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Guest Editorial: The Moldovan Legal Market – Just the Facts

Guest Editorial: The Moldovan Legal Market – Just the Facts

Legal Markets
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The Republic of Moldova has three and a half million people – two and a half million fewer than when it was part of the Soviet Union. The Soviet bar was strictly a criminal/civil/family bar, with lawyers doing international legal work concentrated mainly in Moscow. With the breakup of the Soviet Union, local bars (such as Moldova’s) were forced to develop legal capabilities from scratch to serve the needs of local businesses and foreign investors.

The Moldovan Bar: Back in the Soviet days the Moldovan bar counted only about 300 advocates. Today, the Ministry of Justice has issued 3,400 licenses to practice law (although fewer than 2,000 lawyers are actually practicing). Moldovan advocates may not be employed, and bar licenses need to be suspended for those advocates accepting in-house positions or working outside of the legal profession. 

Law Firms and Solo Practitioners: The law on the Moldovan legal profession requires lawyers to organize themselves either as solo practices or law firm partnerships, and not as commercial entities. The majority of Moldovan advocates are organized as solo practices, and the current register of law firms includes only 180 partnerships. The largest such partnership includes 56 general practitioners. The average Moldovan business law firm has 5-15 advocates. 

Financial Transparency and Market Size: Moldovan law firms do not publicize their annual gross revenue or other similar metrics, and the information is not available from public sources. My estimate of the total size of the Moldovan legal services for international business is somewhere between EUR 10-20 million. For comparison: (a) the profitability of the entire Moldovan banking sector in 2018 was EUR 80 million; (b) the profitability of the entire Moldovan insurance sector in 2018 was only EUR 2.3 million; and (c) the 400+ Moldovan IT sector companies employing about 13,000 software engineers reported EUR 145 million in 2018 revenues from export of IT services.  

Taxation of Legal Practice: Moldovan lawyers pay 18% tax on income after deducting expenses, and they are exempt from VAT. The social security and medical insurance of lawyers are fixed amounts that are independent from the level of earnings. 

Regional Mobility and Language Capabilities: As the majority of Moldovans (including lawyers) have multiple citizenships, and as the most popular second citizenship is Romanian, Moldovan lawyers are able to travel visa-free anywhere in Europe and the CIS. The Romanian/Moldovan language is a must for lawyers, of course, and Russian is indispensable as the regional language of business communication. Contract drafting is Russian is also not infrequent. Many business lawyers also speak English, French, and/or German.  

Core Practice Areas: General corporate, M&A, banking/finance, employment, tax, real estate, and local industry work are the main areas where legal expertise is required. My prediction is that after a long slowdown, M&A will keep Moldovan lawyers busy for at least the next two or three years.

Litigation is not very popular among large businesses (both local and foreign), who prefer, if at all possible, to avoid encounters with the Moldovan judiciary, which dealt with around 300,000 cases in 2018 (less than 50% were civil cases, primarily in the areas of family law, employment law, and ordinary debt collection). The average Moldovan judge hears an average of 60 cases a month.

International arbitration is not a popular practice area among Moldovan lawyers, and business law firms probably manage fewer than ten international arbitration mandates each year, all together.

Emerging Practice Areas: With the launch of the Moldovan Citizenship by Investment Program in November 2018, Moldova has become a destination for affordable European investment immigration. This has opened new professional avenues for Moldovan lawyers interested in international immigration work and has led international immigration law firms from all over the world to treat Moldova as a new market.

Law Firm Referrals: Top global law firms are an important source of business for Moldovan law firms, with referrals coming primarily from London, Bucharest, Moscow, and Kyiv.  

Romanian law firms are another source of business for Moldovan lawyers. Aside from unity of language and traditional historic ties, 30% of all Moldovan exports go to Romania, making Romania the number one buyer of Moldovan products. Many Romanian companies treat Moldova as a market for their goods and services, making the collaboration between Romanian and Moldovan firms quite active. Moldovan lawyers are also known to attend court hearings in Romania frequently in collaboration with Romanian lawyers and vice versa.

Collaboration with law firms from Moscow and Kyiv, as well as other CIS cities, is another area of practice for the Russian-speaking Moldovan lawyers. Moldovan companies maintain strong commercial relations with their customers and suppliers in the East, so that the need for legal work servicing this area of business will always be in sufficient demand.

By Alexander Turcan, Managing Partner, Turcan Cazac 

This Article was originally published in Issue 6.5 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

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