Category: The Buzz

Belarus — squeezed as it is uncomfortably between Ukraine and Russia both geographically and economically — 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 affects of foreign sanctions, imposed on Russia as 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 at least. As a result, and in light of the circumstances in which all three countries find themselves, he sighs, the Belarusian economy and market overall standing, 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 declared approximately 4% drop 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 IT industry, including Facebook’s acquisition of Belarusian app developer Masquerade Technologies (which his office advised on) as a significant deal, as “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 and 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 Belinvestbank (the country’s fourth largest) contemplated privatization 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 to various infrastructure projects anticipated as well, 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.”

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.

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 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 affect 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), but 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.”

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.

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

According to the letter, Karanovic was expelled based on Article 83 1/9 of Serbia’s Law on Advocacy because he was enrolled as 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 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 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,” Karanovic added. 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 CEE Legal Matters’ multiple invitations to comment.

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.

Although 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 a slower for many law firms in Turkey, primarily because of the political environment, 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’etat 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 is not suffering as much as the market was expecting. Only one of Esin’s M&A deals was put on hold — and that was at a very early stage to begin with — and he 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 believed by the Turkish government to have masterminded 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 says the coup attempt has in many respects brought the Turkish people together, as he claims that “almost everyone was against the attempt to remove a democratically elected government by force, regardless of individual political views.” The fact that even many Turkish people 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 time of writing. Clients are now in a wait-and-see mode, he said — 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 cancelled; 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 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.”

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.

Law firm business is decent in Kosovo, according to Visar Ramaj, the Managing Partner of Ramaj & Palushi, but it’s currently mainly 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 an increasingly active tax administration and regulatory agencies.

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

Improving Legal Framework

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, which digitalized and simplified 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 Americans 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 the major projects happening which 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 it into what Ramaj described as “a major failure to the country.” The resulting dispute is now before ICSID arbitration panel.

Still, Ramaj emphasized, there were 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 mineable resources, Ramaj reported, including coal, lead, etc. The Government has initiated a feasibility study to see whether Trepca requires reorganization or liquidation, and 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 was 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 was passed accepting the loan 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 for 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.”

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.