Ukraine’s legal market often mirrors what’s happening in the entire economy. The Kyiv Post sat down with Michael Kharenko, managing partner of Sayenko Kharenko law firm, to discuss what awaits lawyers and the business community in Ukraine this year.
Kyiv Post: What trends are currently taking
place in the legal profession?
Michael
Kharenko: …The share of foreign businesses decreased … The second [trend] is legal
regulation is increasing in sophistication. A lot of new legislative acts were
implemented recently, including the Tax Code, the new Criminal Procedure Code and corporate legislation. This calls for more
sophistication in the profession.
KP: Why do
you call it “sophistication” when the new codes aim to simplify the work for lawyers?
MK: There
are many new rules which are more complex and the role of lawyers is becoming
more important as well. Ukrainian legislation still requires developments in
many areas. The same issue can be regulated by a hundred rules in the U.S. and
only one article in Ukraine. It does work in many situations, but it does
provide an ability to create tax avoidance schemes to manipulate the system.
Sometimes it provides the authorities an ability to manipulate too by interpreting
things that are not clearly regulated.
KP: Why are foreign businesses leaving Ukraine?
MK:
Speaking, for example, about foreign banks which are selling or sold their Ukrainian
subsidiaries to local businesses, Ukrainians appear to be much better equipped
with local knowledge and expertise to deal with local realities. Foreigners,
for example, had a much softer approach towards aggressive Ukrainian borrowers.
They were naïve sometimes. For example, once Ukrainian owners took over banks
which used to be run by foreigners, there was a totally new approach to dealing
with borrowers. They are not trying to negotiate with borrowers a 50 percent
haircut. They demand the whole amount. The borrowers are now complaining and
saying they wish they had agreed with the previous foreign owners as it was
much easier.
KP: So what
awaits lawyers in 2013?
MK: One
trend is that as Ukrainians take over, they require more in-house legal
support. Local businesses are building stronger in-house legal teams and that
also means that they are coming after good lawyers in law firms. The second trend
is that the demand for mid-market advice is decreasing, because in-house legal
departments can deal with this work themselves. Our clients come to us for more
sophisticated advice. They need a person who understands their business
realities financially, operationally, strategically.
KP: This is
much more than what was required from a lawyer five years ago?
MK:
Exactly. In the past, just before the crisis, what we were looking for was a good
technical lawyer. Today, we need a creative person with a glare in their eyes
and a totally different set of communication skills.
KP: Are you
going to hire new lawyers this year?
MK: We are
looking to develop new industry segments such as intellectual property, IT
[information technology] and white collar crime. From that perspective we are looking
to acquire teams of lawyers rather than just hiring lawyers to develop certain
practice areas gradually.
KP: Why is
there a demand for white collar crime practice now?
MK: First
of all, there is a new Criminal Procedure Code in place and people are still
learning how to use it. Secondly, we see much interest from our international
clients in this practice. Whenever they have a tax dispute, deal with fraud or
embezzlement of corporate funds, they do need support of a criminal law
practice as well. We set the trend for top tier firms to enter the white-collar
crime field to be able to provide overall support in addition to tax advice or
litigation capacity.
KP: Could
you give an example of a white collar crime case?
MK: Tax
evasion.
KP: But it
always was a problem in Ukraine…
MK: Well,
the government is upgrading its tax inspection service and their role is enhancing.
Because of the new tax code, there are less ways to avoid taxes, while the tax
authorities are becoming more sophisticated. They are learning. Five years ago,
one could develop any sort of tax avoidance scheme. Now tax authorities are
even targeting complex cross-board structures. As the criminal procedure
regulation changed, it became much easier to start a criminal probe. In this
case, you need lawyers earlier rather than later.
KP: Why is the
time ripe to develop an intellectual property practice?
MK: Ukraine
has huge potential in programming. Currently it is outsourced but hopefully
there will be more IT product companies in our country. The demand for IP work
is increasing substantially especially for cross-border IP.
KP: What
other practices will be in demand?
MK: It was
quite interesting to see capital markets quite in demand since the beginning of
this year. We started the year with a successful Eurobond placement by the
Ministry of Finance and (state-owned) UkrEximbank and we now have a few banks
and several large companies hoping to tap international capital markets in
early to mid-spring. This is a totally different situation from last year when
the capital markets in Ukraine were pretty much dead.
KP: Has
Ukraine’s legal market rebounded from the financial crisis?
MK:
Actually I think we are going further into the crisis. Competition is
increasing. While the standard of advice is improving, the volume of outside
legal support is decreasing.
KP: Any
advice?
MK: A
competitive law firm has to be very technological and very innovative in order
to be profitable in such an environment.
Kyiv Post staff writer
Oksana Faryna can be reached at [email protected].
