The CEE Legal Matters Deal of the Year awards ceremony in Prague on June 6 brought together experts and law practitioners from the region and provided an opportunity to look back at the year while awarding the participants for work on some of the most complex and unique transactions in 2017. The projects represented a variety of different types of transactions, including capital markets, M&A, financing, real estate, and restructuring. The transactions were also some of the biggest and first-of-their-kind transactions in Europe in 2017 and, as such, are reflective of how the CEE region has transformed over the past years and what the future is likely to bring for those countries.
I come from Poland but have spent my entire career as a capital markets lawyer in London, New York, and Frankfurt. At the time when I left Poland almost 16 years ago to pursue my education abroad, Poland was not a member of the European Union. The political and economic transformation started only a few years back and major structural and legal changes were still to be implemented to allow Poland and other countries in the region to catch up with their Western European peers. In fact, day-to-day life looked very different. While this process is still ongoing and countries in the region remain at varying stages of economic development, it is fair to say that CEE today as a whole is different. The reforms initiated a few decades ago have over time resulted in major changes to the economies, societies, and legal frameworks of the region while improving the quality of life of ordinary people.
The region is unique in many respects. Expectations for growth have changed rapidly over the past few years in a manner that is difficult to find elsewhere in the world. Key economic metrics including GDP, inflation, industrial production, unemployment rate, current account/GDP, and fiscal balance remain stable and economic growth in most countries is generally above the EU average. For example, Poland was the only European country not to suffer recession during the 2008 financial crisis. Moreover, FTSE Russell in the United Kingdom has officially reclassified Poland from an emerging to a developed market effective from September 2018. Countries which were previously shut out of the capital markets, like Ukraine, are now able to access them for both corporate and sovereign bond issuances. The CEE region continues to remain attractive for foreign direct investments, as it still has lower wage levels than Western Europe, coupled with high levels of productivity. The combination of these factors has contributed to the attractiveness of the region and provided further business and investment opportunities for foreign and local investors.
The success of the CEE region can not be attributed only to economic factors and foreign investment. It was supported to a great extent by political and legal changes aimed at introducing liberal market reforms, in particular through membership in the European Union (or future accession plans by countries that aspire to join it). The reforms create a stable legal environment based on the rule of law, which provides certainty to investors – necessary for the support of continuous economic growth. In that sense, the European Union has provided substantial benefits to CEE in economic, social, and legal terms. The EU budget has been particularly important for local economies, which have been some of the largest beneficiaries of funds over the past decade, and EU funding remains a large source of investment in the region. This is also why many compare the membership of CEE countries in the European Union with the post-war Marshall Plan for Western Europe, as the purpose of both was the same: to create liberal economies and to improve the quality of life.
This is not to say that the region faces no challenges. Diverging political developments in certain countries, uncertainty around Brexit and its implications for the region, continuous reliance on Western economies, and other country-specific circumstances are just a few examples to mention. However, the ability to handle challenges is a measure of strength, and each of the countries in the CEE region has demonstrated strength and perseverance in meeting and overcoming those challenges on many occasions.
I am honored to have worked with my colleagues and friends at different firms on projects which won Deal of the Year awards this year in Hungary, Serbia, and Greece. We look forward to another exciting year and to providing market participants and investors with the legal expertise and industry insight they need to achieve their business aspirations in the CEE region.
By Pawel Szaja, Partner and Head of Emerging Markets Desk, Shearman & Sterling
This Article was originally published in Issue 5.6 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.