On December 15, 2020 CEELM gathered legal experts from across the region for its annual Year-in-Review Round Table conversation. In a wide-ranging discussion, participants shared opinions and perspectives on their markets, on strong (and less-strong) practices across the region, and the effect of the COVID-19 crisis on both, as well as on how technology is changing the legal industry, and what the industry will look like in 2021.
Participants (in speaking order):
Silvije Cipcic-Bragadin, Director, Cipcic-Bragadin Mesic & Associates (Croatia),
Tomas Dolezil, Partner, JSK (Czech Republic),
Josef Holzschuster, Head of Legal CEE/ MD Philips Hungary & Czech Republic (Hungary),
Nilay Goker, Partner, Nazali Tax and Legal Services (Turkey),
Elena Gabdulkhaeva, Legal & Corporate Policy Director, Uniper Russia (Russia),
Alexandra Doytchinova, Managing Partner, Schoenherr Sofia (Bulgaria),
Nikolay Chernenkiy, Head of Legal, International Investment Bank (Hungary),
Marjan Poljak, Senior Partner, Karanovic & Partners (Serbia),
Mykola Stetsenko, Managing Partner, Avellum (Ukraine),
Gelu Maravela, Founding Partner, Maravela, Popescu & Associates (Romania),
Peter Berethalmi, Managing Partner, Nagy & Trocsanyi (Hungary),
Bojana Bosnjak-London, Partner, Maric & Co (Bosnia & Herzegovina), and
Daniel Klementewicz, Partner, Penteris (Poland).
CEELM: Let’s start with an over-arching question. How have the leading law firms in your markets done this year, in general? Silvije, let’s start with you. How would you analyze 2020 in Croatia?
Silvije Cipcic-Bragadin: I would say, you know, it’s a mixed picture. For smaller firms, it was worse than 2019. Larger firms did better. It just depends. You know, we are not the biggest firm in Croatia, but so far, we’ve been fine. We had a mixed period between April and June, when not so much stuff happened, but during the summer, and especially after the summer, we were quite busy. I don’t think that we will have any decrease in revenue at the end of the year.
Some of this work came from last year, so transactions went on. There was a period of two or three months in which everything stopped. You know, people were assessing their projects, how to go on, whether to downsize. And eventually the market picked up new stuff, especially in employment matters, a lot of restructuring – some development projects that had been put on hold initially, and then the sponsors and investors figured out how to proceed. And that’s it, basically. Considering the overall situation in the world, and what’s going on, I would say that we are pretty satisfied at the moment.
CEELM: So you don’t have a sense that this was a bad year for you financially?
Silvije Cipcic-Bragadin: Yes, financially, we are doing okay. As a market, you know, it shrunk a bit. But as I mentioned, those who didn’t have the background of the work could see some decrease in volume. At our firm, we haven’t seen that. So at the moment, we are fine, I believe.
CEELM: What about you, Tomas, in the Czech Republic? Same thing?
Tomas Dolezil: Yes, I think so. I would say it was a good year. Obviously, it was up and down -- a bit bumpy, and especially the first half of the year was not that stable. Now it seems better, although the visibility and predictability are not as clear as they were in the past. But that’s okay. And I think it’s the same across the market. Maybe some firms are doing better, some worse, but on average, I would say the market is stable. There have been nice and reasonable projects in the market, including transactions. Obviously not as many as in the last three years. It won’t be the best year in our history, definitely. But if I compare it to what happened like 10-12 years ago, it’s much much better. Almost incomparable. And now we are stable and doing fine, with more or less the same team we had five months ago. The vaccine will probably help the economy, a bit. So I would say that the worst half of the problem is already behind us.
CEELM: Nilay, Turkey has had some unique economic and political challenges the last few years. Can you give us the Turkish perspective on things?
Nilay Goker: Well, despite the current pandemic situation, Turkey still remains a significant market for many international companies, for sure. Unfortunately, uncertainty created by the COVID-19 virus quickly disrupted global trade and supply chains, lowered prices, and forced multinational companies to make difficult business decisions about the way forward. And as consumer spending, production, and distribution are considerably impacted, the health crisis is actually testing the entire global economic system. But when it comes to Turkey, as you say, we learned from previous downturns that Turkey’s economy usually recovers quickly. Nevertheless, it might take more time to recover after the COVID-19 pandemic since Turkey entered the COVID-19 economic crisis already in weak financial shape, with high inflation and low central bank reserves. But, as one of the biggest economies in the world, Turkey has some strengths and weaknesses. And in terms of strengths, we can say its geostrategic position becomes more important. Like I said, it usually recovers and adapts quickly to new circumstances and alternative business models.
In conclusion, after the crisis, there will be an overwhelming situation for all different sectors around the world for sure, but we know that this crisis has caught many unprepared. Therefore, we have to set the right priorities for the long run, which requires that each sector has to think and adopt alternative business models, such as introducing new technological tools to their business.
CEELM: Does anyone have a different sense of the year – as either surprisingly good or disappointing?
Josef Holzschuster: The COVID-19 situation was really a special and global event, with two waves so far. I think the first wave was quite a surprise for everybody. First it hit China, especially. Like many other companies, we have factories in China, so we experienced some supply chain issues, as others did. When COVID-19 reached Europe, closing down the borders across Europe did not help much either, because we needed to move goods from country A to country B. So that was really a challenge, from a business perspective.
At Phillips, we have two different business units. One is the medical devices part, we call it HealthCare, which is, as you can imagine, quite critical in the current situation – and therefore has done well in CEE. Of course, we had a lot of customer-facing people out there – for example our service engineers in hospitals, and so on – so we had to be very careful to make sure that they were protected. At the beginning, it was not so easy to get all the personal protection equipment and to really give those people what they needed to avoid getting infected. So, that was, in the first wave, a challenge. But from this perspective – the medical device and customer service perspective – yes, there was and is a big demand in CEE. It’s still ongoing, and it will also continue.
In Personal Health, as we call it, consumer goods like kitchen appliances, and things like that, the first wave was a hit in some countries, but in others we did quite well, like in the Czech Republic. People did not stop buying, but due to the lockdown, they moved to online shopping instead. This clearly showed how important it was and is to have an online shop. You only need to look at Amazon’s numbers in 2020 – this business is really booming. Summer was then, more or less, back to normal, and people forgot about COVID-19. Maybe this is also the reason we have the second wave.
And now, we have had lot of lockdowns in the CEE region again. Now partially they are opening up, which is good. We have a semi-lockdown in Hungary, as you might know, but still online is a good driver. What we see is that it’s not easy to get products shipped – for example from China to Europe. There is limited freight capacity, via ships or even via planes.
CEELM: In terms of your team, Josef: Did you work from home, or did your team stay in the office? How did you handle that?
Josef Holzschuster: We established a crisis management team across Central-Eastern Europe – for 19 countries, starting from more or less the Baltics to the Balkans, and including Estonia, Lithuania, Latvia, Poland, Czech Republic, Hungary, Slovakia, Ukraine, Romania, and so on. We more or less combined our crisis management efforts into one team, to avoid having to handle everything multiple times, and in a different way. We decided on our own, based on existing data as well as measures implemented in all the countries, when and where we needed to lock down and send people to work from home. Most of us are working from home now. It’s a different way of working. I think we have gotten used to it, but frankly speaking, we still miss traveling and seeing each other. It was a tough year, so my whole legal team is quite exhausted – I feel that as well. 2019 was already a tough year from a workload perspective, but 2020 has been even tougher.
CEELM: Can you elaborate on that? When you say it is really tough and your team is exhausted, is that because you’re doing more work than you expected, or because under these circumstances it’s emotionally draining?
Josef Holzschuster: I think from a psychological point of view, that’s one point, because, yes, we all have parents and grandparents, which due to their age are part of the risk or even high-risk group. That’s one point. But also, not being able to interact and socialize within the team face-to-face, but instead being at and working from home all the time was demanding … many have children who were also at home. Some don’t have big houses that would allow them to separate. And the children also have challenges with online schooling, etc., where you need to do much more as a parent than normal. And ultimately a team needs simply to be together, sit together, and work together physically.
The other part is that instead of having real meetings, there are many more online calls, which is tiring. Having up to 10-12 calls a day, while you still you need to do your daily job, makes it not easy. So, in that sense, this year … yes, it has been a tough one.
CEELM: A recurring theme that we’re hearing from in-house counsel is an increasing workload. Is that what that you’re seeing as well, Elena?
Elena Gabdulkhaeva: Indeed, this is the case. There has been a lot more work to do, and particularly for Russia it is valid, because this year the Russian government has produced a lot of COVID-related legislation, implementing different laws and orders, trying to support the market and the economy. Plus, they implemented certain restrictions which continue to influence business. I’m working on the energy market, and we had to be prepared to organize a lockdown of the power station to ensure that personnel permanently stayed on the territory of the power station to avoid a situation where a massive spread of COVID resulted in a lack of personnel able to keep the units running. Plus, there was a lot of new legislation restricting recovery of debts from consumers, etc. Nevertheless – and this was a little bit surprising – business is generally doing quite well. We were expecting some downturn, but it didn’t happen. It’s pretty much okay.
For the lawyers, it was a tough year, because we had to do a lot more work to analyze the new legislation in order to provide urgent updates to the business – how to deal with all these new restrictions, and things like that. And we have been working from home since March – we started a bit earlier than the official lockdown was implemented – and we are still doing so. It makes it emotional and a little bit difficult for the employees - they’re sick and tired of staying home. This applies to those who have enough room in their houses as well. They are simply sick and tired of staying there, and they would like to go back to the office.
In fact, sometimes I see that lawyers, let’s say, create a reason to get out, saying, “I need some papers for court,” or whatever, just to go to the office and stay there for a while. Just to, you know, change the picture around.
But at the end, the biggest surprise for the industry was that … well, the energy industry is generally not used to working remotely. So it has never been a normal practice for energy companies to allow people to work from home. And once they were forced to send people to work from home, it was painful emotionally for the management and for the companies, but suddenly they realized that it didn’t hurt much, because the work remained effective. You know, things are moving, everything is in order, and people are working as well as they had been in the office. So it was a really big change – a big mind-shift for management – and now our company is considering keeping this practice going. Not to keep people working from home constantly, but to have a kind of a combination of working in the office and working from home, to see if we can implement this practice forever, even after these pandemic restrictions will be gone. So that was the biggest challenge, on the one hand, for the industry, and on the other hand, it was a big positive surprise that we can do it and that people can be as effective working remotely as they are in the office.
CEELM: Alexandra, we’ve been hearing that the working from home hasn’t been as disruptive as some had anticipated. As someone who has to manage the work of younger lawyers, do you think this is something that could continue after the crisis, or do you see it impeding your ability to manage your associates?
Alexandra Doytchinova: I think it is sustainable, but not predominantly home office, and not only home office. I think, especially with younger colleagues you need the personal touch. It makes a difference if you sit there and the youngster sits next to you while you’re drafting, or if you sit in a physical meeting and they can not only hear what you’re saying, but also see how negotiation works, with a lot of body language and reactions, not just content. I think the youngest ones are missing that. And they’re not so tired of going to an office, so they don’t appreciate sitting at home, because they have been studying now for five, six years at home, so they really enjoy the social life of the office.
But on the other hand, I had two offices – our Sofia office and our Budapest office – where people went home – started working from home literally over a weekend. We were less concerned about the younger ones than about the support staff because the support staff had never worked from home before. It was really surprising. It worked. I mean, thanks to a really good organization both on our part and on the part of our IT team. We actually didn’t face any problems – we didn’t really even have a hiccup. And it worked – systems were working, the coordination was working.
Of course, we spend much more time on the phone than before because, usually, you can pass by someone’s room and say something, or agree on something, and now you have to agree on a call, and so the calendar is full of video calls. Which is tiring. For a video call you have to plan, to specifically reserve a slot, but it worked. Of course, tele- and video conferencing works best when the clients and the counsels of the counterparty are also sitting at home. You couldn’t do it if just your firm was doing it and clients were wanting to come to meetings or the counterparties were available for physical meetings. But in this environment, it actually worked very well, and we returned to the office in late May or the beginning of June.
One more word. Our Budapest office moved because we needed more space, and we actually negotiated the contract and signed the lease during the first lockdown. And then of course the question popped up – “oh, wait, do we now actually need a bigger office? Is everyone going to be in the office at the same time at all? And do we need to assign rooms to people, or do we operate fully flexible?”
But at the end, we went for the bigger office. There are separate rooms for all lawyers, and we have no double occupancy for the time being. You need the physical presence, and I think lawyers need their own spaces and their own rooms. I think you can’t have totally exchangeable working places. That’s at least my takeaway for the time being. Ask me in ten years.
CEELM: Nikolay, how do you feel that this year affected your ability to build the organizational culture in your new Budapest office?
Nikolay Chernenkiy: Being a small development bank, we have a rather small team, and I think that we don’t have the same problems as larger organizations, especially with establishing remote work. My small legal team is actually four persons in Budapest and two persons in Moscow. I am in contact almost all day with my colleagues in Moscow and I know all the difficulties that they have with some of the regulatory requirements related to the COVID situation. Here in Budapest, I can say that it’s not so difficult for us, as, again, we have a rather small team. We don’t work remotely all the time. I visit the office three times a week, minimum, and while I do not insist on it, I strongly encourage my guys who have time – and if they are not afraid of COVID – to visit the office as well. The personal contact you have all mentioned is extremely important.
Actually, for me it’s easy, because I am alone here, so it doesn’t matter whether I am at home or in the office, but I know that two of my guys have three children. It’s really a disaster for them to organize the appropriate workload at home. So that’s why it’s a problem.
I think all I can say is that this year for us, at least in figures, was even better than 2019, because last year involved our relocation. It was very difficult, because there were a lot of technical/administrative issues to be solved with the relocation, and organizing our business here. There were a lot of new things for us. But this year we started our activity here. I hope that 2021 will be easy and we will terminate all these restrictions.
CEELM: We’ve heard that some of the practice areas – Employment, for instance – have actually benefited from the crisis. Has anybody actually expanded a practice group, hired people, or restructured their organization to formally move lawyers to these practices that are busier? Or has the increase not been so much that it required that kind of structural change?
Marjan Poljak: You know, Employment has been growing in Serbia and across our region for the past two years, but this year saw a kind of explosion. We needed time to see how to reallocate some resources to cope with this. This was most noticeable, maybe, in the first moment in March when everything collapsed for some 20 days, when nobody was sure what would happen in the future. Employment was always on top with activity, and that remains true today. Luckily, everything else pretty much continued to work normally after that first shock. I can definitely say that this crisis has been a little bit – let’s say – “kind and gentle” towards the legal profession at least. So we should be happy that, at least, we can retain business and people and everything, because people were definitely not very sure what would happen at the beginning. But Employment is not the only field. We also saw that Real Estate was booming, and it is still very strong. I don’t know why – I’m not sure how to connect it with this. Maybe as a kind of opportunity in a distressed market situation or something. Regulatory work is also very active. I can say that, from our experience, only M&A is not moving forward, but it is also not going down too much. In Serbia, it is a little bit slower than last year. But it also depends on the market – in those markets where we cooperate with local lawyers, like Macedonia, Croatia, and Slovenia, in the second half of the year M&A also boomed. So Employment, definitely, but there are also other fields as well.
CEELM: M&A, as well? Really?
Marjan Poljak: Yes, M&A, definitely, in the second part of the year in a number of markets. And from my perspective, Slovenia, pretty much, Croatia also. I cannot recall a stronger M&A year in Macedonia. So I cannot say that it is COVID-connected. Montenegro is slow, definitely, but this is due to politics, not only COVID, because they have had a large change of their government.
CEELM: So, at least COVID doesn’t seem to be freezing M&A right now.
Marjan Poljak: No, no, definitely. And one thing that I’m seeing is some opportunities for our profession, because Litigation is also booming. And when we have a traditional crisis, like ten years ago, then M&A went totally down and Litigation and Arbitration went up. But this time M&A is not going down, beyond, maybe, a percent or two. But Litigation is going up. So it is a kind of win-win situation that we have never seen before, because this is a crisis – but not a financial crisis. So M&A will be active. But one important thing that we are seeing is the absolute increase of investments made by private equities. We never had that percentage of private equity involvement in M&A. We are tracking that along our region through concentrations, through all firms we are working with. It’s a huge, huge increase.
CEELM: It sounds like, in Serbia at least, business is good for law firms almost across the board. Mykola, what about Ukraine? Is business going well for you in Ukraine right now?
Mykola Stetsenko: Generally, yes. I have pretty much the same feelings as many of my colleagues, here – that business is okay and we have learned our lessons. You asked whether we relocated any people, created new practices, etc. We haven’t seen such a huge increase in Employment work. Some, yes, but not tremendously. At the same time, we saw a lot of opportunities in general. M&A is steady. It’s not tremendously bigger than last year, but it’s still at a very good level. Other transactional work is up, as is Dispute Resolution work. So it’s very much balanced in terms of the workload that we see in the market, and we see a lot of opportunities.
We saw this year as a challenging year. Part of our team decided to split off and go on their own. We did it in a very friendly, nice manner. They have complementary practices and they will do fine on their own. But then, on the other hand, we also had other teams join us, and we will have more announcements in early January – and two more partners will be either promoted or joining us. So, we looked at this year as a year of opportunity and growth.
I will echo some of the others here, in that, surprisingly, our IT systems were very well-prepared for this type of crisis. I’m really grateful to my IT guys – that we were actually prepared. We indeed shifted very smoothly to working from home, and we continue working in a mixed way. About 70% of our people work from home, now, and about 20 to 30 people come to the office on an as-needed basis. I’m in the office right now, in fact, although for me this is quite unusual, as I usually work from home. We turned out to be, as a firm, quite resilient to this challenge.
Ukraine as a country proved to be quite resilient as well. Of course, the hotel industry and the restaurants have been hit tremendously, as everywhere else in the world. But otherwise, the big industries that employ most of the people continue to survive. Some of them also found lots of opportunities. Despite all the challenges, despite all the headaches and problems that we’ve seen this year – and we end up very tired at the end of this year – at least we can congratulate ourselves that we have proved to be resilient, as a country, as a firm, and as an industry – that’s great.
CEELM: Josef, some of the in-house lawyers we spoke to over the year have suggested that they have been a bit overwhelmed with client alerts – with messages from law firms providing them updates. Have those been useful to you, or not really?
Josef Holzschuster: In my view, they have been useful. We received them as well, which is good, because I think it gives a good and brief overview in a short time frame, especially if you’re not a lawyer from the country you’re located in, like me in Budapest. I’m not a Hungarian lawyer. So it really helped, and in that sense it was useful.
CEELM: And you read them? You make sense of them?
Josef Holzschuster: Correct. Yes, I did.
CEELM: Have you ever followed up on any of them? Has any law firm gotten your phone calls, as a result of sending you this?
Josef Holzschuster: Unfortunately not, because we have our standard law firms, of course, which we use. For Phillips this year has been a special and very busy one, not only because of the COVID-19 situation, but also because we’re doing a disentanglement. As officially announced in January 2020, we’re spinning off the domestic appliances business into its own group of companies. In such cases, of course, you rely on the law firms you’ve used before, because they know your business. It’s not our first time – we’ve done disentanglements in the past, like with Philips Lighting. And in addition, we are also currently combining the Central and Eastern Europe market with the Russian market, to a super-market called CEER, which will allow us to serve our customer even better. So that was, in addition, quite a lot of work, which prevented us to think about getting in touch with or engaging new law firms.
CEELM: Gelu, has your firm handled these sorts of legal alerts? Have you sent information out to clients or even non-clients in that way?
Gelu Maravela: Yes, we have. We actually sent out plenty of legal alerts, but we had to be very careful in order not to overwhelm our in-house counterparts. We sent only those legal alerts that actually made a difference, without actually knocking on the door every day. Because, at the end of the day, you kind of pester them. Because our in-house counterparts are very well organized, and most of the time they are actually updated. So basically, we had this kind of small team working on the COVID matters and COVID legislation. We had to select and put on paper a very short note, sending it out to those for whom we actually believe that it makes a difference. At the same time, to non-clients, we were very careful in this respect, because sending out non-solicited emails is a sensitive matter.
CEELM: Have you gotten any feedback? Did clients follow up or express appreciation for it?
Gelu Maravela: Yes, absolutely. All of them actually sent us either requests for supplemental information or clarification, or just, you know, “thank you for this and keep me updated.”
CEELM: Elena, you giggled when we originally asked the question. Can I ask why?
Elena Gabdulkhaeva: Well, first of all, I have my personal attitude against these alerts and all this. I mean, I definitely agree that you should be very careful not to overload your potential or current clients with this information. I have to admit that, during this year, at a certain moment, it became quite annoying, because there were too many of them. And I would say that some of them were really not helpful and they were just sent for the sake of sending.
But at the same time, I can give you at least one example of a contact that helped. It was not an alert, but a call from a partner of a law firm. We are not currently working with this law firm, but I had a couple of projects with them in the past. He called me and he told me that there’s an amendment to a certain law and it might be of interest to me, because it might affect our business. First of all, it was nice, because it was a personal call just to remind me. Second, it was nice because it was something valuable and it was nice that he actually thought of us as he was reading these amendments. And I would say that these kind of personal things – they help much more in establishing the relationship. I’m not saying that law firms have to do it, because they may not have the time to do it. And if you have never been a client of this law firm they won’t actually know your needs. But they really have to balance, you know. Some alerts are fine, but when it becomes too many of them, they need to find other ways to communicate with future clients. It is maybe better even to organize a meeting because, at a certain point, when you get too many of these alerts from one law firm, you stop reading them. For me, it’s a very, very questionable marketing tool.
CEELM: It’s more effective if you use it less, in other words.
Elena Gabdulhaeva: Exactly. Yes. Because then when you do it, when it’s really something outrageous and important, then there’s more of a chance that, first of all, people will read it, because they would know you for that – that you only send something when it’s really, really something important. And then you will get a reputation that you are selective with this kind of instrument and you will attract more attention even from potential clients. That’s my opinion.
Marjan Poljak: This was a really special situation, because I suppose everybody started by sending millions of alerts, because all practice areas were affected. Although we have different experiences – some clients don’t want to receive too many newsletters, but others ask, “why aren’t you sending them, when others are sending them every week?” So it is really difficult to meet all expectations. But we decided, immediately, not to send so many. We just decided to go with one alert email, giving the clients the option to ask for daily updates. Because we had, for the first two months, daily updates on a number of things. But we put them on the website. And if you wanted to receive the information, you could just let us know. But it was strange. The number of alerts and the amount of pressure from our colleagues, saying, “I have to send this out today, it’s really important!” We didn’t want to send ten alerts in a day – we just couldn’t.
CEELM: So many GCs we speak to report that their choices of outside counsel often boil down to: “Do I know that lawyer? Do I trust that lawyer? Do I want to work with that lawyer?” Not even the particular law firm, often – just “that lawyer.” Peter, how did this climate affect your business development efforts, in a world where you’re not able to wine and dine with clients, and you’re not able to take personal meetings – or at least not as much as usual?
Peter Berethalmi: Yes, good question. Well, I think it would be interesting to see how this will impact client contacts and client communications and how you attract new clients. I’m sure that personal relationships will remain important, but I’m also sure that Internet solutions will play a much bigger role. But, quite frankly, we haven’t really focused on it yet. Maybe, at the beginning of next year we will have to digest what happened this year, and then think about it. Because, just as the others said, it is quite a busy year – and not just with the changes to the laws, but also in terms of the workload as well.
CEELM: Does that mean your business development efforts and strategy didn’t change at all this year? Surely you met with clients in person less than you used to. Has that affected new business at all, or have you seen any effect on your client portfolio?
Peter Berethalmi: Not really. Because even in the past – we had visits from clients, but I think during the last five to ten years, I think we had fewer and fewer. I think it is common to communicate over email these days anyway. But, with current clients, communication has definitely changed. One of my clients that I work quite frequently with – they don’t just have video meetings all the time, but they forced me to use the Google File System and modernize the way I work. Some of our clients don’t like to receive emails anymore and they want to have cloud files. I’m not sure how soon that will become common in the legal industry – I think most lawyers don’t like the idea that there is a file, and anyone can access it or amend it at any time. I think it’s just something we don’t like because we like to, you know, keep control of the drafting and things like that. But that will definitely change.
Bojana Bosnjak-London: I think that, for our firm at least, this year has been very good for business development. As things started to lock down in March and business started to quiet down, we invested a lot more thought into our BD and we started to create internal teams to focus on our online presence. We have increased our online presence a lot with online publications, social media platforms, and thing like that. Mid-year, as business picked up, our business development efforts dropped off, so we tried to balance it. In terms of clients, I wouldn’t say that we’ve lost any. We’ve seen a general decrease in the number of international clients in terms of their new investments in Bosnia, but we have also seen an increase of local clients who have had different sorts of problems, like in litigation. We’ve seen quite an increase in financing work as businesses are turning to investment banks, the EBRD, and the EIB, for loans to help them overcome these situations.
CEELM: Financing as well – it seems that every practice area is doing well for everyone.
Bojana Bosnjak-London: You know how it is: lawyers have work when times are good and when times are bad!
Tomas Dolezil: Just to jump in to provide another perspective on the question. First, I’m a transactional, M&A, and PE lawyer, and this sector this year in the Czech Republic has been affected – there are not that many transactions. What I can see – and it relates to BD for us and probably more for M&A advisors – it has been quite difficult because you really do need to see people, you need to visit clients, or potential clients, when you are putting deals and transactions together. Finding targets, and persuading clients, owners, and business founders, that the deal is good. Since this stopped in the first half of this year, there is, at least here, a gap in the pipeline.
I work in a similar way – meeting people, sending information, speaking to people to see if there are opportunities. It has definitely affected how I develop business and how I become involved in any transaction. In addition, many of us are trying to get work from abroad, via referrals from London, Germany, etc. If you can’t go there and speak to your contact firms and lawyers there, that’s a problem. And although you try to keep in touch with them in various was, it’s actually much more difficult. They probably still have some projects which are related to our countries, but to make sure that they say “okay, I know this person in Prague or Warsaw” is much more difficult than it would be if we were able to be present physically, when you can see faces and put yourself on the radar of those clients or corresponding law firms. So it definitely had an impact. And if the situation continues and we aren’t able to travel or to have events like the event CEE Legal Matters is planning for 2021, then I think it’ll make life much more difficult, for all of us.
Peter Berethalmi: I think we would need to see how this will evolve, because, on the one hand, I agree that we need to see other people in person, but on the other hand, we realize that you don’t necessarily have to pay a lot of money and travel to Asia or America to participate in a video conference or an online training. Life will change a little bit, even when things go back to normal. I think we’ll have a mixture of everything.
CEELM: To some extent, it sounds like this crisis came when the technology was ready for it. If it had come 10 or 15 years earlier, without these kind of video-conferencing tools and cloud computing solutions, it would have been harder.
Peter Berethalmi: I agree. One year ago, when we were engaged by a foreign firm, we had a phone call, but now we have video meetings. So that’s interesting because, of course, we don’t meet personally, but at least we can see each other – and it’s almost more interactive, in a way.
Nilay Goker: I will challenge the efficiency, though, especially if you have a small kid at home who does not understand what a working mom is [laughs]. I’d prefer to travel an hour to the office for work and then come back home for other duties.
Elena Gabdulkhaeva: For me, it’s a mixed case. I mean, let’s be honest, it’s nice to have all this technology and stuff, but, come on, we don’t want to be 100% remote from each other. It’s good training, at least, to understand that we can mix things, but I don’t believe that anybody in this group likes the idea that this is it from now on, that this is all we have, no more personal meetings.
Nilay Goker: It definitely does not provide the same feeling. Technology helps us to do our jobs more efficiently and be more productive or attend team members’ or clients’ needs more quickly. But still I think, as Tomas already mentioned, especially if you’re an M&A lawyer, and you have to negotiate with a counter-party, even it can save time it’s not always easy to do it with emails and phone conversations without any personal touch.
Marjan Poljak: But, you know, if you have a client in Arizona, for instance, this is a good thing. I cannot recall one video call before this crisis, with a client. We used video calls internally, but with a client - never! Now, there are quite a few of options online and there are a number of clients that you won’t meet in person in the next five or ten years.
CEELM: And you think that will continue, after the crisis?
Marjan Poljak: I believe it will, to a certain degree. I also believe that things will change. I work with clients in the aviation industry, and there are expectations that the business side will change, with cost-cutting. Maybe not for us, but other industries, you know, maybe M&A deals – instead of meeting three times, in person, maybe you’ll meet once or twice, instead. Four or five people coming to meet from different parts of the world.
CEELM: Earlier, Alexandra talked about creating the new Schoenherr office in Hungary. I wonder if this will even lead to some kind of different arrangement of law firm offices, if working from home is more common. Maybe you won’t need as many permanent, separate offices, and you can have shared working spaces somehow. Alexandra, what do you think?
Alexandra Doytchinova: Maybe I’m a bit too conservative for that, but I’ve found that, with lawyers, open space does not work. People talk too much – and lawyers like hearing themselves talk – so if everyone is talking on the phone, or even a couple of people, in an open space, it’s really difficult for others to work efficiently. Nowadays if someone is on a (video) call and you have people in the background, that is difficult.
As for shared space, I think that lawyers are still too much into paper. I’m moving away from paper due to travelling but still, if I need to read a contract, I print it. So we end up piling up a lot of paper. This makes it a bit difficult in a shared space, where you really only have a container with pens. At least in our firm, it might be considered a downgrade, if you told people that they no longer have their own space. Maybe smaller/start-up law firms could save on office space; so, if you’re a spin-off or if you’re a smaller team, there is a potential to save. For bigger firms, like we are, I’m not sure people are there yet.
Peter Berethalmi: A lot of UK and American firms – maybe 20% or 30% – have said that in their new leases or new spaces they will have much less space available. If they’re a 1000-lawyer firm, there would be space for 700 lawyers, for example. There would be new spaces used by multiple people, but maybe 2/3 days a week. I guess the question is whether this will be just a temporary trend or if this will really redefine the whole legal market.
Josef Holzschuster: I agree, because we are also in the process of rethinking our office strategy. We have had open and shared-desk offices for several years already, but we are thinking about how to optimize those. One plan could be to make more meeting rooms available, so that people would come to the office mainly for meetings. Afterwards, they would be able to go back home and work from home. That might be an option in the long run.
Mykola Stetsenko: We are actually considering now how we want to change our office space in the next five to seven years. I think there will be a lot more open space, but also separate areas for people to chat and have private conversations and, also, small conference rooms for one-on-one conversations or individual telephone booths for calls. Inevitably, we are all moving in that direction. Among our partners, some are more conservative, some are less. Some are more used to paper – I have tons of it on my desk right now. But we are underestimating the new generation, who are joining our firm every year, they are the generation that grew up with iPads and computers, so for them it is much easier.
In terms of new trends, we really like to do educational webinars for clients, instead of spamming them with legal alerts. We invite clients to join our legal specialists once a month and, if they cannot attend, they can access a recording of it easily. Many clients really enjoy it – it’s no pressure, no spamming, and I think that it saves all of us tons of time, as you can do it while going home, or listen to it. Educational webinars will be more common, while individual meetings will be limited to actual mingling, which would be less focused on educating the client and more on keeping and developing relationships.
Daniel Klementewicz: There has been a strange political situation surrounding Poland recently, but we are coping and doing pretty well. Not as well as ten years ago, when Poland was, I think, the only green island in Europe in a sea of red during the financial crisis. The situation is pretty stable now. It’s business as usual, generally speaking, at least for lawyers, across practices, from M&A to Litigation. Of course, the pandemic actually added to this, with an increase in new legislation. We had to figure out what would be attractive for a given business, to apply for specific financing loans, guarantees, and so on. Trying to figure out how clients could actually benefit from the pandemic, so to speak. Of course, in general, when you look at the news, some sectors are suffering, and the overall situation is not as good as it should be. Culture, the events industry, and tourism are completely dependent on subsidies now, receiving grants from the state. Luckily, the EU is generous, and all support schemes and relief packages are being approved swiftly by the EU commission and implemented quite efficiently in Poland.
All in all, at least up until midway through the year, many people in Poland said that they would have not actually made as much money as they did had it not been for all those schemes and subsidies being made available. Regretfully, the second wave of the pandemic made it much more difficult. Infection numbers grew and restrictions returned – maybe not complete containment, like the first time around, but it was still quite intense for some businesses, with a complete lockdown for hotels and restaurants.
I think it will improve significantly in the late spring, despite Germany introducing a full lockdown. It remains to be seen. The government is reacting pretty swiftly and efficiently, I must say.
But all-in-all, life seems to be moving forward nicely. Technology has definitely helped and made client communication efficient and cost-effective. We don’t travel to meetings anymore, and property viewing are not taking place, so billable hours are gone, to some extent, but we are making up for it by doing some other things, such as restructuring and providing urgent advice about the ever-changing regulations.
I think the general perception for next year is that we will continue to work from home, but as many have already said, lawyers tend to spend more time working together on files, exchanging views, and discussing how to deal with a particular case, especially within Dispute Resolution teams. So it is vital, you know, not to lose that human factor, which has really taken a hit. We miss the old normal. We all talk about the new normal, but on the inside we are hoping that it’s going to be the best of both worlds: being able to go safely back to work but also have the flexibility of these new times. When you deal with commercial assistance, like advising clients in M&A or other fields, I think it will definitely not be a case of the old normal coming back. The new normal is here to stay.
Some reports are saying that 30% of the workforce over the next three years will not be returning to offices. Employers are realizing that the current model works well for them, and they are willing to pay the same money for work being done remotely. That means it has to be pretty effective. And that’s actually the case in our firm!
CEELM: We’ve talked about the amount of COVID-19-related legislation designed to help businesses. How would you assess the state intervention programs in your markets, in that regard?
Gelu Maravela: In Romania, the state had a very good and consistent program of intervention in terms of giving grants and state aid to companies in a very consistent and clear way, in a way it hasn’t before. I think that the Romanian state and government did their job this time, providing a lot of money to be absorbed by companies – it made a difference. I’m not sure that they will be in the same position to do that in 2021. I believe that this year, from what I heard, was a good year for everybody, but let’s not forget that we had a good backlog and pipeline from 2019 and this fed our early work and businesses. I think the next three or four months in 2021 will be harder because this year we’ve been hit, and whatever you put in the ground now, you’ll harvest next year. I believe that after the first six months of next year it would be nice to have another conference, with the same people, to see how it really affected us. Because, even though we did well, still, we are not isolated – we are a part of the market, and our market was hit.
To be honest with you, the legal market shrunk. Big law firms didn’t do well – they axed people while at the same time reducing payroll. Smaller firms sometimes did very badly, and some did very well, depending on the way they were organized. Because you have an IT-critical backbone, allowing you to communicate with people by email, phone, or video conference instead of needing to be present in the same room. What worries me is the next six months. I don’t think that the Romanian state will have the ability to inject money in the economy in the next 6 or 12 months. I hope that the vaccine will do the job and we’ll be able to get back to a normal approach. You are going to have to have, in my opinion, a mixed approach. For sure, you’re going to have some lawyers in the office, because you need contact with, at least, the younger lawyers, who will never grow in the manner you want unless you actually mentor them. Without that mentorship, they will not be organized, and they will not receive the expertise and experience they need to grow.
Marjan Poljak: In Serbia, we are a bit unique, as we are not in the EU. The crisis started just before the elections in Serbia, so all of the subsidies before the elections were very generous, in the first wave. After that, the resources were spent, more or less, and we are not expecting that the government will be able to provide the same level of subsidies in the next period. But, overall, the Serbian economy is, somehow, doing well, and the headlines declare every day that we have the largest GDP-growth in Europe (which actually means that we have the smallest decrease in GDP). Next year, we expect that business will continue as is at least until autumn. Our expectation is that travel and everything will pick up once we have the vaccines, and of course we hope that this will happen sooner rather than later.
Peter Berethalmi: Our government was also quite successful. I think in the spring and in the summer, a lot of mid-sized companies expected more incentives and subsidies – but so far, the economy is doing well. I think what they did right was the credit and loan moratorium, which was originally scheduled to expire at the end of 2020, but now has been extended to June, 2021. So, obviously, there’s a big question: What will happen next year? None of the companies had to pay back their loans this year, since spring, so the beginning of 2021 will be quite decisive, I think, in how it will affect the economy. Now the government is subsidizing the hotel-and-restaurant sector, which has been the most affected, because we have a mid-lockdown, with shops open, but hotels and restaurants closed. I think they were quite pragmatic and that they tried to maintain relationships with various different countries, and foreign investment is still continuing to come – Mercedes announced a new investment (even though BMW suspended its planned investment, probably because of COVID).
CEELM: Nikolay, what about from your in-house perspective?
Nikolay Chernenkiy: It’s a little bit difficult for me to evaluate the efforts of the Hungarian and other governments. As we are an international organization, we are just a little bit on the side of these trends. We are just trying to understand the future development of our current climate. The economy actually had major difficulty here in Hungary, and I hope that in 2021 there will be some state subsidies or other forms of support – and we as a development bank will try to provide the potential possible assistance that we can. But at the same time, I think that it will be a difficult period. We are ready for it, but we hope that it will be a very well-weighted decision from the government.
Tomas Dolezil: I think the government will be more selective in the type of support. They will continue with the so-called “kurzarbeit,” to continue providing support to employees and the companies. In terms of legal work, I think it will be more or less as it is today – as we have seen for the last three or four months. The main difference to normal times will be in a lower visibility of the work ahead of us. Normally, when we think about M&A, you can see in your pipeline what will come in the next three, five, six months, what is on the horizon, what deals are planned, and what could be on the market. Now, we don’t have that visibility, and it is sort of difficult to chase the work in the market.
On the other hand, the situation will create new opportunities, new transactions, maybe slight distressed assets will be on the market, sooner or later, which will be good for us definitely – but this is hard to predict, you can’t count on it. So I generally expect that the year will be similar in terms of the level of business, in terms of financials, to what we had in 2020.
Silvije Cipcic-Bragadin: In terms of the Croatian economy, I don’t think the country will do well in 2021. As you know, Croatia depends heavily on tourism, and we’ve been struck badly this year. We also had an earthquake in March, a quite strong one, with Zagreb being hit hard [this conversation took place shortly before the December 29, 2020 earthquake that did further damage to the country – ed.]. Having said that, there may be a potential for work in the real estate sector, presumably in developing the Zagreb area, which will attract a lot of money and create other opportunities. There may be some development in the tourism sector as well, because some of the projects there stalled because of the crisis, and now they lack financing, so there will be opportunities there. None of us have mentioned Brexit, but we have seen a lot of interest in regulatory financial work over the past couple of months. We’ve picked up some nice mandates from international UK banks as well. Transport is also something that will be a hot topic in 2021 in Croatia.
Daniel Klementewicz: I’ve already touched upon those issues, so wrapping up, I’d say that, despite the situation in Poland, things are looking positive and dynamic, and I hope next year will not bring any major surprises politically, and that there will be no major quarrels. We have three years until the next election, so the focus will mostly be on business recovering, first and foremost. The government should figure out where the emphasis should be placed, on which sectors, and how to structure further financial relief. I think it’ll be more targeted – not as general as it was in the spring – and I hope business will bounce back, with new proposals and new matters for us to deal with. We’re all really waiting until things get back to normal, so things like property viewings can take place, so more transactions can be in the pipeline.
I think we are already seeing positive signs after the vaccinations, which have already begun in some parts of the UK, the US, and Poland. We are prepared and look forward to next year’s challenges. As much as we wish to see things get back to something similar to what we know, we will see some inevitable changes because technology has been pushing the envelope. Flexible office hours existed well before the pandemic, but now surely this will evolve more rapidly now. Even though we have tools, I hope our clients will still be able to enjoy some human interaction. We all miss it, so let’s hope for the best.
Mykola Stetsenko: This was a tough year, but we proved our resilience. Some governments are doing better, some worse, but that’s life. I remain optimistic and look forward to next year and hope that things will improve next year.
Josef Holzschuster: To be honest, we should be optimistic looking at 2021. I’m a little bit pessimistic looking at the long-term financial outlook in general, because the real impact of the crisis we have not seen yet and I assume we will also not see it next year – but we will see it in years to come. All the state funding and support packages that governments around the world have provided to soften this emergency situation, and all debts related to those, will have a serious impact. In 2021 everything will be fine, but I’m pessimistic about what will happen in three or four years. But I am keeping my fingers crossed that it won’t happen.
Alexandra Doytchinova: I think it’s a bit unpredictable. We have parliamentary elections in Bulgaria in March 2021. We currently have a government that experienced a lot of protests against its policies in various fields, and a lot of criticism by the EU Commission with regards to judicial system and corruption. So I think that investors looking at the political environment will be hesitant in Q1, but maybe they will start coming in Q2. The big M&A transactions are happening, but the mid-segments will be missing or be a bit more uncertain in that environment. So it’s COVID plus a little bit of political uncertainty.
Still, we are confident. This hasn’t been the best year we’ve ever had in Bulgaria, but at the end it was actually not bad. If business continues now for us like it concluded in Q4, we will be very happy. So I’m positive. I think things are getting better as people get used to the situation.
Bojana Bosnjak-London: I think Bosnia has one of the toughest economies in the world. It seems we are always in a crisis, be it political, financial, or now pandemic. And it’s not because of the state’s help that we survive, but the private sector is just so resilient and it finds opportunities and it adapts. And for that, we are optimistic about next year. Government subsidies haven’t helped much, we have to say. The government is struggling financially, it is seeking additional funding. The revenues have dropped significantly this year, by some 15%, from direct taxes. So we don’t expect any future subsidies or a lot of help for the private sector. But, we are optimist and hopeful that next year things will start getting back to the old normal and that spending will increase and that, with that, the economy will pick up.
Elena Gabdulkhaeva: Whatever governments do, they will never make everybody happy, even in the best economies. What the Russian government will have to do next year is to sort out, a little bit, the chaotic COVID legislation, because the initial legislative process was quite unorganized. You cannot blame the government for that, as it had to react fast to a rapidly-changing situation – something it had never dealt with before. Next year it will have to see what should stay and what has to be done away with, as there’s a lot of it that’s useless. I would expect that socially oriented industries like hotels and restaurants will be facing some restrictions. Certain price restrictions for goods are already being implemented, and I guess the pharmaceutical industry will also feel it, because they will have to face certain pricing restrictions as well. That’s common in Russia, when any kind of crisis comes. Last but not least, we will have to see how the double-tax treaty reconsideration process continues. We have seen it already this year, with Cyprus, and there are discussions on how to change the treaty with the Netherlands – and we will see how it will impact business in Russia. Overall, as already mentioned several times before, hopefully things will be getting back to normal – whatever that normal is, in the future. The good thing is that we are spending much more time with our families than before.
Nilay Goker: In a nutshell, with respect to the question about governmental measures, the Turkish government has launched a package to tackle the pandemic, including short-term working allowance, deferral of taxes and social security payments, and issuing loans with reduced interest rates and debt deferment. Corporate loans are restructured, new credit lines for exporters are provided and rules governing collateral are eased. I will not get into details about VAT, how other taxes and social security contribution payments have been eased in favor of individuals and corporations. As for 2021, I’m not entirely pessimistic about business in general, except of course for travel and tourism, sports and entertainment, luxury, fashion, etc. But generally speaking, especially in the second half of the year, I’m sure that things will begin to kick off, especially in terms of the legal industry. As for our firm, we do not anticipate any obstacles to expanding our business in 2021.
At that, the conversation ended. CEE Legal Matters would like to thank everyone for participating, and for sharing their perspectives with us, each other, and our readers.
This Article was originally published in Issue 8.1 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.