Category: The Buzz

Elisabeth Eleftheriades, M&A and Project Finance Partner at the Kyriakides Georgopoulos Law Firm in Athens, can hardly contain her enthusiasm about developments in the Greek legal market.

“I’m in the pleasant situation of not having to complain nearly as much as even three months ago,” she says. “Personally speaking, and from the firm’s perspective, things are looking much impressively better. Work seems to be pouring in, in terms of RFPs, and projects are ongoing that had been frozen due to the complexity of the market for the past three years.”  As a result, she smiles, “we’re very busy — more than in some time.”

Last year, Eleftheriades reports, activity was effectively halted by a massive strike across the legal industry in response to the announcement that, to conform with the Troika’s demands, a new social security regime for freelancers like lawyers and engineers that would increase the cap on social security contributions per year from EUR 5000 to EUR 80,000 would be put into effect on January 1 of this year. Thousands of lawyers put down their pens to join the strike for the first 9 months of 2016, putting almost all disputes on hold and slowing down dramatically what had already been a slow market in terms of volume of work and fee compression. 

Ultimately, Eleftheriades reports, lawyers began to accept the inevitable and recognize that, in her words, the strike was “killing the profession.” So, she says, “in October of 2016 things began to pick up again, with litigation lawyers returning to work and some level of normalcy being restored.”

As a result of the new regime, which did come into effect on January 1 as expected, many solo practitioners and smaller firms closed up shops and started looking for positions in larger law firms. Eleftheriades believes that “this is going to be a driver for consolidation of law firms.” She explains: “It was a saturated and very fragmented legal market — lots of Mom & Pop firms, not really partnerships. Up to a certain point it made economic sense, but the new measures are a blow to solo practitioners … the bright side is that it will attract talent from the smaller firms to the bigger ones.” Indeed, she says, “we’ve already seen it with junior lawyers. We had trouble recruiting junior lawyers in the past — especially male junior lawyers, many of whom preferred the independence of solo practice — but now we’re seeing much more talent gravitating to the big firms. It remains to be seen what the long-term effect will be, but so far we have seen the change, and we think it’s going to be good for bigger, better organized firms— and for clients.”

Movement in the market is also being generated by “the closing of the cycle for NPLs,” which she calls “one of the big drivers.” Long-awaited legislation has now come into force and banks have finally starting to clean up their portfolios. Eleftheriades says “we have a lot of distressed assets in Greece, so this is a real driver of economic movement.” The banks, she says, “are now, finally, dealing with what can be saved and what not — what can be sold, with shareholders participating in the process. Distressed business has come to an end, with shareholders realizing they won’t get any more credit, unless things start to happen.” 

Banks are not yet starting to extend more credit, she says — that’s the next step. “We’re still in transition, but it seems we’re at the end of the cycle of shock, and coming to grips with what the reality actually means.

She returns to the big picture. “A corner is being turned. This is how I feel. I hope I don’t look back in six months and scoff at my naiveté. But it feels like we have been going through a cycle of vicious creative destruction and now the cycle is turning. This is a slow and difficult process for everyone, but if we are to remain in this profession and try to see positive signals, then this is the only explanation that makes sense and can keep us going. “

Editor’s Note: Ms. Eleftheriades has asked us to note that her comments reflect her personal views, and that her comments do not necessarily reflect the Kyriakides Georgopoulos Law Firm’s position on these matters. 

In “The Buzz” we interview experts on the legal industry living and working in Central and Eastern Europe to find out what’s happening in the region and what legislative/professional/cultural trends and developments they’re following closely. Because the interviews are carried out and published on the CEE Legal Matters website on a rolling basis, we’ve marked the dates on which the interviews were originally published.

Albania (October 20)

Judicial reform remains on top of the agenda

“The big news in Albania,” says Besnik Duraj, Partner at Drakopoulos, “not just in the legal market, but in the social and economic areas as well, is the ongoing struggle with judicial reform.”

“The country,” Duraj reports, “has been dealing with these problems almost since the beginning of Democracy.” Even this current push towards reform is sliding towards failure, and Duraj’s frustration with the inevitable delays, finger-pointing, and politicizing of the process is palpable. “This is not a really a new thing,” he says with a sigh. “We’ve been struggling with this current process for at least two years now.” According to Duraj, the country’s reputation for judicial corruption, lack of transparency, and lack of predictability is the biggest obstacle to moving talks about potential EU membership forward, and the market risks and inconsistent (and unreliable) law enforcement is the reason foreign investment in the country continues to lag. “So this is our country’s number one priority,” he says.

Still, and despite its importance, the actual process of addressing the necessary reform remains, unfortunately, highly politicized, which Duraj describes as “the no. 1 problem.” Indeed, he notes that the Constitutional amendments alone took 18 months to pass – and even that only came after substantial international pressure. In addition, he reports, “what started as a technical matter, day by day turned into a political matter.” The result, he said, is unsurprisingly muddy. “We know it’s not very clear when lawyers draft – you can imagine how bad it gets when politicians do it!”

Staying on the topic, Duraj also pointed to a shocking lack of transparency in the process, with the actual draft laws being debated very difficult to find. “Lawyers should be part of the solution,” he says, unhappily, “but we are often seen by society as part of the problem. We have a passive role in the process, and it’s a pity.”

“If even the constitutional process took 18 months …” he says, trailing off, before picking up with a combination of black humor and frustration: “And we still have 40 laws to debate! And we’re still discussing only the first seven!”

All of this, he says, delays the foreign investments the country so desperately needs. “And this is what bothers me,” he says, “because this country has a lot to offer, and we are waiting for serious Western investors. And they are waiting for the country to be able to provide a secure market, financially and legally.”

Otherwise, he says, there’s nothing really new to report. He’s not seeing so much M&A in the country, but he describes the energy sector as extremely busy, as the country’s Central Bank has reported that about 60% of all foreign investments in Q2 2016 were concentrated in major energy projects – 24% more than the same period a year ago. Mainly concession projects, Duraj reports, but also some privatizations and capital injection in building up hydro-power plants and putting the necessary infrastructure into place, as “the country is not yet at the stage where it’s all built up and energy can be sold.”

There are some other industries going well too, he says, pointing towards exports in the garment and footwear industry, compared to the extracting industry, which has had a drastic decrease in investment recently. Client service, call centers, joint centers for data processing, technology information services are all strong as well, he reports, and “all seem not to be too affected by the crisis or the other political issues we’re facing.”

“But also litigation,” he says with a laugh. “I don’t think there’s ever a period where litigators aren’t busy.”

Bulgaria (September 23)

A lack of leadership in Bulgaria

“The overall situation in the country – political, financial, social, and so on, which largely determines business (and thus our business),” says Sergey Penev, the Managing Partner of Penev LLP, “may be considered ‘terrible’ for much of Europe, but in Bulgaria it’s pretty stable.” The country is in the top three or four in terms of GDP to debt radio, he says, so in fact things are not as bad as some claim.

The biggest problem, he says, is that wages are still low, and people are not happy. Penev notes that “the cost of living is not too far from Prague or Germany, for example, but wages are not catching up.”

Penev, who’s also the Counsel of Monaco to Bulgaria, does not mince his words describing Bulgaria’s leadership, asserting that “the governments since 2000 could not have done a worse job in terms of capturing business,” and claiming that “the governments owe a big debt to the Bulgarian people.” The economy “does not function well,” he said, “and the only work involves utilization of EU money. Infrastructure, roads, etc. The Bulgarian economy runs more than 80% of EU money,” he says, “and when that is gone, it will struggle.” He sighs. “No effort is being made to make the lives of businesses – SMEs in particular – easier.”

In addition, Penev says, Bulgaria has also suffered as a result of the sanctions imposed on Russia – traditionally one of Bulgaria’s largest trading partners. Finally, he sighs, there’s still a large level of corruption – though he reports that “Bulgaria is not as corrupt as is often said,” and insisting that “I don’t think that we are any more corrupt than any other regional country. Of course there is corruption, but the image far outweighs the reality.” Still, he concedes, “the judicial system, they still need to prove to people, to investors, that their money is safe, and that the rule of law controls.”

The legal market depends heavily on direct foreign investment for business, Penev reports, with the top tier of law firms finding almost all of their work coming from foreign investors. The first problem facing firms in the market, Penev reports, “is that because the economy runs around the EU funds and government-related businesses, the established firms struggle to get that business, because they’re not close to the government. “It’s very difficult for firms like ours to get public procurement work from municipalities,” he explains, “because we’ve always been on the other side – and we’re still at the stage where you have to work very closely with the ministries to get that business.” When asked which firms do get that business, Penev rolls his eyes, explaining that it’s difficult even to name them, not because of any sensitivity, but “because they’re often fly-by-night firms that appear quickly just to get that work, based on previous connections.”

“The other element is simply that the way we do business is hostile to the environment we work in,” as “if you’re not part of the establishment you’re outside the circle.” He elaborates. “Contrary to what the government says, the amount of FDI coming to Bulgaria is low compared to neighboring countries. The strong industries that do exist – automotive, IP/IT, outsourcing, etc. – come from the companies themselves, not because of government assistance or support. So outside FDI is still low.”

As a result, perhaps, Penev reports that the number of companies needing “high end legal services” is decreasing. He explains that Bulgaria in particular attracts companies because it’s “so cheap,” and those same companies therefore are taken aback when the legal fees proposed to them are similar to those in other countries. “They even balk at fees 20% less than elsewhere in CEE,” Penev sighs, “so it’s hard for bigger firms to survive. They still think they’re being taken for a ride.”

Despite all this, Penev describes himself as “an optimist,” nothing that “more and more we’re called the Silicon Valley of the Balkans because of the rapid growth of the IT industry,” which he reports has created more than 30,000 jobs in the country in recent years. “We’ve also become a European leader in the outsourcing industry, and as a host for shared services. Also as a model site for start-ups, in large part because of the highly entrepreneurial spirit of the Bulgarian people.”

Indeed, he sees a pick-up in some other areas of the economy as well, saying, “we’ve started witnessing in Bulgaria some consolidation of businesses, and some picking up, particularly in Real Estate. More and more we see work on various Real Estate projects, and banks extending mortgage loans and business start-up loans.”

He reiterates his optimism. “I really think that EU money should not be so important, and more and more efforts are being put towards increasing competencies.”

Czech Republic (October 21)

Entrepreneurs in the Czech Republic face an increasingly burdensome environment

Jiri Buchvaldek, Partner at Hruby & Buchvaldek in the Czech Republic, is flabbergasted at the amount of new regulations being thrown at small businesses and entrepreneurs in the country. “It’s just freakish what’s going on,” he says, shaking his head.

“I recently found out about an ‘improvement’ to the Czech Republic’s AML [anti-money laundering] law,” he says of a law currently passed by the Senate. The new law, which should become effective on January 1, 2017, would require lawyers and everyone who provides escrow services (“it applies to all real estate agents as well,” Buchvaldek notes, “though not everyone knows about it”) to perform even more thorough checks of the sources of the funds being placed in escrow. The law also establishes a new register of real or ultimate owners/beneficiaries of businesses, which is to be kept by the Courts. Although not completely public, the registry will be open to all major authorities incuding the newly Financial Analytical Bureau, newly separated from the Ministry. All legal entities will be required to keep record of their ultimate owners / beneficiaries and record them in this register.

Even the current AML law, according to Buchvaldek, is “burdensome and complicated,” and this new obligation goes even further. Buchvaldek suggests that many clients have legitimate reasons for keeping a low profile and for staying out of the public eye, “but this makes it easier for everybody to know everybody’s business.” In his opinion, the over-riding principle is that “nothing is private anymore.”

Buchvaldek then turns to the new law on consumer loans scheduled to come into effect on December 1, which will require the 50,000 entities currently providing consumer loans in the country to obtain licenses from the Central Bank. The licensing requirement and the minimum capital requirements of the law aim to scale down the numbers of providers and increase consumer protection, shifting the risks and burdens to the providers. Despite the laudable goals of the regulation, Buchvaldek calls it “another new market regulation – another piece of the puzzle.”

At this point he’s on a roll. Buchvaldek points to the new amendment to the country’s Capital Gains/Income Tax, empowering the Czech tax authorities to investigate the sources of income when they encounter discrepancies between income and expenditures of anything beyond “quite a low” 5 million Czech crowns. The law, which was in the works in one form or another for about 10 years before finally passing, “increases their ability to levy massive taxes on those who can’t account for the discrepancy to their satisfaction.”

Buchvaldek is wide-eyed. “Sometimes I think this is incredible. What will happen next??”

Finally, he turns to the new Czech law on Public Tenders which came into effect on October 1st and which allows public authorities to exclude Joint Stock Companies with shares in paper rather than electronic form from participation in public tenders. Buchvaldek calls it “gross discrimination,” and says that “it solves absolutely nothing, and again burdens the entrepreneurs with another costly burden.” Buchvaldek sighs, explaining that converting from paper to electronic shares just to satisfy this law will cost “a minimum of EUR 2000 plus annual costs, because shareholders will have to have electronic accounts, pay fees, etc.” For Buchvaldek, the obvious question “Why?” has a similarly obvious answer: “I think this is yet another attempt to eliminate “anonymous“ joint stock companies.”

Again, as before, Buchvaldek explains, “they use the word ‘transparency,’ but from my perspective as a lawyer they may be damaging to individuals who may have legitimate reasons for wanting to stay private.” Ultimately, he says, “it’s all about taxes, and an effort to keep everyone under their thumb.”

Hungary (September 19)

Long-awaited licensing scheme for renewables on the way in Hungary

When asked what news he is paying the most attention to, Zoltan Faludi, the Managing Partner of Wolf Theiss’s Budapest office and Chairman of the Energy Arbitration Court in Hungary, says, “I would have to point to my original profession: Energy.”

Faludi reports that the Hungarian government is finally putting together a new licensing scheme for solar and wind projects, for which the industry has been waiting for many years. The last tender was cancelled suddenly in 2010, and since then nothing has happened. 

Faludi describes the draft legislation – which is expected to be passed and come into force in the next few weeks – as operating on a “First Come/First Served” basis, with subsidies given to those companies that apply first “from the basket … until the basket is empty.” He describes the process as “strange stuff,” and worries that it is designed to provide access to the subsidies to a favored group of individuals while excluding those foreign investors that need more time to review and familiarize themselves with the new regulatory environment. “That’s just a guess,” he admits, conceding that “at this point you can’t say it’s all about politics.” But when it’s suggested that he doesn’t sound impressed, Faludi laughs. “I’m not impressed, and I’m not surprised.” 

Faludi refers to the current EU talks about penalizing Hungary for its treatment of immigrants in conceding that the proposed energy licensing scheme is, by comparison, “a much smaller scale issue.” Nonetheless, he says, “for the energy sector this is something new, because in the renewable sector in the past seven years nothing has happened – no new licenses, no new regulatory regime, and no new feed-in tariffs. So now, it’s a big step.” He says, “I just hope that it’s done on an equal treatment basis and on a transparent basis. I hope that the process will be transparent and fair.”

Otherwise, Faludi reports, business is good, and getting better. He reports a “positive trend” in M&A in Hungary, describing the deals coming in the door almost every day as “more and more and bigger and bigger.” He also reports a real uptick in disputes and arbitrations handled by his team, though he says that’s probably a function of their own increased specialization and capacity rather than reflecting an increase in disputes across the market.

Macedonia (September 26)

Ongoing political crisis in Macedonia

The strike of Skopje court administration employees that began in May ended in mid-August, according to Biljana Joanidis, the Managing Partner of Law Firm Joanidis – but only, perhaps, temporarily. Joanidis reports that the employees have agreed to return to work until the December 11 national elections – after which they’ll consider and, potentially, walk out once again.

The elections reflect a significant political crisis in the country, Joanidis says. “I want to be realistic,” she sighs. “In general, in Macedonia, the main problem is the political crisis, which is present in every core of society, including the judiciary, as the governing political party elects and dismisses judges.” The country’s court system struggles through other unique challenges as well, according to Joanidis, including the recent attempts to introduce Common Law elements into the traditionally Continental system. “A little bit of confusion” exists as a result, she says, noting that there have also been 26 changes to the Panel (Criminal) Court in the last eight years, and that, at the moment, there are two different laws of criminal procedure.

“The situation is confusing here,” Joanidis repeats, “but we’re optimistic. We hope that after the elections it will get better.” Still, she says, “for the time being, it is what it is.”

Joanidis reports that the attorneys in the country feel somewhat under attack as well. “A lot of work has been taken away from attorneys and given to notaries, to executors, etc.,” causing attorneys to “feel marginalized.” Unfortunately, she says, “the political parties in Macedonia see attorneys as being on the opposite side, as attorneys are for protection of rights, so they don’t want to empower us or give us full rights.”

She returns to the guiding theme of the conversation, noting that “political influence is everywhere. It’s in the courts, attorneys, government, everywhere.” As a result, she says, “everyone’s interested in the elections.”

Finally, she’s asked how business is. “Our law firm business is ok,” she reports, “but we’re not a good indicator, as we’ve been around for 30 years. We have work – I’m not complaining. But in general work is down. There’s a lot of uncertainty. It’s only the top 10-15 firms or so in the country that are thriving, “and everybody else is on the edge, struggling to stay alive.”

Poland (September 19)

Business is good and optimism is high in Poland

“My impression,” says Marcin Aslanowicz, Partner at Wolf Theiss in Warsaw, “is that the Polish market is changing rapidly.”

Several of the largest law firms in the market, including Dentons, SK&S, Wardynski & Partners, and DZP – all of which boast well over 100 lawyers – seem to be pursuing an aggressive growth strategy, while firms in the 50-70 lawyer range, like Wolf Theiss, seem to be comfortable at that level. Regardless, Aslanowicz reports that business is good across the board, and he reports a number of significant M&As and disputes ongoing in his own office as evidence.

Turning to the subject of legislation, Aslanowicz refers first and foremost to the changes to the Code of Civil Procedure that went into effect on August 1, 2016, including the introduction of electronic filings, among other things. Aslanowicz describes these changes as “quite significant, but it’s not something that’s overwhelming in its scope.” He also referred to the potential modifications to the Code of Commercial Companies, which are expected to include a simplified form of Joint Stock Companies – which should enable shareholders to establish and operate a JSC with limited obligations and at a cheaper cost. As discussions regarding these modifications are ongoing, it’s not clear yet, Aslanowicz says, when they’ll be implemented in full.

Otherwise the biggest change, Aslanowicz reports, is the “total change of structure of the Polish Civil Courts” being seriously discussed by the government. Aslanowicz explains that, as proposed, the district courts will probably be wholly eliminated, with the Regional Courts taking over their competencies. Nobody knows yet for sure when this will happen, or even if, but Aslanowicz says that if it does happen this will constitute “the most significant change in the last decade.” Reports suggest the Minister of Justice is hoping to implement the plan in the next 12 months, but Aslanowicz suggests that, as the formal plan hasn’t even been published yet, and in light of the dramatic change this would entail, he thinks it will “probably be a bit later.” The plan is expected to increase the efficiency of the court, though Aslanowicz himself is slightly skeptical.

Business is good, Aslanowicz reiterates, noting that he himself never really share the fears expressed by many others about investors fleeing Poland in response to the elections in 2015, and indeed, he says, now almost 12 months on, “it looks like it’s not going to happen.” Similarly, while many were anxious about the possible consequences of the Brexit, no real negative consequences have been seen so far – and, if anything, Aslanowicz believes, the country could stand to gain by picking up some of the large financial institutions that may leave London, should the Brexit actually come to pass.

Ultimately, optimism is high – and increasing. The unemployment level – already among the lowest in Europe at between 6.5% and 7% – continues to drop, and many experts expect it to level out at about 5.5%, which would put the country in rarefied air.

Russia (August 30)

A resilient market in sanction-laden Russia

According to Leonid Zubarev, Senior Partner at CMS, Russia, the economy in Russia continues to suffer from the wave of sanctions imposed on the country by the West in 2014 – an effect only exacerbated by the simultaneously plummeting price of oil and depreciation of the ruble. As a result, he reports, “clients are thinking twice,” and international law firms in Moscow are “fiercely competing” for work. The problem is especially potent, he believes, for firms without diverse practices, while those with the capacity to refocus on bankruptcy, restructuring, and other contentious practices are in a bit better position.

Indeed, Zubarev maintains, the crisis has affected ILFs more than locals, who are less focused on foreign clients and able to work with Russian clients who may be on sanction lists. The international law firms, at the very least, are required to do more due diligence before taking on a client matter. Although Zubarev is unaware of any international law firms closing aside from K&L Gates (which closed its smaller Moscow office back in December 2015 (as reported by CEE Legal Matters on January 7, 2016), he reports that most firms have sent most of their expatriate lawyers back to their home countries.

Nonetheless, Zubarev insists, the situation is hardly bleak. Some transactions are continuing to take place, and disputes and other matters continue to generate revenue. As the leader of CMS’s Insurance Group in CEE, Zubarev reports that his own practice remains fairly active, with various claims and disputes between and among insureds, insurers and reinsurers, regulatory issues, and so on. Ultimately, 2015 was “not as bad as expected,” Zubarev says: “Not good – but not disastrous.” General corporate and competition work, disputes, etc., remain active, though he concedes that some are fairly dormant – the infrastructure practice in particular. In 2015 – 2016, according to Zubarev, CMS’s M&A practice has been picking up as well, primarily as a result of new Russian clients

Turning to the subject of legislation, Zubarev notes that the most significant recent development is a set of the anti-terrorism laws enacted at the end of July that, among other things, requires all Internet and telecom providers to keep records of all correspondence and Internet traffic. This “very controversial law,” which will come into full force in July 2018, is contested by Rostelecom and other providers who face what Zubarev describes as “the incredible costs” of installing the necessary technologies required for compliance.

Zubarev also refers to the trend for “import substitution” or “localization” – pushing investors to open plants and factories rather than importing goods into Russia.He says the project has had mixed success, but it’s growing, especially in the “core industries” of Pharma, Agriculture, and Automotive sectors (not only in terms of car manufacturing plants, but also in manufacturing of components). As a result of the State initiative, there are a number of transactions in these areas, relating – as examples – not only in terms of opening new plants, but also in joint ventures, the construction of new factories, repackaging, and so on. The end result allows the application of “Made in Russia” tags, which helps in public procurement processes. Zubarev reports that “this is quite interesting for us, and also where we’re quite busy.” 

Zubarev refers to ongoing changes to the Russian Civil Code last year and this, which he describes as “a continuous reform of the Russian Civil Law.” He says that “was, and still is, a challenge every day, because the Court practice hasn’t caught up.” Another factor continuing to affect Court practice, Zubarev says, is that the August 2014 contraction of the Russian Supreme Court from two separate supreme courts (one dealing with simple civil law disputes and criminal law matters, and another dealing with commercial disputes between companies) into one has resulted in a Court practice “getting more and more difficult”, as the Court is less concerned with freedom of contract, and more interested in exploring the actual intent of the parties, and protecting the weaker party. Courts are getting more and more eager to get involved and inject themselves into the relationship between the parties. 

Talks are also ongoing to formalize a regulation of the legal profession in Russia, which to this point has been haphazard, at best. The Government, primarily acting through the Ministry of Justice, has been working to introduce such regulations,  especially on non-criminal law attorneys (i.e., the commercial lawyers), but Zubarev describes the process as a “bumpy road,” as many lawyers in the country resist it. He doesn’t expect it to happen soon – at least before the 2018 elections. Afterwards, however, Zubarev says, “anything can happen.”

Slovakia (October 20)

Slovakia modernizes on lawyers and law

One of the four announced priorities of the Slovakian presidency is the “modern single market,” according to Squire Patton Boggs Partner Jana Pagacova. Part of this, she explains, is the aim to develop unifying projects such as an energy union and the digital single market. And a “big rush in the legal environment” that makes up a significant part of the digital single market process, she explains, is to create an “electronic mailbox” system for all individuals and legal entities in the country through which they will receive all statutory communications from the court.

This “electronic mailbox” takes the form of a central government portal which all businesses, and therefore also lawyers, will need to access. Unfortunately, Pagacova says, not everyone activated their mailboxes by the original July 1st deadline, so a new deadline has been set for December 31st, 2016. The new system should, Pagacova believes, make things easier if it works as intended – but she see that’s a fairly big “if”, as technical problems and some uncertainties about how the system would work for non-Slovak internationals who don’t have the state-provided identification required to obtain the chips necessary to activate their mailboxes remain.

Turning to other matters, Pagacova says the biggest news is the July 1st entry into effect of three new Civil Procedure Codes to replace the one Communist-era Code that existed previously. These codes – the Civil Dispute Procedure Code, the Civil Non-Dispute Procedure Code and the Administrative Procedure Code – are currently the primary subject of conversation in the legal community, especially as neither judges nor practitioners have much experience with them yet. Both attorneys and judges are going through lots of intense internal and external trainings, Pagacova reports, to come up to speed, but she thinks it may be another two years before the market has fully adapted to all significant changes, which are perhaps most notable in the changing responsibility for judges (who are  now much more limited to ruling based on the submissions of the parties) and in the various preliminary proceedings judges are empowered to encourage the parties to pursue to find possible solutions to disputes before trial.

The new electronic mailbox system, Pagacova points out, is among the many new procedures set out.

Ultimately Pagacova believes the new Codes are a “good idea,” but “all new laws require a working out of kinks in practice, so we’ll have to see how it plays out.” She points to some uncertainty in the market about the new Codes, and repeats that it will take a few years to really begin working as planned.

Another newly-enacted law of significance is the Act on Criminal Liability of Legal Persons, Pagacova says, which also came into effect on July 1st. This law calls for the imposition of criminal liability on corporations and other legal entities, and Pagacova claims it’s extremely significant “on the corporate governance rules for Boards of Directors to avoid company’s criminal actions and liability imposed as a result of actions of employees.” She reports that she and her colleagues are kept busy at the moment by preparing presentations and trainings to various boards, so they can “see when potential risks may arise.” She has no doubt of the importance of the issue, noting, “I think that all boards should deal with this.”

In part because of the increasing number of regulatory and legislative changes, including also for example the risk of criminal liability, Pagacova says more General Counsels are on Boards of Directors than ever before, and “the trend is for them to develop strong in-house legal departments.” As a result, she says, the market is becoming ever-more competitive, and private practitioners have to specialize more to ensure they’re providing valuable expertise, insight, and advice. In addition, making sure they are and stay familiar with the industry and the sector, so they don’t have to bill for the process of educating themselves before advising the client, is also a requirement of the modern legal market.

Ukraine (October 18)

Delayed privatizations and long-awaited judicial reform in Ukraine 

Things are “fairly busy” in Kyiv these days, according to Avellum Managing Partner Mykola Stetsenko, but he concedes that “we expected it to be busier.”

The chief culprit, he reports, is the various big-ticket privatizations promised by the government for 2016 that have been put on hold. The major energy privatization – that of CenterEnergo – has been postponed so the government can complete the necessary pre-privatization processes, which can take some time.

Also delayed is the “famous privatization” of the PSC Odessa Port Plant chemical company, which was initially set for summer 2016, but the initial asking price was too high, and a new initial tender has been pushed back until December. “But I wouldn’t count on it,” he says.   

Turning to happier subjects, Stetsenko refers to the long-awaited kick-off of the country’s judicial reform, which took effect on September 30th and resulted in the dismissal of some 500 judges by Parliament and the initiation of the process for replacing them. The new system is expected to limit at least petty corruption at the judicial level by providing for significant salary increases – for some positions as much as 10 times – and creating more independence (including lifetime appointments) for judges. Although its success in achieving its goals remains to be seen, Mykola admits that, “yes, we’re hopeful.”

When asked whether the dismissal of so many judges would be a problem, Stetsenko says no, pointing out that the nation as a whole has some 10,000 judges, and while there might be a slight and temporary effect, “we’re not known for having the fastest system anyway, so it shouldn’t be that noticeable.” Stetsenko is quick to point out to his American interviewer that the country’s judicial system is, regardless, faster than that of the United States.   

Stetsenko reports that the Ukrainian Parliament has also created more legislation for the country’s energy regulatory authority – a major requirement of the IMF and other Western investors – while the Pension and land market reforms are actively discussed in the Parliament. In addition, Stetsenko reports, the National Bank is continuing to decrease the discount rate – the benchmark rate at which the National Bank lends to commercial banks in the country. It’s now down to 15% – still high, Stetsenko concedes, but a marked improvement from the 30% it was at several years ago. It’s still continuing to drop, he says, which is a very good sign, and the National Bank is slowly opening the market and increasing capital flows. He expects to see more commercial acquisitions as a result sometime in the spring of next year.  

The legal market is fairly stable, Stetsenko reports, and he points to AstapovLawyers’ transformation into Eterna Law and the recent defection from CMS to DLA of dispute resolution Partner Olga Vorozhbyt as the only recent developments of note. 

Thank you!

We thank the following for sharing their opinions and analysis on the news:

• Besnik Duraj, Partner at Drakopoulos 
• Sergey Penev, Managing Partner at Penev LLP
• Jiri Buchvaldek, Partner at Hruby & Buchvaldek
• Zoltan Faludi, Managing Partner at Wolf Theiss
• Biljana Joanidis, Managing Partner of Law Firm Joanidis 
• Marcin Aslanowicz, Partner of Wolf Theiss
• Leonid Zubarev, Senior Partner of CMS
• Jana Pagacova, Partner of Squire Patton Boggs
• Mykola Stetsenko, Managing Partner of Avellum

This Article was originally published in Issue 3.5 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

The Austrian banking industry at the moment is not as sexy as the M&A area, explains CMS Partner Gunther Hanslik.

Indeed, he says, “on a wider scale, this is a quite a difficult time for Austrian banks, still.” Hanslik says that “the crisis which started in 2008 has still not completely abated,” and he points out that the onerous process of selling off the many remaining Hypo Alpe-Adria bank assets continues, which continues to impose huge losses on the Austrian taxpayers —”in the amount of billions and billions of Euros” — despite the recent settlement between the Austrian government and creditors. That settlement was “just to get Carinthia out of trouble,” he says, laughing, but, turning serious, notes that “quite a lot of assets remain to be disposed of.”

In addition, Hanslik says, the other big banking story in Austria at the moment is the recently announced spin-off of the entire CEE business of UniCredit Bank Austria to UniCredit’s Italian mother company. That transition is underway — some employees have already moved to Milan — although it is expected to take eight years to finish. “After those years nothing will be left of UniCredit’s CEE business in Vienna,” he says, “if it goes as expected.” Once completed, it will, in Hanslik’s words, leave Bank Austria as a pure Austrian (rather than a CEE) bank, and the CEE activities will be steered out of Italy.”

Hanslik says there’s not much impending or recent legislation of significance expected in Austria, which is traditionally more stable than many of its CEE neighbors, as is the legal market. Nonetheless, “what is noteworthy,” Hanslik says, of the Austrian legal market, is the rise of the Eisenberger & Herzog law firm, which, he says, “has moved up in the ranks quite a bit, especially in the transactional area.” The firm began in Graz — outside the traditional centers of commerce — but it merged with a spin-off from Freshfields several years ago, “and apparently they’re quite successful, and they’ve been growing quite consistently and continuously over the past five years or so.” 

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In “The Buzz” we interview experts on the legal industry living and working in Central and Eastern Europe to find out what’s happening in the region and what legislative/professional/cultural trends and developments they’re following closely.

“There’s always something going on,” says Ermo Kosk, Partner at Primus in Estonia.

The most significant thing, Kosk reports, remains the ongoing success of the e-Residency program initiated in 2015, which allows individuals from outside the country to register for an Estonian e-Residency ID card allowing for e-signatures, opening of bank accounts, incorporations of companies (which, Kosk says, usually takes around 18 minutes), and other acts, via the Internet, all without being physically present. “I think it simplifies quite a lot, actually,” he says, pointing out that over 13,000 e-Residency cards have been provided so far, with over 1000 new companies started as a result. The average size of those companies is usually quite small, Kosk concedes, “but cumulatively it’s still quite significant.” He refers to reports that, within ten years, the ultimate number of ID cards provided to foreign internationals is expected to be as much as twice the current Estonian population of 1.3 million people.

Indeed, the country seems to be going all-in to maximize its reputation as a good home for start-ups and as a technological leader in its pursuit of foreign investors. Kosk says, “foreign investment is what this government has been fighting for,” by digitalizing everything possible, reducing bureaucracy, and simplifying relevant legislation. Among the legislative changes being discussed at the government level is a further simplification of the existing employee option scheme regulation, which already provides a tax-free benefit provided that the option is exercised by not earlier than three years after it has been granted — “quite start-up friendly, I would say, compared to other EU member state laws” — and the development of legislation which would allow companies to not file taxes, and instead of have their banks provide information to tax authorities, which would then prepare and provide tax filings for them.

Also, compared to “old EU member states,” Kosk said, the Parliament is currently working to legalize Uber and other similar service providers who will be in better positions than older competitors, like the traditional taxi companies. 

In addition, Kosk says, although the country is often identified as a “fairly high” state for employment taxes, the government is working on reducing those taxes, including the social security taxes, which should also benefit employers in the coming years. “So yes, we are fighting for foreign investments.” 

When asked whether his firm is busy, Kosk is emphatic: “Yes, yes, absolutely.” He concedes that the same may not hold true for the entire market, but says “especially firms doing M&A are doing quite well,” and notes that the increased wealth in the market is clear, as “we’re seeing local Estonians re-purchasing companies that they sold in the past” via management buy-outs, among other things. The real estate sector is also busy, Kosk reports — “not booming, like before Lehman’s,” he notes, “but good, and transaction values are rational.” Ultimately, he says, the GDP growth is “nothing special — between 1-2% — but everybody expects that growth to continue into the near future.”

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In “The Buzz” we interview experts on the legal industry living and working in Central and Eastern Europe to find out what’s happening in the region and what legislative/professional/cultural trends and developments they’re following closely.

When asked what the buzz is in Russia — what lawyers are talking about at the moment — KIAP Partner Anna Grishchenkova laughs. “Of course lawyers always talk about money,” she says.

Turning serious, Grishchenkova reports that, at least for her and her fellow litigators, “the top news is the new Arbitration Law.” Grishchenkova describes herself as being “very hopeful” about the new law, which came into force on September 1st of this year, and she says, “my understanding is that it should encourage arbitration, making it both more popular and more transparent.” She notes that arbitration in Russia is already considered “more sophisticated and more civilized,” and the new law represents “a good opportunity to make our dispute resolution system better.”

According to Grishchenkova  the new rules of arbitrability of corporate disputes are designed to overcome the traditional conservatism of both lawyers and courts. Arbitration institutions are, under the new law, required to obtain a license from the Ministry of Justice, and while many international arbitration institutions were initially concerned, they are only required to demonstrate a legitimate and established reputation. By contrast, domestic arbitration institutions, which have been proliferating despite a reputation for being untrustworthy, will be forced to improve their transparency and reliability. It is hoped this will strengthen those domestic institutions.

In general, Grishchenkova reports, although the new law provides a base for increased enforcement of arbitration awards, “of course we’ll have to see how it works out in practice.” Grishchenkova notes that about 80% of arbitration awards are enforced in Russia, which is significantly more than several years ago, but still means that one in every five is rejected. Her sense is that the courts are more willing to enforce arbitration awards coming from foreign institutions — they look with much more skepticism and scrutiny at this coming from domestic institutions — so the expected improvement in those domestic institutions should be effective. Again, she says, “we’ll have to see.”

Turning to the legal market, Grishchenkova says she’s unaware of any recent firm openings, closings, or mergers, noting that split-offs are much more common in Russia than mergers anyway. She notes a recent trend of Russian firms in particular launching White Collar Criminal practices.

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In “The Buzz” we interview experts on the legal industry living and working in Central and Eastern Europe to find out what’s happening in the region and what legislative/professional/cultural trends and developments they’re following closely.

In “The Buzz” we interview experts on the legal industry living and working in Central and Eastern Europe to find out what’s happening in the region and what legislative/professional/cultural trends and developments they’re following closely. Because the interviews are carried out and published on the CEE Legal Matters website on a rolling basis, we’ve marked the dates on which the interviews were originally published.

Austria (July 18)

Political Developments of Significance

An “exciting election” has marked the Austrian market over the last few months, according to Alexander Petsche, Managing Partner of Baker & McKenzie in Vienna. “We had an election of the President of the Federal Republic that was annulled recently by the Constitutional Court due to formalistic misbehavior during the election process,” Petsche explained.

According to Petsche, Austria allows voting by post, and the two issues raised before the Constitutional Court were that the members of the committee responsible for counting these “votes by letter” started the counting process too early (despite, Petsche says, the existence of several rules setting forth when the letters should be opened and when the counting should commence), and that, in some regions, not all the members of the committee were present when the counting started. “It was a very large trial with over 90 witnesses being heard. It has never happened that an election of a President was challenged and, while the court found no evidence of manipulation, it did argue that theoretically it could have happened, which was sufficient to annul the election.”

Staying within the political realm, Petsche pointed out that Austria has a new Chancellor, as the previous one stepped down “mainly due to the failure of the left wing party to have a successful presidential candidate.” The new Chancellor was described by Petsche as a “typical manager,” who acted as the CEO of Austrian Railways in the past. This change has brought forth a “New Deal” that has some legal impact: it mainly aims to make it easier for companies to be set up in the country. At the moment, Petsche explained, the foundation of a new company is “very complicated in Austria” and the goal is to lessen the amount of red tape. This initiative is also going to be complemented by “a start-up initiative, with more than EUR 185 million put aside towards supporting start-ups.” 

Turning to legal industry, Petsche noted an increase in the amount of investment arbitrations taking place in Vienna involving CEE countries. Petsche – himself a Board Member of the International Arbitral Centre of the Austrian Federal Economic Chamber – mentioned that the arbitration function of the organization has been considerably busier in the recent period. 

Speaking about the legal market, Petsche highlighted two developments. The first is an increasing number of boutique firms opening in the country: “Ten years ago no one would have left a large firm as a Senior Partner – you just made your career and would have been in a position to maintain that. I assume it primarily relates to either a matter of decision making within law firms or to the fact that sometimes senior lawyers do not want to invest part of their time on administering a firm. From our perspective, they don’t necessarily pose a threat, as they work in a different segment.” The second development was that of PwC Legal’s entrance into the Austrian market on July 1. Petsche noted that, surprisingly, it wasn’t PwC Austria that initiated it but rather PwC Legal Germany that expanded into the country. He described PwC Legal Germany as a very strong player in Germany and its arrival in Vienna means that KPMG is the only of the Big 4 without a law firm arm in Austria.

Belarus (August 19)

Between a Rock and a Hard Place

Squeezed as it is uncomfortably between Ukraine and Russia both geographically and economically, Belarus continues to suffer from the ongoing crises in and conflict between the two, according to Sorainen Belarus Managing Partner Kiryl Apanasevich, as well as the indirect but continuing effects of foreign sanctions imposed on Russia, its closest trade partner and largest investor. Apanasevich points out that Russia has traditionally provided about 50% of Belarus’s foreign trade and foreign investment, with Ukraine usually also among the top in trade. As a result, and in light of the circumstances in which all three countries find themselves, he sighs, the status of the Belarusian economy and market again “shows negative trends so far this year.”

The first quarter of 2016, in particular, Apanasevich reports, was “pretty dreary.” There were very few transactions in corporate/M&A or banking/finance, and Real Estate, he says, “was totally down.” The GDP was declining, he said, and resulted in a declared drop of approximately 4% in 2015. Q2, he conceded, was a bit better, with international financial institutions starting to show some activity. He also pointed to several completed transactions, mainly in the IT industry, including Facebook’s acquisition of Belarusian app developer Masquerade Technologies (which his office advised on) as significant, and “already a sign of a maybe a slightly growing market.”

“Nevertheless,” he said, still referring to Q2 “GDP was down by another 2.5% over last year – which itself was already down from the year before. Real Estate remains dead, with no transactions of any significance, and Banking/Finance work has changed, with less work coming from trade finance and almost no project finance work, and instead more requests coming related to securitization and financial restructurings – which, he noted, “means that many corporate borrowers do not feel healthy.”

Q3 so far, “has been the most positive in terms of the micro-economy.” Apanasevich explained that inflation is going down, the State implemented a local currency denomination on July 1, and recent forecasts refer to an expected 1% growth for the next year. IT remains the most active sector, and international institutions seem to be showing more interest in Belarusian companies as a result of difficulties of various kinds they’re encountering in neighboring countries. There’s also, Apanasevich reported, “a new wave of privatization-related issues,” including in the banking industry, and he refers to the contemplated privatization of Belinvestbank (the country’s fourth largest) with the participation of the EBRD and recent announcements that the Belarusbank – currently 100% owned by the Belarusian state – will potentially be looking for a foreign investor to take a minority share (perhaps 20%-25% in the next few years). Apanasevich referred as well to various anticipated infrastructure projects which “should generate work for lawyers and also have an impact on the economy of the country in general.”

Finally, Apanasevich is able to smile at the shifting alliances and associations that have dominated news in the neighboring Baltic legal markets for the past 18 months, reporting that lawyers at firms in the Belarusian market, which is much calmer and more stable, are enjoying “taking popcorn and watching the show.”

Czech Republic (July 4)

Controversial Changes to The Execution Procedure

Zdenek Tomicek, Partner in the Czech office of CEE Attorneys, turned first to the intended amendment to the Execution Procedure Act proposed by the Czech Ministry of Justice, which could oblige creditors to provide monetary guarantees of costs of the Court Executor in the proceedings – which would then be forfeited if execution turned out to be impossible.

“I understand the reason for this amendment,” Tomicek said, “but the problem is, this will also be applicable to B2B creditors, who are not always aware of debtor assets, and public sources are very limited [in] this respect.” As a result, creditors who win their claims – which should, after all, put them in a better position – will have to provide guarantees to the executors, providing additional risk to them.

Tomicek said this will, on top of everything else, have a significant effect for lawyers and law firms who also provide debt collection services, who will have to explain to clients that yet another fee is required of them.

Tomicek also agreed with previous The Buzz sources who expressed frustration with the Czech judiciary, noting that judges – especially at the lowest level – are simply not regularly trained and from time to time fail to refer to the judicial practice of higher courts in reaching their verdicts. Tomicek rolled his eyes, saying “sometimes it’s frustrating.”

The legal market itself is strong at the moment, Tomicek said, especially with the continued rebound of the real estate and financial services markets. There’s a continuing need for international or regional firms in the Czech Republic, he said, but the particular kind of firms needed is changing. The major international players “from the 1990s” are too expensive, he said, pointing out that one or two seem to be closing their doors and withdrawing from the country every year. They’re being replaced, he reported, by smaller regional players, staffed by lawyers who trained at major international firms during the big-payday years but are now able to offer their services at considerably lower prices. As a result, “small Czech law firms are more and more involved in the market,” which Tomicek called “a good thing for the Czech market – better if Czechs are successful here than just foreign lawyers.”

Finally, Tomicek referred to the comments about the changing demands and expectations of young lawyers that were made in the article about the Hungarian Round Table that appeared in the April 2016 issue of the CEE Legal Matters magazine. He said his colleagues are witnessing an identical phenomenon in the Czech Republic: new lawyers who “come out from law school, know nothing about the practice, but ask when they can go home.” He called it a “sad question,” and explained, “I understand asking about money – but when to go home?” He agreed with the comments by Zoltan Lengyel of Allen & Overy in that April 2016 Round Table that it’s up to the law firms to adapt, and asked, simply, “but how?”

Estonia (July 22)

Changing Legal Market Remains Primary Subject of Conversation

“In terms of the legal market,” said Toomas Prangli, Sorainen’s Managing Partner in Estonia, “times have been very turbulent the last 15 months. Many Baltic alliances are being broken, and new ones are emerging.” He pointed, by way of illustration, to the recent split of the Estonian part of Tark Grunte Sutkiene from that pan-Baltic alliance, which replaced it with Varul’s Estonian office – which in turn triggered the dissolution of that firm’s alliance in the region.

Sorainen, Prangli said, has been following the developments closely from the sidelines, although “the changes don’t really affect us directly.” Nor does he believe the consolidation and shake-up of alliances in the Baltics has stopped yet, noting that there is “still a lot of pressure, especially on second- or third-tier law firms, to merge to stay in the race.” “The small-sized law firms have to decide if they want to be close to the first tier” – by merging or aligning with others to increase headcount and practice group coverage – “or stay smaller, which can also be a perfectly good choice for them and many clients.”

In terms of business, Prangli said, “things have been very busy this year.” The bigger Estonian firms, he reported, have been very busy, with M&A, financial transactions, and real estate practices all strong. “Existing businesses are reevaluating their positions, and new ones are entering,” though he conceded that “it’s hard to generalize why, exactly.” He referred to research showing that local investors in Estonia are much more active in buying up foreign capital than their counterparts in other Baltic markets. He expects Q3 and Q4 to stay profitable as well, in the absence of any disrupting financial event. 

When asked about the effects of the Brexit, Prangli said so far they are minimal in Estonia, which he described as not as exposed to the UK markets as other countries in the region, which have proportionally bigger trade with Great Britain. “We’ll just have to wait and see until Article 50 is invoked and negotiations are clear.”

There are a few “hot topics” in terms of legislation, Prangli reported. The first is related to e-residency. A year and a half ago Estonia initiated a residency program allowing anyone from anywhere in the world to register for an Estonian ID card, providing access to Estonia services, programs, and agencies online. “At last count 11,000 people from outside the country have taken advantage of this,” he said, though he explained that many of the related legal issues – from possible double taxation issues to money laundering concerns – remain unresolved. “How to make sure the system is not misused,” he said. Parliament has acknowledged the problem and is already drafting a framework to address many of the issues. In the meantime, law firms such as his are encouraging some clients to take advantage of the program, which is designed to make life simpler for them.

Another area that is “quite active,” according to Prangli, is the Estonia start-up sector, booming both in the number of start-ups and start-up accelerators. “As always, legislation lags behind,” Prangli says, but changes enacted last year are making things better, and people are talking about it. Estonia has a strong history of tech start-ups – with Skype being the most famous example – and Prangli suggests that the small size of the country can actually function as an advantage, forcing start-ups to think about cross-border and multi-lingual functionality at early stages in the process. “Small is good, in that sense.”

Finally, Prangli commented on the “bottleneck” in employment tax – especially in social insurance tax – which can discourage companies from hiring highly paid specialists. “That’s an issue,” Prangli notes, but “on the other hand, clients see the value of stability in taxation, and one of our clients has said they watched the income tax structure for ten years, and only now are confident in its stability enough to invest in the country.”

Greece (July 7)

Successful Review Encourages Hope in Greece

“First of all,” said Nicholas Papapolitis, Managing Partner of Papapolitis & Papapolitis, “there was a very big debate, and a very big pause, on everything that had to do with investment in Greece and Greek businesses up until the completion of the first Review by the Troika.”

That first Review happened in May, after which, Papapolitis said, “there was some real positivity, including a sense of new interest, specifically by foreign capital.” The demonstration by the Greek government of its ability to make the necessary reforms has created a real “change in atmosphere,” he said, and a real increase in interest.

There’s also been a significant amount of legislative reform as well, Papapolitis noted, particularly in the Greek Civil Code, which has been amended “in order for the enforcement to become faster for lenders who have lent money in the Greek market.” In addition, Papapolitis, said, “we have created a new framework for the acquisition, servicing, and management of non-performing loans.” All of this is “towards the positive,” he said, “for the first time in a long time.”

Also, he said, the ECB has announced that Greek banks have received a waiver, resulting in almost a half billion euros of increased liquidity for the banks. And now there are discussions to have Greece – if the country successfully completes the Troika’s second review in October 2016 – to also be included in the ECB program of quantitative easing.

Papapolitis is unquestionably enthusiastic about the changes, but he warns that the effects of the Brexit on the Greek economy are difficult to predict, leading to yet another period of uncertainty.

Business for law firms is “definitely” picking up as a result of interest from foreign credit institutions and financial investors purchasing assets from banks, and M&As are slowly picking up as well, with his own firm preparing to announce its involvement in a major M&A in the next few weeks. Papapolitis explains that the large firms suffered a great deal from the recent years of crisis, and some laid off of people as well, and while that process seems to have concluded, he’s not seeing any rebound in headcounts just yet. In addition, he sighed, the government has recently instituted a new pension scheme for “freelance professionals” (which includes lawyers, doctors, and engineers), increasing insurance payments made through the public pension fund five times.

Hungary (July 19)

Competition for Quality, Not Fees

A change in the way law firms compete in the Hungarian market was highlighted by Eszter Kamocsay-Berta, Managing Partner of KCG Partners, who explained that while law firms have tended to compete on fees in an otherwise saturated market over the last few years, there is now a trend of “moving beyond price competition.”

Kamocsay-Berta argued that, instead, it is now a competition of quality, with clients “expecting and appreciating value added, cutting-edge knowledge, and smart and tangible solutions with clients finding it critical for law firms to understand their perspective.”

Another trend in Hungary Kamocsay-Berta identified was that of small- and mid-sized firms looking to join or build their own law firm networks in CEE: “We don’t really expect to see more international firms expanding into the country, but we do see more and more of these international alliances shaping up. The latest example of that is the that of the former Kinstellar team announcing it co-founded a new regional network.” This focus on building a regional alliance is, in part at least, responsible for another direction of the evolution of law firms in the country, according to Kamocsay-Berta: “In a world where building these kinds of regional cross-border alliances is becoming a priority, it is of enormous importance for law firms in Hungary to focus on enhancing their exposure and visibility in the market. This has led to increased attention being dedicated to law firm marketing and communications, and we see that the legal services market is slowly evolving towards opening up and communicating more.” 

This acknowledgment that law firms are competing with one another for business, Kamocsay-Berta observed, may also be what’s behind the increased buzz in the market about the possibility of a new act on the legal profession. The KCG Partner said the final form of this update – if, indeed, it comes to pass – is not yet known, but she hopes that it will further this evolution towards a fully functioning and commercial market. 

Turning to the legislative front, Kamocsay-Berta spoke of a general tendency towards modernization and innovation. She pointed to Hungary’s newly enacted public procurement law, new civil code, and ongoing reform in the civil procedure as examples of this. The last of these, she said, were the updates enacted “in order to restore trust in the financial markets.” Following a scandal involving brokerage firms that led to several high-profile criminal cases, the new updates include elements such as an increased liability and personal liability of the main officers or supervisory board members of financial services providers.

Kosovo (July 13)

Reason for Hope in Kosovo

Law firm business is decent in Kosovo, according to Visar Ramaj, the Managing Partner of Ramaj & Palushi, but it’s currently dominated mainly by simple transactional/commercial work with local companies making business connections primarily in trade (distributorship agreements, etc.). There are also a growing number of disputes – the result of increasingly active tax administration and regulatory agencies.

But Ramaj believes business should pick up substantially in the next few years, thanks to an ever-improving legal framework, projected economic growth, and a series of major development projects expected to affect the country’s major industry and infrastructure.

Kosovo is known for being a “dynamic legal market,” Ramaj reported, explaining that the country’s legal framework changed frequently in the 17 years since the Kosovo War concluded. This resulted in an improved legal environment for business and a resulting increase in the need for legal services. As evidence, he pointed to three major legislative changes in recent years. The first, he said, was the Law on Obligations enacted in 2012/2013 which made Kosovo a stronger and more appealing business environment, especially in the area of Contract law. The second development of significance was the “complete change in the tax regime” that took place in the second half of 2015, including a new Law on Value Added Tax, Corporate Income Tax, Personal Income Tax. Finally, Ramaj said, the country’s Law on Public Procurement came into force earlier this year, digitalizing and simplifying the relevant procurement procedures while also guaranteeing that foreign and local investors would be treated the same in tenders. Ramaj described the three changes as “positive … with impact on the legal industry,” though he conceded that the country was still in a “period of uncertainty,” waiting for a formal practice to be established under the new laws.

Ramaj also drew attention to the new EU-funded Code of Civil Law, which has been in the drafting process for almost two years and which is expected to unify the current patchwork system, with various laws drafted by American and EU experts under different grant programs. No public draft has been released yet, so it’s difficult to predict the eventual success of the project, but he’s hopeful.

Ramaj then turned the conversation to current major projects that bring with them the potential for significant work for lawyers in the country, but he started with a disappointment: the recent failure of the Brezovica privatization – one of the very first PPP projects contemplated in the country – for a ski resort widely regarded as the best in the Balkans. The tendering process lasted some two years, but it failed because the French investors failed to provide guarantees for the first stage of the investment (approximately EUR 164 million), sending the entire project back to square one. Ramaj noted that another major project, the apparently-successful privatization of the Kosovo Post & Telecommunications services, had also failed for several reasons, including a breakdown of the political process in Parliament, turning the effort into what Ramaj described as “a major failure to the country.” The resulting dispute is now before ICSID arbitration panel.

Still, Ramaj emphasized, there are a number of encouraging projects in process. First he referred to the creation of a new coal-based power plant (sponsored by the World Bank, the Kosovo Government, and Contour Global). An MOU was signed and the contract should be signed soon, Ramaj said, noting that the project will inevitably create a need for legal expertise.

Ramaj also referred to the disposal of the Trepca mining complex. Kosovo is widely considered one of the richest countries in terms of minable resources, Ramaj reported, including coal, lead, and other minerals. The Government has initiated a feasibility study to see whether Trepca requires reorganization or liquidation and to review possibilities for infusions of private capital to revitalize the mining industry. The results of the study, Ramaj claimed, will be important for the development of the country and will provide a lot of work for lawyers.

Finally, Ramaj said, the country is exploring the development of its railway system following a EUR 50 million grant from the EU and a EUR 50 million loan from the EBRD. The law accepting the loan was passed in February. This project as well will involve many local companies and various transactions with local enterprises, requiring more local legal expertise.

In light of these major projects planned for Kosovo, the Government has drafted a Law on Strategic Development which would allow it to negotiate directly with investors rather than following the strictures of the Public Procurement Law. This has raised many concerns and caused some controversy, Ramaj reports, but he notes that the “Government is pushing hard,” for the Law, which would also provide tax breaks and subsidies for major investors.

“The current level of development in Kosovo is very low,” Ramaj concedes. But with more investment expected soon and projected economic growth leading to increased activity in local business, he’s expecting “an increased need for legal services.” As a result, he says, “the legal industry is optimistic about the future.”

Latvia (July 6)

The Solidarity Tax Under Fire

The most controversial legislative development in Latvia in recent months, according to Klavins Ellex Managing Partner Filips Klavins, is the so-called “Solidarity Tax” that went into effect in January 2016.

The tax applies to individuals with the highest incomes in the country – estimated as affecting only those with incomes in the top 0.5%. Many people are complaining it’s unjust, Klavins reports, as it represents an unreasonable reach into the pockets of those who, acting honestly, are already paying the most tax, instead of those who have, by participating in the so-called shadow economy, avoided paying tax altogether. A challenge to the tax was just filed in the Constitutional Court last week, Klavins reports. 

The Solidarity Tax is not creating much billables for lawyers in the market yet, though Klavins reports that executives of clients “are raising questions about it.” Attorneys are paying close attention to and discussing the issue, as in Latvia, “by quirk of law,” they are considered sole proprietorships and self-employed. As a result it’s not clear yet whether they will be affected by the new tax or not. 

Another “hot topic,” according to Klavins, is the recent legislative proposal to expand the rights of notaries by requiring all Real Estate conveyances to be performed under the Notarial Act, based in part under the assumption that notaries would be able to evaluate the pricing of transactions to ensure they’re not set artificially low to avoid accompanying taxes. Klavins described the notary association in Latvia as being well-organized and good at lobbying, but said the proposal “just didn’t make sense,” especially for more complicated transactions with multiple moving parts. Although the debate over it was heated for the first six months of the year, the proposal is fading now, Klavins believes. 

In general, business is good in Latvia, following several years of 4% growth. The Brexit has put everything on hold for a couple of weeks while people try to evaluate its consequences, but he expects things to pick back up soon. M&A is not as strong this year as it was last year, but finance work and regulatory work are up. The process for Latvia’s May 2016 accession to the Organization of Economic Cooperation and Development has resulted in the levying of fines against some Latvian banks which hadn’t been paying full attention to their AML obligations, providing a source of work for banking lawyers in the country. Real Estate is strong as well, with shopping malls and construction developments underway. “Things are good,” Klavins reports, while also pointing out that his firm’s dispute resolution team is active, with cross-border work both in the form of arbitrations and in Latvian enforcement of foreign judgments keeping them busy.

As for the Latvian legal market itself, Klavins believes more consolidation is likely later this year, from smaller firms joining forces to increase their ability to compete with the major players. It’s time-consuming to grow organically in the country, Klavins reports, and there’s not that much lateral movement, so significant expansion is likely to come in the form of mergers and consolidation.

Macedonia (June 28)

Courts on Strike 

“Let’s start with the bad,” said Valentin Pepeljugoski, the Managing Partner of the Pepeljugoski Law Firm in Macedonia, who reported that the strike of Skopje court administration employees that began at the end of May was “not good for bar members.”

The strike, which started when administration employees were not included in the recent 35% salary increase received by judges, public prosecutors, and officials in the public prosecutor’s offices, is, according to Pepeljugoski, “really bad for the rule of law, for clients, etc.” He concedes, however, that the salaries of court administration “are really very low” – he called them “beneath human dignity” – and he emphasized that, “if you ask me I fully approve of the administration.” Matters considered “urgent” which can’t easily be postponed – including requests for injunctions, bankruptcies, and IP matters – are being heard, but the solo practitioners and smaller law offices that focus their practices heavily on litigation are being really hurt by the delay in most matters. Business law firms like his, Pepeljugoski says, are better able to weather the storm.

Otherwise, business in Macedonia is as good as it can be under the circumstances, Pepeljugoski says, “although the political situation is not so good.” He refers especially to the energy sector as strong, as the country’s Competition Authority has begun a process of reviewing agreements in the sector very carefully, providing substantial work for lawyers. The Macedonian energy market is not a “free market,” according to Pepeljugoski, with only state-owned enterprises able to purchase energy from suppliers, who are often badly positioned to sue because of badly drafted agreements. He also notes that the banking sector is strong.

He also refers to an ongoing fight for market share among two trash collecting companies, which spills over regularly into the courts.

Turning to the legal market in Macedonia, Pepeljugoski points out that there are no “big international firms” in the market, as “our law does not allow foreign lawyers to set up classic law firms here as founders,” although he notes that several regional law firms specializing in the former Yugoslavia have “consultant” offices in Skopje. The market is fairly stable, and a few local firms have sprung up recently, started by two or three young lawyers, but in his opinion the traditional firms still dominate the market.

Finally, Pepeljugoski noted, a new Civil Code is in the works and expected to be enacted sometime next year. “For me it is not necessary,” he sighed, “because we already have the law.” He said the decision to create a new Civil Code in the country is following “a trend in CEE,” and said, “for me, it’s not a positive one.” He sighed. “It creates problems when you’re always amending, always revising.” 

Poland (July 26)

Political Turmoil Possibly Overestimated 

There’s still a lot of discussion about the political climate and political upheaval in Poland, according to Wladek Rzycki, Partner at K&L Gates in Warsaw, but concerns about the change in government haven’t yet had any noticeable affect on the legal industry itself, he says, emphasizing that, “I hope they won’t.”

Instead, it’s business as normal, Rzycki reports, with firms in the market “fairly busy.” Corporate transactions are still going on, and foreign investors remain interested in Poland. Real Estate seems a little down at the moment, he concedes, especially in the office development and construction sector, but he also notes that so much office space was built in the country in the last couple of years that people may simply be taking a breath to adjust. And while Private Equity may be a bit down at the moment, as foreign funds may be a bit cautious about the short-term effect of the 2015 elections (which saw control of the government shift to the right wing Law & Justice party), strategic and institutional investors “are still doing stuff, looking [at] things from a long-term perspective.”

Taking a step back, the Krakowian Rzycki noted that Warsaw has become a “very nice place to live” in recent years, noting that while it used to be “quite ugly,” it’s now “really improved, the standard of living is better, and it’s much easier to post people here.”

Turning to the legislative front, Rzycki referred to recent changes to tax laws, particularly relating to tax restructuring – which might, he said, impact transactional work – as well as changes to the Polish Public Procurement law designed to make infrastructure projects easier (though he’s not convinced). 

He also referred to last winter’s crisis involving disputed appointments to Poland’s Constitutional Tribunal, which remains a major point of discussion, although he noted that the controversy “hasn’t really translated into effects yet on corporate lawyers.”

Turning finally to the legal marketplace itself, Rzycki referred to persistent rumors about the smaller and weaker international firms being under increased pressure, noting that Chadbourne’s recent departure may be related to that pressure. “The trend is,” he said, “you need to be bigger to survive.” He described the process as “a sign of a developing legal market,” but also said that “this is a market in transition – there’s lots of disruption in the marketplace.”

Serbia (August 12)

Controversial Announcement by Serbian Bar 

On August 1, 2016, the Belgrade Bar Association published a letter on its website signed by President Slobodan Soskic, asserting that Dragan Karanovic, Senior Partner of Karanovic & Nikolic, had been removed from the Bar’s table of registered lawyers.

According to the letter, Karanovic was expelled based on Article 83 1/9 of Serbia’s Law on Advocacy because he was enrolled as of March 7, 2016, in the court register of the Municipality of Sarajevo. CEE Legal Matters reached out to both Karanovic and Soskic for comment. 

Karanovic, not surprisingly, contested the Belgrade Bar’s decision, which he attributed to the Bar’s “abusing a vague regulatory provision.” He explained that the only statement by the Bar that had merit was “the trivial fact” that he had been a Director of a Bosnian company for 20 days in March this year. He claimed that he is “still in all formal and practical respects a member of the Bar” and said he was never expelled. Karanovic declared that the decision of the Belgrade Bar “is only one illegal step in the illegal process, a process that we expect will not be carried through.” He said that the Bar, ultimately, is “an illegally-formed body, given that the representatives that present themselves as the Board are not elected in a legal manner that passed a decision in a process without due process which is, in its merits, illegal.” Karanovic reported that he would be taking steps to remedy the situation: “We will file an appeal with the Serbian Bar Association and expect the decision to be annulled in a short period.”

In terms of the statements published on the Bar Association’s website, Karanovic said: “I realize that there are some letters on the site of the Bar but we will take steps to find remedies to address this abuse and we expect support from regional and European Bar Associations” – support that he argued would arise out of his and his firm’s “over 20 years of practice where I think we confirmed the highest standards and a stance on moral integrity.” He also noted that he has “already received a lot of support from other law firms and lawyers, in particular young lawyers who see this as a signal for concern for professionals in the field.” Karanovic concluded, “I am not personally targeted as much as I think this is more about what we stand for.” 

“Looking at the bigger picture,” Karanovic said, “there are ongoing disputes between the boards of the Serbian Bar and the Belgrade Bar, which saw long campaigns carried out by the Belgrade Bar trying to impede the progress of the legal practice.” “They simply do not recognize that the nature of firms has evolved and there are commercial lawyers in the market now as well who are just as much legal professionals as, say, criminal lawyers.” He also noted that this move by the Belgrade Bar might be part of a pre-election campaign, as elections are due to take place this autumn. 

In terms of what he expects after things settle down, Karanovic said: “We will invest more of our time and effort to engage into changes of the regulations so that they support the highest standards of integrity – which I do not feel is the current situation of the Belgrade Bar. We hope the elections will be a starting point in that direction, and we certainly want to talk to all those involved in the legal profession to organize our profession in a way that gives all of us a way of working in the market.”

Soskic did not respond to repeated attempts by CEE Legal Matters to reach him for comment.

Slovenia (August 18)

Slow and Steady Wins the Race 

This is a stable and steady time for lawyers in Slovenia, according to ODI Law Managing Partner Uros Ilic, who says that the consistent growth of the past few years – he reports 12 straight quarters of growth in the country – shows no sign of abating. Indeed, Ilic reports, although lawyers and clients alike are taking holidays in August, July was “extremely busy” in Slovenia.

NPL transactions – both single and portfolio deals – remain a primary concern in the country, with the highly-publicized IPO of NLB temporarily on hold as a result of the Brexit. Ilic explains that it had been contemplated that the newly-privaticized bank would be dual listed on the London Stock Exchange but that the Brexit puts that in doubt, so everyone’s taking a step back to consider. The privatization is expected to go forward in September, but Ilic shrugs: “Who knows?”

When asked if the Brexit was affecting Slovenia in other ways, Ilic dismissed the idea. “To be honest, if the expected listing on the LSE wasn’t involved in the NLB privatization, there would be no major effect on Slovenia at all.”

Otherwise, the banking sector remains in a consolidation phase, and the RE market is “finally awakening,” particularly in the hotel sector, as Ilic notes that the Hotel InterContinental in Ljubljana currently under construction is adding a new floor every week. 

In Slovenia, as in the rest of the former Yugoslavia, the courts take a month off from mid-July to mid-August (except for urgent matters), and the judges returned to work on August 16, meaning the litigators in the country are now ramping up as well. 

Finally, Ilic says that there are no significant changes to the Slovenian legal market. Fee pressure remains extremely high, Ilic notes, pointing out that fees were not really discussed for several years after the crisis hit and suggesting that the downwards pressure on them, which continues now several years after the crisis has abated, is therefore perhaps not surprising. 

In short, Ilic says, “people are busy, and things are going well – everything is quite stable.”

Slovakia (July 4)

Significant Changes to Slovakian Codes 

According to Jan Azud, Partner at Ruzicka Csekes s.r.o. in association with members of CMS, the new Slovakian government still hasn’t completely settled in following the March 2016 elections, and with summer and the EU Presidency here, Azud says, “everything has stalled a bit.”

The Slovakian legal market deals with commoditization and insourcing like the rest of the region, Azud reports. There are few changes of significance among the leading firms in recent years, nor any real spin-offs of significance, and Azud doesn’t expect the list of international firms in the country to expand anytime soon. One persistent characteristic of the Slovakian law firm market is that it’s highly competitive, and the long-term trend is seeing fees decrease. There’s an increased awareness of the need for value-added services and special products at law firms, Azud reports, as well as the need to invest in law firm marketing, and lawyers increasingly have to be ready to compete aggressively to “get the work you need and to get interesting work.”

Last year was good in terms of the amount of work for the bigger law firms, Azud says, though it’s still difficult to tell whether this year will be successful or not. The trend is positive, and the economy is growing, but Azud reports that “Slovakian business is, to a significant extent, driven by public spending, so the government situation needs to get settled.” He’s optimistic, though, that things will start moving more effectively soon.

Turning to recent legislation, Azud says that Slovakia has expanded its current Civil Procedure Code into three parts, which became effective in July. He described this as a “complete reform of civil procedure” and expects it to have a “significant effect on the legal market” – although, at this point, it’s difficult to predict exactly what form that effect will take. Modernizing the Code “should be a good step forward,” Azud explains, but ultimately “we’ll have to wait to see the actual consequences of its application.”

On July 1 Slovakia began enforcing criminal liability of legal entities as well, bringing the law closer to EU and American standards; previously, only natural persons or individuals could be found guilty of crimes. Azud expects this to increase work for lawyers as well, at least to some extent, helping companies with preparations and compliance, not to mention with formal investigations or prosecutions.

Finally, Azud says, the country enacted a new Public Procurement Law which became effective on April 18th of this year, transposing EU directives on public procurement. Reiterating his point about the significance of public spending to the Slovakian economy, Azud reports that, while the actual effect of the law remains to be seen, it is “definitely an important piece of legislation.”

Turkey (August 3)

The Coup’s Consequences 

Eren Kursun, Partner and head of M&A and PE practices at Esin Attorney Partnership, the Turkish member firm of Baker & McKenzie International, concedes that the second half of 2015 and 2016 has been slower for many law firms in Turkey, primarily because of the political environment, but he also emphasizes that the year has been “so far, so good for us.”

When asked about the effect on business of the failed July 15 coup d’état in Turkey, Kursun says: “It’s complicated.” He describes the event as “like a nightmare” and says “during the first few days, to be honest, nobody – including myself – was thinking much about business. We cared first about more fundamental issues.” Still, he emphasizes that business has not suffered as much as many expected. Only one of Esin’s M&A deals was put on hold – and that was at a very early stage to begin with – and Kursun reports that the firm continues to work on IPOs and many other projects. He does not expect to see any real exodus of investors as a result. “Turkey remains open for business and an attractive market for both financial and strategic investors.”

Indeed, Kursun reports, the removal of those in positions of authority associated with Fethullah Gulen, the exiled Turkish cleric accused by the Turkish government of masterminding the coup attempt, “is quickly moving past any sense of crisis.” He continued: “There is of course some political uncertainty, like in many countries, but it’s nothing like as bad as has been reported internationally.” In fact, he says, “many people are seeing the government’s actions as necessary to safeguard the country’s long term future and prosperity.”

Kursun claims that “almost everyone was against the attempt to remove a democratically elected government by force, regardless of individual political views,” and he says the attempted coup has in many respects brought the Turkish people together. The fact that even many Turks who do not necessarily support the AKP did not view the attempted coup as an opportunity to get rid of the government played a uniting role for the people, Kursun reports, which he says “has created conditions for a somewhat peaceful environment.” He also praised the government for its efforts to keep financial markets as stable as possible in extremely difficult circumstances – pointing out that the XU100 is up 7% this year at the time of writing. Clients are now in a wait-and-see mode – a familiar situation across much of Europe, he points out, referring both to the United Kingdom after the Brexit vote, and Spain after its recent elections. “I don’t want to be too optimistic,” he says, “but I think things will bounce back in a couple of months. And, as I said, even now very few deals have actually been canceled; things are just moving a bit more slowly. We have received several RFPs and engagements since the failed coup.”

Finally, the subject turns to the legal market itself. When asked whether the recent police shut-down of YukselKarkin (reported on the CEE Legal Matters website on July 25, 2016) is of concern for the legal market, Kursun says no, describing it as an isolated event, and “not reflective of anything against the legal market.” Kursun points out that ten years ago White & Case, where he himself spent nine years, was pretty much the only international firm of significance in the market, and faced little competition. “But now all the biggest international firms are here: Baker & McKenzie, Allen & Overy, Clifford Chance, and so on. Meanwhile Turkish firms have become more sophisticated.” In part as a result, he says, fee pressure has grown due to tough competition. “The market is ever more competitive. That’s a challenge, but we take a long- term view. You will always find someone buying work by offering big discounts. But that’s not sustainable. Clients want and need quality advice, especially in uncertain times. Just because something’s cheap doesn’t mean that it’s good value. Clients increasingly recognize this important difference.”

Thank you!

We thank the following for sharing their opinions and analysis on the news:

• Alexander Petsche, Managing Partner of Baker & McKenzie 
• Kiryl Apanasevich, Managing Partner at Sorainen
• Zdenek Tomicek, Partner at CEE Attorneys
• Toomas Prangli, Managing Partner at Sorainen
• Nicholas Papapolitis, Managing Partner of Papapolitis & Papapolitis 
• Eszter Kamocsay-Berta, Managing Partner of KCG Partners Law Firm
• Visar Ramaj, Managing Partner of Ramaj & Palushi
• Filips Klavins, Managing Partner of Klavins Ellex
• Valentin Pepeljugoski, Managing Partner of Pepeljugoski Law Firm
• Wladek Rzycki, Partner at K&L Gates
• Dragan Karanovic, Senior Partner at Karanovic & Nikolic
• Uros Ilic, Managing Partner of ODI Law
• Jan Azud, Partner at Ruzicka Csekes in association with CMS
• Eren Kursun, Partner at Esin Attorney Partnership Turkish member firm of Baker & McKenzie International

This Article was originally published in Issue 3.4 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Jiri Buchvaldek, Partner at Hruby & Buchvaldek in the Czech Republic, is flabbergasted at the amount of new regulations being thrown at small businesses and entrepreneurs in the country. “It’s just freakish what’s going on,” he says, shaking his head.

“I recently found out about an ‘improvement’ to the Czech Republic’s AML [anti-money laundering] law,” he says of a law currently passed by the Senate. The new law, which should become effective on January 1, 2017, would require lawyers and everyone who provides escrow services (“it applies to all real estate agents as well,” Buchvaldek notes, “though not everyone knows about it”) to perform even more thorough checks of the sources of the funds being placed in escrow. The law also establishes a new register of real or ultimate owners/beneficiaries of businesses, which is to be kept by the Courts. Although not completely public, the registry will be open to all major authorities incuding the newly Financial Analytical Bureau, newly separated from the Ministry. All legal entities will be required to keep record of their ultimate owners / beneficiaries and record them in this register.

Even the current AML law, according to Buchvaldek, is “burdensome and complicated,” and this new obligation goes even further. Buchvaldek suggests that many clients have legitimate reasons for keeping a low profile and for staying out of the public eye, “but this makes it easier for everybody to know everybody’s business.” In his opinion, the over-riding principle is that “nothing is private anymore.”

Buchvaldek then turns to the new law on consumer loans scheduled to come into effect on December 1, which will require the 50,000 entities currently providing consumer loans in the country to obtain licenses from the Central Bank. The licensing requirement and the minimum capital requirements of the law aim to scale down the numbers of providers and increase consumer protection, shifting the risks and burdens to the providers. Despite the laudable goals of the regulation, Buchvaldek calls it “another new market regulation — another piece of the puzzle.”

At this point he’s on a roll. Buchvaldek points to the new amendment to the country’s Capital Gains/Income Tax, empowering the Czech tax authorities to investigate the sources of income when they encounter discrepancies between income and expenditures of anything beyond “quite a low” 5 million Czech crowns. The law, which was in the works in one form or another for about 10 years before finally passing, “increases their ability to levy massive taxes on those who can’t account for the discrepancy to their satisfaction.”

Buchvaldek is wide-eyed. “Sometimes I think this is incredible. What will happen next??”

Finally, he turns to the new Czech law on Public Tenders which came into effect on October 1st and which allows public authorities to exclude Joint Stock Companies with shares in paper rather than electronic form from participation in public tenders. Buchvaldek calls it “gross discrimination,” and says that “it solves absolutely nothing, and again burdens the entrepreneurs with another costly burden.” Buchvaldek sighs, explaining that converting from paper to electronic shares just to satisfy this law will cost “a minimum of EUR 2000 plus annual costs, because shareholders will have to have electronic accounts, pay fees, etc.” For Buchvaldek, the obvious question “Why?” has a similarly obvious answer: “I think this is yet another attempt to eliminate “anonymous“ joint stock companies.”

Again, as before, Buchvaldek explains, “they use the word ‘transparency,’ but from my perspective as a lawyer they may be damaging to individuals who may have legitimate reasons for wanting to stay private.” Ultimately, he says, “it’s all about taxes, and an effort to keep everyone under their thumb.”

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In “The Buzz” we interview experts on the legal industry living and working in Central and Eastern Europe to find out what’s happening in the region and what legislative/professional/cultural trends and developments they’re following closely.