act as a driver for sustainable development. DEG is a wholly-owned subsidiary of KfW, a German promotional bank aimed at sustainable economic, social, and ecological development in Germany and worldwide.”

Sorainen’s team included Partner Maksim Salahub, Senior Associates Alexey Fidek and Ann Laevskaya, and Associate Aliaksei Vashkevich.

“On its way through Europe, the Covid-19 pandemic has certainly not missed Belarus,” says Maksim Znak, Managing Partner at Borovtsov & Salei in Minsk.

The country is staying in what Znak describes as a “guerrilla quarantine,” and even though no strict Governmental policy regarding the crisis exists, various bodies have issued different instructions in order to stop the spread of the virus. “The National Bank, Ministry of Health, and even the local executive committees have urged businesses to start home-working programs and public to keep safe distances from one another,” he says,” adding that “there is still no mandatory policy, but more and more companies have started working from home, while parents first could choose not to send their kids to school and then got a one-week prolongation of school spring holidays.”

Znak reports that legislation in the past couple of weeks has been related to the pandemic and to other crisis issues. “A great example of this is the prohibition of any increase of price of more than 0.5 percent without special permission,” he says, “in order to protect consumers in these difficult times.” According to him, this prohibition has generated various questions, as it appears to conflict with certain higher normative acts, and it may hurt business. Some other anti-pandemic measures also are questionable from a legal perspective, he says, but he reports that lawyers are generally satisfied with overall measures, explaining that “sometimes things must work this way, because otherwise they would take way too long, when there is no time to waste.”

This year was supposed to kick off well for Belarus in terms of economic growth and foreign investment, but Znak notes that “given the current situation, we will have to reconsider our optimism,” and he describes the status quo as “double-trouble.” One part of that trouble comes from the pandemic, of course, while the other is related to the drastic fall of oil prices and consequent fall of the Belarusian ruble to the euro by more than 20% in three months. This means that those working with the Belarusian ruble now earn less, he says, but businesses involved with real estate traditionally calculate rate payments in euro equivalent, and businesses connected with important manufacturing still have to spend foreign currency in order to import goods and materials. Znak adds that the fall of the currency has happened before, but had less of an impact, as “the pandemic has stalled business in general, so we will need more time to recover from this crisis, compared to the previous ones.”

Still, Znak notes that the situation won’t last forever, and he believes that it might actually incentivize long-term investment in certain fields. “While it hasn’t started yet,” he says, “I expect to see investment in M&A, real estate, and other related areas, as people are getting used to the situation, and will be needing money more and more as time goes by.”

Ultimately, Znak describes himself as optimistic about the future, and he says that “the upcoming period may be very interesting, because of the changes that occurred and the fact that the pandemic found us unprepared. People will start re-thinking their business models and focus more on distance working measures, different contractual procedures, and different public procurement procedures.” He believes that this will be especially interesting for lawyers, “as it brings change to everyday work.” According to him, “the new approach will require creativity, and some new market players will emerge. History has shown that people will live through every crisis. The interesting part, however, is what awaits us afterwards.”

“The economy in Belarus has been stable for the past few years, but recently has been heavily affected by both the negative impacts of the coronavirus and a tight situation with Russia,” says Sergei Makarchuk, Partner at Cerha Hempel in Minsk. “Tensions between the two countries have really taken their toll over the past six months and a few conflicts have taken place, in most cases related to the supply of oil.”

Makarchuk reports that the European Union’s and the United States’ sanctions against Russia are also indirectly affecting Belarus’s economic situation. “Russia was a major market for Belarusian economy for decades. Nowadays, because of the anti-Russian sanctions, the purchasing capacity of the Russian market shrank. As a result, the sales of Belarusian companies in Russia has also dropped. In addition, despite Belarus’s membership in the Eurasian Economic Union, in fact, there is a lack of free movement of goods to Russia as a result of the restrictions systematically imposed on a number of Belarusian manufacturing companies by the Russian consumer protection authority Rospotrebnadzor. Considering how small Belarus’s market is, this has resulted in a financial loss.”

According to Makarchuk, it’s not only Belarusian entrepreneurs that are affected, and that “the situation is rather discouraging for foreign investors too, as we have noticed that clients are tending to move their manufacturing businesses from Belarus to Russia. The effects are very visible in the M&A market, which in 2019 was record low for the past few years in terms of both numbers and volume of the deals. The cause of this is also related to the fact that there is a lack of strategic investors interested in Belarusian companies, and the equity ratio in most of the local targets is around zero or even negative, so they have little strategic value for potential buyers, and there is a big gap in the price expectations of potential sellers and buyers.”

Makarchuk doesn’t believe things will improve anytime soon, noting that “the situation will stagnate further in the future as well,” but he says he hopes that “the negative interest rates in the EU and low value of assets in Belarus will incentivize the M&A market to grow.” He admits that the IT sector is prosperous, but says it is “not sufficient to overcome the greater geopolitical and structural trends. Besides, the growing difficulties in Russian export is forcing local businesses to open new markets, which will be very positive in the long run since such new markets as China and EU are rather promising.”

“In the legislative field, we have seen some positive trends, such as Presidential Decree No. 8 On Development of Digital Economy,” which was adopted at the end of 2017, says Makarchuk. According to him, “many progressive legal innovations introduced by the decree and initially intended for IT companies are now expected to be incorporated into the Belarusian Civil Code this year, which would be positive not only for business but for the entire economy.”

Finally, Makarchuk says there is “a big demand for structural reforms, which will hopefully open up the economy and lead to freer and more open competition.” He says, “I hope that companies will become more competitive in the near future, which will hopefully result in a stronger market, attractive to investors.”