Category: Issue 11.3

Ten years have passed since the day I picked up my diploma and embarked on my professional journey as a lawyer. Right from the start, I’ve been working for law firms deeply rooted in the region, offering continuous opportunities to collaborate with colleagues from different areas, engage in cross-border projects throughout CEE, share experiences, and, most importantly, observe the landscape in which we operate. While the past decade has shaped my own growth, it’s also been – in my view – a period of remarkable transformation for lawyering in CEE.

One of the main segments that I’ve noticed has changed throughout the years is simply the workforce marketplace. At the time I started my career, there was fierce competition among law graduates, all striving for positions in firms where we could both professionally grow and earn a salary. Today, a noticeable decline in the number of individuals opting for a law career is evident, and finding an adequate associate has become a challenge. Beyond still typically modest salaries, there is at least one more circumstance contributing to this situation: unlike other professions that have embraced a more balanced lifestyle, the legal sphere still clings to a culture where success is often correlated with extended working hours. Such a mindset has given rise to a surge in professional burnout as lawyers push themselves tirelessly to meet the demands of their roles and partners’ high-level expectations. Interestingly, such a mindset often transcends mere responses to external pressures; rather, it is fueled by an inner passion that we have for helping clients as we would help ourselves, even if it backfires as a burnout – it’s a glitch successfully surviving in the genes of each person who loves their work.

Legal work has changed as well, and I believe this applies worldwide. The comfortable focus on purely legal matters and completing tasks has now expanded to constant consideration of challenges such as those imposed by the usage of AI, sophisticated in-house teams, and the rising desire of clients to keep industry-specific professionals under one roof. Being “only” a lawyer is often not enough anymore; we are supposed to act as equipped business advisors and have a strong multi-disciplinary character.

We even dress differently. Once, a tie was a symbol of professionalism but today, if we need to dress up, it is acceptable to show up in jeans and a blazer, wearing sneakers. As work demands and professional challenges rise, physical appearance becomes more relaxed. Sometimes, thanks to virtual skills developed during the COVID-19 times, we are not required to dress up at all.

Despite all the challenges, I would say that in the past ten years of my experience, the perception of lawyering in CEE has drastically transformed. Most importantly, I have a feeling that we have gained more respect from our Western colleagues. In the past, teaming up with international law firms (usually involving merely locally supporting their large international clients) gave off a vibe as if we were the underdogs. There was a subtle skepticism, making it seem like their advice was a notch above, their templates more sophisticated, and our English-language skills could use a second look. Sometimes, it felt like they really believed that, in addition to the client, they needed to advise us as well. That was especially obvious at the associate level. 

Since then, things have taken a turn, and lawyering in the CEE has evolved. We’ve demonstrated our capabilities, refined our expertise, and now find ourselves on equal terms. Even the power centers are being reshaped and cities such as Zagreb and Belgrade emerge as legal hubs for large clients, challenging the traditional dominance of Vienna or Prague.

What changed for me personally is that most of my mentors through the years have become my true friends (Dora Gazi Kovacevic, Ira Peric Ostojic, Tarja Krehic, and others). I have met one of the most significant people in my life (Katarina Kezic) and learned to depart from my former law firm, with a quote shared by likely the most inspiring amongst us (thanks, Ron Given): the award for doing good is the opportunity to do it better. And I know it for sure: the next ten years, during which I will hopefully still be lawyering in the CEE, will be awesome.

By Ivan Zornada, Attorney-at-Law, Vrtaric and Partners in cooperation with Deloitte Legal

This article was originally published in Issue 11.3 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

On February 29, 2024, energy experts from Bulgaria, Croatia, Moldova, Turkiye, and Ukraine sat down for a virtual round table moderated by CEE Legal Matters Managing Editor Radu Cotarcea to discuss the key developments in the field of oil & gas over the past few years.

Round Table Participants:

• Dmytro Fedoruk, Partner, Redcliffe Partners
• Kostadin Sirleshtov, Managing Partner, CMS
• Marin Curic, Senior Associate, Marohnic, Tomek & Gjoic
• Sorin Dolea, Managing Partner, Dolea & Co
• Zahide Altunbas Sancak, Partner, Guleryuz Partners

CEELM: Let’s start with the elephant in the room: The words “energy” and “crisis” have been going hand in hand for the last couple of years. In your jurisdiction, to what extent is the energy crisis behind us?

Fedoruk: As you are aware, there has been a significant escalation in military attacks on Ukraine’s energy infrastructure during the past two winters. With investments from multiple donors and the private sector, along with extensive campaigns in the country’s history, the government has intensified passive defense measures to safeguard energy sources. However, approximately 50% of the energy infrastructure has suffered damage, leading to a slowdown in the country’s economy and a decrease in oil & gas consumption. Notably, around 70% of wind farms are situated in territories now occupied, including the Zaporizhzhia region.

Initially, Russia targeted energy facilities, seizing the Zaporizhzhia nuclear power plant, disconnecting the energy grid, and occupying over 60% of coal and gas deposits. In response, the government swiftly prohibited natural gas exports to ensure sufficient reserves within the country. Efforts were also made to bolster domestic production and integrate Ukraine’s power grid with the European network, resulting in enhanced security, both militarily and within energy systems. Nevertheless, the situation remains chaotic, with the government striving to ensure the sustainability of energy systems amidst ongoing challenges.

Sirleshtov: As for Bulgaria, if we define the energy crisis by the increased prices of oil, gas, and electricity from 2022 to 2023, it appears that this crisis has subsided as prices have stabilized. However, its effects continue to impact us. To mitigate these effects, the Bulgarian government took proactive measures during the crisis, accelerating the development of an interconnector with Greece. Notably, we successfully completed the Balkan Stream project, connecting energy streams from Turkiye to the rest of the Balkans, and recently finalized the interconnector with Serbia. Throughout the so-called crisis period, interestingly, the Bulgarian energy sector experienced benefits from high energy prices due to the increased export of electricity in the region. However, in recent years, there has been a notable shift to renewables investments with the installation of 2 gigawatts of solar energy capacity just last year.

Dolea: In Moldova, aside from electricity, the energy crisis is still lingering. However, amidst this ongoing challenge, we’ve learned valuable lessons on the need to diversify away from Russian gas dependency. The Iasi-Ungheni-Chisinau gas pipeline has been instrumental in reshaping our energy import strategy. From a security standpoint, the crisis persists, but in terms of embracing alternative energy sources, it appears that the worst may be behind us.

Altunbas Sancak: Unlike many EU countries, we do not directly feel the impact of the energy crisis due to Turkiye persisting in purchasing gas from Russia despite our support for Ukraine. However, we do experience an energy crisis in terms of prices, primarily due to fluctuations in the Turkish lira. While we cannot claim that the crisis is completely resolved, the country has been actively taking steps, particularly in the renewable energy sector, to mitigate the situation and reduce energy costs.

Curic: For Croatia, although wholesale oil & gas prices are nearing pre-crisis levels, the crisis persists. The government continues subsidizing retail electricity, oil, and gas prices, particularly for households and small to medium-sized enterprises. Efforts to reduce subsidies are underway through energy efficiency initiatives. Additionally, there has been a notable increase in regulatory measures intended to facilitate the development of renewables, particularly photovoltaic plants, especially in the spatial planning framework. However, these investments face challenges due to conflicting regulations in other sectors, indicating potential deliberate government obstruction to new developments, with certain companies receiving preferential treatment. Overall, households, construction, and energy sectors are significantly affected.

CEELM: What are the current domestic outputs from oil & gas, and how has your country’s dependency on imports evolved over the past five years? What are the main connectors currently in place?

Sirleshtov: Clearly, Bulgaria remains heavily reliant on imported foreign gas. Despite the lessons of the 2009 crisis, the concept of interconnectedness became widely acknowledged, yet tangible progress was lacking. Presently, Bulgaria has established gas interconnections with Greece, Serbia, Romania, and Turkiye. Domestic natural gas production in Bulgaria is extremely limited, with only a small amount of onshore and offshore production from the Galata and Pleven fields, accounting for less than 1% of the domestic consumption. We rely entirely on oil imports, which have seen a somewhat negative trend over the past five years. Previously, the Galata field in the Black Sea contributed up to 15% of consumption, but this has since collapsed due to depleted fields and minimal investments.

Dolea: As for Moldova, there’s absolutely no domestic production, none at all. Consequently, we are entirely dependent on imports. Especially regarding oil & gas, we faced a significant challenge before 2015, as we solely relied on one pipeline from Eastern Ukraine. However, in 2015, the addition of another pipeline from Romania proved instrumental in overcoming the crisis. We have learned a lesson, hopefully, as it would be highly tragic for Moldova to have only one route for gas imports going forward.

Altunbas Sancak: The main weakness of the sector has consistently been Turkiye’s significant reliance on energy imports, particularly oil & gas. This dependency made it unfeasible for the country to reduce gas imports. Consequently, for Turkiye, the impacts of energy imports have been escalating, with currency fluctuations posing the most significant challenge. For example, energy imports in 2021 surged by 7.2 billion to reach 41 billion cubit meters, highlighting the country’s predominant challenge and weakness in its reliance on oil & gas imports. Turkiye has limited domestic resources in terms of oil & gas, with almost 100% dependency on other countries. Nevertheless, the country is actively involved in connecting with neighboring nations through various cross-border projects, which is a promising development.

Curic: Like its neighboring countries, Croatia has a high dependency on oil, making it one of the most reliant EU member states in this regard. The construction of the LNG terminal at the island of Krk aimed to mitigate Croatia’s gas dependence, however, its capacity needs to be augmented in the upcoming years, necessitating substantial capital investments. Croatia does have domestic production in both oil & gas, but the most recent license for hydrocarbon exploration was issued in 2016, and these projects are yet to commence commercial production. During the energy crisis, the lack of domestic projects and declining domestic production have been evident every year. With the introduction of these new projects, domestic production may potentially rise to around 40%. Additionally, a new floating LNG terminal was constructed in 2017, initially considered a security asset, but its importance has significantly increased following the war in Ukraine, not just for Croatia but for regional consumption.

Fedoruk: I’d say that most of the challenges, primarily stemming from the war, have been addressed earlier. Despite the ongoing conflict, there remains some foreign investor interest in Ukraine’s oil & gas sector. Additionally, new ventures have been initiated by Ukrainian state-owned companies. However, centralized oversight is required to manage these developments effectively.

The positive aspect is that natural gas production reaches 18 billion cubic meters, nearly satisfying the entire domestic demand. However, the Ukrainian oil refinery industry has suffered catastrophic damage, and Ukraine is almost entirely dependent on imported petroleum products. The government aimed for energy independence by 2020, but this goal wasn’t achieved. Following the war, however, Ukraine largely made steps toward energy independence due to the destruction inflicted by Russians on refineries in Odesa and other key facilities. Although this presents challenges, there are opportunities ahead.

CEELM: What have been the main/largest new oil & gas production projects in your country in the last five years? And what is in the works?

Fedoruk: Before the war, there was significant activity focused on achieving energy self-sufficiency. The approach involved attracting international investors through production-sharing agreements – a strategy also pursued by Croatia. A major tender was held in Ukraine, which saw relative success. Exploration was poised to commence. Apart from the production-sharing agreements, there was a novel concept called production enhancement contracts. Under this scheme, companies with significant carbon output would tender certain areas, establish baselines, and share profits beyond those levels. This concept garnered attention, particularly when a Romanian company with French connections won the tender and signed the pact.

However, all progress has been halted, except for a significant ongoing auction organized by Ukrnafta, a Ukrainian state-owned company. They are seeking foreign partners to develop oil & gas projects jointly. The outcome of this auction remains uncertain, as it is unclear how much interest it will attract. While attempts are being made, there is a sense of skepticism prevailing among stakeholders.

Altunbas Sancak: In Turkiye, we have the primary link through its state-owned entity, Petroleum Pipeline Corporation (BOTAS), which oversees the two existing NLG terminals. Additionally, numerous international oil & gas endeavors have been successfully concluded, such as the crude oil pipeline, the Turkiye-Greece pipeline, TANAP (Trans Anatolian Pipeline Project), and the TurkStream project. TANAP, which connects to the BOTAS transmission network, began delivering natural gas to Turkiye in June 2018, with an inauguration ceremony for its European connection held on November 30, 2019, marking the start of natural gas supply to Europe in 2020. The TurkStream project, consisting of two pipelines each with a capacity of 15.75 billion cubic meters, connects Russia to Turkiye and extends gas transport to Europe. The offshore section, crossing the Black Sea, was completed in November 2018, and gas flow to Turkiye began at the beginning of 2020.  Moreover, several projects are currently in progress, including the Nakhchivan gas pipeline, alongside several independent ventures spanning the continent.

Dolea: In short, over the past decade, significant developments have included the establishment of a high-pressure pipeline linking between Moldova and Romania and ongoing efforts to expand the power network. Notable projects include the recent experimentation with reversing the flow of the Trans-Balkan Pipeline, aimed at importing gas to southern Moldova from Ukraine. However, there have been no major projects in the realm of oil & gas during this period.

Curic: Currently, the most significant undertaking in the Croatian oil industry is the modernization of the oil refinery in Rijeka, overseen by the Croatian national oil company and its Hungarian co-owner, MOL. This project includes the installation of a delayed cocking unit, with a total value of EUR 650 million, scheduled for completion this year. Additionally, planned projects involve an increase of the capacity of the LNG terminal to 3.6 billion cubic meters per annum, which will require a major overhaul of the gas transport network, estimated at around EUR 400 million, aimed at connecting Hungary and Slovenia.

Sirleshtov: Regarding upstream projects, the most promising endeavor is the Han Asparuh offshore project in the Black Sea, specifically after the Neptun discovery in Romania. Notably, OMV has made an investment decision in Neptun, primarily for export by OMV Export. Although the Han Asparuh field has been awarded and three wells have been drilled, only a small oil discovery has been made, which is not significant. However, this year marks the drilling of the fourth well, which holds more promise due to recent discoveries. Onshore, there’s a peculiar situation where the largest oil & gas project developed by an American investor didn’t receive support from the government for the Vratsa East block. Despite this setback for the Han Tervel deep offshore block, there’s hope that the project will proceed, especially with the anticipated adjustments in light of the Turkish discovery in the Black Sea. The Han Kubrat block, previously awarded to Shell, has garnered considerable recent interest, especially after the Turkish discovery, making it more lucrative.

CEELM: How difficult is it to secure new production/exploration rights? Is state participation mandatory?

Sirleshtov: In Bulgaria, there is no mandatory participation, but in recent years, the state has displayed a growing inclination toward involvement. One prevalent issue we encounter here, though not the most extreme case, is the presence of multiple agreements rather than a unified one. If an issue arises, one must demonstrate commercial viability separately for each agreement. Consolidating these agreements into one would be beneficial for future operations.

Altunbas Sancak: There exists extensive regulation concerning private energy projects, with Turkiye consistently showcasing a welcoming stance toward robust investments in energy sources by the state. Typically, such investments are structured around specific intergovernmental agreements, prioritizing international agreements over local legislation. Moreover, there’s no obligatory state participation mandated. However, the government reserves the right to decide on participation, often making strategic decisions, particularly concerning BOTAS, a state-owned company. Regarding renewables, neither mandatory nor strategic participation is enforced, except in petroleum legislation where the government holds discretion over projects involving petroleum discovery and sales under particular circumstances. 

Dolea: As I mentioned earlier, since there is no production in Moldova, there are no relevant acts in place.

Curic: New projects appear to be unfeasible due to insufficient government awareness and strong opposition from local communities. The last licenses were awarded in 2016, and governmental participation is compulsory, with all hydrocarbons being owned by the Republic of Croatia, for both exploration and production.

Fedoruk: You don’t require approval for the first option, while the second involves obtaining a license, particularly suitable for smaller-scale projects. This process is straightforward and transparent, conducted through an electronic auction open to all. Production sharing agreements, as exemplified by the recent projects, can be cumbersome and time-consuming to negotiate properly. However, aside from production-sharing agreements, there is no compulsory state participation. In such cases, the state participates by receiving license fees.

CEELM: The Green Deal and ESG push have taken a bit of the shine away from the oil & gas sector. To what extent is this statement true in your jurisdiction? What would be the main caveats?

Sirleshtov: Currently, we’re witnessing an increasing number of international institutions aligning with the coal phase-out, but this is just one aspect of the broader issue. Generally, the trajectory appears clear: a shift toward renewables and nuclear energy.

However, for countries like ours, this journey may be fraught with challenges as governments grapple with regulating non-traditional energy sources. Personally, I predict that there will come a time when the importance of gas will resurface. Nonetheless, the key lies in how swiftly and reliably we can navigate this transition.

Fedoruk: In Ukraine, significant investments were made in constructing facilities for the European grid, but unfortunately, many of them are not operational. However, the situation isn’t entirely bleak – there is hope for improvement. Despite the substantial development of renewable energy, the country’s focus is primarily on ESG priorities. However, the ongoing conflict has necessitated attention to other pressing matters.

Dolea: In general, Moldova has ratified the EU Association Agreement and is now a candidate for EU membership. However, its infrastructure is still not adequately prepared to transition away from oil & gas as primary sources of energy. In reality, this remains a pressing issue, and it will take many years to effectively implement all the legal requirements into practical action.

Altunbas Sancak: I would say that despite the increasing emphasis on renewable energy and Turkiye’s participation in the Paris Climate Agreement’s green initiatives, the reality remains that oil & gas still play a significant role. While I acknowledge the necessity for diversifying our energy sources, it’s important to recognize that nuclear power construction is also underway, posing challenges for many nations. Balancing ESG considerations alongside the goals of the Green Deal presents additional challenges for oil & gas projects.

Curic: The Green Deal and ESG initiatives have diverted some attention from oil & gas in Croatia. However, due to Croatia’s strategic geographical position and the beneficial LNG terminal for neighboring countries, oil & gas remain a focal point. Moreover, with plans to increase its capacity and introduce new interconnectors, oil & gas are anticipated to maintain a significant role.

CEELM: What would be one item on your wish list regarding the development of oil & gas in your jurisdiction?

Sirleshtov: For me, a stability clause, particularly regarding the tax regime, would serve as a strong incentive. What investors require assurance of is that once they commit their investment, they can be confident of stability throughout the duration of the project.

Curic: The issuance of new licenses and the initiation of new projects are crucial for enhancing domestic energy production in Croatia.

Altunbas Sancak: It’s improbable that all energy supplies will transition toward the Green Deal, as they would undoubtedly find a solution, but currently, we’re no closer to achieving this goal.

Fedoruk: We just need peace. Everything else is secondary.

This article was originally published in Issue 11.3 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

In The Corner Office, we ask Managing Partners at law firms across Central and Eastern Europe about their backgrounds, strategies, and responsibilities. While in the legal field maintaining client relationships is vital, there are occasions when law firms must end engagements. To explore some of the reasons that might lead to this, we asked: After accepting mandates, what have been the main reasons for which you ended up having to drop clients?

Kostadin Sirleshtov, Managing Partner, CMS Sofia: Sanctions are the primary reason why we had to drop existing clients. Especially since February 2022, this has been a complex and very important matter. Pre-merger consultations are the second reason for dropping existing clients. Not so long ago, CMS completed the largest three-law-firms merger in the UK’s legal history (the merger between CMS Cameron McKenna, Nabarro, and Olswang) and, as a result, we had to drop the largest of our CMS Sofia existing clients at the time – it just so happened that, otherwise, we would have CMS acting for both parties in a complex litigation in London. Seldom, we are forced to terminate existing client relationships where payments are either never coming or are consistently delayed. We normally show understanding to clients who are late with their fees, but following the terms of the engagement is an important element of every client relationship. In extreme cases, we are forced to terminate existing relationships in cases where our gross margin does not make any commercial sense or is negative as a result of various factors.

Nenad Cvjeticanin, Managing Partner, Cvjeticanin & Partners: One common issue is a misalignment of expectations. Despite our best efforts to communicate clearly and set realistic goals at the outset, sometimes clients have unreasonable expectations or demand outcomes that are not feasible within legal constraints. When it becomes apparent that we cannot meet these expectations, despite our efforts to manage them, it may be necessary to part ways.

Another recurring challenge is non-compliance or refusal to adhere to legal advice. Our role as legal advisors is to provide sound guidance based on our expertise and knowledge of the law. However, if a client consistently disregards our advice, engages in unethical practices, or refuses to comply with legal requirements, it compromises our ability to represent them effectively and ethically. In such cases, we have no choice but to terminate the relationship to protect the integrity of our firm and uphold legal standards.

Additionally, financial issues can strain the client-lawyer relationship. Despite our best efforts to establish clear fee arrangements and communicate transparently about costs, some clients may struggle to fulfill their financial obligations. This can create tension and resentment, particularly if the client disputes the fees or refuses to pay for services rendered. While we strive to work with clients to find mutually acceptable solutions, persistent non-payment or disputes over fees may ultimately lead to the termination of the relationship.

Bernhard Hager, Managing Partner, Eversheds Sutherland Slovakia: Dropping clients after onboarding is a rare moment in our professional life. When it happened, it was for ethical reasons or because of a different understanding of our agreed scope of work and remuneration. As to ethical reasons, we stopped working for a client because the client was not willing to discuss our concerns regarding AML, tax evasion, or bribery. We have only experienced such discussions with a few, rather small clients. Other issues are discussions about the scope of work and caps. When clients try to extend the scope without increasing the cap, this might lead to the termination of our legal work. As mentioned in the beginning, it was a rather rare event – in almost all cases we settled such issues on good terms.

Ivana Ruzicic, Managing Partner, PR Legal: Although we conduct a thorough initial vetting process, instances where we have had to part ways with clients typically stem from a fundamental misalignment of values, expectations, or communication styles.

The legal profession thrives on a deeply personal and trusting relationship between attorney and client, necessitating a certain level of compatibility in sensibilities. When this synergy is lacking, it becomes evident that the representation or collaboration with such clients is unsustainable.

We pride ourselves on cultivating close relationships with our clients, built on trust and mutual respect. However, in rare instances where trust is compromised or absent, we do not hesitate to terminate the relationship. Over our firm’s history, such occurrences have been minimal, underscoring our commitment to maintaining a high standard of client satisfaction and ethical conduct.

Timur Bondaryev, Managing Partner, Arzinger: While onboarding the client, the firm has various angles to consider, all of which are really crucial. There is a regulatory angle, which has become much more serious and important recently following the Russian invasion of Ukraine. Apart from the usual conflict check, KYC & compliance prescriptions, a heavily extended sanctions network has largely contributed to the onboarding routine to ensure that the potential matter doesn’t create sanctions complications for the persons involved. While mentioning conflict check, it should be specifically emphasized, that not only actual but also potential conflicts are being carefully considered, while evaluating the case. An important premise for cooperation is the profitability of the client/project, which should be ensured all along the lifecycle of the project. Finally, the reputational angle has always been quite an important one in the onboarding process and its “weight” in the overall onboarding process has become increasingly serious in the course of the last years. Even if the client/matter looks very fine from a regulatory, conflict check standpoint and is very financially viable, it may be rejected for reputational reasons. In practical terms, for instance, the Russian business of a potential client can trigger rejection or dropping the client.

Should some of these premises/angles change after the client is onboarded, we can initiate the “dissolution of our relationship,” – respective covenants are part of our engagement letter. For instance, when we find out, that despite the public statements of the client about its intention to leave Russia, i.e., seize cooperation with the defense sector of the latter, the client keeps expanding business in the country, we can drop the matter.

Pavel Dejl, Managing Partner, Kocian Solc Balastik: As our founder and former IBA president Martin Solc once said: lawyers are known and valued not only for the work they do but also for work they do not do. To my knowledge, we have ended our work for a long-standing client only twice in the whole history of our law firm, with the second case being just immediately following Russia’s invasion of Ukraine. In response to such unprecedented aggression, and having in mind our own country’s terrible experience from 1968, we took the unanimous decision – even before any official sanctions had been approved – to terminate our relationship with a long-established client (a Czech entity) who was affiliated with the Russian state, recognizing the unacceptable risk for us of its potential financing of the conflict and Russian invasion. These decisions were guided by our commitment to ethical considerations and global responsibility, and emphasize the importance of lawyers demonstrating principled conduct in their professional engagements.

Pal Jalsovszky, Managing Partner, Jalsovszky: Luckily, such circumstances occur rarely in our practice. But they do happen sometimes. Each event is different though so it is difficult to find patterns among them. In the last couple of years, we have already terminated mandates with clients due to the non-settlement of our previous invoices. We also stopped working for a client when we received an unethical request from their side. But it also happened that we found ourselves in a conflict situation after having started to work for a client (and we found ourselves advising on a dispute where the counterparty was another client of ours). In all such cases, termination is a delicate issue. We endeavor to maintain a good business relationship with our ex-clients and, if reasonable, suggest another law firm replacing us.

Janos Rausch, Managing Partner, Ban, S. Szabo, Rausch & Partners: It would be ideal if we could state that our law firm can pride itself on never having to sever ties with any client. It is extremely rare that we must let a client go, because our professional relationship with our clients, is built on the solid foundation of mutual respect, clear communication, and often shared values. We conduct thorough initial consultations to ensure alignment in goals and expectations, setting the stage for a successful attorney-client relationship. But beyond the initial vetting, what truly defines a “good” client, and how both parties can work together to build a harmonious and effective partnership? We are looking for clients who do not withhold information, recognizing that transparency is key to allowing their legal team to provide the best advice. They ideally understand the legal process, respect the expertise of their lawyers, and have realistic expectations about outcomes. Obviously, it also helps if the client pays the bills.

This article was originally published in Issue 11.3 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

In our Looking In series, we talk to Partners from outside CEE who are keeping an eye on the region (and often pop up in our deal ticker) to learn how they perceive CEE markets and their evolution. For this issue, we sat down with Addleshaw Goddard Partners Markus Perkams from Frankfurt and Alex Hogarth from London.

CEELM: What was your first interaction with the CEE region?

Perkams: My father’s family comes from the Baltics. My mom studied CEE history, and we traveled a lot in the East as tourists, even losing our passports there once! Work-wise, as a young Associate, I worked on a big international arbitration in the gas sector with a state-owned entity as the defendant, which was a departure from the everyday disputes for a German commercial lawyer. To this day, I still focus on disputes – state court and arbitration/investment treaties.

Hogarth: I had the pleasure of traveling across a significant part of the region as a student many years ago and studying the politics of CEE as part of my master’s degree in international relations. My first interaction from a work perspective came as a trainee in 2010 working on high-profile litigation in England over the ownership of CEE-based natural resources. Since that time, I’ve worked regularly on CEE-related disputes, be that for non-CEE clients with cross-border elements into the region or, increasingly, working for CEE clients on cross-border disputes outside the region. We co-counsel regularly with CEE firms, including, for example, on reciprocal enforcement of judgments, and very much enjoy doing so and learning more about the region as we go. As co-head of our Airports & Aviation Group, we’re also doing a lot of work with CEE-based airlines which continue to go from strength to strength despite challenging sector conditions.

CEELM: As for the current pipeline, what has been keeping you busy in the last 12 months?

Perkams: The first is Ukraine-related work, focusing on how Russia can be brought to justice for the harm done to Ukrainian businesses, mainly by way of claims based on the Ukraine-Russia Bilateral Investment Treaty.  This obviously involves questions of third-party funding and enforcement scenarios in the future.

It’s also important to note that it’s not just about Russia but also about rebuilding the country and bringing in FDI to ensure that the money needed is there, as well as advising on protecting those investments – the best disputes advice is on the prevention of disputes.

Second, ordinary commercial disputes in the regions have been developing similarly to Western jurisdictions over the last 4-5 years, particularly disputes in the automotive and energy sectors in terms of the ongoing transitions – e-cars and climate change more generally. The German automotive industry is strong in the region, and many suppliers in CEE face the same set of problems (either as subsidiaries or suppliers).

Hogarth: The region suffers from the same market challenges faced by the rest of the global economy, including high interest rates, inflation, and, of course, the political and economic uncertainty caused by the Russian invasion of Ukraine. That said, CEE businesses have continued to invest and grow. At the same time, CEE states have continued to incentivize FDI, in particular from the Middle East into domestic infrastructure projects and assets (e.g., airports). It may be depressing for some to read, but with business-related uncertainty come disputes. In particular, in the last 12 months, we’ve been kept busy on supply chain, technology and licensing, and M&A and joint venture disputes.

CEELM: How has London’s role in CEE evolved over time, and what is it now?

Hogarth: We’re lucky that a significant number of contracts for CEE businesses are governed by English law and subject to the jurisdiction of English Courts. As a result, London firms remain busy in the region. As much as we might want to, we cannot ignore Brexit. The benefits of resolving disputes in England remain, but how Brexit ultimately impacts the enforcement of English judgments abroad, and the speed at which that can be done, will be an important factor in London maintaining its prized position as one of the go-to global disputes centers.

Perkams: There’s a difference between the economic outlook and the legal perspective. In many jurisdictions, the German economy is still the biggest investor and will continue to be for a long time, despite Asian investors coming in. The more international the region becomes, the more opportunities there will be for the German industry as well. CEE is very important not just as an export market but also as a place of production.

The CEE workforce is still very skilled, making it easy for German companies to set up shop there or pick up plants and benefit from the workforce and take advantage of some of the strategic aspects of the region. It is a region that is politically stable and safe – a firmly established part of the EU – all of which is very good for the German economy, which will continue to play a critical role in the region, in particular now as supply chains are brought back closer to Germany.

Also, German law has played a significant role in the modernization of local law, obviously benefiting the German economy. In the ’90s, we saw a lot of German firms going into the region. Now, the legal market is consolidating, many firms are moving out, the quality of local lawyers has grown considerably, and many regional firms have established themselves in solid positions. It’s essential for us to cooperate with them, and there’s no longer a big market that only belongs to international players.

The advantages of a post-Brexit reality to commercialize German courts are not really materializing; there are always language barriers – English is the language of finance, and people are still used to using English law templates. I don’t think German law will be in a position to challenge English law any time soon, though because German businesses investing in the region tend to prefer German law as the applicable law and German courts to handle disputes, German law will always play a certain role in the market.

CEELM: What is your perspective on internationals in CEE – how will their presence evolve?

Perkams: The market is by now quite consolidated. Those already there will likely continue to be, but I would be surprised by new firms opening up offices. The markets are comparatively small, and you have a high degree of quality. You also have a lot of partner-levels by now who are foreign-trained and educated on the ground. In my opinion, the firms present will stay, but I’d be surprised to see many new investments.

Hogarth: I agree with Markus. I think it would be a bold move for an international firm without an established presence in the CEE to set up in the region. Competing against the strength and quality of the established CEE firms seems risky with little realization of upside in the medium term. Much more likely we’ll see further consolidation and expansion of local CEE firms both within the region and beyond.

Perkams: We see local/regional firms as partners. We give them work concerning Western companies and get work back from them. This is a trend we currently see growing despite troubling times. Also, there’s no real need for locals to tie up anymore and give up their competitive advantage to actively seek merger opportunities.

CEELM: Where do you see the most activity in the next 12 months?

Hogarth: The expectation from CEE-based businesses and law firms is that there will be an uptick in activity as the economic headwinds of recent years begin to subside.  I think Hungary will continue to perform well economically. Its mix of strong-performing domestic-based companies alongside the potential for further and significant FDI should mean it remains a buoyant market. From a sector perspective, across the region, infrastructure and energy will no doubt continue to be a source of investment and growth as will the technology sector in which the region continues to be market-leading in a number of respects.

Perkams: My thinking is very much the same. Beyond focusing on Ukraine for the reasons already mentioned, I expect that the Czech Republic will keep us busy because there are many German investors there, and they see many of the same challenges as in Germany. I would be surprised not to see a surge in disputes there as a result. I’d also keep an eye on Poland – the new government has led to a renewed interest. It’s one of the largest economies in the region and is quite keen on renewables.

This article was originally published in Issue 11.3 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Heralded as a cornerstone of the national economy, the Hungarian automotive sector faces significant challenges but also promising opportunities. Baker McKenzie Partner Zoltan Hegymegi-Barakonyi, Lakatos, Koves & Partners Partner Adam Mattyus, Szecskay Senior Partner Judit Budai, and Kinstellar Sector Head and Senior Counsel Akos Nagy take a deep dive into the sector’s status amidst a backdrop of labor shortages, geopolitical shifts, and the government’s concerted efforts to continue growth and maintain global competitiveness.

Still the Biggest Driver of the Economy

The “In Hungary, vehicle production is still one of the most important sectors, accounting for 25% of manufacturing output according to the data of the Hungarian Statistics Office,” Budai begins. “The automotive sector accounts for 90% of Hungary’s exports. The main destinations are Germany, the UK, France, and Italy – this justifies Hungary’s position as a suitable hub for the whole of Europe with its well-established road and communication networks and warehouses,” she explains.

Furthermore, she reports that, in 2023, “the automotive sector in Hungary employed around 100,000 people and was responsible for generating 20% of the national GDP. This is still impressive, although the sector – mainly due to COVID-19 – has been in decline since 2019 when we saw a record production level of automobiles.” According to Budai, in “recent months, German industry has reduced production, so the Hungarian export that serves this segment has slowed down and left over-capacities in Hungary.” Mattyus adds that, by December 2023, “Hungarian manufacturing output had fallen significantly, and so had vehicle production – down by 9% compared to December 2022.” Mattyus highlights the same cause: “This is mainly due to the weakness of the German economy, as Germany remains the most important market for the Hungarian automotive industry, where economic growth has at least stalled in the past year.”

It’s not all bad news though, with Mattyus stressing that “we also need to look at the start-up and expansion of investments in the sector. In this respect, last year was a successful one.” Budai agrees, adding that “significant development is expected from increasing Chinese involvement in Hungary, for example, the ongoing construction of a USD 14 million electric car factory by BYD. EV production attracts key suppliers such as the world’s largest battery producers for electric cars – for instance, Chinese CATL has a USD 7.6 billion factory to supply Mercedes and BMW.”

Moreover, Budai indicates that the strong position of the automotive industry is thanks to “investments of Audi, Mercedes, and BMW, who have their car factories in Hungary and which are in a phase of increased innovation. These OEMs also attract a lot of foreign suppliers, establishing development opportunities for local suppliers.” Additionally, Budai reports that the “Suzuki factory is still a strong performer with a well-established local supply chain.”

“The automotive sector in Hungary has shown resilience amidst recent geopolitical challenges,” Nagy chimes in. While uncertainties have impacted global supply chains, Hungary’s automotive industry has adapted swiftly, he says, “leveraging its diversified market presence. Despite some initial setbacks, production levels have remained stable, albeit with some adjustments in response to supply chain disruptions.”

Such is the strength of the sector that Hegymegi-Barakonyi expects the Hungarian vehicle industry to potentially rise to 30% of the country’s GDP by 2030, “together with the battery production and related investments, which are already significant but continue to grow.”

Workforce Road Bumps

The automotive sector in Hungary, like its counterparts across Eastern Europe, is currently facing a significant workforce challenge. Hegymegi-Barakonyi highlights that “the lack of labor is probably the biggest challenge for car-making companies.” He highlights the dependency on foreign workers due to the insufficient number of Hungarian workers, with one of three car builders in Hungary importing a “skilled workforce from India to meet demand.”

Echoing Hegymegi-Barakonyi, Mattyus identifies the missing workforce as a central challenge: “The huge labor demand of new or expanding factories cannot be satisfied by the labor supply of cities and villages next to the new production plants.” Mattyus adds that the skilled workforce’s preference for higher wages in Western Europe exacerbates the situation. Furthermore, he points out that “the increasing demand for new or expanding factories for energy, which the energy-poor Central European countries can only satisfy with increased investment, also poses a significant challenge. And, we must not forget the environmental protection objections of the population living around the factories, which has already led to lengthy legal battles.”

Budai agrees with both, adding that Hungary’s labor force is getting expensive due to the country’s macroeconomic problems. “The volatile export demand creates production and labor overcapacity, which may create working capital and liquidity difficulties. Therefore, among others, the vehicle industry cannot satisfy wage increase expectations of the labor force to keep up with inflation,” she says. “This creates tensions and increased activity of trade unions stepping up in the interest of salary increases, which increase the risk of OEMs and suppliers dealing with strike threats.” Moreover, Budai says that “new skills are required in line with the increased usage of artificial intelligence, electric vehicle technology, and other automation. Therefore, constant labor force restructuring is necessary, which eventually puts employers in a position where a mass layoff is necessary if the speed of re-education of the labor force cannot follow the technological development needs.”

Overall, “the automotive sector faces multifaceted challenges,” Nagy adds, naming “liquidity constraints, the need for refinancing, and ongoing restructuring efforts,” as the most prominent ones. “Geopolitical uncertainties have intensified these challenges, impacting both domestic and international operations,” he says, while also agreeing that “labor shortages and skills mismatches pose significant obstacles to sustaining production levels.”

Governmental Cruise Control

The Hungarian government has positioned itself as a mediator in the global automotive industry, aiming to transform Hungary into a “meeting point” for Western and Eastern automotive giants, notes Hegymegi-Barakonyi. This vision includes the government supporting a “technological transition, including the production of batteries for electric vehicles and other modern facilities of mobility like ZalaZone for the testing of self-driving vehicles.”

Mattyus provides further insight into the state’s role in fostering the sector’s growth through financial incentives and infrastructural developments, all within the EU’s state aid regulations. “Large investors can count on infrastructure developments that also serve community purposes, such as the construction of railway tracks and highway connections or the establishment of schools teaching in foreign languages,” he outlines. “Furthermore, a separate government body deals with attracting foreign investors and helping them in the course of the implementation of their investments, among other things, by finding sites where investments can be inaugurated, negotiating with local governments, recommending professional advisors.” According to him, qualifying certain projects as investments of “enhanced importance by the government, facilitates the speed up of the licensing processes before the respective authorities. This takes decision-making away from local authorities and is causing political tension.”

This article was originally published in Issue 11.3 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

After eight years with the MET Group, Legal Director Sandor Zorad reflects on the company’s path to international expansion.

CEELM: Tell us a bit about yourself and the career path you took leading up to your current role.

Zorad: I’ve been with the MET Group for eight years now, after my time at Baker McKenzie in Budapest, one of the world’s largest law firms. When I first joined MET, it was much smaller compared to its current size, but it was a significant client of Baker McKenzie, particularly in M&A projects.

At the beginning of my career, I was on the advisory side, but always attracted to the dynamic world of the energy sector. At that time, even if MET was a lot smaller on the international stage, it clearly held promise with its rapid growth and motivated workforce. Now, MET is a truly international company represented in 14 countries in Europe and already established its first subsidiary in Asia, based in Singapore.

In 2016, my first in-house role at MET was working for the freshly established joint venture of MET and Magyar Telekom Nyrt (the Hungarian company of Deutsche Telekom), focusing on natural gas and electricity sales in Hungary. Diving into the period of laying the groundwork for the company, it was a unique experience overseeing not only the merger of two distinct customer portfolios handed over by the two shareholders but also two groups of employees and two different corporate cultures as it was united into one joint venture.

In mid-2017, MET decided to centralize its M&A operations, with the legal team based in Budapest and serving the headquarters in Switzerland where the business team was operating. I transitioned into this centralized M&A team and spent six years supporting MET’s M&A projects mainly on the buyer side, as part of the company’s inorganic growth strategies.

My role evolved over time, transitioning from junior to senior positions and eventually becoming the Legal Director of Western and Eastern European Sales Divisions last October. This move wasn’t just about titles, but it represented a shift in responsibilities. While I still work on selected M&A deals, my focus now includes supervising and supporting companies in seven countries within our divisions, namely Germany, France, Spain, Italy, Romania, Bulgaria, and Turkey, even as I continue to be based in Budapest but work for the Swiss headquarters.

CEELM: What made MET a good client back then?

Zorad: MET has always been highly active in the market, constantly generating new business ideas. Its debut M&A project, the acquisition of a Hungarian gas fire power plant (Dunamenti), stood as a testament to the company’s success. While many energy companies may be perceived as somewhat dull with limited innovation, the MET team has been notably driven and innovative compared to their counterparts.

CEELM: What was the biggest shock when transitioning to the in-house world?

Zorad: Transitioning to the in-house world brought its share of surprises, especially compared to a large international law firm like Baker McKenzie. There, the work you do essentially embodies the product, meaning legal services, that is marketed and sold, whereas, in a company, your work supports other colleagues in conducting business. In a law firm, you serve numerous clients across various industries, whereas as an in-house lawyer, you practically represent and work for one client – the company that employs you. Moving into an in-house role brought me closer to the core of the business, and the depth of engagement with a single client provided a deeper understanding and knowledge base.

CEELM: Over the past year, what has been your main focus?

Zorad: Approximately a year ago, I got involved in a project involving the transfer of a French customer portfolio. This project was particularly intensive as it involved a newly established subsidiary of MET in France with no existing customer base. Subsequently, a significant local player entrusted MET with the takeover of its substantial portfolio of electricity and natural gas customers. The project successfully closed on October 1, 2023, marking the commencement of my collaboration with colleagues in France and also the Western and Eastern European Sales Division. This experience provided me with significant motivation and enthusiasm to transition to my new position as Legal Director within the division.

CEELM: Looking ahead, what do you anticipate keeping you busy in the next 12 months?

The story of MET was that of consistent growth since its inception. My journey with MET has always been dedicated to facilitating this growth. Mostly, my focus was on the legal support of the inorganic expansion through M&A projects. However, looking forward, I am shifting my efforts toward capitalizing on organic growth opportunities.

Since October 1, my responsibilities have expanded to seven countries within Europe, spanning from Spain to Turkey, each presenting unique challenges that form a significant part of my workload. In addition to ongoing operations, MET aims to establish new entities in several countries in the coming years, and navigating these developments while maintaining operational efficiency remains a top priority.

Additionally, I focus on standardizing legal frameworks across regions to streamline processes while maintaining our competitive edge, especially important with the rise of digitalization in the energy sector. MET’s investment in digital platforms emphasizes this strategic shift.

Of course, MET also continues to pursue inorganic growth opportunities – likely through share and portfolio acquisitions within our division as well. While these projects remain very close to my heart, it is necessary to allow my former colleagues in the M&A legal team to take the lead on most of these due to current workload constraints generated by organic growth opportunities.

CEELM: How do you decide if you are outsourcing a project or using internal/in-house resources?

Zorad: When it comes to tasks like transactional M&A, external counsel often becomes necessary due to manpower limitations. For example, assembling a team of 15-20 lawyers within a two-week timeframe for reviewing hundreds or thousands of documents in various languages to prepare a due diligence report is a challenge best addressed by external resources.

Furthermore, engaging local counsel becomes crucial when dealing with legal matters in different jurisdictions. Although I studied law in Hungary and England and have a good understanding of European Union law, my expertise may not be fully applicable to transactions in countries such as France, Italy, Romania, etc.

As a final consideration, there are undoubtedly areas of law where specialized expertise is essential. In such instances, we cannot navigate matters without the guidance of individuals who have invested years in mastering their respective fields. Data protection, regulatory compliance, and competition law serve as a few important examples where having genuine external experts by our side is essential.

CEELM: When selecting external counsel, what criteria do you consider?

Zorad: As I mentioned earlier, the MET Group aims to expand its presence into a few new countries, necessitating efficient legal support. Personal experience with a concrete law firm is usually valuable, but sometimes even factors such as successful cooperation with the firm in one country do not guarantee success in another. In cases where we lack personal experience, we try to evaluate the local teams’ capabilities, often referring to public rankings like Legal 500’s Tier 1 and Tier 2 listings in commercial-corporate, M&A, and energy fields. Organizing introductory calls and checking references are also standard practices, although outcomes can vary. Flexibility is key – we’re prepared to change law firms if needed.

Decision-making is challenging and not always foolproof. Gut feeling plays a role, though it’s not the sole determinant. Budget considerations also matter, but quality, responsiveness, and reliability are more important. For matters like company establishments or smaller operational legal needs, switching firms is relatively straightforward if we do not receive adequate legal support. However, in M&A deals, decisions are more binding since changing counsel mid-project is extremely challenging – you have to most likely stay with the same law firm until the end of the project.

CEELM: What do you anticipate will be the main challenges for MET Group and also GCs in Hungary in the near to mid-term future?

Zorad: The past few years have been exceptionally challenging, with events like the COVID-19 pandemic and geopolitical conflicts significantly disrupting the energy industry. While some companies have managed to weather these storms, others have struggled to survive. The biggest question for everyone is what lies ahead.

Overall, when it comes to the energy crisis that started in 2022, I feel a cautious sense of optimism that the toughest hurdles may now be behind us. However, we still do not know how certain we can be about the future. Navigating this uncertainty will require a different approach and strategy. Lawyers will need to adapt and operate in ways that differ from those employed before, being constantly prepared for significant changes and unexpected events, and maintaining a continuous focus on credit risk management. They must closely monitor regulatory developments and give full legal support to new business ideas. This approach is also crucial to ensure that the ongoing growth story of MET continues along the path established 17 years ago.

This article was originally published in Issue 11.3 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

An in-depth look at Balazs Dominek of Szabo Kelemen & Partners Andersen Attorneys covering his career path, education, and top projects as a lawyer as well as a few insights about him as a manager at work and as a person outside the office.

Career:

• Szabo, Kelemen & Partners Andersen Attorneys; Managing Partner; 2023-Present
• Szabo, Kelemen & Partners Andersen Attorneys; Partner; 2014-2023
• Szabo, Kelemen & Partners Andersen Attorneys; Junior Lawyer; 2010-2014

Education:

• Pazmany Peter Catholic University; Juris Doctorate; 2009
• University of East Anglia; LL.M. in International Competition Law and Policy with Research Methods Training; 2010

Favorites:

• Out-of-office activity: Being and eating outside. BBQ or cooking in a cauldron are obvious matches. I often do these during the weekends with family and friends.
• Quote: “He gives twice who gives promptly” (proverb)
• Book: My Family and Other Animals by Gerald Durrell
• Movie: Star Trek (all)

Top 5 Projects:

• Representing Fundamenta, FHB Bank, and Takarekbank in the BankAdat case and follow-on judicial revision. This was one of the biggest cartel cases in Hungary ever (involving a fine of over HUF 4 billion).
• Advising Corvinus Nemzetkozi Befektetesi Zrt. on the acquisition of Budapest Bank (one of the leading banks of Hungary at that time) from General Electric Capital Group.
• Obtaining merger clearance for MKB-Euroleasing (one of the largest car financing firms in Hungary) and Eurolizing Letet for the acquisition of a car financing portfolio from PSA Group and carve-outs.
• Advising the City of Dunaujvaros regarding its shares in power plants and public utility provider companies;
• Advising Lightware (a global leading DVI company) regarding its internal restructuring and transformation of its channels of distribution involving 30+ jurisdictions.

CEELM: What would you say was the most challenging project you ever worked on and why?

Dominek: It is hard to point out the most challenging project. Challenges might be professional or might relate to time concerns, client relationships, etc. I think the most complex project was the work for the City of Dunaujvaros. It concerned corporate and legal disputes with minority shareholders in several power plants, distance heating suppliers, and other public utility provider companies. There was a deep corporate dispute between the city and minority shareholders spiced with many high-value litigations about breach of contract and torts. We represented the client in 20+ litigations at the same time. Needless to say, all disputes were interconnected, and many involved complex regulatory and civil law issues.

CEELM: And what was your main takeaway from it?

Dominek: In so many interconnected litigations, standard litigation tactics might pose severe risks. Also, different service lines had to work closely due to the involvement of regulatory and public procurement elements. The strategy had to be built prudently and consistently. Indeed, I was very proud that the different service lines of our firm could work together so closely, professionally, and effectively. I realized that our firm culture and close friendships are one of our firm’s most important core values.

CEELM: What is one thing clients likely don’t know about you?

Dominek: I am a DIY guy – I like to fix and make things in the house by myself. I am a “hobby” electrician, painter, carpenter, and so on. I would not build a business on these, but such work helps me to get out of my everyday work routine.

CEELM: Name one mentor who played a big role in your career and how they impacted you.

Dominek: I must name two. One is my professor of competition law, Pal Szilagyi. To be honest, I took one of his courses by chance. Nevertheless, his enthusiasm and professional knowledge impressed me so much that I finally took all his courses in the years to come. During those years, we became friends, and he also gave me an inestimable push and helped me apply for and win the OTDK (National Student Conference) and other awards, as well as apply for an LLM. The other is Laszlo Kelemen. Laszlo has been a Managing Partner at our firm since I joined, and we have worked closely together on many projects. Besides his deep knowledge of the law, I learned many soft skills from him and also that these soft skills and client relations are at least equally important in our profession as solid legal knowledge.    

CEELM: Name one mentee, you are particularly proud of.

Dominek: Zsolt Eperjesi. I have been advising many shopping and other retail centers, and Zsolt assisted me a lot when he was a junior lawyer at our firm. During the years, Zsolt became a recognized practitioner in commercial and retail real estate law. We always discuss more complex legal issues and, to be honest, I also learn a lot from him. I am proud that – together with three other new partners – Zsolt has been promoted to be a Partner at our law firm from January 1, 2024. 

CEELM: What is the one piece of advice you’d give yourself fresh out of law school?

Dominek: After a few years of law school, students often take a very strict legal approach to everything. This happens in other professions as well, I believe. Being open to other perspectives helps find solutions in many cases, however. Never underestimate the powers of thinking out of the box.

This article was originally published in Issue 11.3 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Following the recent election in Slovakia, the newly formed government has shifted its legislative focus. CLS Cavojsky & Partners Partner Peter Cavojsky and Taylor Wessing Partner Andrej Leontiev explore how the government’s priorities have changed in terms of public spending, criminal justice reform, and relations with non-governmental organizations.

A Change in Focus

Following the elections, the legislator’s main focus areas and priorities have “shifted significantly,” begins Cavojsky. He reports that “different communication approaches to the war in Ukraine and fast legislation pressure for changes in the Criminal Code surprised the public.” In addition, in order to retain “core principles of budgetary financing, the new government has made it a key priority to reduce the public finance deficit by 0.5% of GDP and to amend the constitutional law on budgetary responsibility regarding the need to slow down the growth of debt,” he reports. Further essential focus areas, Cavojsky reports, involve the “revision of the judicial map with regard to mandatory requirements of the Recovery and Resilience Plan, the recodification of civil law, and the strategy of restorative justice.”

Leontiev expresses concern about the fast-tracked changes to the criminal code, particularly those targeting corruption offenses. According to him, the main aim was to “significantly lower the sentences for economic crimes, including corruption and tax frauds, to shorten the respective statutes of limitations, and dismantle specialized law enforcement bodies that were successfully dealing with corruption during the previous government.” However, he says that the Slovak Constitutional Court suspended a significant part of this legislation, at least for now.

“We expect that further legislative steps will focus on accelerating the exploitation of EU funds, mainly via lifting supervisory mechanisms and constraints in public procurement, construction law, and environmental protection,” Leontiev says. “Finally, legislation directed at increasing taxes and public revenues that are necessary to cover the steep rise of social spending is foreseeable,” he posits.

Going into specifics, Cavojsky reports that reforming the police and the Criminal Code are a priority for the new government. “A major change in the Criminal Code, including the cancelation of the Office of the Special Prosecutor, caused considerable disruption in the Parliament. It has been obstructed for months by the opposition, and currently, its implementation is being partially suppressed by the Constitutional Court,” he explains.

Moreover, Cavojsky feels that in the field of criminal policy, the government wants to “increase depenalization, which should be reflected in the reduction of prison sentences to the level of developed European countries and to valorize quantitative damage limits with regard mainly to inflation.” Additionally, he reports that the government also emphasizes “alternative penalties and the distinction between first-time offenders, particularly dangerous recidivists, and other offenders. It wants to abolish or change the factual nature of the crime of bending the law, or probation and mediation.”

According to Leontiev, while “there is no clear-cut overarching economic strategy announced by the government that would enable the prediction of the upcoming legislative changes,” he argues that “it might be deduced from the steps taken so far that the government will push forward with legislative changes designed to provide it with as much control and influence as possible over various regulatory bodies that are enjoying institutional independence, such as the Public Procurement Office, Whistleblower Protection Office, Regulatory Office for Network Industries.” This approach, he argues, “goes hand in hand with the general relaxation of regulations aimed at accountable execution of public duties – the attempt to heavily reduce sentences for corruption had been only a first step in this direction. This policy will be defended by the government as necessary to simplify and accelerate the use of EU funds and execution of public investments.”

A Change in Tune

“Military support and the donation of weapons to Ukraine have ended, while orders for Slovak army manufacturers and humanitarian aid continue,” Cavojsky reports, adding: “Noticeably, the government decided that important domestic socio-economic goals would not allow it to continue to increase its defense spending.”

On the other hand, Leontiev reports that “the government is openly hostile toward non-governmental organizations, particularly those which represent civil society’s interests, such as watchdogs.” According to him, “it is to be assumed that all amendments concerning laws that include the participation of the public, such as EIA assessments, will be drafted with the aim to limit the rights of the public represented by NGOs.”

Against this, Leontiev says he “expects that cases of conflict of interest at the level of governmental politicians and newly appointed high-level state servants will increase.” He believes that this may lead to “more public contracts being awarded to private companies of oligarchs and sponsors of the governing political parties. The usual suspects are from the construction business, IT sector, and consulting industry.” As for other private companies, including multinational groups, Leontiev believes it will become “harder to compete with the politically preferred Slovak companies. Due to high margins on public contracts that may result in price dumping in private tenders, a distortion of competition favoring the politically preferred Slovak companies is expected.” This is particularly important as Cavojsky insists that one of the most important challenges is the “continuation of the implementation of the Recovery and Resilience Plan, regulation of the price of electricity, a balanced budget, increasing employment of marginalized groups, and long-term completion of highways.”

Lastly, Cavojsky says that the “post-election peace in the coalition is particularly disturbed by the presidential elections to be held on April 23, 2024. Among the key candidates are Peter Pellegrini – the leader of Parliament and leader of Hlas – Social Democracy, which is a member of the coalition.” As his opponent stands a “pro-European candidate with the support of the opposition” – former diplomat Ivan Korcok. “The result of the presidential election might have a significant influence on the future direction of the country,” Cavojsky concludes.

This article was originally published in Issue 11.3 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Slovakia has undertaken a comprehensive reform of its court system. Peterka & Partners Partner Andrea Butasova and Ruzicka & Partners Partner Sarlota Stosova explore the ambitious restructuring and its consequences, the challenges encountered during its implementation, and its far-reaching implications for legal professionals and the justice system of Slovakia.

Main Updates

The restructuring of courts in Slovakia represents “a significant change to the Slovak court system, which was adopted with an aim to aid specialization and thus speed up court proceedings as the lengths of cases have been viewed negatively by the general public,” Butasova begins.

As she reports, the reform has brought many changes, among the most important of which are the “establishment of Municipal Courts in Bratislava and Kosice by merging previous district courts to newly established municipal courts; the reduction in the number of district courts, down from a previous number of 54 to 36; and the establishment of administrative courts of the first instance.” Now, an administrative action can only be brought before “one of the three administrative courts with seats in Banska Bystrica, Bratislava, and Kosice, as opposed to the previous system, where there were eight first-instance administrative courts,” Butasova explains.

“In the case of the Bratislava municipal courts, the creation of agenda municipal courts has taken place – each of the four municipal courts has a different agenda, e.g., Municipal Court I has a criminal law agenda,” Stosova adds. “The courts introduced the specialization of judges in civil, family, criminal law, and commercial law. In addition, the commercial law agenda is concentrated exclusively in the district courts in the region’s seat.” Furthermore, she reports that “the number of regional courts remains unchanged, including their seats – the specialized civil and criminal law agenda remains in all of them. Another novelty is the introduction of causal jurisdiction for appeals in commercial and family law cases only to the three appellate (regional) courts.”

Aiming for Efficiency

According to the Slovak government, Butasova reports, the “aim of the reform of the judicial map was to improve the judiciary’s credibility, performance, and quality, while ensuring better working and decision-making conditions for judges and court staff. The reorganization is aimed at achieving an efficient judiciary, as it was supposed to create appropriate conditions for the specialization of judges, both at the level of district courts and at the level of regional courts.”

“In the view of the authors of this bill, often fragmented and small courts were less efficient and less resilient to local ties while limiting the possibility of specialization of judges, which is one of the prerequisites for an efficient judiciary,” Stosova chimes in. “One of the fundamental objectives of the new court map was precisely the specialization of courts and judges, especially for criminal, civil, family, and commercial matters in general courts and for administrative matters in the separate administrative judiciary.”

Encountering Challenges

Though the government declared that one of the aims of the judicial reform is to speed up proceedings, the “reality we have seen thus far is a bit different, especially in the Slovak capital, where the changes to the court structure had the most impact,” according to Butasova. “Namely, as the agenda of individual courts was changed in the declared interest of aiding specialization,” she adds, explaining that this was accompanied by the extensive moving of files, judges, and clerical staff, which, in her view, “disrupted the usual effectiveness of the given court departments. In some cases, the judges chose – or were assigned – to new locations away from the staff they were used to working with, and this also negatively affected the departments, at least for the time being.”

Additionally, Stosova says that the reorganization resulted in the transfer of files from the original courts to the successor courts, as well as in a change in the original case file marking. “This has caused many hearings to be canceled while the file was transferred to the new successor courts, and, in turn, the new successor courts had to take a period of time to physically process or enter these new proceedings into their systems, which had a significant negative impact on the length of many of the proceedings,” she explains.

“With the creation of a new administrative law court system, the Ministry of Justice has repeatedly published calls to fill vacant positions for administrative judges,” Butasova reports. “Continuous efforts are being carried out to hire competent administrative support for judges, as there is a general shortage of clerical staff in Slovak courts connected with the high fluctuation of the workforce.”

However, even here, there are issues. “Since the enactment of the laws regulating the change of court seats and judicial districts in the National Council of the Slovak Republic, only a six-month postponement of the effectiveness of most of the planned changes was adopted at the end of 2022 because, as stated by the then Minister of Justice, the courts were not yet ready for it,” Stosova says, adding that “due to the relatively short time since the entry into force of these changes, it is difficult to say objectively what impact this amendment has had and what further steps are needed to increase the efficiency of the judicial system.”

Consequences for Legal Professionals

As for the impact that these changes might have specifically on legal professionals, Butasova reports that the “specialization should bring better quality decisions, and the predictability of court decisions is expected to increase as well. This may indirectly mean fewer appeals being filed in the future.”

“For lawyers, the change of the court map has brought several changes – as a simple example, the place of filing lawsuits has changed as a number of courts have been abolished and their districts have been incorporated into other courts,” Stosova adds. According to her, the most significant changes occurred in the case of commercial disputes, which, “if not finally decided on by the end of May 2023, were automatically transferred under the new rules on causal jurisdiction to the new successor courts in the seats of the regional courts, which may have resulted in a significant increase in the duration of the disputes.”

Stosova concludes by adding that the reorganization bill itself was “drafted by the Ministry of Justice without much discussion with practitioners, and thus the court map does not in any way address several problems of the Slovak justice system.”

This article was originally published in Issue 11.3 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

With a background in international law firms, Marcela Augustinic transitioned to become the first general counsel at DM Drogerie Markt in Slovakia, where she has been serving for the last eight years. Augustinic shares her strategies for balancing internal and external legal resources to tackle emerging regulatory challenges and drive sustainable growth in the ever-evolving market.

CEELM: Tell us a bit about yourself and your career path leading up to your current role.

Augustinic: I have had the privilege of working in international law firms in Prague and Bratislava as a Senior Attorney for many years. My career took an exciting turn when I was offered the opportunity to join DM Drogerie Markt in Slovakia as their first General Counsel and to develop its internal legal team. This was a tremendous opportunity and, at the same time, a challenge to bring my vision into such a well-established multinational company operating in CEE.

I have now been active as the company’s General Counsel for eight years. I can confidently say that this experience has greatly enriched me professionally and continues to provide me with ongoing growth and fulfillment. I enjoy the challenges and opportunities that come with the role of an in-house lawyer.

CEELM: What was the biggest shock when transitioning to the in-house world? On the flip side, what was the most pleasant surprise?

Augustinic: Transitioning from a law firm with many clients to the in-house counsel role within a multinational company was indeed a remarkable experience. One of the advantages of being an in-house counsel is having the opportunity to be involved in projects at both national and international levels in a variety of areas, as well as in being involved in internal processes from their launch to their implementation. Being an in-house counsel allows you to look into the internal workings of the company that you usually do not have access to in private practice. This position requires a deep understanding of the internal processes of the company, thinking in broader contexts, identifying interplays between different departments and topics, as well as finding customized solutions to address the specific needs and goals of the company. This requires many years of practice and a broad range of expertise in a number of legal areas. Having a business approach and economic background is beneficial as well. The company is constantly evolving and with this comes greater dynamism in setting up processes and finding legal solutions. As an in-house counsel, there are no external clients. Instead, we work closely with internal clients, providing support to various departments, branches, the central warehouse, and management. This requires the ability to quickly respond to legal requests from different areas and sides, using their own business language.

One notable difference from private practice is the immediate feedback from internal clients throughout the process of addressing their legal issues. From the initial stages to the final decision and implementation, there is direct communication and involvement with the internal client. This feedback loop enables a more effective and efficient approach to problem-solving within the company.

CEELM: How large is your in-house team currently, and how is it structured?

Augustinic: Our in-house team currently consists of three lawyers, with each member specializing in different legal areas and topics. This strategic allocation of expertise allows us to efficiently handle a wide range of legal matters. Furthermore, within our corporate group, we maintain close interaction with legal teams from other countries. We frequently collaborate and exchange experience and expertise on shared projects and topics. This collaborative approach extends to the establishment of internal processes throughout the entire group, ensuring synchronization and consistency across multiple jurisdictions. It allows us to effectively leverage knowledge and resources, ultimately providing comprehensive and tailored legal support to the company’s operations.

CEELM: What has been keeping you and your in-house team busy over the last 12 months?

Augustinic: Our company has embraced dynamic changes over the past 12 months related to the improving environmental footprint of its operations and adjusting to the new legislation. We dedicated significant efforts toward environmental, social, and governance compliance and new EU regulations. Our company also targeted reducing its environmental footprint, investing in technologies, and implementing sustainable concepts and projects in the field of environmental preservation, including for the branded product lines. At a Europe-wide level, our company has adopted an ambitious strategy to fully phase out natural gas supply by 2030 and prioritize the use of cutting-edge VRV systems for heating and cooling. To fulfill this strategy, we have successfully transitioned 16 branches and have been conducting negotiations with landlords to install photovoltaic panels and decarbonization of our branches. Additionally, we are looking to expand our branch offers to include over-the-counter medications. However, the heavy regulation in this area in Slovakia presents a significant challenge.

CEELM: What about the upcoming 12 months? What are you keeping on your radar that you think will impact your workload the most?

Augustinic: Looking ahead to the upcoming 12 months, there are several initiatives on our radar that we believe will significantly impact our workload. The company plans to open new branches to reach a wider customer base and further expand its market presence. Additionally, the company is in the process of launching a pilot program for self-checkout systems in select branches, aiming to enhance the overall customer experience and streamline our operations. Furthermore, there is a need to modernize the IT infrastructure across branches as part of an ongoing commitment to stay at the forefront of technological advancements. Overall, the focus remains on continued growth, sustainability, and delivering exceptional customer service. The company will prioritize staying abreast of emerging trends, such as advancements in renewable energy, eco-friendly initiatives, and regulatory changes, as they will undoubtedly impact the nature and scope of our work.

CEELM: How do you decide if you are outsourcing a project or using internal/in-house resources?

Augustinic: We evaluate whether to outsource a project or utilize our internal legal in-house resources based on various factors. Our internal legal team consists of people with extensive experience and expertise in legal areas necessary for the day-to-day business. Our primary objective is therefore to handle legal matters internally. Depending on the specific topic or expertise that is not covered by the internal legal expertise, we may engage outside counsel. Additionally, we may choose to outsource high-risk areas or when the internal capacity is exceeded. By adopting this approach, we ensure that we leverage both our internal resources and external experts effectively, allowing us to provide comprehensive and timely legal services of the best quality to our company.   

CEELM: When picking external counsel, what criteria do you use?

Augustinic: When selecting external counsel, there is a set of essential criteria. It is crucial that the external counsel has a deep understanding of the business and can effectively navigate its intricacies. They must be able to provide tailored and practical solutions that align with the company’s objectives. In addition to professional capabilities and expertise, mutual trust and an effective working relationship are of high value. It is vital to collaborate with external advisors who align with the company’s values and can uphold its reputation. Finally, chemistry plays a vital role in our selection processes as well. Having worked as an attorney for many years, I believe this gives me a unique advantage in understanding and evaluating these criteria.

CEELM: What do you foresee as the main challenges for GCs in Slovakia in the near/mid future?

Augustinic: In the near/mid future, I believe the main challenges for GCs in Slovakia revolve around two key factors: ever-increasing regulations, particularly in emerging areas such as ESG, and the dynamic nature of our business development. The GCs are tasked with finding legally robust solutions for areas and processes that have not yet been fully developed. This requires us to stay ahead of the curve, not only in terms of regulatory changes but also in identifying innovative approaches to address these challenges. It is our responsibility to navigate the intricate legal landscape while ensuring compliance and minimizing risks, all the while contributing to the growth and success of our companies. To overcome these challenges, GCs must possess a dedication to staying informed, a proactive mindset, and a strong ability to think outside the box.

This article was originally published in Issue 11.3 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.