In honor of CMS Budapest’s 30-year anniversary – the Pearl anniversary, formally, in the city often called the Pearl of the Danube – we reached out to several of the prominent partners to learn a bit more about the changes they’ve seen over the years, and the practices they manage.
CEELM: Gabriella, you’ve been with CMS since the firm (then operating as Cameron McKenna) opened its doors in Hungary in 1989, and you played a significant role in establishing it as a highly-regarded (and consistently highly-ranked) provider of top tier legal services across a wide variety of practices, including Employment, where you still lead the firm’s team. How did you build it up over the years?
GABRIELLA: We started to build up our Employment practice around the time of privatizations in the early nineties. We advised investors in the privatization process itself, and in most cases, we continued to work for them even after the transactions finished, as new problems and issues arose. Often those key issues involved employment, so we had to build up an expertise to be able to provide solutions.
This then became our strategy: to develop practice areas that our clients actually needed on a daily basis. The more we became specialized, the more practice areas we built up. In the beginning, commercial and corporate were together, and then areas became more defined, and we had to hire more and more people who were experts in each specific area. And then we slowly grew out of legal polymaths and became a firm of highly-specialized experts.
But the evolution didn’t stop there. What we see now is that companies have regional GCs who are responsible for several countries, so we had to be able to coordinate and advise them on a regional level. I think we recognized this trend pretty early and adapted ourselves to it. Now our comprehensive coverage of the region is one of our biggest advantages.
CEELM: Focusing on Employment in particular, can you give us a quick snapshot of where the market stands at the moment?
GABRIELLA: The area of employment went through significant changes in the past couple of decades (as did all of the other areas, of course). Currently the biggest issue is the labor shortage. While Hungary is good in attracting foreign investors, the shortage of a qualified, trained, and skilled workforce may be a problem in the long term. There are two other trends which are closely connected to the labor shortage: one is the rising popularity of trade unions, especially in the manufacturing sector, and the second is the growing need of companies to find solutions to not to lose workers whose specialized training they have heavily invested in.
CEELM: Let’s turn to Real Estate. Gabor and Jozsef, what can you tell us about the current Real Estate market in Hungary?
GABOR: We chatted with our Polish colleagues recently about the market, and while there are plenty of similarities between the two markets, such as low interest rates, the most striking difference is the ratio of domestic investors here. In the Hungarian market, domestic investors have played a rapidly growing role in the past ten years or so, and local institutional investors now account for 60% of the total deal volume. Just to put this in perspective, only 38% of deal volume was tied to local investors in 2016-2017, and although we don’t have the exact statistics for this, before 2008 it must have been around 10%. This is a very significant trend, but many worry that, as assets purchased by local investors are often held for a longer term, if Hungarian funds keeps buying at this rate, there won’t be enough assets left on the market and the price competition will be even greater. The recent requirement of the National Bank of Hungary that the issuance of new investment units should be made subject to a redemption period of 180 days and the commencement of consultation discussions about the fees banks may charge for the trading of real estate fund investment units may have a negative impact on the flow short term investors’ money into the real estate funds, which may create a climate change on the real estate investment market.
JOZSEF: Otherwise, the most important trend has been the huge influx of greenfield developments and industrial investments. We have advised several major companies from the industrial manufacturing and automotive sectors in the past few years, most of the time from the very beginning, even sometimes providing assistance in choosing the most suitable location for their investments. Of course, tax incentives always play an important role in their decisions, but other issues, such as for instance the quality of workforce, can be just as important to their decision-making process.
CEELM: Erika, you’re both the Managing Partner of CMS in Budapest, and you are in charge of the firm’s Hungarian Banking/Finance practice. What’s that sector like?
ERIKA: I have been riding waves of the Banking and Finance Market for 23 years, alternating between financial crises, liquidations, and restructurings, and booming markets with strong competition for customers. I have also had to deal with the financial regulator’s response to these changes, with regulation and overregulation following each other in waves. As far as I can tell these waves are largely the same across all the CEE countries, although there are of course countries where events occur with a slightly different timing.
CEELM: And how has the firm’s practice adapted to these waves?
ERIKA: Banking and Finance has become very specialized in the last several years. Twenty years ago our practice focused primarily on real estate finance and simple project finance transactions. Then, as CEE markets were populated by foreign banks, we started dealing with big banking M&A transactions. Then came the financial crisis, and with it a lot of restructuring and insolvency cases. After the financial crisis regulators in Eastern Europe – like everywhere else in the world – started a strong regulation wave which provided us lawyers with the opportunity to specialize in the interesting regulatory aspects of banking law, such as payment services, markets in financial instruments, market abuse, and so on. Since Banking and Finance moves in cycles, it is interesting to compare the ups and downs of the market and to prepare for the next move of the market.
CEELM: Finally, Dora, you specialize in Commercial and TMT. How have you developed those practices over the years?
DORA: I arrived at CMS ten years ago – just when Lehman Brothers filed for bankruptcy – so we had to grow our practice in a time of financial crisis, on the basis of the strong foundation of the existing team. We started out with strategic advice, both in sectoral and HCA matters, and focused on what kept GCs awake at night. This proved to be a good strategy, as we now we have a commercial team of over 30 lawyers, including the strongest TMT team in Hungary (with four people ranked in legal directories) and a competition team which has three lawyers recommended and ranked. This recognition is huge, and it is something that I’m truly proud of.
In terms of the TMT sector, we are still on the digitalization trip, like we were ten years ago. I used to say back then that it’s good to be a TMT lawyer, because in ten years every company is going to be a TMT company. I think the CEOs of both TESLA and Mercedes have said that their companies are essentially software companies – they just put cars around them.
Everything is about digitalization, and at CMS we want to not simply follow this trend, but also to shape it. Accordingly, we have initiated several campaigns on topics that keep GC’s awake at night these days: cybersecurity, data privacy, and artificial intelligence. If we look at these topics, we see that there is huge competition between neighboring countries, and even neighboring regions. Almost all countries claim that they are the Silicon Valley of the east. As a Hungarian lawyer I cheer for Hungary to come out as the winner of this competition, but when I’m wearing my regional hat, I say “the more the merrier.”
CEELM: In honor of CMS’s anniversary in Hungary, let’s end this with a different question: What are you proudest of at CMS, or what gives you the most pleasure, at the firm?
DORA: What gives me the most pleasure? Maybe the ability to react quickly to challenges and change, which is extremely crucial in our jurisdiction. I am very proud of our team spirit (both at work and outside work), but I was probably the proudest when our men and women soccer teams were both won the annual CMS Global Football Championship.
JOZSEF: The thing I enjoy the most is that every year we participate in some of the biggest real estate projects on the market, so I get to go around the city and show my kids some of the buildings and developments I played a role in creating.
GABRIELLA: I’m proud that I joined a firm, where every minute I feel that I’m at the right place – for 30 years now. And every day I come in, I see that people are happy to be here too, which gives me the most pleasure.
ERIKA: As a woman lawyer, I take great pleasure in watching our young lawyers develop and grow in an office which I consider one of the top equal-opportunity law firms in Europe. One shouldn’t forget that CMS Budapest’s first managing partner was the brilliant Gabriella Ormai. That I have had the good fortune to continue Gabi’s work proves that CMS remains an environment where women can rise as high as men, and that this firm judges people by merit, dedication and industry. It’s also important to remember that equal opportunity benefits men as well as women, and so when I see young lawyers beginning their career with us, I know there is nothing that can hold them back.
This Article was originally published in Issue 6.4 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.