The Ukrainian legal market is living in times of change and promise. Being a successful law firm in Ukraine is not an easy task, but for those who know the rules, the changing landscape presents more opportunities than threats. So, what does the Ukrainian legal market look like now?
Turbulent Doesn’t Mean Troublesome. After the Revolution of Dignity in 2014, a variety of reforms were launched. At that time, in its Ukraine 2020 Strategy, the President’s Office announced 60 key reforms, involving different clusters of the economy and different legal elements. This resulted in many unique projects which would never have popped-up but for the challenges that our country has faced, such as bank resolution reform and related measures launched by the National Bank of Ukraine, anti-corruption reform, the nationalization of the largest Ukrainian bank, energy market reform, privatization processes, major international arbitrations regarding Crimea, and so on.
2019 is a double-election year, and both the Parliament and the President of Ukraine have changed. Although the change seems radical, with new elites coming to the government, the overall expectation is that the reforms will continue. One of the major announcements is that the moratorium on the sale of agricultural land will finally be lifted, which will provide more work for the legal community.
Steady Growth. Law firms in Ukraine are seeing a steady growth in the volume of work, but that work is not balanced in terms of type. The top three growing practices in terms of firm revenue are dispute resolution (including international arbitration and cross-border litigation), tax consulting and tax disputes, and corporate/M&A.
The procedural rules have been changed dramatically. In addition, an attorneys’ monopoly in courts has finally been established, which will eventually result in more cases being outsourced to law firms.
Transactional work is less predictable. Risks in the country impede the optimism of foreign investors, who remain cautious. As a result, only one-fourth of all transactional work comes from referrals from foreign law firms, which seems quite low for a country of Ukraine’s size, and Ukrainian businesses are much more active in the transactional domain than international corporations.
It’s a buyer’s market now, and the most active run the game. Private equity houses already present in Ukraine have a good risk appetite and are active in buying both profitable export-oriented assets and distressed assets with good prospects. Strategic investors follow, but mostly in industries which are traditionally stable and non-risky.
Industries in the agriculture, energy natural resources, and IT sectors bring money to the Ukrainian legal market, with a second tier formed by banks and financial institutions, pharma, real estate, and telecom.
There is No Middle-Size Any More. Competition is getting tougher every year – and as a result there is no middle-size for a law firm. You are either getting bigger (100+ fee earners) or staying small and niche. The summer of 2018 saw the tie-up of Avellum and A.G.A. Partners, and soon thereafter Asters and the Ukrainian office of EPAP merged to form the largest Ukrainian law firm by size. Many other competitors are participating in the race and are considering lateral hires or tie-ups of their own.
This leads to another interesting observation: large law firms tend to be full service, with offers including such practices as family law, private clients, and criminal law. The last of these in particular is becoming a goldmine for business law firms (primarily Ukrainian) which are seeing a steep increase in the amount of work in the white-collar crime segment.
Another trend is the rise of boutique law firms, trying to offer businesses a cheaper alternative in traditional boutique areas such as IP, litigation, family law, etc.
Otherwise, the legal market has not changed much. The same local law firms still hit the league table. There are no newcomers among international law firms either. The usual suspects – DLA, Baker, CMS, and Dentons – compete with leading Ukrainian law firms as equals both in disputes and transactional work.
A Postscript. The last –but not least – trend in Ukraine is the big fight for talent. Law firms are having real trouble finding motivated and competent associated and senior associates, which is the result of several crisis years before. I see it as the biggest challenge for the next few years for those who want to expand their legal business by ways other than mergers or lateral hires.
As a positive sign, Ukrainian law firms understand that clients want the same services as before, but faster, cheaper, and more efficiently. To address these demands the most advanced Ukrainian law firms pioneer innovations, including advanced legal-tech products and solutions.
By Anna Babych, Partner, Aequo Law Firm
This Article was originally published in Issue 6.8 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.