The commercial legal markets of Central & Eastern Europe didn’t appear automatically. They didn’t develop in a vacuum. They were formed, shaped, and led, by lawyers – visionary, hard-working, commercially-minded, and client-focused individuals pulling the development of CEE’s legal markets along behind them as they labored relentlessly for their clients, their careers, their futures.
It is, of course, a truism that any legal market – any market at all, any society at all – reflects the input, preferences, and actions of a multitude of individuals who work within it. Still, some stand out more than others.
To identify these stand-outs, the editors of CEE Legal Matters spent the better part of two years asking our friends and contacts across the region to identify the one individual who they considered most uniquely responsible for having “created” each country’s modern commercial legal. No other criteria than that. We asked our experts to think carefully before making their nominations. We then gathered and tabulated the results before reaching out to the winners directly to inform them that they had been identified by their peers as the “Market Maker” for their country.
Their selection was by its nature a subjective, unscientific, and personal process, and in many countries the final vote was extremely close (in many others it was far less so). That’s how it should be. These individuals make no personal claim to being solely responsible for the shape of their markets, and no such status should be read into their selection here. Instead, to a significant extent they can be seen as representatives for their peers, colleagues, and counterparts, all together having taken these once-nascent legal markets and turned them into the thriving, dynamic, and sophisticated centers of top-level legal service they are today.
They, along with their peers, can be said to have made the commercial legal markets in CEE it is our pleasure to cover in CEE Legal Matters. Congratulations. Truly: Well done.
- Albania: Perparim Kalo (Managing Partner, Kalo & Associates)
- Austria: Andreas Theiss (Partner, Wolf Theiss)
- Belarus: Liliya Vlasova (Senior Partner, Vlasova, Mikhel & Partners)
- Bosnia & Herzegovina: Branko Maric (Founding Partner, Maric & Co.)
- Bulgaria: Borislav Boyanov (Managing Partner, Boyanov & Co.)
- Croatia: Ratko Zuric (Founding Partner, Zuric i Partneri)
- Czech Republic: Martin Solc (Partner, Kocian Solc Balastik)
- Estonia: Juri Raidla (Senior Partner, Ellex Raidla)
- Greece: John C. Dryllerakis (Managing Senior Partner, Dryllerakis & Associates)
- Hungary: Andras Szecskay (Managing Partner, Szecskay Attorneys at Law)
- Latvia: Filips Klavins (Managing Partner, Ellex Klavins)
- Lithuania: Eugenija Sutkiene (Managing Partner (Lithuania), TGS Baltic)
- Macedonia: Kristijan Polenak (Polenak)
- Moldova: Alexander Turcan (Managing Partner, Turcan Cazac)
- Montenegro: Dragan Prelevic (Managing Partner, Prelevic Law Firm)
- Poland: Stanislaw Soltysinski (Of Counsel, Soltysinski Kawecki & Szlezak)
- Romania: Ion Nestor (Co-Managing Partner, Nestor Nestor Diculescu Kingston Petersen)
- Russia: Andrey Goltsblat (Managing Partner, Goltsblat BLP)
- Serbia: Dragan Karanovic (Founding Partner, Karanovic & Nikolic)
- Slovakia: Igor Palka
- Turkey: Fadil Cerrahoglu (Managing Partner, Cerrahoglu Law Firm)
- Ukraine: Vasil Kisil (Senior Partner, Vasil Kisil & Partners)
Market Makers Round Table (Part 1)
On May 31, 2017, many of the Market Makers came together at the Bristol Hotel in Warsaw for a unique Round Table conversation: A joyous celebration of history made, challenges overcome, opportunities seized, and careers built. Over the course of three hours these Market Makers laughed their way through reminiscences of earlier times, different technologies, unexpected obstacles, and eventual success.
CEELM: Thank you so much for coming. We at CEE Legal Matters are honored to be hosting this special celebration. Our special moderator today is Jonathan Marks, a Partner at Slaughter and May in London.
Jonathan Marks: Thank you. I’m delighted to have been invited to moderate this session. I am one of a number of partners who look to maintain the practice that we have inherited at Slaughter and May. We have developed over 125 plus years and we’ve got probably that many partners. Whereas the people in the room today are professionals in terms of legal practitioners and are also the most tremendous entrepreneurs – you’ve managed to achieve in a few decades what it took us over a hundred years to do – so I feel a little bit humbled to be with you today. Why don’t we go around the table and get a short introduction from each of you?
Dragan Prelevic: It’s incredible to be here. Montenegro has only 600,000 people, so I may ask why we are here today. On the other hand, I think in terms of entrepreneurship and all of this transitional building of corporate and commercial law firms in post-Communist countries, we are all following the same pattern, no matter how small or large the market may be. Honestly, it was kind of an easy choice for me because I just joined my father’s law firm. I joined in 1991, still as a law student, and then I became a Partner in 1998, so all of my 26 working years now has been in this business.
We saw all kind of cases in the transition from the former Yugoslavia to independent Montenegro. The transition actually started in 1991-2 with civil wars and UN sanctions, changing the pattern of values from socialism to the new unknown ideals. So we basically witnessed the tremendous change of the market and we adjusted as a law firm to that market. Real business in Montenegro started with the country’s division from the Serbian regime and control and eventual independence, which happened ten years ago. Our firm has managed to develop a very significant portfolio, first in privatization and then in real estate, development, and investments in the country.
We rely on between 20 or 30 lawyers and a total staff of about 50 people. Montenegro is, in a way, an easy market because it is so small with such a small population. The market is changing, it’s developing, and there is more of a presence of international law firms now, not only for referrals or specific projects. From the region we see firms like Wolf Theiss and Schoenherr from Austria and Serbian law firms like Karanovic & Nikolic present now.
CEELM: Is yours the largest firm in Montenegro?
Dragan Prelevic: Yes, we are the largest firm. The Montenegrin market is developing now, but for a long time it experienced this Balkan-inherited uncertainty and trouble with the rule of law and political uncertainties. But we have joined NATO now, so we are hoping for more stability and a more constant presence of foreign investors in the country.
Eugenija Sutkiene: My story is quite extraordinary, I would say. I never dreamt of establishing a law firm. After independence – or during the independence battles – I worked in the Lithuanian government. I was head of a department in the Ministry of Economics, and one day the Deputy Minister took me by the hand and hauled me through the doors towards the hotel. I was actually terrified: “What the hell is going on?! He is out of head or something!” I was actually resisting, I have to tell you. In the lobby he said to me, “there is a group of American lawyers and they are interviewing the lawyers around and I think you are the one they need to see.”
And that’s how I met the representatives of McDermott, Will & Emery, but I had no intention whatsoever of gaining employment. I was relaxed, and I was simply telling them about the realities on the ground. I was very much involved in the creation of new legislation, as we were now apart from the Russian kind of legal system and needed to establish everything on our own. It was a two-year journey into our legislation and since I used to work in the Ministry of Economics, of course, drafts of new commercial legislation were always on my desk. And the guys from McDermott, Will & Emery said “ok, fine. We have learned a lot of things. We will ring you.” And I said ok and I forgot about it. But after one month they rang me and said “look, we have decided to employ you.”
And I thought “ok, I have a safe job, people respect me and I have had the opportunity to create the legal system and develop legislation, etc. However, I still need to learn.” I took the job. Of course, at that time there was no Internet, you know – no anything. You couldn’t consult media to see what you were going into. I took that opportunity and I do not regret any minute of it.
We established the law firm in February of 1992, when Russian troops were still moving and tanks were on the street. And it was rather funny: My supervising partners were telling me “Ok, now you have to charge clients USD 100-150 per hour.” And I thought, “this is insane; we don’t even have our own currency” – what we had was effectively paper towels – “who in the world would pay all this money?” But they did pay.
We started establishing businesses, privatizing companies, and this journey lasted until 2003 – 11 years. It was a very, very good learning experience for me, as I had never worked for a law firm before, and I needed to establish our law firm in Lithuania from scratch.
Jonathan Marks: Martin, what were you doing before you set up your firm?
Martin Solc: I was not even allowed to practice after graduating, so I delivered newspapers every morning for almost three years.
CEELM: What do you mean you were not allowed to practice?
Martin Solc: Well, my father was an outspoken Roman Catholic activist, and I was an outspoken young gentleman. I would say a mix of political views and probably also being stupid (laughter) cost me some two to two-and-a-half years of my professional career. And then, eventually, I was allowed to practice – but in some God-forsaken place on the East German border. If you imagine a God-forgotten place in the middle of nowhere, that’s where I started my career
Jonathan Marks: And you were sort of told: “Go and work there”?
Martin Solc: Well, I was given the equivalent of a practicing certificate only on the condition that I would practice there, because no one else wanted to. (Laughter). It was very interesting.
Filips Klavins: That was the system then.
CEELM: They would direct you where to go …?
Martin Solc: Well, not quite. Usually, the profession was organized regionally, I would say, in most of the countries we are currently discussing. And, first of all, although you had a practicing certificate that would be valid in the whole territory of the country, you had to join one of these regional groupings to receive it. I received mine only on the condition that I would work in that remote spot. Then, while I was practicing there I developed a reputation in dispute resolution in relation to damages. In 1989, when the Berlin Wall fell, I was somehow put in the middle of the group in the profession that wanted to throw the previous leadership out the window and establish a new one.
CEELM: The Czech tradition!
Martin Solc: Yes, we’ve become very good at that. (Laughter). Anyway, I became Vice President of the temporary leadership for the newborn Bar, then a member of the permanent leadership of the Bar, and I became the President of my Bar a few years later. In 1990, I established a three-lawyer law firm, which has grown a little bit since then …
Jonathan Marks: And you were in Prague by then?
Martin Solc: No, I started very close to that God-forgotten place. Not there, but in a slightly better place not far away. And it was in 1992 when we moved to Prague. By the way, our law firm story is very interesting because we would probably have remained a local or regional dispute resolution law firm at best, as Prague was far away.
It was probably 1990 and I was asked to speak about Human Rights violations in the Czech Republic at an event in Oslo. I was told by my partners, “forget it, you’ve done enough, it’s a waste, why don’t you focus on the law firm instead, we need you.” I was stubborn – still am – and I went to Oslo anyway. A couple of months later we received instructions from a global industrial company for a major acquisition in the Czech Republic and I said “But, I don’t know much about this.” They said, “don’t worry – we know everything about it, we just need a loyal lawyer on the spot who will help us understand the local rules and ramifications.” Being a lawyer, I asked them, “well how do you know I am loyal?” And the gentleman said, “well, my friend saw you speak in Oslo.” So you never know what is a waste and what is investment. And then, on the basis of that interaction, our firm has grown into one of the largest in the country.
Branko Maric: I must say, I was always a lawyer, nothing before. I divide my career in two parts: The first part is, I started as a lawyer in the office of my father. He was the former President of the Commercial Court in Bosnia, so we were always oriented towards commercial cases. But in the Communist regimes, most of the work that lawyers did was litigation, nothing more than that. So it was a rather comfortable life.
And then there was the Bosnian War. At the end of that war, my office was destroyed. There were no clients, no money – there was nothing. Because I was Christian, in the Muslim part at the time, it seemed there was no chance. But I knew one thing: I had to be oriented to foreign clients because in the local market, because of my nationality, I wasn’t too popular. And, as another small problem at the time, I didn’t know English at all …
CEELM: A small problem. (Laughter)
Branko Maric: Even now it is not much better, I’m afraid – but it’s fine. But I must say I have succeeded. With hard work and with the experience that I gained from working with commercial cases before the war, I have succeeded in creating the largest law office in Bosnia, with more than 20 lawyers in the office. And I am very grateful to this profession because it keeps me really young. Now I have 46 years working in this profession – so it’s enough. At the end of the story, I was elected President of the Bar for the Federation of Bosnia-Herzegovina, and now that’s finished, so I can work peacefully.
CEELM: You said you wanted to focus on foreign clients. But without speaking English, how did you start that process? What did you do?
Branko Maric: First of all, at that time, no one in Bosnia had a vision of how democracy would develop in the future. I realized that it would never be the same as it was before. I had my time at the Bar, I had contacts with lawyers from Western countries, and I was good in French, so I was able to communicate. Still, when I got the first mandate, I needed two hours to understand what was written on the sheet of paper! It was easier to answer than it was to read, but you know, step-by-step. It was a lot of work, but I did it.
Jonathan Marks: We had more time then, because it wasn’t an e-mail. It had to have been a letter or a fax. Gave you time to think! (Laughter)
Branko Maric: I am very proud that all of the lawyers that now work with me in the office have been trained by myself. And most of the foreign firms present in Bosnia have lawyers that were my trainees. I am very proud that I succeeded in creating a very good team, specialized in different issues, so that we can serve foreign clients on basically all issues that can occur in Bosnia. Now it’s going by itself.
Andras Szecskay: Speaking about the age of firms, I think that none of us would be older than twenty-something years, simply because of the political and economic changes in this region. This also reminds me of a story, if you permit me to tell this, about Lajos Kossuth, who was the leader of the 1848 Hungarian revolution against the Habsburgs. After the revolution he emigrated to England and he found himself in a law suit that was launched against him by Emperor Franz Josef. The parties were represented by two very well-known lawyers: Lajos Kossuth by Mr. Freshfields and the Emperor Franz Josef by Mr. Ashurst. So, when we speak about the age of a firm, UK firms are definitely much older than firms in our region.
Jonathan Marks: That’s interesting. Mr. Slaughter and Mr. May used to work at Ashurst, and they decided that they wanted set up their own firm – and that’s how we got Slaughter and May.
Andras Szecskay: So, I always practiced as a lawyer. Right after graduating from the university I started practicing law. My father was a lawyer too, in a city south of Budapest called Kecskemét. And as many of us have mentioned, in those days, lawyers were organized administratively by the state – they were not free to choose their partners, as the Bar assigned lawyers to an entity called “lawyers’ cooperatives.” This was a kind of cost-sharing system, but not a partnership at all. I remember that my father shared an office-room with four other lawyers. You can imagine sitting and consulting your lawyer with all these other lawyers around – confidentiality was rather difficult.
After graduating from university, I decided, to the surprise of my father, not to join his office. I decided to move to the capital city and start there. I was assigned to a law cooperative: Cooperative No. 16. This was a good firm simply because many of the lawyers practicing in it focused on Intellectual Property – and Intellectual Property by definition is international, so we had a reasonable amount of international work. To cut a long story short, after the political and economic change in 1989, the Canadian Bar Association was kind enough to offer training programs in Canada for young lawyers, and I was invited to participate. After I returned from Canada, I decided that I would quit my old lawyers’ cooperative and would establish my own firm. It was relatively easy because many Hungarian lawyers were contacted by foreign firms to launch practices in Hungary. Central European countries were favorite destinations for firms from countries like the US, UK, France, and Germany.
I was contacted by a French firm, Moquet Borde & Associés – maybe some of you still remember it – which was one of the leading French firms, and which had an extensive international practice. We stayed with them for approximately ten years, until they merged with Paul Hastings Janofsky & Walker LLP, and then we became independent. We were contacted by other firms too, but my partners and I preferred to decide by ourselves what to buy, which computer to change, and which lawyer to employ, and so on, therefore we decided that it’s probably more challenging but much nicer to become independent. Since the early 2000s we have been an independent firm, probably the biggest in Hungary. We started in the 90s with privatizations and the green-field investments of foreigners in Hungary and we now offer fully-fledged services in all practice areas required by anyone doing business in Hungary. In addition to my activities and managing the firm, I have some responsibilities at the Bar Association, as Vice President of the Hungarian Bar Association and Vice President of the Budapest Bar Association, responsible for foreign relationships.
Filips Klavins: I guess my story is a little bit different than that of most of the people here. My parents were Latvian refugees who ended up in the US after World War II, so I was born and raised in the US. I grew up going to Latvian schools on the weekends in addition to my normal US school during the weekdays, learning about Latvia, learning the language. I grew up speaking Latvian at home with my parents and my brother and sisters. Latvia and Latvianism was a totally separate part of my life – this weird cultural quirk that I had. My parents forced me to go to Latvian School; I wasn’t very happy to be there all day on Saturday, as that was the sports day, so I didn’t get to participate in sports teams. I never thought that it would have anything to do with my professional career.
I was educated and started practicing law in New York. The first law firm that I started with was a famous firm in NYC called Finley, Kumble, Wagner, Heine, Underberg, Manley, Myerson & Casey. This firm was remarkable and scandalous. Eventually the whole firm went bankrupt – a very famous event in the legal market in New York. For me, I didn’t have much invested in it, as I was only a first-year associate, but I did learn a lot from that experience about what kind of partners to look for and what kind of culture you want. At that point I never dreamed I would be shaping my own law firm and implementing these ideas – but that was something that stayed with me, thinking about the kind of workplace I would like.
I visited Latvia as a tourist in the 1980s, and sort of the turning point for me came in 1988 when the Latvian Popular Front invited a group of 25 Latvian-American entrepreneurs and business professionals to come to Latvia to talk concretely about establishing economic ties with the country, which was moving towards independence – first autonomy then independence. These were the first serious attempts to establish real business connections with the refugee population. I was one of the 25. At that time, I was working at Baker & McKenzie in New York. They were very encouraging about this, being an internationally-minded firm, and they were really supportive of what I was doing. That was a turning point. It was just a two-week trip, but it was just so exciting, what was going on in Latvia, with everyone talking about independence and about autonomy from Moscow. It was very exciting; everyone was interested in doing business. It was just a much different environment from 1986, the previous time I was in Latvia, where it was really Soviet, and dreary. People were not really talking freely, but going out in the park to talk or hiding in corners and talking. It had become radically different in just a couple of years, and I was amazed at how quickly things were changing and incredibly excited by it.
So I ended up making arrangements for the following year to go to Latvia and read lectures at the University of Latvia Law Faculty, just as a practitioner on contract law and how we do it in the States. I took with me a contract for the sale of an office building, 55 Wall Street, and that was my textbook for the semester, just kind of going through it and talking about the clauses and how we might negotiate them and why they were drafted the way they were drafted. That class was in big demand. Also for the students and the faculty there was this big push in English too, so they wanted the lectures half in English and half in Latvian, so the bilingualism also helped there too. I took a leave from Baker & McKenzie and I was planning on teaching one year and then going back to my career and my life in New York. But then with the independence with Latvia, that move never happened. It was just too exciting; the opportunities were something that I couldn’t look away from.
Not to mention, I was single when I was living in NY. I had rented an apartment; I didn’t own a car. You could say that it wasn’t hard for me to try it out, try opening a practice in Latvia. I didn’t have much to lose. I was confident that if I moved back to New York, I would definitely be able to find a good job, so I didn’t have those kinds of worries.
I ended up volunteering in the Latvian Ministry of Foreign Affairs before I set up the law firm in 1992. Because there were very few native English speakers on the ground in Latvia. I did all kinds of stuff, and I had fun for several months working in the Ministry of Foreign Affairs. I was contacted to do film dubbing for Latvian film festivals and scientists would find me and say, “I have a dinner with another scientist who is visiting from abroad, would you mind coming along and sort of helping with communications?” Translating a rock ‘n roll newspaper. All kinds of offbeat, fun stuff.
Then, in 1992, my law practice kicked off because of a conflict of interest. I was in the Foreign Ministry, and the US contacted me because they wanted to start a US embassy in Latvia and they needed to do a lease with the Latvian Foreign Ministry. And they asked me, as a US lawyer, could I help them with the embassy lease? But I was in the Foreign Ministry, so I had to decide what to do. So that’s when I started my practice. I took the case for the US government.
And my second client was Kelloggs. Kelloggs was in the process of establishing a joint venture factory in Soviet Latvia and it became a solo project as a result of Latvian independence. And Kelloggs was a world-wide client of Baker & McKenzie, and they sort of put us together and I started working for Kelloggs helping them with a construction agreement to build the factory in Latvia and with a ninety-nine-year land lease. Kelloggs was my client for many, many years until they restructured their European operations and ended up leaving Latvia.
It’s just incredible the way it started. As they say in the US when you start a solo practice, you “hang out the shingle” and hope for clients, and to have your first two clients be the US Government and Kellogg, that’s just unthinkable in the US. So, that’s why I stayed in Latvia. I’ve had an amazing run and it’s been rewarding being in the midst of Latvia’s post-Soviet development.
CEELM: Can I ask, did you have to qualify somehow to begin your private practice?
Filips Klavins: No. Well, it was 1992. I was able to start my practice then because I was sworn in by the Chief Justice to become a Latvia-qualified attorney, but no, I did not have to take any tests or exams. They said, “if you are a member of the New York Bar, then that’s good enough for us.” I got my driver’s license that way too. I didn’t have to pass any tests. They said, “you have a New York Driver’s License, ok we will give you a Latvian license.”
But I have to say that I felt that in certain ways that I had an advantage over local Latvian lawyers because all the Soviet laws were being thrown in the garbage, and all the new laws were based on Western market concepts which I was already familiar with. Of course, I came from a common-law country, and Latvia went back to its civil law roots, so that was different, but the fact is that the new laws were based on a market system. Land ownership, bankruptcy laws, things like that, I was already more familiar with than my colleagues here in Latvia.
Jonthan Marks: Ion?
Ion Nestor: I come from a family of lawyers. My mother was a judge. She was thrown out of the judiciary system when the Communists came to power, and she became a notary. She ended her career after working fifteen years as an expert in commercial arbitration. My father was one of the most respected lawyers of his generation. He specialized in international private law, and he was one of the promoters of international commercial arbitration. So it was an easy choice for me. I did it and I continued the tradition.
After graduation, I worked in a state-owned enterprise which was a piece of luck for me because that particular enterprise worked on some very interesting things, like selling engineering and consulting services abroad. So that allowed me to get in touch early with commercial law. My wife graduated from law school the same year and we worked together in the same company. At a certain point in time they threw me out of the in-house position because I had a relative who decided to stay in Germany – which at the time of the Communist regime was considered a sin in Romania. But kicking me out was the best thing that ever happened to me because they forced me into private practice, where I am today. So I learned very early that sometimes a kick in my butt can be the best way to achieve a step forward.
CEELM: When were you kicked you out? What year?
Ion Nestor: In 1984. My wife and I graduated in 1976. In February 1990, immediately after the fall of the Communist regime we decided to set up our own private practice. The two of us started working back to back like street fighters. A lot of what we achieved is due to the fact that from the very beginning we were a very strong duo. Our first office was our kitchen. It was a long, long way from our kitchen to today’s law firm, which has about 130 lawyers, plus 20 tax experts. This journey was really fantastic; we were lucky along the way.
In the early 90s we met another couple: two young Americans, Patricia Peterson and Andrew Kingston. They have since left us but are still on the letterhead. They were Harvard graduates, very excited about the – you know, the pure American Dream. They came to Eastern Europe and they were very inspired – because instead of going to Warsaw, or Prague, or Budapest, which were crawling with lawyers and international law firms, they came to Bucharest, which was “peaceful.” This is a sort of a paradox, because Romania started reforms kind of late – we did not go through the same early stages as our counterparts from Central Europe, and what was unfortunate for the economy became fortunate for the Romanian lawyers. So through the 90s Romanian lawyers were almost alone, and we were left on the market to structure ourselves as law firms.
These two Americans came and started their own little practice in the early ‘90s, and we became friends. And then in 1995, when we felt that the market started to move ahead, we decided to join forces. We were having a beer, talking, having fun, and we thought, “how about we join forces and try to sell a new professional story in town, you know?” The best of the Western legal culture together with the best of the local legal culture. And this is how we created the firm. This was a very good thing to do because after that, we started to grow quite fast.
The local market in Romania is still, even today, largely Romanian because of that ten-year hiatus. For example, the top five firms in terms of size and strength are Romanian. It doesn’t mean that we don’t have international law firms – we have many prestigious international and regional firms in Romania and we have quite a peaceful market, there is no hostility. Ten, twenty years ago, there were some problems, but not anymore.
Jonathan Marks: What sort of problems were there?
Ion Nestor: It was the usual competition. People were not able to understand at the time that in reality there is a place for everybody. In fact, the presence of international law firms was important for the growth and the structuring of the market. Right now, we don’t have problems. We live together, we compete like lawyers do.
Borislav Boyanov: Well first of all I think that all of us should be grateful for this opportunity to go back and feel young. The only concern that I have is that you’ll need a few volumes for your special issue.
I am the first lawyer in my family. I graduated first in my class and that gave me the opportunity to become the youngest member of the Bar. And it was very different in the cooperatives – number seven was my cooperative. We were not allowed to work with foreigners because there were only a few lawyers that were allowed to render services for them. In early 1989 the Bulgarian Bar received an invitation from the International Bar Association to send a lawyer to a meeting in Strasbourg, so it collected 25 names, we wrote essays, and they sent them to London. For some reason the IBA chose me. And then for six months the Bar discussed whether to send me or not. And finally, they decided, “Okay – Comrade Boyanov will go. And we will pay half of his airfare from Sofia to Paris.” Nothing more
Ion Nestor: And then walk the rest of the way! (Laughter)
Borislav Boyanov: And we were only allowed to buy 30 dollars’ as foreign currency per year. So I collected my 30 USD. I landed in Paris and I was young and I was very hungry and I had my breakfast … and that finished my money. So I found somebody – a relative – and they found somebody at the embassy and they put me on a train to Strasbourg. So I arrived in Strasbourg, and I remember I had to ask, at the hotel, “I’m sorry – where can I iron my trousers?” And they said “Don’t worry; it costs 10 francs you leave it here and we’ll do it for you.” And I said, “no no, I would like to iron this myself.” So they sent me to the basement where the pipes were. I pulled off my trousers and I started to iron them. And suddenly I heard “Boyanov! Boyanov!” And I realized that somebody was looking for me. And it appeared – and I hadn’t thought it was possible – that three more Bulgarians had been sent by the state to look after me. It was incredible. And I was shocked because I didn’t know all the details of the system at that time.
Anyway, so throughout the IBA event I had no money. They gave me a scholarship which covered the hotel, but no food. And at one point I saw this old man standing there at reception and I walked up to him and I held up my hand and I shook his hand and said “Hi, I am Boris from Bulgaria. Do you have business in Bulgaria?” And the man said, “Bulgaria? Oh yes we do.” The gentleman was the GC of Philip Morris. So I came back to Bulgaria and the changes happened and a few months later Philip Morris came to interview me, and they became my first client. And then I was here in Warsaw in March 1990, at an IBA conference. And by chance I met somebody who said “oh Boris why don’t you go to the US for a summer law academy?” So I went to the US and saw how it works and I said, “okay I should go back and I should start a big firm.” And my wife said “you know this is Bulgaria not the US.” And thanks to her, you know she really helped me to put together this firm. We created a real firm which was new, for Bulgaria.
I remember the first time when I came back from the US I brought with me a printer that was about 12 or 15 kg. The transformer itself was probably five kg. And I had a typewriter and the legal opinion was about 20 pages. I used to receive it at a hotel, a big 5-meter-fax. And then I had to retype this on my typewriter and then I used to go to the Central Post, because of the time difference, in the night to send it back. And then my American counterparty would say “No no, you’ve missed a few commas.” And then they’d send it back to me and I would have to retype it, and so on and so on.
And that’s how it happened. I am also a strong believer of cooperation; we created the South East Europe Legal Group Legal 15 years ago, and we created the Balkan Legal Forum in 2000.
Jonathan Marks: So, Dragan?
Dragan Karanovic: Yes, thank you. After hearing all of these stories, I never realized how my career and my life was so regular and standard. I didn’t have any machine guns or anything ... luckily.
Borislav Boyanov: Not yet (Laughter)
Dragan Karanovic: Yes, I’m still young!
So being from Serbia, the former Yugoslavia, my story begins – or rather involves – the war. I graduated in 1990. I think I had spent six months as a trainee at a law firm when the war broke out in Yugoslavia. So there were five years of war, with nothing to do really. Being a trainee in a law firm I could have taken some work in real estate or maybe some criminal cases, but I knew from the very beginning that I didn’t want to be a criminal lawyer. I was always interested in the commercial aspects of law, but commercial lawyers didn’t really exist in Serbia until 1990. In my country, it was sort of a mixture between Communist and socialist regimes. Everything was state-owned, socially owned. It’s kind of a difficult concept – a commercial entity belonging to everyone – but then the workers who worked in each specific factory would have the right to manage that factory.
Then in 1994, after the war, I spent a year in London. And that was totally revealing in terms of understanding a democracy and being a lawyer as something that is really professional and plays a role in defending human rights. So when we returned from London, we started entirely from scratch, as there was no legal market. I remember our first client was a big American Fortune 500 company in the construction business. They wanted to start in Serbia. And I remember at that time we were using faxes and we had just started to use email. At the time, the fax machine was still widely used. I can still remember, one day, we heard the sound of a fax coming through, and we looked at the fax machine and slowly, slowly the paper came through, while we wondered what exactly was coming. Eventually it arrived, and we responded, and this guy was calling from America and he said “oh I’m so glad that you responded on the same day, we were basically trying to get in touch with this lawyer and we didn’t get anything from him for a week or so.”
So I guess in the beginning, the competitive advantage was speaking the language and responding within a decent time to a fax. It’s a totally different situation today with the competitive market. In Serbia we don’t have big international players, we have regional players. But it is very competitive and it requires specialized work in specialized areas. With everything you know, you need some sort of talent. You need a lot of work, but you need a lot of luck.
Grabbing the opportunity was more instinctive than anything else. You realize that there’s been a war, and everything’s starting from scratch, but you decide, “let’s try.” You try, and you work hard, but you still need some set of circumstances and that’s really what happened.
And then after ‘95 there were basically two periods. There was the Milosevic period until 2000, and it worked – but it was difficult. And then in 2001 I think the country changed and a lot happened. Everything that was state-owned was privatized through a series of transactions. In that context, everything was sort of in transition – and it is still very much in transition from that old economy to the economy that we have today, as a country that is aspiring to become a part of the EU. So we are where we are but it is very much in transition.
Market Makers Round Table (Part 2)
Jonathan Marks: The first session was rather fascinating, I thought. It was more of a book really than a magazine article. It is a book that someone should write.
Borislav Boyanov: There are so many international lawyers here, I think creating a book would be good business. Because there are so many stories around, it could be very interesting.
Jonathan Marks: Something that I thought was really interesting was that no one really talked about money. None of you talked about money as a source of motivation when you were starting up. How much was money part of your decision to become a lawyer, Martin?
Martin Solc: At the very beginning money was no part of it. After years of socialism, where we were not allowed to do what we wanted to do, the feeling that now we can was absolutely prevailing. I certainly did not make this decision to make myself poor, but little time was devoted to thinking about money in the initial years. I actually remember losing someone I asked to join us in the very early ‘90s who came to us with the thought that “yes, I am going to earn my share.” But at that time we did not distribute anything – or virtually anything. We probably were able to buy a car or have a holiday, but nothing more than that. And by holiday I’m not speaking about French Polynesia. So, in organizing the firm one has to think about money, but as to personal motivation, it was not there in the initial years.
Borislav Boyanov: Life is so short. Money is very important, but it is not enough. I think many of us are very blessed, that we had and we still have a different, very strong motivation than money.
Branko Maric: We didn’t speak about money – we just collected it. (Laughter). There was a different feeling then. In the Communist regime, I was a commercial lawyer. I was as good as I am now, but there wasn’t a real market for legal services, so you had to have a friend in a state company who would delegate business to you. And now it’s a completely different situation. You are in the open market, and then you realize that the market appreciates you, that you have a high ranking in the market, and the money is just a way of measuring this appreciation. And that’s a good feeling. You feel as though you are being rewarded for your expertise and that you are being appreciated for it.
Back then that wasn’t the case.
Eugenija Sutkiene: May I say something? I mentioned that my first career was not law, but in law, my first career was in the courts. I started in the courts, and ended up as a judge. Then the next career was a state enterprise. And I had a privileged position in the state enterprise, because for all kinds of quality deviations, by law, I was allowed to take fines from the industry. And I had, by law, large premiums added to my salary. So I was getting paid the same as three ministers. Triple the salary of the minister.
CEELM: So the law allowed you to keep some percentage of the fines you collected?
Eugenija Sutkiene: Exactly. And I was a really serious person in a really serious job. Everybody was trying to bribe me – it was basically like I had the doors to the bank. Somehow I was privileged enough to get the job and the salary was okay. But it was a job with some risks. Because I received a lot of threats, I was not standard, and that’s why after the revolution I was invited to work at the Ministry because they believed that in that position I might do something. But in that position, my salary was especially low. Very very low. But it was a huge motivation because you could start a new system, you know? You could contribute to your country’s well-being. And the same story repeated when I was hired by McDermott Will & Emery. They offered me USD 300 an hour – that was for two years in a row, no more than that. Of course, they collected much more money from our clients, such as Coca-Cola, which came and created joint ventures with Lithuanian state companies. They collected much, much more. But I understood that it was an excellent opportunity.
In my Ministry, I was lucky enough to learn English, because we were doing international trade because of imports into the country, and I had a little bit to do with the international contacts. But technically, money was not an issue at all. We were lucky that we got in this situation and we could get access to these clients, you know? For example, at my law firm, people were terrified. It was like, “how in the world could you have access to such clients?” When they looked at my list of clients, they couldn’t believe it. In America or in the UK it wasn’t possible to assemble such a list of the best multinational clients. But fees were very low.
Andras Szecskay: I wouldn’t be that shy and overly modest because I believe that money is very important. But I would definitely distinguish between making money for your own benefit and financing the launch of a firm which is internationally recognized and which meets international standards. And starting a firm from scratch costs money –a lot of money. And I remember at the beginning, a good 70 or 80% of what we earned was reinvested into the infrastructure. You know how expensive it is to run a firm of this size, one which qualifies under international standards. Later on we also benefited from the profits of the firm, but in the first 10, 15, maybe 20 years, we reinvested a lot and that’s why, I think, money mattered.
Eugenija Sutkiene: Your situation and mine were slightly different. But still, there is something common in this. You reinvested money most of the time until the firm grew up. American firms invested, they gave me a USD 10,000 check to start the firm – and never anything more. We always reinvested from our own operation, in our locality. But this pay was really low until our operation became really sizable. Basically we invested our health, our hours – there were no vacations.
Filips Klavins: I thought it was cheap to start a law firm from my perspective. Everything in Latvia was cheap. I couldn’t believe it. And we still had rubles for a while – we had Latvian rubles. So the motivation to start it was young idealism and enthusiasm and energy and interest – definitely not the money. In the back of my mind it was heartening to know that you could charge foreign clients USD 100 an hour or USD 50 an hour, because that meant there was potential. But that was not the main motivator. And having Western standards, the service was the number one priority in the early days. I think all the clients and firms that we had contact with in the first few years, they understood if you didn’t have an office or all the equipment. It was totally understandable to them. So that came kind of slowly for us. But again, my partner and I started talking about the money when we started growing and had more personnel where we started feeling responsibility for these people and their families. That started to make me nervous, and that’s when I started keeping closer track of money issues.
Jonathan Marks: As I said earlier, at Slaughter and May, we’ve got a whole infrastructure, we’ve got an accounts department, we’ve got a finance team, we’ve got a training department. You guys were doing everything. How did you manage to do all of that as well?
Ion Nestor: We built up everything step by step and we learned from each experience, from each and every project, and from each and every client, because we had this huge benefit of working with the top of the top. All of us, it’s the same thing. And that helped us to make very quick progress because at the end of the day, in a 20-year span, we built up institutions. Now we are more or less as established as a regular, mid-sized law firm from the West. We have the same things, and sometimes we have better things, because everything with us is brand new. The technology, everything is brand new. But we had, as you said, to learn step by step. And we did! I mean, we took advantage of each relationship. We started with a big contract and we learned from the transaction and we learned from the client sometimes. It’s a unique process.
Borislav Boyanov: It’s very important to mention that it’s different for us, the people here, than it is today. The younger generation, they are more used to thinking about money. Because now they take the rest for granted you know?
Ion Nestor: It’s normal.
Jonathan Marks: And how do you manage to cope with that? Because some firms and some jurisdictions, there are people sort of splitting up the whole time, it becomes a problem. You’ve got someone who’s thinking “look I’ve brought in that business, why am I not getting that share?” How do you manage to make that transition?
Andras Szecskay: Almost at the beginning I decided that the investment that I made, at least during the initial years, shouldn’t matter when deciding on new partners. So we created a scheme where their initial investment represented a very small, almost negligible amount and, in addition, the percentage of anyone’s share of the profits of the firm or their chances to become a partner was not dependent on the initial financial monetary contribution. That was the way I extended an offer for partnership to new partners because I knew exactly that, in light of the fact that we always preferred to grow the firm organically – meaning that we trained the young lawyers who, over the years, became partners of the firm – they never had the money to invest in their share and the partnership.
Ion Nestor: The difference with us, I’m sure we’ve all shared the same situation, is that new equity partners were not required to invest even that capital. We gave equity for free, but when they leave the equity stays with the partners. You did not have to bring any kind of money as capital. You simply step in and get the percentage.
Martin Solc: One of the motivating elements was, “let’s show them!” Prague was an open market from the very beginning for many reasons, and lots of global or foreign law firms settled in Prague. It was a common feeling that we were competing as a national law firm and “we’ll show them.” That helped me probably more than money would. It was a matter of personal pride: “I’m coming to a firm which doesn’t have headquarters in New York which can decide on its own and we’ll show them.” And that brought many people to us.
Let’s put it into perspective, I was for a short time with Allen & Overy in London and, quite surprisingly, when I was discussing our client list with them in 1991, they were open-mouthed. It is an effect of a market where there is virtually no competition, so you have all the things you can imagine, all the clients you can dream of, on your client list. So we were in an ideal fishing period. We didn’t have the infrastructure, we were lagging behind in doing our accounts and all kinds of paperwork we were supposed to do in the beginning, but there was something to harvest.
Dragan Prelevic: Let me just come back to role of money. I’m second-generation. My father had no sense for money in his mindset. He was just a lawyer, discussing legal matters and that’s all. So initially we were a kind of no-money law firm. I remember in 1994 I wanted to charge 500 Deutsche Marks as a bill to one or a rare foreign client. My more experienced colleagues from Belgrade said it should be between 30 and 50 thousand. I was afraid to charge that, so I sent my bill, shaking, for 15,000 Deutsche marks, and they paid the same day. That day I changed my league, I changed my appetites and I saw this as a world of different possibilities. I was already with the law firm, I was doing the same thing as before, but this is one of the things that gave us the feeling that we were different. Because, before that, especially before the Wall fell, in a socialist country the concept of money was different from what you had at the West. It was different.
Jonathan Marks: So how did the market develop?
Dragan Prelevic: Well, we weren’t really thinking about the market. It was these other two motivators that really were very strong: being able to earn and invest money in your business and feeling of being important offering a unique, advanced service. And I was enjoying being … well, being special!
Jonathan Marks: You were in the center of things.
Dragan Prelevic: Exactly! You were somehow in the middle of investment, in the middle of privatization, in the middle of making business – and you did not have to be a member of the political party, or part of the establishment.
CEELM: Those of us who are not familiar with pre-Communist markets have no idea what the legal market looked like under communism. I understand there were state-run companies, but surely there were good lawyers and bad lawyers? Even then, surely, there were people who recognized the value of high quality, the difference between good legal work and bad legal work. Would you compete with each other for clients? How did that work?
Martin Solc: We did, there was competition. In my country, the Czech Republic, there was huge competition. Surprisingly, it was not mainly money-driven, because the difference in official earnings that you would get for being more successful was relatively very small, though some were fighting for some side money as at that time there was the existence of corruption. But most were fighting for recognition – to show others that, “I am more successful as a lawyer.”
CEELM: Clients were free to choose?
Martin Solc: They were free to choose. And they were free to choose regardless of location. Corporate clients didn’t exist. In practice it boiled down to individual persons, but companies were not prohibited from hiring a lawyer so at the time, I got many corporate – or rather State Company – clients that knew I was specializing in one area and some of them actually came to me and said, “would you handle this dispute for us? We have one company lawyer but he’s not an expert in that.” So we were allowed to have clients and we competed for them. It was a different type of competition than we have now.
CEELM: How would word get out? You certainly weren’t able to advertise; you certainly weren’t able to represent that you were the best at this kind of work. So how would people know to come to you if they wanted high quality service?
Martin Solc: First of all, word of mouth, but interestingly, very often coming from your peers. Because I got many clients when I was working in Northern Moravia that needed assistance and were given my name by a local attorney once they started to investigate. So it was word of mouth, but it would be partially through clients. But the clients wouldn’t have any means of communication like they have nowadays. So that’s why, in the small community of the legal profession, it was more word of mouth.
Dragan Karanovic: It was very different in Serbia. Before 1995, before the war ended, basically there was a difference between commercial law and criminal law and civil law and litigation. Commercial law almost did not exist because everything was state-owned and everything was decided by people in sort of a Central Committee. It didn’t really matter because everything was controlled by them.
CEELM: So you didn’t even need to negotiate anything?
Dragan Karanovic: No, because the contracts were already set and that was it, because there were no conflicting interests. Criminal law, civil law yes, we had some private practitioners, with some more prominent than the others. At no time were they allowed to advertise, but I think they got into the newspapers because of famous cases, and writing books, and we developed a sense of who was a more prominent civil lawyer than another. And, before 1995, there were a couple commercial law firms that really focused on intellectual property and maybe serving foreign clients. They were also able to speak and understand the international language of business, so for a company like Pepsi Co. that needed a lawyer who sort of spoke the language, that was basically it. There were no cooperatives, and after the Second World War, the lawyers were independent. It was always a big issue that there was no influence of the State or the Ministry of Justice on the lawyers. Practically you always had the sort of law you wanted to focus on that was very basic, basically telling the lawyers that you were a self-regulating lawyer
Eugenija Sutkiene: Was it “self-regulated” or truly self-regulated? That’s the difference. Under Soviet rule we were quasi self-regulated because the Ministry of Justice intervened very often.
Dragan Karanovic: In Serbia being a lawyer, or a solicitor, or an in-house lawyer, was always very independent.
Branko Maric: In Bosnia, for the first 20 years of my career, there were commercial lawyers, and I was one of them. No one asked for our advice about an agreement during negotiations – but we had a lot of commercial litigation, because even the companies were not strictly state-regulated at that time. The Commercial Court just resolved disputes between the companies – it existed. The point is that we were just litigation and nothing more. No one asked us for advice. We were called only when a problem arose. But the practicing was always completely independent. That was the difference between Yugoslavia and all the other Soviet countries.
CEELM: Was the Judiciary genuinely independent, though?
Branko Maric: It was absolutely, completely independent. The Bar was the Regulator, the Bar and even the Judiciary System were completely independent. Except when there was a political crime, then you knew that the judge was influenced by the state. But at that time it was quite easy to pursue civil litigation against the state.
Ion Nestor: It is important to understand that there were differences because Yugoslavia was known to be more on the freedom side. That was the view from Romania. For us, it was much stricter, like in your case, Eugenija. There were the private practitioners – advocates, let’s say – who were confined to litigation or criminal matters only for physical persons because everything that was related to the activity of state-owned enterprises was dealt with by the in-house lawyers. By law, state-owned enterprises couldn’t hire us. We were independent in the sense that we were self-regulating. There was a certain influence from the Ministry of Justice, but they never interfered too much. But we were limited only to criminal cases or civil cases of a certain nature. Private property was very limited, so because of that our area of activity was confined. For international clients, we could be hired by them. Corporations from outside Romania could hire us, our cooperative. Our earnings were capped, so irrespective of how many clients you had, or how good a lawyer you were, there was a cap which was quite low. So the money was an issue. There was very little money. This is what we emerged from. There were two different systems: What belong to the state was regulated in state arbitration – and this was a sort of joke, and had nothing to do with commercial law. It was regulated by the laws governing Communist property.
Just for you to understand there were differences between us. Czechoslovakia was a happy example because there was more freedom there than in Romania.
Borislav Boyanov: We had a similar system – the Bar in Bulgaria was completely independent. Of course, the Chairman of the Bar was supposed to be a Communist. But even at that time we had somebody who was not a Communist. In the last two to three years they started to introduce new commercial acts and to allow commercial companies. We, as lawyers, as members of the Bar – we started this process. We started to register, I remember, 20, 30, 40 companies per day. We incorporated so many businesses. So that’s how it started, in 1986 and after.
Regarding the Judiciary, I fully agree with Branko; if it was not a political case, it was even better than today. There was no corruption – or corruption was so well-hidden that we didn’t see it. Today we see it. The judges were better educated. My first case was very big and something nobody wanted to touch because people were afraid. But I was very young and wanted to take the case. I didn’t know the political complications around it and jumped. But nobody tried to push me for anything, and at the end of the day there was Justice.
Eugenija Sutkiene: I used to work as a judge for a few years and then I switched to civil law because these changes started in the country. Now, when I look into the judges, into the courtrooms of judges, I am really terrified. A bribe was unthinkable – you would get fired immediately and never get any legal job again, you know? I have to confess the largest bribe which I received was a box of chocolates and champagne, or candies at the best. So it was really iron discipline.
CEELM: So you think the Judiciary System is less reliable now than it was then?
Eugenija Sutkiene: I think so. Of course it was influenced by the state, by the Communist party, and I remember receiving certain calls from the bureaucrats from the Communists asking for some kind of favor. But I did not take the bribes – although a lot of the industry tried to bribe me. I preferred to take the fines – but to enforce the law.
CEELM: You took the box of chocolates, though. (Laughter)
Eugenija Sutkiene: Well, this was just a sign of gratitude, but not in exchange for some favor.
Jonathan Marks: I think it’s important to hear that sometimes, in some ways, things have gotten worse rather than better.
Ion Nestor: It is a little bit dangerous to generalize, you know? What I have noticed is that the reality of a court case is like a tennis match. Somebody wins and somebody loses, there is no draw. And usually the easiest way for the lawyer from the losing party to explain to the client what happened is to say, “Ah, well, the judge was bribed.” So there are a lot of legends around it. Unfortunately bribery exists, of course, and I agree that in the past judges were not subject, at least in my experience, so much to bribery simply because they were not judging multi-million-dollar cases. But it’s not fair to say this as a general statement.
It’s a complex situation. Yes, there are judges who are bribed, but there is also a huge buzz around this in our countries. Because a certain degree of bribery and corruption is everywhere in the world. If you speak about the U.S. or the UK and Europe, I have people telling me, “look, you guys are small children compared to what we have to do in other places.” So this is nothing. In addition, over there it’s huge in comparison to what we pay here for authorizations, etc.
Jonathan Marks: Many of you have said that some of your first clients were U.S. corporations. But presumably you had to be quite careful in choosing your clients for work. How did you decide? I had one jurisdiction where it was like, “if they’ve not killed anyone and there’s no drugs involved, then we can’t be too choosy.” That’s with some exaggeration, of course. But you probably had to make some choices over the years about oligarchs, about other things …
Andras Szecskay: In fact, if I may intervene here, I think we all were at the right age. After practicing for a while, after gaining some experience, we had this sense of – at least I speak about myself – I had the ability to sense whether a client was fishy or not, or if it was a serious investor. We were always very sensitive about taking clients who we didn’t feel comfortable about and where we had a feeling that it might be a delicate situation.
Jonathan Marks: So you had to be careful and use your judgement.
Andras Szecskay: I do not think somebody who is just starting in the profession or their career would have the same experience of dealing with people, of knowing about human relations. I was 42 when I decided to quit my former firm and start my own, I had 19 years of experience behind me so I had a good sense of how to judge people.
Martin Solc: What applied with respect to our firm, I suspect, applied to almost all the firms represented around this table. We were very conscious about that aspect. All of us were in the practice long enough to know that a reputation that has been gained over decades can disappear in one day. So from Day One we introduced a policy of a high level of conservatism. We would really check on the clients thoroughly. Indeed, it was easier than today because there were so many that eliminating one or two didn’t matter, at that time, because there were many. Just to name an example, in the late nineties we were involved in a huge PPP project that started to smell somewhere in the middle and we walked away from the deal, probably losing a huge amount of money. When we talk with colleagues in the profession, they still sometimes refer to that event. So a firm’s reputation comes not only from what it has done but also from what it has not done. I think that probably links the Round Table, because otherwise they would not be sitting here.
Filips Klavins: And if I could just add to that also, that because of those concerns for ethics and the right kind of client, from Day One, or from very early on – let’s say Day Two – the market knew that we were like that. And actually slimy clients wouldn’t come to us because they knew there was no hope that we would help them in the way that they wanted to be helped. So we worked with foreign clients – and over the years actually it became more of a challenge to try and get more local clients because so many were not maybe, wholly above-board.
Jonathan Marks: Slightly switching the subject, we should say something about the large international firms that, to some extent, have come and gone from the region. A few of you have looked at those firms, maybe even spent a year or two working for those firms before doing your own thing. Do you have any reflections on their role in the development of your markets? Did they play a positive factor in the development of the market or were they a problem?
Ion Nestor: I would say that in our case we understand them to be a positive factor. Except for the clashes that existed in the beginning – some misunderstandings. It was the position of some of the local lawyers who feared that foreign law firms would somehow jeopardize some of their possibilities to act before they were able to find their niche and the market diversified. Because at the end of the day – this is the key – the market is sufficiently diverse. This means that the economy is sufficiently developing and there is a degree of sophistication in the market. More or less everybody who wants to work and is capable of working can fit in that market and find something to do. At the beginning, when things happened, there were mostly the foreign clients and that was it. That was the basket, so we were forced to compete in that basket. Not anymore. Today, we have different layers and each lawyer can sit on a layer, more or less. Of course there are clashes sometimes, but that’s normal and that’s healthy.
CEELM: Can I just interject that in your market – Romania – and in the Baltic markets the local firms are stronger, debatably, than the international firms. But in other countries, such as the Czech Republic and Russia, the internationals are very strong.
Andras Szecskay: I think the Czech Republic, Poland, and Hungary are completely competitive. In Hungary we have just under a 10-million-person population and we have at least 40 foreign firms present in Budapest, although most of the big Magic Circle firms have now left. But we still have a number of Hungarian firms, UK firms, German firms, and Austrian firms, so it’s extremely competitive.
CEELM: Do you see their presence in Hungary as beneficial or as unfortunate?
Andras Szecskay: I would say that without these international firms, many of our lawyers would not have the opportunity to train and develop and to practice at an international level. This is a sector where competition matters and the foreign firms create big, big competition.
Martin Solc: First of all, I’m actually very proud that when I was President of the Czech Bar I did two things: First, that I divided the profession in 1993 – other countries did that much later. And second, that I forced – and that’s the right expression – forced the Bar to open to the foreign law firms, because in many other countries that developed somehow in a grey area that tolerated them de facto, but not allowed by law. My view is we’ve benefited hugely from that. I think there were idiots on both sides at the beginning. Czech lawyers that thought they knew everything and did not. And international law firms thinking that once they fly out Mr. Clever from XY or Z, that everything would be resolved – and that was a complete lie. But that was at the beginning. That changed as time went by and the international law firms became very sophisticated and very important players on the market.
Andras Szecskay: And there was a huge difference between the strategy of foreign firms in Hungary then and now. The older model was to employ young Hungarian lawyers and assign a foreign partner or two and two or three associates to the country. But the other model, which we favored and which was much simpler, was where they came in a kind of a partnership with senior local lawyers who were considered local partners. That was a completely different model. And this was much more digestible for the local law firms because being just simply employed and trained and then having your employment contract terminated was not a favorable outcome. All the firms which followed Model 1 failed and all the firms that followed Model 2 succeeded.
Borislav Boyanov: In my case, in Bulgaria, there were almost no international firms, and there were just a few regional firms. But a few years ago there was a lawsuit that reached the Bulgarian Supreme Court. The Bar decided that the foreign law firms should comply with the Bar rules – and they said, “we don’t care.” And then the local firms took it to the Competition commission and then to the Supreme Court because they were acting via limited liability companies, so they were free to advertise while we were prohibited, and we were required to have insurance and they weren’t. So it was not an equal playing field for everybody. We won the case, and as a result the President of the United States and the EC implemented serious pressure and Bulgarians changed the Bar rules. But we were friends after that again because after one year everybody knew that it was a mistake on both sides.
What I’m trying to say is Bulgaria is a small market. We like to have the international and regional firms; it makes a level higher, it’s healthy competition, and as Ion said at the beginning, we benefited too from the time when foreign firms were not there, so the locals are really strong.
Branko Maric: Competition is always good but the problem is that very often it’s not fair competition. We have for instance in the Bar a very strict rule about money. Marketing is not allowed, just information. But a couple of the regional firms have offices in Bosnia, and on their website they put “we are the best, we have everything in the world.” In fact, they only have a couple of people on the ground in the law capacity.
The problem with Bosnia is that there is no other small country with such a complicated legal system. We have laws on three levels. Can you imagine that in one state we have 12 different laws regulating taxis on the books? So can you imagine one young lawyer doing serious business knowing everything? The key for the success of my firm is that we have a large number of specialized lawyers for each area. So we can meet all expectations. But if you are one or two young lawyers, you are nothing.
CEELM: Some of us who host advertisements for law firms think that the answer to that might be to start opening up to advertising in Bosnia.
Branko Maric: I know. I’m not legally allowed. And that is the key around fair competition.
Martin Solc: I agree with CEE Legal Matters on that. I have always been fond of a level playing field and something needs to change from our road as well. I think that’s absolutely right.
Andras Szecskay: And in fact it’s better to change the law and the Bar regulations before the regulation office comes and knocks at your door as it did in Hungary because of not allowing law firms and lawyers to advertise and market.
CEELM: Finally, do you think the markets that you all have been so influential in creating are sophisticated in the way they need to be? Or is there still work to be done?
Dragan Prelevic: International law firms are bringing a lot. It is a steep learning curve when they are involved and I’m actually very much in favor of liberalizing the market. Somehow open and liberalized in terms of marketing and creating the equal possibility of work. Regarding the sophistication of the market, I think there’s a long way to go in Montenegro.
CEELM: In what sense? Do you mean in the level of lawyering, or …?
Dragan Prelevic: I think there is a lot of work to do on the transparency of the system in general Corruption is a big issue, maybe in Montenegro more than other places. A lot of rumors about bribes, kickbacks, including the law firms engaged from the government, fake arbitrations, you name it. I would say that what we need is to recover, somehow, the authority of the judiciary, because nowadays they are not solid enough to really rely on
Eugenija Sutkiene: The Baltic market is very developed – it is very sophisticated. Local law firms are very big, and foreign law firms are almost non-existent. We have them, but they have very small offices and we don’t regard them as serious competition. Why are there no foreign law firms? I spoke with Clifford Chance and Baker & McKenzie after we spun off our operation about why they are so hesitant to come to our markets. And they said simply you guys are very sophisticated, well-educated, have experience. It’s much cheaper to have you as a partner rather than come and invest. Our leading law firms in Lithuania are really strong – our own firm is a 130-person operation and our main competitor is also about the same size. Some other law firms are smaller, and in Latvia for example, historically the law firms are slightly smaller. But they are now picking up.
What challenges are we facing? Actually, we have basically gotten rid of all these obstacles, because the Bar Councils consist of a majority of commercial lawyers. That’s why we were able to just remove all the obstacles for development; we really wanted to be progressive, civilized, and developed, and be up to the standard. But what I notice is that we are facing all of the challenges that European and American law firms are starting to face – including, primarily, commoditization. This is absolutely coming and you can feel it every day, and prices are decreasing. All of this artificial intelligence exists in our countries with the help of European aid and so we have all these electronic products. Basically, we really need to think about the future of our profession. We have dropped our rates of profitability and we really need to see how to structure pricing. This is what we are working on. Like everybody.
Ion Nestor: It’s not like everybody. In our case, they have to understand that they are coming from the Western culture. What we are facing is the client is coming from the mentality that he’s looking for commodity work, but in our countries it’s not yet commodity work, so this is the paradox. We have to support a structure of professional lawyers and satisfy the wishes of the clients – even if it is not commodity work – to pay as if it is commodity work. Because the legal systems that we inherited are so complicated, and bereft of clear jurisprudence. Clients come from the US and they say, “do this, do that, it’s only commodity work!” But take for example a due diligence for a real estate project - in our country it may be one of the most sophisticated legal matters ever because of the situation of the land property. If you make a wrong step, you can you lose tens of millions. So, at the end of the day, it’s not commodity work. This is the problem.
CEELM: Just to return to the question: Is your market as sophisticated as you’d like it to be and, if not, what could be improved?
Eugenija Sutkiene: It is sophisticated … but we have some regulatory issues which basically influence our market negatively. We are working on that but I think that we have made a huge leap in terms of liberalization.
Martin Solc: I think the Czech market is sophisticated. Prague is a sophisticated market. We do not face some of the issues I see brought up at this table. Global law firms present on the market are true global firms, not just a name on a business card. So we have some genuine operations that have helped raise the standards of the marketplace. What we are missing is an even better regulator. The Bar is still mainly run by lawyers from small or mid-size firms, max, and they do not understand issues of higher sophistication. We all depend on a very high quality regulator.
Branko Maric: Our market is not sophisticated because there are no real criteria on the capacity of law offices present there. So that’s one thing that’s really missing. Sometimes the state rules the situation because the lawyers are within the public procurement process. So when the state company has to hire a lawyer, we are subject to procurement processes. This adds pressure to fees because it is such a small price that I don’t want to compete. The idea that all lawyers are the same and we have to find the cheapest is ridiculous, but it is still very present.
Andras Szeccskay: Probably 10% of the Hungarian legal market is sophisticated enough. The rest need to train, develop, and progress. I would say that not more than 1-2% of the professionals are capable of handling a case at the international level. This means there is still a lot to do. I am not in favor of a more sophisticated regulator because I believe that market demands, business needs, and competition are the most efficient regulators. If there is a demand for quality legal work, the quality will rise.
Filips Klavins: I think Eugenija characterized our Baltic law firms very well. For Latvia I see two points: One is our regulation: Our Bar Association leadership has nine members, but only one is a partner and one is from our law firm. I would like to see liberalization in advertising, which is a little bit restricted now by the Bar. What I would also like to see is Latvian lawyers lending their voices to social concerns in our country. Just speaking out more about income inequality, demographic problems, and corruption. Just be a louder voice, as leaders of our profession – of any profession – should be. We are a little bit too quiet on that.
Ion Nestor: What you have to keep in mind is that there are different markets. The legal markets have different layers. The layer in which we operate – that layer is sufficiently sophisticated and sufficiently open. I am satisfied, because as I said, we have a very good atmosphere. The international law firms that are present are real law firms. All of them have between 40 and 60 lawyers, which is a reasonable size. As a result, this is beneficial to all of us because they are there as a reminder to us that we have to keep on being very good. Very few retreated because they did not want to invest, were unable to cope, and had to close their rep office. But all the others are well established and we co-exist and I have nothing to complain about. It works perfectly for us.
Borislav Boyanov: The market is mature. There is more sophistication. For me, it is very important that the lawyers continue to develop their professional and business skills and should also serve society actively. They should think about ethics and morals. These are areas that, with technology growing, more and more people forget about. They should not forget that at the end of the day they are human beings.
Dragan Karanovic: I assume “sophisticated market” would mean professionals able to meet the highest standards. If that’s so, then I think we in Serbia are close to the target. The standards are now global, talking about the commercials firms, and companies expect the same level of services in London, New York and also in Belgrade. Maybe 20 years ago when it was perceived as “the Wild East,” if you wish, whatever service you received was ok – “this guy speaks the language, he answered my phone call,” etc. But now they expect the same level of knowledge and understanding as elsewhere. So the standards are coming from larger, more developed markets.
In that context, I am a big fan of liberalizing the profession to the greatest extent possible. What’s needed are really clear regulations, setting absolutely the same ground for everyone, local, big, small, boutique. The client can decide and we shouldn’t be doing anything to prevent the client from getting the best possible service for the most efficient pricing they can. We need a lot of local and international support. We are living in a regulatory sector that’s 30, 40, 50 years old – it’s totally outdated. Changes are needed, at least in commercial law. We need to keep up with the standards. Also, we should be aware that when the regulations change, there are differences on the market, and so there are better and worse places to start. Clearly, if there is a transitional period needed where everyone can get on a proper footing and everyone can get up to speed and compete on the same level would be great. But I’m not sure if that’s going to happen in the near future.