CEE Legal Matters

Category: The Buzz

  • The Buzz in Ukraine — Interview with Mykola Stetsenko of Avellum

    The Buzz in Ukraine — Interview with Mykola Stetsenko of Avellum

    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.

    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.

  • The Buzz in Macedonia — Interview with Biljana Joanidis of Law Firm Joanidis

    The Buzz in Macedonia — Interview with Biljana Joanidis of Law Firm Joanidis

    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.”

    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.

  • The Buzz in Bulgaria: Interview with Sergey Penev of Penev LLP

    The Buzz in Bulgaria: Interview with Sergey Penev of Penev LLP

    “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 3 or 4 in terms of GDP to debt radio, he says, suggesting that 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.”

    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.

  • The Buzz in Hungary: Interview with Zoltan Faludi of Wolf Theiss

    The Buzz in Hungary: Interview with Zoltan Faludi of Wolf Theiss

    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.

    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.

  • The Buzz in Poland: Interview with Marcin Aslanowicz of Wolf Theiss

    The Buzz in Poland: Interview with Marcin Aslanowicz of Wolf Theiss

    “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.

  • The Buzz in Croatia: Interview with Boris Savoric of Savoric & Partners

    The Buzz in Croatia: Interview with Boris Savoric of Savoric & Partners

    The relative success of the center-right Croatian Democratic Union in the September 11th extraordinary parliamentary election in Croatia “should be good for Croatia and good for business” reports Boris Savoric, Senior Partner at Savoric & Partners in Zagreb, if the party succeeds in forming a government with one of the minority parties in the country.

    The previous government’s postponement of a planned bond issuance on international capital markets “should be back on the table soon,” he said, and several infrastructure projects which were delayed or cancelled as a result of the collapse of the previous government, such as the big Croatian motorways tender and the LNG project at Krk may be reactivated as well, providing substantial work for law firms in the country and a wealth of new jobs and investment.

    Savoric reports being upbeat even before the election, however. He says the country’s GDP was growing “even when we had no government — so less politics, more business,” and he explains that the country “had a successful touristic season, and there are lots of private deals regardless of the government problems.” 

    In particular, he said, “some Croatian companies successfully issued bonds” even during the political crisis, and he reported that “there are lots of private equity funds buying non-performing loans, buying real estate projects, and shopping malls. There movement between Croatian companies — some mergers and acquisitions have been announced. We’re still very busy, as are many of our competitors.”

  • The Buzz in Romania: Interview with Alina Popescu of Maravela & Asociatii

    The Buzz in Romania: Interview with Alina Popescu of Maravela & Asociatii

    The overriding theme at the moment in Romania, according to Alina Popescu, the Co-Managing Partner of Maravela & Asociatii, is the fall-out from the government’s successful and ongoing efforts to combat Romania’s reputation for corruption.

    “The big component for law firms,” she said, “is the White Collar Crime cases popping up on an almost daily basis.” Popescu reports that this consequence of the process initiated a few years ago to root out corruption has resulted in a boom for business law firms, many of which have formed dedicated practice groups as a result. In the past, Popescu reports, such matters went primarily to the boutique criminal law firms, but with “the flourishing activities of the prosecutors and tax authorities,” there’s enough work for the larger firms to take notice. In addition, the firms’ ability to form dedicated and multi-disciplinary teams — consisting of criminal law specialists, tax specialists, and lawyers with expertise in other critical areas — give them a real advantage. As a consequence, Popescu says, there’s real demand for quality criminal lawyers, and even a trend of hiring former prosecutors or policemen with degrees in law.

    In addition, according to Popescu, business law firms which once had a substantial percentage of their work coming from the state as a result of personal connections are finding those sources of work drying up. The process of obtaining work from the government has, in recent years, become substantially “fairer,” she reports, with real procedures and tenders being conducted, instead of the closed door agreements that typified the process in years gone by. Indeed, she reports, some firms have disappeared altogether in recent years as a result, either as a result of diminished business or from damage caused by public reports of senior partners’ own malfeasance. “It may not last,” Popescu says of the more transparent moment, “but right now people are more afraid to give away work illegally.”

    Indeed, she says with a sigh, some procurement teams within public authorities are even hesitant to give out work, worried about possible accusations of corruption, and this translates either into excessively beaureaucratic and lengthy procedures, which considerably burden and slow down the process, or into work not being externalised at all.  “Still, the competition is now fairer for the time being.”

    Popescu turns to new Public Procurement legislation enacted last month which, she says, is aimed at simplifying procedures and eliminating unnecessary bureaucracy. Authorities are not used to implementing the new mechanisms, she says, so they’re reluctant to employ the new procedures, but over time she expects the process to smooth out. In the interim, she says, there is a period of questions and gray areas, as there always is with new legislation, creating work for law firms dealing with clients facing potential ambiguities.

    As for the legal market, Popescu refers to the “process of segmentation of law firms.” She refers to a trend of spin-offs — her own firm spun-off from Musat in 2013 — and she refers to “increasing rumors and speculation about whether the big law firm model is feasible in light of pressure on fees and the costs of maintaining such large organizations.

    Finally, Popescu spoke about the overall quality of lawyering available in Romania. “There’s fierce competition in the market now,” she says, “causing real pressure to increase the quality of service.” She also pointed to “the challenges of this jurisdiction,” referring, among other things, to “legislation that is always changing or ambiguous, and court practice that is often contradictory.” She smiles, noting that “whatever doesn’t kill you makes you stronger,” and says that firms are being pushed to get “better and better to survive.” Finally, she says, the effect of the many international law firms in Romania over the years — though some have left in recent years — has been to increase the overall quality of lawyering in the country, both from those who have worked within those firms and those who have interacted with them.

  • The Buzz in Lithuania: Interview with Gediminas Dominas of Dominas & Partners

    “The hot topic” in Lithuania at the moment, according to Gediminas Dominas, Managing Partner at Dominas & Partners, “is the merger announced last week of the Baltic operations of Nordea Bank and DNB” (as reported by CEE Legal Matters on August 25, 2016).

    Otherwise, according to Dominas, the winding up of the holiday period means there’s little news of significance at the moment. Still, in general, Dominas reports, “everybody is quite busy,” in part because the “number of law firms has decreased” — he refers both Borenius’s withdrawal from the Baltics at the beginning of this year and the widely-reported consolidation of the Baltic markets as firms tie up in pan-Baltic alliances — “so there’s more room for everybody.”  

    “The most important recent development is the new Labor Code, which is quite liberal and modern.” The draft law passed through Parliament but was vetoed by President Dalia Grybauskaite, who expressed concern about several provisions, and sent it back to Parliament for further debate and consideration. Dominas expects the Code to be passed eventually — perhaps after the elections scheduled for mid-October. Dominas notes that “all legislation in Parliament is currently working in that context,” and suggests that, until the election, any significant legislation is unlikely to emerge. In his words, “the next two months will be a political election campaign more than law making.”

    Dominas reports that the major PPP project for the operating license of the three major Lithuanian airports is generating a lot of attention, and a number of major international companies have expressed interest in the tender, which is expected to take place next year. 

    BuzzIn “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.

     

  • The Buzz in Russia: Interview with Leonid Zubarev of CMS

    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.”

    BuzzIn “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.

     

  • The Buzz: April – June

    The Buzz is a short summary of the major and relevant topics of interest in Central and Eastern Europe, provided by those best positioned to know: law firm partners and legal journalists/commentators on the ground in each CEE country.

    Turkey

    “Continued Political Turmoil And Encouraging Legislative Developments“

    The big news in Turkey, according to our source (who requested anonymity), was the May 5, 2016, announcement that Turkish Prime Minister Ahmet Davutoglu would be resigning from his position. Nobody’s sure what’s going to happen, our source said, who’s going to replace Davutoglu, or what the affect of the shake-up will be on foreign investors. There has been no reaction from his firm’s clients as yet, he reports, but there seems to be consensus that this is “an unfortunate development”, and his firm’s position, at the moment, is “wait and see.”

    On a happier note, Turkey’s new Data Protection Law (the “Law”), passed just now, a decade after the first draft was put forward and 35 years after Turkey first committed itself to enact a national data protection law under its Council of Europe obligation. The Law – passed ultimately as part of the country’s ongoing attempt to harmonize its laws with EU law to facilitate the country’s accession to the EU – is characterized by our source as a “good thing.” Companies are finding themselves obliged to review their processes to ensure compliance with the provisions of the Law, which is creating work for firms across the market. Our source says that his firm’s data protection advisory team is working “flat out” at the moment, making the new Law “a gift from the government to the lawyers in the country.” The Law also creates a Data Protection Authority. “But,” he says, pointing to the increasing role of the Turkish government in such matters, “the question is: ‘Who’s going to run it?’” 

    Finally, our source notes, a recent draft IP law – addressing a subject the Turkish government insists on calling “Industrial Property” instead of “Intellectual Property” – has a significant amount of “good stuff” in it as well, and it is expected to be passed soon as well.

    Lithuania

    “New Code of Ethics And Increased Visibility of The Big Four”

    Irmantas Norkus, the Managing Partner of Cobalt’s office in Lithuania, describes the new Code of Ethics approved by the General Meeting of Advocates of the Lithuanian Bar Association on April 15, 2016, as “a significant move forward.” The previous Code of Ethics was created in 2005, and the rapid growth and substantial changes in the market since then required that the Code be modernized. Changes affect the rules applicable to conflict of interests and the ability of firms to represent multiple clients in matters upon informed consent, among other things.

    Turning to changes in the legal market itself, Norkus refers to the recent decision by the Varul office in Lithuania to rebrand as part of Primus as part of the extended fall-out of Varul’s Estonian office deciding to leave the network in favor of Tark Grunte Sutkiene. In addition, he reports that the law firms associated with PWC, Deloitte, and Ernst & Young – and, to a lesser degree, KPMG – are increasingly promoting their legal competencies and capabilities in Lithuania in an effort to compete more effectively with the traditional law firms in Lithuania. At the moment the increased visibility seems to be related more to marketing and communications than to actual presence on deals/transactions of significance, but as the firm associated with PWC in particular has publicly announced its intention to be among the top four or five firms in the country within five years, Norkus is keeping a look out. In addition, the PWC-related firm recently successfully appealed the Bar Association’s refusal to allow it to use the PWC trademark in its official name, meaning it is now able to more prominently display the PWC brand in its marketing efforts.

    In terms of practices, Norkus reports that the Real Estate and Infrastructure practices are “really hot” at the moment, particularly related to three significant ongoing privatizations, including, most significantly, the government’s plan to offer three Lithuanian airports for operation by one concessionaire for the next 25 years. That concession should be announced soon, and at the moment a number of Lithuanian law firms – and at least five larger international firms – are representing potential concessionaires participating in the tender. Other privatizations of significance include the PPP project for a new National Stadium and another PPP project for the Utena National Road.

    Other dynamic practices in Lithuania at the moment are those involving the Financial Services industry, which is seeing a great deal of consolidation and loan portfolio sales, and Data Protection, as companies try to prepare for the upcoming changes in applicable EU law.

    Bulgaria

    “NPL Sales Provide a Glimmer of Hope in Otherwise Quiet Market”

    There has not been much movement on the Bulgarian market in recent months, according to Alexandra Doytchinova, the Managing Partner of Schoenherr’s Sofia office.

    Still, there’s some reason for hope. Doytchinova says that the Bulgarian NPL market – which, contrary to the markets of other neighboring jurisdictions, has been fairly dormant – is expected to pick up soon, also as a result of an asset-quality review and bank stress tests initiated by the Bulgarian National Bank, the results of which are expected in August 2016. Doytchinova expects this to be the kick-off for increased NPL sales and a source for legal business in Bulgaria for the next few years. While NPL transactions have not yet started on a large scale, pioneer transactions have already been announced. Schoenherr itself is already working sell-side on the first sizeable NPL portfolio sale for HETA, Doytchinova reports, and other Schoenherr clients are looking at other NPL portfolios for sale.

    IT and start-ups are also always good for Bulgaria, though Doytchinova points out that start-ups, working with limited budgets, are rarely able to obtain the external legal advice they would need. Still, she believes many of them are becoming aware of the necessity of doing so, and the more sophisticated start-ups, seeking investment from the United States, United Kingdom, and other western countries, are increasingly looking for quality legal assistance. A number of law firms are assisting start-ups as an investment in future business, even matching their budgets in doing so.

    Renewables remain a dead area in the country, Doytchinova says, with no real movement in the sector beyond occasional disputes with the regulator and off-takers who sometimes fail to pay as obligated.

    As always, the overarching problem for Bulgaria is the perception of corruption in the judicial system that bedevils attempts to promote and generate investment in the country. The problem doesn’t appear to be any closer to being solved, either, Doytchinova sighs, pointing out that a recent effort to introduce a serious judicial reform widely supported by practitioners failed in Parliament – signifying that the political system is obviously fairly satisfied with the status quo and causing widely-respected Minister of Justice Hristo Ivanov to resign in frustration.

    Romania

    “Spotlight on Real Estate”

    The real estate market is in the spotlight in Romania, according to Bogdan Papandopol, Partner at Dentons in Bucharest. Specifically, the country is “seeing the logistics area going quite well,” Papandopol explains, with new developments popping up in and around Bucharest. He notes that the capital city is not alone in registering growth, pointing to developments in other large Romanian cities as well, including Arad, Ploiesti, and Constanta. 

    The office real estate market is also registering healthy growth, the Dentons Partner reports, in particular in Bucharest. Also notable is the shopping center sector, and Papandopol reports that, “while not as big as the logistics sector, we are definitely seeing some good deals in commercial real estate not only in Bucharest but also other major cities in Romania.”

    Turning to residential real estate, Papandopol points to the recent so-called “Darea in Plata” (“giving in payment”) legislation, which affects credits with a value under EUR 250,000 meant to fund the purchasing, building, or refurbishing of residential real estate. The main update is intended to help consumers notify their banks and initiate a procedure that ultimately results in returning the collateral to the bank and discontinuing the loan. “We have to see the impact this will have on banks and how this will be reflected either in terms of the conditions that banks set up, the end cost of credits, durations of loans, etc.,” Papandopol reports. “Ultimately, it does look like it will make it more difficult to access such loans, which may impact the residential landscape.” As to the driving force behind the legislation, the Dentons Partner notes that “it is difficult to comment precisely as to the cause of it in an electoral year. This was a widely-discussed legislative update. We’ll see, based on how banks react, if that legislation will impact on the development of the residential projects.”

    Estonia

    “Fallout From Legal Market Changes Includes New Emphasis on Marketing and Head-Hunting”

    Martin Tamme, the Managing Partner of Varul in Estonia, says that “from my perspective, the big news is still the merry-go-round” that accompanied the recent news of his firm’s merger with Tark Grunte Sutkiene. He refers to the move as being part of the “start of the second phase” in the market that has led to the establishment of what he calls the “Big Four Baltic law firms” (referring to Tark Grunte Sutkiene, Sorainen, Cobalt, and Raidla Ellex). He also refers to the increased marketing/public relations push he’s seeing in the market in the last few months, which he says is a new paradigm. For instance, it is reported that Cobalt has been buying up front page advertisements to get their trade name out in the industry. He expects all firms to step up their efforts similarly. “Each of the Big Four will have their own personality,” he says, “and it will become more of a ‘brand’ business in upcoming years.”

    As another aspect of the upheaval in the market, Tamme points to the “serious head-hunting going on now as a result.” Tamme notes that, “we want to grow, Raidla Ellex wants to grow, and Sorainen needs to fill in the gap left by four senior litigators who established their spin-off, Nove,” (see page 16) as Cobalt continues to deal with the integration process following its 2015 merger with the former Lawin office in Estonia. He agrees that it’s a good time to be a good lawyer in the market, with all the major firms competing for talent. 

    Despite this competition, Tamme says legal recruiters are rarely employed in Estonia. He refers to the legal market as a “village,” and says that personal contacts are a much more common source for lateral hires.

    There’s nothing very much coming in the near future in terms of political, legislative, or regulatory developments, Tamme says. Gas should be stronger for the next few years, as Estonia pursues a policy of energy independence from Russia. Many projects are in their early stages, Tamme notes, though few of them have actively started generating revenue yet.

    Finally, Tamme notes that Estonia is continuing to experience a mini-boom in private sector real estate, discernible still in M&A and JVs and innovative financial schemes. He is realistic about the process, though, noting that people are “taking bets as to when it will turn to insolvency work.” He sighs. “I expect to see it happen within a few years.

    Ukraine

    “Unmistakable Signs of Progress”

    Natalia Kochergina, the Head of Real Estate for DLA Piper in Kyiv, says that, from a business perspective, things are “absolutely” better in the country than they were six months or a year ago. The situation remains fragile, she concedes, but she insists that progress is undeniable. She points to the stabilizing hrivnya as a welcome sign.

    DLA Piper’s office has expanded in the past six months as well, Kochergina reports, noting that while before the Euromaidan Revolution of 2014 the firm did most of its work for foreign clients, the ratio of foreign to Ukrainian clients now is closer to 50:50, or even swung towards the local. In terms of foreign investors, Chinese investors are more active now than their European or American counterparts, who are more risk averse. In Kochergina’s own practice, Real Estate, she has also seen a definite recovery in foreign investment, particularly in the retail sector.

    The legal market has changed a great deal in the last few years, Kochergina points out, noting that Chadbourne, Clifford Chance, Gide Loyrette Nouel, and Schoenherr have all withdrawn from the country (though Gide’s office was taken over by another French firm, Jeantet). She describes a general trend in that direction, as some foreign firms lose trust in the geopolitical future of the country. Nonetheless, the market has stabilized, she believes, with local firms getting stronger, and an increasing number of boutiques doing niche work.

    In terms of practice areas, Kochergina reports that litigation is very strong at the moment, as is tax restructuring. Infrastructure is also strong, as the government seeks to improve the nation’s ports with international investors.

    Despite the overall positivity of her report, Kochergina concedes that corruption – while improving in small steps – remains a problem, especially in the judiciary. Still, she notes, legislation is improving rapidly, and she said that recent changes in the title registration legislation which increase transparency are “really great.” She concludes that these changes are, “definitely, positive.”

    Finally, Kochergina turns to the noticeable positivity in the country as a whole, which she says was less obvious a year or two ago. She accepts congratulations on the recent victory by Ukrainian singer Jamala at the Eurovision contest with pride, and says that overall “people are very happy.” Speaking on Vyshyvanka Day – the Ukrainian holiday named for the embroidered shirt in the Ukrainian national costume, which has also become a celebration of Ukrainian identity – Kochergina comments on the number of people she sees outside her window wearing the Vyshyvanka in a display of patriotism as another positive sign.

    Slovenia

    “Debt, Privatization, Real Estate Are Areas of Activity”

    The distressed debt front is an interesting area for lawyers in Slovenia, according to Vid Kobe, Partner at Schoenherr in Ljubljana, who says, “apart from privatization and restructuring-driven M&A, it is the main type of work dominating our schedules.”

    Kobe points to two main elements that follow as a natural progression to the restructuring boom of the recent past: (1) The likely refinancing of the capital structures of the large restructured corporates which have achieved stability and returned to growth (one recent example is the ACH Group’s recent refinancing of its senior debt by VTB); and (2) The repeated instances of new players buying up senior debt of those large corporates – especially those holding interesting assets – for which restructuring has not resulted in a turnaround. This year is critical for NPL portfolios in Slovenia as well, according to Kobe, who points to the recent placement of a huge portfolio by the largest Slovenian bank, with other big players likely to follow.

    “Much of the big-ticket stuff has already been wrapped up, and the first round of large deals is behind us,” Kobe comments about the equity side. He adds: “By far the largest ongoing deal is the privatization of NLB – the largest Slovenian bank – which looks like it will be sold via an IPO.” Kobe notes that the market is waiting to see the State’s updated plans for disposing of large corporates in which it has a stake, with everyone “curious to see what amendments will be made to the list of companies to be sold with rumors in the market being floated that other companies will be up for sale in the near future.” Kobe also points to an increasing number of assets being sold by debt holders: “a new breed of sellers, if you will, who were not holding an asset as a strategic investor nor as a private equity investor.” This, he argues, “is a slightly different type of work, but it’s still M&A-type of work that keeps us busy.”

    Finally, Kobe points to activity on the real estate market: “We’re seeing new players buying up real estate (backed) assets from distressed corporate groups who, for one reason or another, are exiting the leisure sector as one of their core activities.” Kobe reports that a lot of auction sales to private individuals are being completed, with many apartment building projects that ended up in the hands of the Slovenian bad banks or private bad banks now being placed on the market.

    Austria

    “HETA Remains at the Forefront”

    Unsurprisingly, for regular CEELM readers, the winding down of HETA remains among the hot topics in Austria, according to David Christian Bauer, Country Managing Partner at DLA Piper in Vienna, who says: “it is still a huge case with many lawyers (as well as accountants, auditors, etc.) being kept busy by it.

    In a recent development, Bauer says, “the Austrian Republic has made an offer to investors to pay a specific percentage of the amount requested.” Not much has happened recently on the German front of the HETA/Hypo story, Bauer reports, as the recent court hearing in Frankfurt has not yet resulted in a decision. There is one erroneous detail being floated around that the DLA Piper Partner would like to correct: “Unlike what many are saying, it is not the case that if the German claim is successful, insolvency will automatically follow, as HETA still has a lot of defenses.” He argues that it is not possible to really enforce any claims on HETA since that enforcement would directly clash with the goal of the EU Directive on the resolution of banks, which is to avoid situations in which some investors recover their full shares while others don’t. He explains: “They all need to be treated equally, so I don’t see how that would be enforced.”

    Concern about investor-state disputes are also in the spotlight in Austria, according to Bauer, both because of a current (and what he describes as a “huge”) ICSID arbitration going on in Washington resulting from a claim of the owners of Meinl Bank, and because there is a lot of “fear” over the proposed Transatlantic Trade and Investment Partnership. Bauer believes both concerns are exaggerated: “First, if the new agreement with Canada is to come into force, US companies will simply be able to use their Canadian subsidiaries to sue European states, so, really, the feared risks can happen anyway. Second, one needs to consider what the alternative is: to bring a claim in front of local courts, which is difficult for any investor, may it be a Romanian, French, or so on. I mean, if you invest in Saudi Arabia and then your investment goes bust due to unfair changes locally and you expect to be able to claim your money in Saudi courts, Good luck!” At the end of the day, he says, “what’s proposed is a well-established system that simply works, and, really, many times, if not in most cases, investors lose their case, so I find many of the concerns floated around as unfounded.”

    Bosnia & Herzegovina

    “New Labor Laws and Regulation on Advocacy”

    New Labor Laws in both jurisdictions of Bosnia and Herzegovina are keeping lawyers and companies on their toes, according to Aleksandar Sajic, Managing Partner of Law Firm Sajic. 

    The Republic of Srbska implemented a new Labor Law at the beginning of the year, but the employment community and unions have not yet agreed on a new collective agreement, Sajic reports. As the new Labor Law replaced the previous agreement, the jurisdiction is now in an “insecure situation for the companies, since there is a new Labor Law, but there is no new collective agreement in place, and every month the Government adopts a new decision to prolong the old agreement for a month.” Sajic adds: “this is naturally a problem, since there are huge differences between the old and new law in terms of holidays, working times, employee rights, procedures for canceling agreements, working on a temporary basis, and so on. This, you can imagine, is frustrating for management of companies, as they cannot predict what their obligations or rights will be for the next month.” This affects lawyers as well, Sajic explains: “The biggest problem for us, as consultants, is that our clients want to know not what they need to plan for in the next month, but what to plan for at least until the end of the year.” 

    In other parts of the country, the Labor Law adopted in the summer of last year ended up being nullified by the High Court of the Federation because of some mistakes in its procedure. The new proposal for a Labor Code will hopefully make the lives of companies easier since, as, under the current regime, there are “on paper, very strong, and at times too strong, protections and rights in place for employees – a socialist heritage – which became an obstacle towards attracting new investment.” Sajic explains that “both Governments were aiming to open the door to new investors with the new labor laws, since, unfortunately, one of our advantages at the moment is a cheap workforce, but that is not as effective when you are faced with a lot of rights for employees – to such an extent that they are, at times, hard to understand even for companies coming from other former socialist countries like Poland or the Czech Republic.”

    In terms of the legal profession itself, Sajic says that there is a new regulation on advocacy, which “for the first time, means there is a new structure within which you can provide legal services: that of a limited liability company.” He adds: “Until now, lawyers could work as solo practitioners, gatherings of two lawyers, or law firms that had to be organized as general partnerships – meaning full liability of its private individual members.” According to Sajic, that structure had merit: “The reason is related to the relationship we have with our clients – we have a huge and important right to represent our clients, many times in important or potentially expensive cases, and I think this type of personal liability incentivizes us to be particularly careful and committed to the better interests of our clients.” In contrast, he points out, “now you can establish an LLC law firm with 50 cents of social capital. This could be useful but I am unsure it is healthy in our profession, especially in the situation of a country like Bosnia and Herzegovina where we have a lot of legal reforms ahead of us and where we see a lot of problems in our profession, which is rather saturated, with not all lawyers being particularly concerned with providing a high quality of service.” As to the driving force behind the implementation of the LLC option, Sajic explained that it was primarily pushed through by a couple of lawyers who lead the professional association, and he added: “It was not an update that was included in the draft circulated to the national assembly – rather, it was included in the law almost overnight, as far as I know, due to some private interests.” He added that the update also included “a number of problematic articles” (for example, a “sudden” limitation on lawyers dealing with bankruptcy procedures, “introduced without any good reason”) and that a group of lawyers has already initiated a claim with the Constitutional Court challenging the update. 

    Croatia

    “Government upheaval causing uncertainty”

    Unsurprisingly, for regular CEELM readers, the winding down of HETA remains among the hot topics in Austria, according to David Christian Bauer, Country Managing Partner at DLA Piper in Vienna, who says: “it is still a huge case with many lawyers (as well as accountants, auditors, etc.) being kept busy by it.

    In a recent development, Bauer says, “the Austrian Republic has made an offer to investors to pay a specific percentage of the amount requested.” Not much has happened recently on the German front of the HETA/Hypo story, Bauer reports, as the recent court hearing in Frankfurt has not yet resulted in a decision. There is one erroneous detail being floated around that the DLA Piper Partner would like to correct: “Unlike what many are saying, it is not the case that if the German claim is successful, insolvency will automatically follow, as HETA still has a lot of defenses.” He argues that it is not possible to really enforce any claims on HETA since that enforcement would directly clash with the goal of the EU Directive on the resolution of banks, which is to avoid situations in which some investors recover their full shares while others don’t. He explains: “They all need to be treated equally, so I don’t see how that would be enforced.”

    Concern about investor-state disputes are also in the spotlight in Austria, according to Bauer, both because of a current (and what he describes as a “huge”) ICSID arbitration going on in Washington resulting from a claim of the owners of Meinl Bank, and because there is a lot of “fear” over the proposed Transatlantic Trade and Investment Partnership. Bauer believes both concerns are exaggerated: “First, if the new agreement with Canada is to come into force, US companies will simply be able to use their Canadian subsidiaries to sue European states, so, really, the feared risks can happen anyway. Second, one needs to consider what the alternative is: to bring a claim in front of local courts, which is difficult for any investor, may it be a Romanian, French, or so on. I mean, if you invest in Saudi Arabia and then your investment goes bust due to unfair changes locally and you expect to be able to claim your money in Saudi courts, Good luck!” At the end of the day, he says, “what’s proposed is a well-established system that simply works, and, really, many times, if not in most cases, investors lose their case, so I find many of the concerns floated around as unfounded.”

    Thank you!

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

    • Aleksandar Sajic, Managing Partner of Law Firm Sajic 
    • Aleksej Miskovic, Partner at Glinska & Miskovic
    • Alexandra Doytchinova, Managing Partner of Schoenherr
    • Bogdan Papandopol, Partner at Dentons 
    • David Christian Bauer, Country Managing Partner of DLA Piper 
    • Irmantas Norkus, Managing Partner of Cobalt
    • Martin Tamme, Managing Partner of Varul
    • Natalia Kochergina, Head of Real Estate at DLA Piper
    • Vid Kobe, Partner at Schoenherr
    • Erik Steger, Partner at Wolf Theiss

    This Article was originally published in Issue 3.2 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.