Western-educated lawyers rise to top in tough place.
Ukraine’s notoriously tough and opaque legal climate is good news for the nation’s domestic law firms.
While in the rest of Eastern European countries and Russia only a few lucky locals have managed to compete with the international legal powerhouses, Ukraine shows a totally different picture.
When it comes to the nation’s top-five law firms working in corporate, mergers and acquisitions and banking and finance sectors, three of them are Ukrainian. In contrast, no locally owned companies make the top five in comparable rankings in Russia, and only one does in Poland.
Some experts and market players explain that, with few exceptions, major international firms in the mid-1990s simply ignored Ukraine’s relatively small market, preferring the more mainstream and busier Moscow.
(Photo: Michael Kharenko, partner at Kyiv’s Sayenko Kharenko law firm)
Meanwhile, others note that given the complexity, cumbersomeness and constant changing of Ukraine’s legal system, international firms would sometimes lack the necessary flexibility and creativity to attain positive results for the client.
But whatever the views on such impressive performance of the domestic law firms are, there is no doubt that they have been able to offer the clients the expertise and advice vital for surviving in such a tough place for doing business as Ukraine.
“The tough environment means that people who come on top need to be very, very good,” says Joanna Thomas, European editor at London-based Chambers & Partners, a publisher of some of the most reputable legal guides. “That’s why you have some truly phenomenal Ukrainian firms.”
Experts estimate that domestic law firms control nearly 70 percent of the market, owing to the development of legal services after the fall of the Soviet Union. During Russia’s economic boom of the mid-1990s, almost all the world’s major companies rushed in to open an office in Moscow to capitalize on the foreign investment inflow into the country and great demand for Western legal expertise.
Back then, Ukraine was viewed simply as too small a market to enter. Only a handful of international law firms would go to the trouble of establishing its presence.
Serhiy Chorny, managing partner at the Kyiv office of Baker & McKenzie, the first major player to enter Ukraine’s market, said this situation led to an interesting phenomenon. Whenever major international law firms without a local office worked on a deal involving Ukraine, they partnered with Ukrainian firms, just in order not to support their direct competitors.
“They looked for small local firms with little resources and a small number of lawyers, but which would still get the job done well,” Chorny said. “That’s how these companies grew big.”
Michael Kharenko of Kyiv-based Sayenko Kharenko said that by the time the internationals began to consider Ukraine a lucrative business opportunity, the local players has built enough capacity to establish a strong presence on the market and were able to counsel clients both on local and international transactions, “offering more flexibility on rates.”
Oleh Malskyy, partner with Kyiv-based AstapovLawyers, points out that unlike in Russia, in Ukraine one could really tell no difference between the lawyers working at the local and international firms.
“Most of them speak English and are Western-educated, which makes them very competitive. You don’t find this at the Russian firms often, as the internationals would be the first to compete for such lawyers,” he said.
Yet, Jared Grubb, managing partner at the Kyiv-based practice of Clifford Chance, points out that very often it is the Ukrainian firms’ senior partners that are really on par with their international colleagues.
“The challenge for many Ukrainian law firms is to develop beyond just having really good senior lawyers to train junior lawyers to have these skills as well,” he said.
However, when it comes to the competitive advantages of Ukrainian law firms, their unique knowledge of the local market and ability to adapt to the constant legislative changes gets mentioned far more often than their somewhat lower rates and fluent English.
“Ukrainian clients trust local lawyers more, since they know that Ukrainian legislation changes so often that foreign law firms simply won’t be able to follow it,” said Maksym Lavrynovych, managing partner of Kyiv-based Lavrynovych & Partners, who is also the son of Ukraine’s justice minister. “Also, to the advantage of Ukrainian lawyers are their expansive business connections.”
Kharenko put this in an even more straightforward way, saying that the “one-stop shop” principle, the key selling point of international law firms for cross-border transactions, is becoming less and less appealing to clients, as having the same quality of services is very difficult to ensure.
Instead, people go for the best legal teams in each jurisdiction, having such combined teams of experts working cross-border.
Yet, some think that such cross-border team work makes it difficult to establish the chain of responsibility when a transaction goes wrong, as such combined teams often would lay the blame on each other, Chorny said.
When it comes to dispute solving, Chorny is unequivocal about the competitive advantage that some of his Ukrainian colleagues have. He does acknowledge the real talent and skills that a handful of local law firms have, yet for the majority of locals the key to success in Ukraine’s notorious courts, in his opinion, lies elsewhere.
“To be able to resolve problems successfully, in addition to professionalism, you need to have good connections and the capacity to influence the court beyond the legal means,” Chorny said. “The clients perfectly realize this. And it’s impossible to compete with [some Ukrainian law firms] in this area.”
Oleksiy Didkovskiy, managing partner with Kyiv-based law firm Asters, said it would be wrong to suspect foul play behind every court success. Often, he said, it is about the skills and understanding the expectations and attitudes of local judges.
“When an international law firm files a claim that’s 30-50 pages long, like they usually do in the U.S., it’s very unusual for Ukraine, and it doesn’t work,” Didkovskiy said. “Unfortunately, our judges simply don’t read documents that are so long.”
Regardless of the reasons for the strong market position of local players in Ukraine, Chorny said he doubts that they will be able to enjoy such a comfortable life for much longer.
He thinks that the major Ukrainian firms that mainly partner up with internationals on cross-border transactions will cease to exist within the next two to five years. He said they are likely to follow in the footsteps of Magisters, which was the largest Ukrainian-owned law firm in recent years. This summer, Magisters announced plans to merge with the Russian legal services giant Egorov, Puginsky, Afanasiev & Partners.
Chorny forecast that several international powerhouses will enter the market and will acquire the top local players – either directly, or offering lucrative partnerships to its star lawyers.
(Photo: Maksym Lavrynovych, managing partner of Kyiv-based Lavrynovych & Partners)
“Only the small local boutique firms with very narrow specialization will remain on the market,” he said.
Didkovskiy offered a radically different version of market development. In his view, when it comes to top Ukrainian legal talent, international firms have very little to offer to them and a lot to take.
“They feel good as it is, so why merge to be imposed with those corporate standards?” he said. “Ukraine’s top lawyers earn very decent money now. Yes, they could earn more by merging with the internationals, but the difference wouldn’t be so crucial.”
Kyiv Post staff writer Vlad Lavrov can be reached at [email protected]
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