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Guest Editorial: Ukrainian Legal Market Heads for Happier Time

Guest Editorial: Ukrainian Legal Market Heads for Happier Time

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While happiness is increasingly considered the proper measure of social progress, Ukraine occupies only 138th position among 156 nations included in the multi-index World Happiness Report 2018. The country has fought for its happiness since becoming independent in 1991 following the collapse of the Soviet Union. As part of this patient and hopeful nation, I continue to believe that happiness is coming soon, exactly as I did in that already-distant 1991, when there was almost no private business and almost no legal market in Ukraine.

Back in 1991, the best legal brains were all in academia teaching and analyzing law for law degrees and manuscripts. Then came the years of wild capitalism, unfair privatization, fantastic enrichments, barters, raider attacks, and the first foreign investments and joint ventures. These developments required new laws and new law practices. It all came quickly – through governmental assistance, study programs, NGOs, and international law firms such as US-based Baker & McKenzie, Altheimer & Gray (which eventually merged with Chadbourne & Parke), and Squire, Sanders & Dempsey, which injected their professional style and workaholic mentality into early Ukrainian legal practitioners. Many Ukrainian legal start-ups supported continued self-education, practical training with internships, and LL.M degrees from top US and European law schools. Fluency in English and a strong knowledge of Western and Ukrainian law provided unprecedented opportunities. There was almost no competition, and fees were aligned with Western standards. Happiness seemed to be very close.  

With these exciting expectations in 1999 I returned to Ukraine from my 8-year experience-gathering stay in the United States. However, I discovered that reality turned out to be harder than I expected. Competition started to pick up quickly with new international firms such as DLA Piper, CMS Cameron McKenna, Clifford Chance, and Salans (now Dentons), and a large number of Ukrainian firms spinning off from international strongholds or established from scratch by young entrepreneurs. Maturing local firms soon became strong competitors for their international “coaches,” which nonetheless continued to dominate the market both in numbers and reputation. 

Challenges also came from the economy, which faced one crisis after another. The ever-changing governments were neither helpful nor skillful, and instead were consistently corrupt. Frustrated internationals (including Clifford Chance, Chadbourne & Parke, Schoenherr, Gide Loyrette Nouel, Noerr, and Beiten Burkhardt) started to close their Ukrainian offices and abandon the legal market. Local firms had no choice but to hold on and engage in crisis work. 

The critical point dividing Ukraine’s destiny into “before” and “after” was the inevitable Revolution of Dignity, which saw the people taking the streets to force a change in the political regime and direct Ukraine’s course to the EU. What happened next is an unprecedented identity-forming period, with military interference in one part of the country’s territory and illegal annexation on another, accompanied by the launch of painful and difficult economic, political and judicial reforms and anti-corruption efforts. 

Ukraine’s legal industry continues to adjust to a difficult political and economic environment today. Many practitioners have volunteered to join the government and legislature in various positions to help implement reform, and market insiders are predicting a continuous outflow of practitioners from the legal business to the judiciary. A so-called “attorneys’ monopoly” is expected to be introduced into the legal market, in which only attorneys are allowed to represent clients in court. Thus, the bar will grow, and the role of the attorneys’ community apparently will become stronger.

Among the pulsing issues for the legal profession remain insufficient legal education and practical training. The Legal Practice publishing house has recently launched its sensational Legal High School, with practicing lawyers teaching classes on corporate, tax, and litigation, backed-up by web-cast. The purpose is noble – to make sure the next generation of Ukrainian lawyers is up to date on the country’s legal doctrine.

The consolidation of the legal market is another clear trend, as several law firms have merged recently, including, notably, ours, which has become the largest domestic law firm in the country, with a headcount exceeding 240 employees and plans to expand internationally. 

Of course, legal practitioners continue to deal with their own problems, including increasing competition, the never-ending necessity to focus on new practices, and deflation of legal fees. Traditional practices such as M&A and real estate are giving way to areas like dispute resolution, corporate and financial restructuring, and debt recovery. Some industries, such as IT, infrastructure, and energy (especially renewables), continue to heat up, and many law firms have announced a readiness to expand in these directions.

Next year, 2019, is a year of Presidential and Parliamentarian elections in Ukraine. Looking back to history and understanding all the challenges currently facing the country and the legal profession, I still believe Ukraine deserves to be a happy nation. Just let it happen soon.

By Armen Khachaturyan, Senior Partner, Asters

This Article was originally published in Issue 5.11 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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