Category: Uncategorized

The energy sector in Macedonia has been one of the areas where privatization has progressed with the most difficulty. Up to 2004, the vertically-integrated and state-owned JSC Macedonian Electricity Company (MEC) exclusively provided the generation, transmission, distribution, and supply of electricity, as well as imports, transits, and maintenance of the integrity of the electricity system. In 2004, MEC was split into two independent new joint-stock companies. Its legal successor MEPSO assumed the transmission function, while ESM assumed the electricity generation, distribution, and supply functions. In 2005, ESM was further unbundled into two independent joint-stock companies:  Macedonian Power Plants (MPP), which assumed the electricity generation part of the company, and ESM, which retained the electricity distribution and supply parts. In 2006, ESM was privatized by Austria’s EVN AG and was rebranded into the EVN joint-stock company. As a result of the restructuring and privatization process, therefore, the key players in the electricity market currently are three separate and regulated monopolies: (i) generation – the state-owned MPP; (ii) transmission – the state-owned MEPSO; and (iii) distribution and supply – the privately owned EVN.  

Privatization of MPP

Recently, the Government has announced its intention to privatize the 100% state-owned MPP by increasing its share capital and offering private investors the opportunity to purchase up to 49% of newly issued shares. The process for hiring a privatization consultant is underway, and it is therefore likely that the international public call for the privatization will be published in 2015.

Why is the privatization of MPP important?

MPP generates more than 90% of the nation’s electricity. It owns and operates the main national generation facilities: (i) the thermal power plants in Bitola and Oslomej, with a total installed capacity of 800 MW; and (ii) seven large hydropower plants, with a total installed capacity of over 500 MW. It also acts as the wholesale electricity supplier for the retail supplier EVN. The estimated value of 49% of MPP’s shares is approximately EUR 750 million. Therefore, this will be the largest privatization in Macedonian history (the largest Macedonian privatization to date was the EUR 388 million sale of Makedonski Telekom to Hungarian Matav in 2001). For now, the largest privatization in the energy sector remains the sale of EVN’s shares in a transaction of EUR 225 million and an investment obligation amounting to EUR 96 million in the three-year period following the sale.

How will the privatization be organized?

The key legislation that governs the privatization process in Macedonia is the Law on Transformation of Enterprises with Social Capital (OJ 38/93) and the Law on Privatization of State-owned Capital (OJ 37/96). Both laws provide foreign investors with equal rights to domestic investors in the tendering and privatization process for sale of Government’s shares in state-owned enterprises. It is very likely that the privatization will be organized similarly to the sale of EVN, which  was organized through an international public call for a trade sale in a one-round bidding process. The ranking criteria for the received bids were the purchase price and a three-year investment commitment. In the case of MPP, it is reasonable to expect that the Government will also apply an investment commitment criterion, as it has announced that it expects the successful bidder to make additional investments in the development of electricity generation facilities.

What will be the main legal concerns?

Any attempts by the Government to “clean” or restructure MPP prior to its sale (e.g. write-off state debt, debt-to-equity conversion, and capital increases before privatization) will in many instances constitute state aid if they are not compliant with the “market economy investor principle” (i.e. if a public authority invests in the enterprise on terms and in conditions that would be acceptable to a private investor operating under normal market economy conditions, the investment is not considered as state aid). The Government’s enthusiastic efforts to attract foreign investment by providing various incentives to international corporations are well known. Therefore, it is of critical importance for the Government to organize the privatization through a well-publicized, transparent, unconditional, and competitive tendering process, to provide prospective bidders with access to all relevant information for valuation of the share package and to ensure that there is no discrimination based on the nationality of the prospective bidders.

The Government will remain the majority shareholders in MPP (51%) and will therefore retain control of management. The successful bidder will want to ensure that it has a voice in MPP’s management and that there is an effective dispute resolution mechanism in place. The memory of the dispute between the Government and EVN AG in connection with EVN’s sale is still fresh. In 2009, EVN was ordered by the Macedonian courts to pay EUR 200 million to MPP on the basis of a debt deriving from unpaid electricity bills from consumers, before the privatization. Not long after EVN AG filed a claim for arbitration against the Government alleging a breach of the Bilateral Investment Treaty between Macedonia and Austria, the parties settled.      

By Gjorgji Georgievski, Partner, ODI Law Firm

This Article was originally published in Issue 3 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

  

Like diamonds in the rough, the finalists of the 2014 Top Sites awards for the Russian and Hungarian markets stand out from their peers. And the winners – the websites of Lidings in Russia and Jalsovszky and VJT & Partners in Hungary (in a tie) – demonstrate that there’s more than one way for a law firm to effectively communicate its mission and capabilities online.

TopSite Award – Russia

The Lidings website is colorful and busy, effectively identifying the firm’s clients and capabilities by both sector and practice group with attractive design, perfect English, and full contact details for all its lawyers. The firm also presents a full component of press releases and thought-leadership articles in a creative way, allowing visitors to sort the information by practice area or industry sector. 

Julia Zhabina, Lidings’ Head of Business Development, claims that when creating the site in summer of 2012 the firm “aimed at a simple yet bright and eye-catching interface.” She explains that, “our website is an essential source of information for both internal and external users, and we invest significant time and resource to ensure that the information it offers is the most up to date and is presented in a logical and visually attractive manner.” 

Zhabina believes that the substantial thought-leadership articles and the provision of full contact details for all the firm’s lawyers are distinguishing factors in the firm’s marketing efforts. “At Lidings we believe that sharing information rather than purely accumulating it is what truly distinguishes leading law practices today. Thought leadership is one of the top priorities for our website content. The other thing that distinguishes Lidings is the effort we put into personal branding and marketing of our key employees.”

The Goltsblat BLP professional and technologically impressive website ranked a close second to that of Lidings. Though the firm is proud to declare its association with the international Berwin Leightner Paisner firm, the Russian office did not settle for its mother ship’s website but instead created its own, which nicely breaks down the Goltsblat BLP partners into their respective areas of expertise and includes an unusually thorough and impressive client and deal list.

TopSite Award – Hungary

Two firms share the Top Sites Award for Hungary, as the websites of Jalsovszky and VJT & Partners impressed the judges equally. Both sites are more restrained and sober than those of the Russian winners, and though neither site provides news of recent deals or transactions, they are undeniably competent, elegant, and polished.

The Jalsovszky website has an unusual interface on its team page, which provides a group black and white photo of all the lawyers at the firm, with each individual identified and illuminated into color as the cursor hovers over his or her image. The firm’s site is elegant and restrained.

Pal Jalsovszky was pleased to be informed of his firm’s award. He explains that Hungary’s Allison Group designed the website for his firm in 2010, and that, “with the website we tried to reflect our core values: we are, on one hand, young and dynamic but on the other hand deeply professional.” The restrained professionalism of the site was no accident, Jalszovsky says, as “we wanted to be informative but without using the ‘general bullshits’.”

The VJT & Partners website is similarly restrained, though in contrast to Jalsovszky’s professional photos of lawyers and the office, VJT instead provides whimsical photos of penguins, a feather, and other metaphors of the firm’s focus and capabilities.

Like the Jalsovszky site, the VJT & Partners’ website provides a focused and easily negotiable recitation of the firm’s capabilities and the profiles and competencies of its lawyers, along with the requisite thought leadership articles. Alone among this issue’s four finalists, the site does not provide contact details for the firm’s associates, though it does identify them by name and image.

Janos Tamas Varga, the firm’s Managing Partner, responded enthusiastically to the news of the award. He explains that: “This award is a great honor for us. It recognizes our efforts to express our values in every tiny detail. We are not satisfied until every sentence, every image, every color and the layout of the website are in accordance with our values. This is the very simple way in which we made our website and how we work in our day to day legal practice.”

Drakopoulos participated in a working group on the revision and amendment of the Greek Civil Procedure Code, held by the Legislative Reform Committee of the American-Hellenic Chamber of Commerce.

The members of the Committee were invited to submit their proposals and positions regarding the amendment of current legislation and the introduction of new procedural provisions in favor of parties residing abroad.

The Committee presented its final report and proposals before Nikolas Kanellopoulos, the Secretary General of Ministry of Justice, at a meeting held on June 4. In addition to Evangelos Margaritis, who represented Drakopoulos, others at the meeting included Judges Ioannis Hamilothoris and Panos Petropoulos, John Kyriakides and Panos Alexandris of the Kyriakides Georgopoulos Law Firm, George Scorinis of Scorinis Law Offices, as well as Elias Spirtounias, Executive Director of the American – Hellenic Chamber of Commerce.

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The leading Austrian law firms have, in the past decade, taken advantage of their country’s significant history in Central and Eastern Europe to develop unparalleled reach throughout the region. The Schoenherr and Wolf Theiss law firms have particularly large footprints, with offices in 14 and 13 different countries, respectively. Others aren’t far behind. CMS Reich-Rohrwig Hainz is in 9 countries (not counting the many offices belonging to other firms in the CMS network). Cerha Hempel Spiegelfeld Hlawati (CHSH) is in 7 countries, and Taylor Wessing ENWC (the CEE/SEE “competence center” for Taylor Wessing international) is in 6.

Combined, these firms cover almost every CEE/SEE market, including Belarus (CHSH) and Turkey (Schoenherr). Add in the Austrian Lansky, Ganzger + Partner’s four offices, and the list includes CIS members Kazakhstan and Azerbaijan.

But not one Austrian firm has an office in the largest country in the region/the continent/the planet. Russia, it seems, despite having the largest economy in all of CEE, stands apart from the other countries in the region as a uniquely intimidating challenge, one considered and then rejected by the firms that otherwise reach across it.

Of course, there’s no mandate that a firm try to be everywhere anyway – especially when it’s not clear that CEE means much more than the official Scrabble spelling for the third letter in the English alphabet. Albert Birkner, Partner at CHSH, makes that point. “You are aware that Eastern Europe is not Eastern Europe. You have to differentiate among the various markets and various jurisdictions. For example you can not compare Hungary to Romania, only because it’s all Eastern block – it doesn’t mean they have anything in common.” 

Raimund Cancola, Managing Partner at Taylor Wessing ENWC, concurs. “Every country in Eastern Europe is different, and the culture is different, we know that. But we here in Central Europe and in particular in Austria are probably closer to every other Eastern European culture than we are to the Russian culture. This is something different.”

“Different” or not, most of the Austrian firms seem comfortable with remaining CEE/SEE-focused. Indeed, Alexander Popp, Partner at Schoenherr – the firm with the largest number of offices outside Vienna of any Austrian firm (including one in Brussels) – is up-front about his firm’s focus. “The geographical footprint that makes sense for us as a strategy is Central and Eastern Europe,” Popp says, and “we believe that we have figured out what is Central and Eastern Europe. It’s the area which we are currently covering.” 

Circular reasoning aside, Popp dismisses even the possibility of his firm entering Russia. “It won’t happen. Because it does not fit into our strategy, and even if we would decide to go there, it would require such a large amount of management capacity, money, getting people on board … nobody is waiting there for us. Excellent firms have been there since the 90s, they have excellent people there.”

Of course, Popp concedes that “you have to have a solution for covering 

Russia, because the market is important.” Schoenherr’s solution – as that of the other leading firms in the market – involves the good relationships it has built with the leading Russian and international firms already there. And thus, when his clients in Ukraine and Slovakia, for instance, ask for an extension of their coverage into Russia, his response is straight-forward. “We don’t have an office in Russia, but we work together with Russian firms, and this is how we cover it.” 

Erik Steger, one of three members of the Wolf Theiss Management Board, says that, “we feel we’re everywhere we need to be at the moment.” Wolf Theiss traditionally follows client demand in deciding which markets to open offices in, Steger says. “And, from a strategic perspective, whether Russia is an option for us, must be evaluated on the basis of how many of our clients that are in the CEE/SEE region, also go into Russia, and go to Russia so much that they would ask their lawyers to be there as well. Now if you look at Wolf Theiss, we have a huge client base in Banking and Finance, we have a huge client base in Real Estate, in Infrastructure and Energy, you will be able to see that some of these clients, yes they do have Russian operations, but the majority not. So Russia appears to be, for our clients, every now and then maybe too big to dare move.” 

And if it’s too big for the firm’s clients, it’s too big for the firm. “If you were going to move to Russia,’ Steger explains, “you can’t do that with 7 or 8 people. You could do that if you had a niche offering – so if you had a firm that focuses only, say, on Real Estate. Then you could have 8-10 lawyers in an office there, and just do fine. But if you offer more than that – if your offering is broader, just like ours – then you need a massive operation there .… if you need 50 in Poland, you probably will need 100 to 150 in Moscow to meet client expectations. What that means is you need a massive investment. And the question is whether a partnership of our size can, risk-wise, manage such a step.” His question is  rhetorical – the answer, obviously, is no.

The cost of entering in appropriate numbers is a common refrain. Cancola, at Taylor Wessing ENWC, also refers to that particularly intimidating obstacle. “The Russian market, in my view, is so huge, it doesn’t make a lot of sense to start with a small unit. You will most likely be more effective by being present with a remarkable size from the beginning, which requires a certain investment.”

Clemens Hasenauer, Partner at CHSH, agrees. “Russia is a huge market, it’s farther away from Austria, and you have a lot of large firms still located there, also US firms, where you have quite high barriers to entry, when it comes to costs you incur, in order to get office space in a decent location, and get good lawyers – it’s all very costly there.” 

In addition to the cost of doing business in Russia, partners at the Austrian firms often make explicit reference to the historical connection between Austria and its closer neighbors in explaining their lack of interest in that farther country. Birkner, for instance, explains that CHSH has focused its Eastern European expansion primarily on Southeastern Europe, “because those countries are smaller jurisdictions that have a history of being a kind of backyard market for Austria.” He continues, “so this makes perfect sense for Austrian investors to be there, and together with them we kind of accompanied them and set up our offices there, particularly because we have a very strong Austrian client base.” Raimund Cancola also refers to Austrian history and geographical proximity when considering why ENWC stayed out of Russia even before its 2012 tie-up with Taylor Wessing. “It’s a funny thing with Russia: We always had the philosophy that we look at new markets from our perspective, and … we always had the philosophy of ‘we go where we feel more at home’ …. So if you look at our history – from Hungary, we moved further and further down the road of our historic roots.”

The question of Russian expansion is no longer his to struggle with, Cancola notes. Taylor Wessing ENWC is the “the competence center” for SEE and CEE, “but because Russia has such a global impact, Russia is dealt with on the Taylor Wessing international level.” Still, Cancola believes that “looking at Taylor Wessing’s international road map, I can say that, we will look into Russia in the next 4-5 years. However that also depends on the nature of demand of our clients.”  

Explanations for Austrian firms’ avoidance of Russia may differ to some minor extent, but none of them see any reason to incur the significant costs and face the undeniable competitive, legal, and cultural challenges involved in opening an office in the country. The firms are already profitable and content in the rest of CEE, and none faces significant pressure from clients to be on the ground in Moscow. Ultimately, even while they compete with one another for clients across CEE, one thing Austrian partners seem to agree on is: “Russia is different.”

Few law firms in Europe were able to completely escape the punishing effects of the recent global financial crisis. Russian lawyers in particular were laid off in unprecedented numbers. And across CEE, firms were forced to take steps to limit risk or adapt to the new reality, including – in some cases – cooling plans to formalize market entry (see: Allen & Overy/Romania), or actively closing offices and withdrawing altogether (see: Beiten Burkhardt/Warsaw).

But while the Czech Republic suffered badly from the crisis, partners at many of the leading Corporate/M&A law firms in the market claim that, by and large, they were able to survive its darkest days without substantive change. Of course, rare is the partner willing to concede financial challenges or anxiety to outsiders, and optimism is de rigeur in conversations about business, so to some extent simple assertions of confidence should be taken with multiple grains of salt. 

Still, it appears that the leading law firms in the Czech Republic were able to adapt to this more challenging climate without too great a disruption of their operations by slowing growth, freezing salaries, limiting promotions, and finding other ways to cut costs without laying too many lawyers off – and by fighting harder to win and keep clients than they had to do before. 

Of course, some layoffs were inevitable. CMS Cameron McKenna, Baker & Mckenzie, Kocian Solc Balastík (KSB), and Squire Sanders, among others, acknowledge that they were forced to let  some of their lawyers go as a direct result of the financial crisis. Other firms as well, while demurring about specific ties between the lawyers who were shown the door and the crisis, made the strategic decision to not replace lawyers  who were let go for other reasons – or who left on their own initiative. As a result, most of the top-tier Corporate/M&A firms shrunk somewhat from their 2006 numbers, or, at best grew only slightly (Baker & McKenzie, for instance, has 26 fee-earners, compared to the 23 it had in 2007). 

Alexandr Cesar, the Managing Partner of Baker & McKenzie, says that “everyone in the local market has a different experience regarding the crisis.” But on the whole, partners at most leading firms in the Czech Republic are sanguine. Jiri Hornik, Partner at Czech KSB, says that the crisis was simply not as pronounced in the Czech Republic –  no Czech banks went into bankruptcy, for instance – as it was in some neighboring countries. He says that in fact 2010 was KSB’s “most successful year ever”, and Hornik says his firm didn’t start feeling the crisis until 2011. And although it did let a few lawyers go as a result of the crisis, “the only real change was that we stopped growing so aggressively.” 

But Hornik says that business is simply not as easy to get as it was pre-crisis, and keeping his firm’s lawyers busy and profitable requires much more aggressive marketing efforts than ever before. In addition to various marketing initiatives, fee caps or blended fees are much more common than before, he says, and KSB, for one, places a greater emphasis when hiring or promoting lawyers on those who can market and generate business than it did before.

Alexandr Cesar at Baker & McKenzie also claims that the crisis had a delayed impact. Then, “in 2010 it really hit, and transactions stopped.” Eventually, last year, he was forced to let 2-3 mid-level and senior lawyers go – and chose not to replace several others who left to go in-house or start their own offices. (Though he notes that the firm did add 5-6 junior lawyers at the same time).

And the changing climate required other cuts as well. Cesar reports renegotiating his office’s lease, eliminating extra bonuses, and freezing salary – instituting what he described as “a more reasonable form of remuneration.” He sighs at the increased time and attention he’s had to spend defending his bills to clients, renegotiating arrangements with service providers, renegotiating his lease, etc.  

Nonetheless, he notes with pride that the most recent fiscal year for the firm, which ended in July of 2013, was their “most successful ever” – and was in fact 40% better than 2007. But the cycles, he says, seem to be shortening – this fiscal year has been not nearly as profitable as last – and he’s now seeing noticeable changes in profitability and utilization every 2-3 months. 

As a result, Cesar also draws attention to the increased competition for clients, saying that, “across the market you have to fight harder to get the business than you did in 2007.” Six years ago finding business was an easier proposition. Now, Cesar says, “the pie is still the same – but it’s getting smaller and colder.”

Cesar also says of the pressure to lower fees that “sometimes it’s unbelievable.” He rolls his eyes at the low fees he’s obliged to bill his attorneys out at, and jokes that, given their respective rates, he’s given thought to hiring his lawyers to replace the man he pays to check his home gas heating boiler going forward.

Still, he’s confident, and says that the firm’s average business over the 6 years of the crisis has been good.

Of course, even the business that does come through the door needs to be done more cheaply than before. Helen Rodwell, the Managing Partner at CMS Cameron McKenna in Prague, says her firm has begun offering different rates for different kinds of work, tailoring its rates to the sophistication of work involved, with the more complex and challenging work costing more. Rodwell also notes that the scrutiny clients are increasingly applying to their bills means that “it is essential that your financial hygiene is in order, as transparency on fees and regular reporting are essential for most clients these days.”

Radan Kubr says his firm, PRK Partners, didn’t lay off any lawyers, though it initially reduced its administrative staff and secretarial team somewhat. The firm also chose not to replace some of the lawyers who left during the crisis who might have been replaced before, “so in terms of size we might be a little bit smaller than we were before, but it’s not going to be a big difference – we’re still the 3rd largest law firm in the Czech Republic, with over 75 lawyers.”

PRK Partners also reviewed other potential sources of savings: “Everything from trying to get better terms for our lease, for our telecom services, looking at our costs to see if they’re reasonable and if there was any possibility to reduce them.” Kubr emphasizes that this review was done as a prophylactic measure, not as a result of actual pain. “We never had to ask for a bank loan, for instance.” 

And like everyone else, PRK Partners has also recognized the increased competition for business and the increased importance of marketing. Kubr says, “the growth has slowed down, and the difference is that you have to fight more to get the work, and you always have to be on your top if you really want to keep your reputation and manage to attract new work. It’s definitely not getting easier to get the work and retain the top clients. It’s getting increasingly difficult, but it’s the world we live in.”  As a result, he says, the firm has “definitely expanded our marketing efforts.”

The increased demand for lower fees has created real incentive for those firms willing to race to the bottom, Kubr believes, and “many firms in the Czech Republic practice really very aggressive price dumping.” And Kubr, like Cesar, draws attention to the plunging rates of lawyers compared to blue collar workers, albeit in a less jocular way. “We’re not ready to undersell ourselves and to try to match the cheapest offer, because the price levels are just so ridiculous in the Czech Republic that we don’t want to work for the rates of a cleaning woman. If there are other people in the business who are willing to play that game, they can do that, but we’d rather close shop than work for the fees of a janitor.”

Radek Janacek, the Managing Partner of Squire Sanders’ Prague office, rolls his eyes at any suggestion that firms haven’t been forced to adapt to the new economy. “I do think there are changes,” he says. “I don’t think it’s anything like before the Lehman Brothers fall, so that’s just plain stupid to say there’s been no change. The stagnation of the economy continues, and there’s not really been any major pick up in the GDP growth.”

Janacek admits that Squire Sanders was forced to lay off several long-time associates, as well as a mandated overall pay cut for 2009/2010. According to Janacek, “we were unfortunately forced to let some people go who had hit the ceiling. Senior people who never developed their own business or practice, and were impeding the growth of more junior people. We just did that gradually over a couple years. We’ve always been fairly mid-sized – 20 or 25 people – so we could afford to swap one person one year and one person the next year.” As a result, “in terms of size we’re pretty much the same we were 5 years ago, but we’ve gone through fairly big changes.” 

Still, the firm saw about a 5% growth in revenue in 2013, Janacek reports, and he expects about the same this year.  But he doesn’t expect a much bigger jump, as continued economic stagnation and the increased competition in the market – particularly in the form of new offices split off from the more established players – makes that increasingly difficult. Still, he says with a laugh, he’s “realistically optimistic.” 

Janacek’s not the only one.  Kubr says that a “small upturn in the Czech Republic … was already felt last year with a surge in acquisition work, so we’re reasonably optimistic that 2013-2014 will be a good year.” Rodwell at CMS Cameron McKenna also points to “a big increase in M&A since last summer”, and says that as a result she is “much more optimistic” than before.

Still, the champagne corks aren’t flying just yet. Cesar concludes with a note of caution, pointing out that “half the articles in the paper are still about the crisis. People are still not hiring. So in the heads of all of us the crisis is not over yet.” 

On May 6, 2014, DLA Piper announced the global launch of its Rapid Response app which, according to the firm, is “designed to complement the firm’s existing Rapid Response service that helps individuals prepare for and deal with crisis situations.” CEE Legal Matters reached out to Andras Posztl, Managing Partner of the Budapest office, to understand just how open clients in CEE markets are towards such solutions.

 CEELM: DLA Piper announced on May 6 the launch of the Rapid Response App, meant to complement the firm’s Rapid Response Service. Can you describe for our readers, first of all, what the service itself entails?

A.P.: The Rapid Response Service is primarily a device that helps individuals prepare for and deal with crisis situations. It means in practice that the firm’s clients have access to a global emergency hotline in critical ad hoc situations such as a regulatory raid or a damaging broadcast of a report.

The firm’s global regulatory, dispute resolution and crisis management expertise enables it to give rapid responses in the case of legal emergency tailored to local law, language and conventions of the concerned jurisdiction. Rapid Response is a practical and cost effective solution in regulatory and commercial risk management.

The Rapid Response Service can be a very useful support in a wide range of situations such as police or regulatory raids, industrial accidents, crisis communication, product recall or handling a sensitive data leak.

 CEELM: The new application, how does it work exactly? I push a “panic button” on the app at 2 am. What specifically happens next? 

A.P.: The App is a supplement to our earlier established Rapid Response Service. It provides quick access to all the substantial information the client may need for the effective use of Rapid Response Service. For instance, you can quickly find your local Rapid Response hotline number or the most useful tips for the different emergency cases such us dawn raid, home raid, unannounced visits, seizure of documents etc.

Besides providing ex post assistance the Rapid Response App can be also very helpful in prevention. Following the instructions of the separate interactive questionnaires for document management, crisis management, information security, internal investigations or whistleblowing you can measure how prepared is your company. 

 CEELM: This “global emergency hotline” is available to clients in CEE as well. How often did you see clients in CEE use it relative to other markets where DLA operates? 

A.P.: In our region the use of emergency hotlines can be described as rather conservative. The personal and confidential way of seeking help in such cases is still much more preferred. The main goal of launching our free Rapid Response App is to make our clients more familiar with this service in an interactive way. We hope that by downloading and trying this App our clients can recognize how useful such a form of assistance can be in need. The new App shall act as an effective promotion to our Rapid Response Service.

 CEELM: Of the CEE markets covered by the Rapid Response Service (Austria, Czech Republic, Hungary, Poland, Romania, Russia, Slovakia, Turkey, Ukraine), in which one(s) did you find it was most popular amongst clients? Why do you believe that was the case?

A.P.: Besides Austria and Russia, in the rest of the countries the service is rather new and clients still tend to contact their established contact at the respective offices rather than using the hotline. Nonetheless, we believe slowly but surely this attitude may change and we would like to ‘lead the pack’ offering clients new ways to communicate in ‘legal emergency’ situations.

 CEELM: In Hungary specifically, in what circumstances did clients use this service most often until now?

A.P.: Similar to the situation in other CEE countries the Hungarian clients still have to get used to this new kind of legal services. However the launching of this new App is an excellent occasion for us to emphasize a key element of DLA Piper’s philosophy. Our expertise and fully discretion is not limited to certain colleagues known by the client. Our strength is the way we integrate the wide range of resources and expertise accumulated by our lawyers in Hungary, Europe and other parts of the World. In the case of legal emergency the client can lean on this comprehensive network of knowledge by using our Rapid Response Service.

In preparation for the LawTech Europe Congress due to take place this upcoming October, CEE Legal Matters spoke with one of the Speakers at the conference, Michael Schulte, representing kCura, an e-discovery service provider making a push into the CEE market, about the growing interest of firms in the region in such technology-driven solutions.

 CEELM: If you had to describe e-discovery and what kCura does in one sentence each, how would it sound like?

M.S.: Broadly, I would describe e-discovery as the management and exchange of electronic data as it relates to litigation and investigations.  kCura is a Chicago-based software company whose software helps users address and overcome the challenges inherent in the various stages of data management and e-discovery.

 CEELM: You will be attending the LawTech Europe Congress in Autumn this year to showcase your software. What are the main reasons that draw you towards the CEE region as a potential market for your product(s)?

M.S.: We very much see the CEE region as an emerging market for e-discovery – and have already seen our software, Relativity, expanding there.  Additionally, many of our channel partners already operate or are beginning to operate in the CEE region, so we’re also here to support their efforts.  Lastly, we hope to get to know the market more – and better understand its unique demands – so we can better support the region’s growing Relativity community.

 CEELM: Based on your assessments of the markets in the region, how common is the use of e-discovery software by law firms?

M.S.: Typically, we find that firms in the CEE region haven’t seen the data volumes that we see in the UK or the U.S.  Nevertheless, this seems to be changing – we are seeing increasing interest in using e-discovery software and technology overall to meet the requirements of managing large data.  As data volumes grow, the need for technology grows along with it, and we feel that Relativity is well-suited to meet those needs.

 CEELM: Do you see a growing trend in the region as a whole in using e-discovery solutions? What do you believe is the main reason for this?

M.S.: Yes, we do see a growing trend, but it’s difficult to point to the main reason for it. Overall, as mentioned, we see that data sizes are growing in the region, so the need to support e-discovery with powerful technology is growing along with it. This seems to lead to an increased demand not only for newer technologies, but also for the people that are skilled in putting those technologies to use.  We’re consistently supporting our partners in the region as they build out their services here.

 CEELM: This increased demand that you are registering, does it come primarily from UK/US firms operating in the CEE region who have used such software for a while now in their global offices or are local firms in the region turning towards such solutions as well?

M.S.: It seems to be a combination of both. I think that as firms in the CEE region see their data volumes growing, they are increasingly looking towards the markets and solutions that have been dealing with larger volumes over the last few years. At the same time, we are starting to see our US-based and Western Europe-based partners and clients pushing into the region to proactively serve the growing need for e-discovery solutions.

 CEELM: How has e-discovery been evolving recently, and what trends will continue?

M.S.: One of the most noticeable trends that we’ve seen is that the industry as a whole is really embracing advanced text analytics technologies, like computer-assisted review and email threading. As data volumes continue to grow, those technologies are becoming more and more important.  With our partners and clients, we’ve seen a significant spike in the use of Relativity Analytics and Relativity Assisted Review to help address the growing number of documents that need to be reviewed.  We plan to focus heavily on pushing innovation in this area, as we see it as vitally important to the industry.  

Visitors to the website of Russian boutique firm, Ost Legal, will find, under the “Team” heading, the following message: “We don’t employ junior associates and paralegals and we do not teach our lawyers at the client’s expense.” Intrigued by this approach, we reached out to the firm’s Managing Partner, Vladimir Lipavsky who was kind enough to offer insight into the reasons behind the choice to build a team different to the usual associate-based pyramid structure of law firms and the implications of this approach.

 CEELM: Your website has a clear-cut statement that you only have senior lawyers in your team. What was the thought process behind choosing this strategy in building your team?

V.L.: We are a niche law firm, which focuses in several sophisticated areas: energy and natural resources, construction, litigation and arbitration (related to our expertise). Such a business model requires, apart from substantial purely legal experience, also considerable expertise in the industry. Only practical experience can give that.

 CEELM: Without junior lawyers or paralegals in your team, who manages work traditionally handled by junior members of a law firm?

V.L.: We don’t have much of such work – we don’t have a lot of filings, M&A work, etc. – which usually requires engagement of juniors. We primarily draft EPC, EPC(M) and other construction contracts, equipment supply contracts, and we negotiate such contracts for the client – that’s the type of work which can only be done by a senior or partner.

 CEELM: Does this strategy then imply that you only grow your team through lateral hires?

V.L.: Yes, we employ only people with substantial experience – they either come from other law firms (for example, one of our counsels came from Clifford Chance) or from In-house – primarily from construction companies.

 CEELM: What are the criteria based on which you select who you hire? What do you look for primarily: knowledge, practical/deal experience, or personality/attitudes for team cohesion?

V.L.: We select our people very carefully. All the factors mentioned matter. Both purely legal and industry expertise are important. Besides we pay much attention to personal aptitudes such as communication skills, possessing a commercial mind, ability to carry out negotiations, etc. 

 CEELM: One of the traditional justifications for growing organically is the ability to train lawyers in your culture, your standards, your methods. Many lateral hires don’t work out, traditionally, because at the end of the day lawyers who were trained in different law firms have different ways of working, which can result in an unwelcome clash of expectations and inconsistent service. Is this a problem for you, then? Why not?

V.L.: I didn’t say we don’t train the lawyer. We do and we do a lot. Our work differs from the work of most law firms and we always motivate our lawyers to share our methods, approaches and culture. I just meant that people who join us – at that moment they usually already have years of experience. Which doesn’t mean that we do not train them afterwards.

 CEELM: The argument that you announce on your site is that you do not wish to train juniors at the expense of clients. However, does this strategy not also mean that clients are also charged senior rates for work that would normally be charged at junior associate rates?

V.L.: We don’t have a lot of work that could be done by juniors. See above. 

 CEELM: What has been the client’s feedback to this strategy to date and how, if at all, will you change it in the upcoming future?

V.L.: To our knowledge the clients like our expertise. Our concentration on few selected areas allows us to successfully compete with some giant international law firms.

Visitors to the website of Russian boutique firm, Ost Legal, will find, under the “Team” heading, the following message: “We don’t employ junior associates and paralegals and we do not teach our lawyers at the client’s expense.” Intrigued by this approach, we reached out to the firm’s Managing Partner, Vladimir Lipavsky who was kind enough to offer insight into the reasons behind the choice to build a team different to the usual associate-based pyramid structure of law firms and the implications of this approach.

 CEELM: Your website has a clear-cut statement that you only have senior lawyers in your team. What was the thought process behind choosing this strategy in building your team?

V.L.: We are a niche law firm, which focuses in several sophisticated areas: energy and natural resources, construction, litigation and arbitration (related to our expertise). Such a business model requires, apart from substantial purely legal experience, also considerable expertise in the industry. Only practical experience can give that.

 CEELM: Without junior lawyers or paralegals in your team, who manages work traditionally handled by junior members of a law firm?

V.L.: We don’t have much of such work – we don’t have a lot of filings, M&A work, etc. – which usually requires engagement of juniors. We primarily draft EPC, EPC(M) and other construction contracts, equipment supply contracts, and we negotiate such contracts for the client – that’s the type of work which can only be done by a senior or partner.

 CEELM: Does this strategy then imply that you only grow your team through lateral hires?

V.L.: Yes, we employ only people with substantial experience – they either come from other law firms (for example, one of our counsels came from Clifford Chance) or from In-house – primarily from construction companies.

 CEELM: What are the criteria based on which you select who you hire? What do you look for primarily: knowledge, practical/deal experience, or personality/attitudes for team cohesion?

V.L.: We select our people very carefully. All the factors mentioned matter. Both purely legal and industry expertise are important. Besides we pay much attention to personal aptitudes such as communication skills, possessing a commercial mind, ability to carry out negotiations, etc. 

 CEELM: One of the traditional justifications for growing organically is the ability to train lawyers in your culture, your standards, your methods. Many lateral hires don’t work out, traditionally, because at the end of the day lawyers who were trained in different law firms have different ways of working, which can result in an unwelcome clash of expectations and inconsistent service. Is this a problem for you, then? Why not?

V.L.: I didn’t say we don’t train the lawyer. We do and we do a lot. Our work differs from the work of most law firms and we always motivate our lawyers to share our methods, approaches and culture. I just meant that people who join us – at that moment they usually already have years of experience. Which doesn’t mean that we do not train them afterwards.

 CEELM: The argument that you announce on your site is that you do not wish to train juniors at the expense of clients. However, does this strategy not also mean that clients are also charged senior rates for work that would normally be charged at junior associate rates?

V.L.: We don’t have a lot of work that could be done by juniors. See above. 

 CEELM: What has been the client’s feedback to this strategy to date and how, if at all, will you change it in the upcoming future?

V.L.: To our knowledge the clients like our expertise. Our concentration on few selected areas allows us to successfully compete with some giant international law firms.