A rude awakening struck Kyiv’s legal services market in 2007 when multinational firms opened shop in Ukraine, igniting a wave of aggressive recruiting.
A rude awakening struck Kyiv’s legal services market in 2007 when multinational firms opened shop in Ukraine, igniting a wave of aggressive recruiting and pirating of talent from existing firms.
The Silecky Firm lost three associates to Baker & McKenzie, while Kyiv-based Asters said it lost two associates during the last six months to Chadbourne & Parke and Gide Loyrette Nouel.
“Some of them, who may have been the brightest stars, left to internationals that are not newcomers, but saved their own skins because their firms were also under attack by the newcomers,” said Armen Khachaturyan, senior partner at Asters, a Kyiv-based law firm established in 1995.
With Ukraine becoming a new priority for multinational corporations, the global law firms have followed, causing seismic shifts in Kyiv’s legal market and forcing many of the smaller, local firms to become more competitive or sell out.
In recent weeks, global giant Clifford Chance announced its entry, with another Magic Circle firm, Linklaters, also reportedly considering the move.
Last year was “a big wakeup call” to international firms, with “waves of people” leaving one firm and going to another, said Oleg Riabokon, a cofounder of Magister & Partners law firm, founded in Kyiv in 1997.
Kyiv’s local firms are being hit hardest, as multinationals increasingly dominate the corporate law market, have more backing, and can therefore lure the best talent from the small legal talent pool, lawyers said.
The entrance of UKbased multinational CMS Cameron McKenna dealt the biggest blow to the existing system, lawyers said, opening its doors in August 2007 having already recruited 30 people.
Unlike in the US, where recruiters find talent at universities and nurture their careers within a firm, multinationals such as CMS entered the Kyiv market simply by raiding existing firms for talent, Khachaturyan said
“Until 2007, the market was more or less balanced,” he said.
“People understood what the services were, what the hourly rates were, what the compensations were fairing in terms of overall cost of life in Ukraine, and quality of life. But then suddenly that started to change so rapidly.”
Base salaries began spiking to “extraordinarily high levels,” said Jason Bruzdzinski, chief operating officer at Magister & Partners.
The multinationals, able to provide higher quality services, made it “very painful” for many small, local firms to compete.
“Headhunting and recruitment tacticswere almost unprofessional in some cases,” Bruzdzinski said. “They were very aggressive.”
CMS’s entry didn’t only affect Ukrainian firms.
USbased Chadbourne & Parke and Baker & McKenzie were two multinationals hit hardest by the penetration of CMS, according to market players, each losing partners and attorneys.
Baker & McKenzie did not respond to requests for comment from the Post.
Chadbourne & Park had one partner and four associates leave their firm for CMS, according to Jaroslawa Johnson, managing partner at the firm. It took about 45 days to replace them, she said.
Unlike many local firms, who accuse CMS of using unfair and aggressive tactics, Johnson said the pirating was “not unusual.”
“The legal market has become very fluid and people move from office to office, not just in Ukraine,” Johnson said. “In the United States, in England, in France, it’s a common, common practice now.”
Swiping lawyers wasn’t the only way multinationals affected the Kyiv market, lawyers said.
Frishberg & Partners, a local law firm led by two partners and 12 lawyers, was unaffected by the pirating, but saw a significant portion of clients disappear to multinationals.
“There wasn’t any one giant that entered that changed everything,” said Alex Frishberg, senior partner. “It’s just over the course of half a year or a year, all of the law firms came in.”
CMS’s entrance caused “the first ripples,” Frishberg said, after which the big law firms got together in a consortium and readjusted prices and salaries, he said.
Frishberg estimates that multinationals now control 80 percent of the corporate law market.
“It made getting client referrals from different embassies more difficult, because in the old years when we were the monopolists in Kyiv, we’d get referrals from most, if not all the embassies,” Frishberg said.
Now that several multinationals from the US, France, and Germany have entered, client referrals from those embassies have dried up, said Frishberg.
“These days each embassy has their own law firm, to which they pretty much give work exclusively,” he said.
Local firms are trying to set themselves apart and stay competitive in different ways, such as expanding to Ukraine’s regions, implementing international business standards and practices, increasing compensation packages and finding new niches in the market.
For example, Frishberg’s firm created Payroll Ukraine, which he dubs a “smaller version of Ernst & Young or PricewaterhouseCoopers,” through which he offers accounting services to his clients.
They also created the Family Law Group last October, a firm manned by two lawyers dedicated to family law. No such law practice exists in Ukraine, he said.
The events of 2007 were just the beginning, Riabokon said. “We’ll see more of these developments throughout 2008 and probably further,” he said.
No matter how local firms try to boost competitiveness, “some of the weaker firms are going to start merging with either local or foreign firms,” said Frishberg, adding that negotiations have already started.
After losing a quarter of its lawyers, Kyivbased The Silecky Firm, founded in 1995, is in merger talks with multinationals, said Markian Silecky, the founder.
Khachaturyan and Asters cofounder Oleksiy Didkovskiy said they are in talks to acquire local law firms, which should produce results by the year’s end.
“We feel that we are attacked, to a certain extent, and we need to respond,” Didkovskiy said.
