For Erwin Hanslik, the Managing Partner of Taylor Wessing in Prague, one subject of conversation is always at the top of the list for lawyers in the Czech Republic: Fees. According to Hanslik, “the topic which is always interesting is the price — the hourly rates.” Hanslik explains that this is “a special topic in the Czech Republic due to the high amount of competition here,” which, he insists, “is not comparable to anywhere else in CEE. Absolutely.”
In addition to the pressure coming from the large number of international competitors, Hanslik reports, there’s also “high pressure from the domestic firms, some of which charge about EUR 150 an hour, which ruins the market and brings everyone under pressure.” Hanslik sighs, suggesting that the question “How do we deal with this!?” is never far from their minds.
Part of the answer, Hanslik says, is the gradual abandonment of hourly rates. “Clients don’t really want hourly rates anymore,” he says. “They all want caps.” Still, and especially in the context of commoditized work (which, Hanslik says, includes a great deal of M&A work), "clients don’t understand that low prices mean — or can mean — lower quality.” As a result, he says, “I always wonder how other firms manage to provide high quality service while still making a profit.” He considers. "So it may not even be so much about the hourly rate,” he says. “At the end of the day it’s always about the cap — and the assumptions that go into it."
Hanslik is asked whether, over time, clients are becoming more educated about the trade-offs between cost and quality. He shakes his head. “Definitely not.” He sighs again. “Clients simply know that there is great competition for work, with top firms at almost every level on the market [international firm, regional firm, domestic firm], and they use the situation.”
Finally, he’s asked how he and other firms in the market are able to increase their fees, now that the global financial crisis looms less large. “There’s no way,” he says, shaking his head again. “Clients simply wouldn’t accept this.”
Turning to another ongoing source of frustration, Hanslik raises the subject of the now two-year old Czech Civil Code, pointing out that among its many controversial provisions is one that allows buyers of real estate who rely in good faith on information on the cadastre to rest easy, even if that information turns out to be incorrect. Hanslik believes this is a good rule, but points out that there’s very little guidance about how it will be applied or what its ramifications are. Hanslik reports that the Czech Supreme Court has recently held that the provision in the new Civil Code works retroactively as well to protect acquisitions made in good faith before the law was passed. But, he notes, “this opens a lot of questions,” including what that means about acquisitions that were reversed and denied under the previous law, which now — under the new law as interpreted by the Court — should have been upheld.
“This is typical in the Czech Republic,” Hanslik laughs. “Changing the Civil Code, and new interpretations of its provisions, and we have no idea how to react with this, or how to advise our clients.” Hanslik says, “it’s almost like a third world African country. Clearly it’s not the ‘Wild East’ here anymore, but … 25 years after the fall of the Iron Curtain, and now we’re starting all over again.” As a result, Hanslik says, resignedly, “advising clients becomes very difficult. And when you factor in the questionable judiciary as well … how can you predict for clients?”
In “The Buzz” we interview experts on the legal industry living and working in Central and Eastern Europe to find out what’s happening in the region and what legislative/professional/cultural trends and developments they’re following closely.