Special Issue CEE January 2017 Legal Matters In-Depth Analysis of the News and Newsmakers That Shape Europe’s Emerging Legal Markets What do you expect from your law firm? wolftheiss.com EDITORIAL YEAR END SPECIAL IssUE CEE EDITORIAL: OUT WITH THE Legal Matters In-Depth Analysis of the News and Newsmakers That Shape Europe's Emerging Legal Markets BAD, IN WITH THE GOOD Few would con- tria, the trend is undeniably rightward. test that 2016 was, Against this gloomy backdrop, optimism might on balance, a dis- seem to be in short supply. And yet, at least in appointing year. the legal industry, it’s perhaps not completely un- Indeed, by now warranted. descriptions of the year just concluded First, as the participants in this year’s Expert as unfortunate, or Summit (page 12) attest, business in CEE contin- terrible, or an an- ues to grow. Partners at law firms in some of the nus horribilis are most troubled CEE countries, such as Ukraine, so common as to Russia, and Turkey, remain positive, and firms approach cliché. Still, the year is unlikely to be in many other CEE countries, such as Austria, remembered fondly, in CEE or anywhere else. Hungary, and Romania, report increased growth, profits, and enthusiasm. Those reports are borne And indeed, recalling the stories from this part out by our annual Table of Deals ( page 32) as of the world that generated global media cover- well, which is much larger than it was in 2015 – age in 2016 is a painful exercise. In Turkey alone, which itself, in turn, was much larger than it was a woeful series of terrorist attacks killed an esti- The Editors: in 2014. mated 276 people (with an additional 39 killed in David Stuckey the bombing of the Raina nightclub in Istanbul Perhaps not coincidentally, CEE Legal Matters [email protected] on January 1, 2017), and a failed coup attempt had a good 2016 as well. The 2016 GC Sum- Radu Cotarcea resulted in the deaths of an additional 300+ peo- mit, which convened in Istanbul with Chairman [email protected] ple, the imposition of a still-ongoing state of Sponsors Baker & McKenzie and Slaughter & emergency, and the subsequent arrests of over May, was a rousing success, creating growing Letters to the Editors: 40,000 individuals, including some 2,745 judges. momentum for the third GC Summit, sched- uled this June in Warsaw. The CEE Legal Mat- The country was hardly alone in its misfortune. If you like what you read in these ters magazine – which published more articles The ongoing refugee crisis saw hundreds of pages (or even if you don’t) we and more interviews than ever before – recorded thousands of civilians fleeing Syria and other really do want to hear from you. more subscribers than ever before as well, giv- war-torn Middle Eastern states to reach Euro- Please send any comments, crit- ing us little choice but to make the magazine a pean (usually Greek) shores, from which they icisms, questions, or ideas to us monthly publication in 2017 for the first time. at: wound their way up through Croatia, Hungary, And in the fall of 2016 we were pleased to intro- and Austria, and then into Germany, France, [email protected] duce our brand new CEE Legal Matter website, and Northern Europe. The conflict in Eastern with far more features, platforms, and stories Ukraine between the Ukrainian military and than the previous one, which was starting to be- Disclaimer: pro-Russian rebels and separatists remains ac- come creaky from overuse. At CEE Legal Matters, we hate boil- tive, as does the persistent Greek debt crisis, with erplate disclaimers in small print as that country still in a state of enforced austerity CEE Legal Matters is growing, month after much as you do. But we also recognize the importance of the “better safe than and with economic recovery – and hope – still month and year after year, and our confidence sorry” principle. So, while we strive for seemingly far away. Russia, of course, continues that 2017 will be our best yet is pure. We’re grate- accuracy and hope to develop our read- ful for those of you who have been along for the ers’ trust, we nonetheless have to be ab- to suffer the effects of Western sanctions and solutely clear about one thing: Nothing still-low oil prices as well. ride throughout our history and equally grateful in the CEE Legal Matters magazine or for those of you who have signed up more re- website is meant or should be under- The sense that these crises are increasing, both in cently. The very point of CEE Legal Matters is stood as legal advice of any kind. Read- severity and frequency, seems to have dropped a ers should proceed at their own risk, and to inform and entertain you, our readers, and the veil of anxiety upon CEE, as in much of the rest any questions about legal assertions, results of 2016 indicate that we’re succeeding in conclusions, or representations made of the world, and voters in member states are re- that goal. in these pages should be directed to the sponding to nationalist appeals as a result. Thus person or persons who made them. right wing governments in Poland, Hungary, the Despite the region’s growth, last year was a We believe CEE Legal Matters can serve as a useful conduit for legal ex- Czech Republic, Russia, and Turkey consolidated mixed bag at best. Here’s hoping 2017 takes the perts, and we will continue to look for their power in 2016, opposing what they see as best parts of 2016 and makes them even better ways to exapnd that service. But now, unwarranted and unjustified EU infringement and takes the worst parts of last year and turns later, and for all time: We do not our- selves claim to know or understand the on national autonomy and instilling anxiety in them around. Peace, happiness, and healing, to law as it is cited in these pages, nor do potential investors and international observers all of our readers. we accept any responsibility for facts as alike. Although more progressive governments they may be asserted. were elected in 2016 in both Romania and Aus- David Stuckey CEE Legal Matters 3 YEAR END SPECIAL IssUE EXPERT ESSAYS UKRAINIAN M&A MARKET REVIEW IN 2016 By Mykola Stetsenko, Managing Partner, Avellum Current Market Environment phenomenon can be found in MHP’s withdrawal from Russian business by means of an exchange of its assets in Russia for the The year of 2016 was marked by relatively low M&A activity in Ukrainian assets of the Agrocultura Group. Ukraine. Although transactions were carried out in almost every industry, their total number turned out to be quite moderate. The infrastructure segment, particularly seaports, whips up more and more interest. The establishment of a joint venture between Here we should distinguish transactions relating to the Ukrainian TIS Group and Cargill, the world’s agro-industrial giant, may market only and transactions that were affected on a global scale serve as a model here. As far as we know, Ukrainian and foreign containing, however, a Ukrainian element. If we speak of Ukrain- investors are also discussing a number of transactions related to ian transactions only, a number of banking transactions are worth port infrastructure and transshipment terminals. mentioning – in particular the acquisition of Ukrsotsbank by Alfa Group. Also, we witnessed a certain number of transactions in the The dramatic increase of activity in the non-performing loans agricultural sector (the sale of Creative Group, for instance), the (NPLs) market (i.e., the market for secured or unsecured default IT segment (Soros’ investment in Ciklum), and the investment of loans) became a new trend this year. Although the targets of such Horizon Capital, a private equity fund, in Rozetka. transactions are rights of claim under loan agreements, in fact A huge event in December was the state’s sudden nationalization such transactions are M&A transactions typically of an unfriendly of PrivatBank, the largest bank in Ukraine. Its consequences for or opportunistic nature. the country remain yet to be seen. Unlike the Ukrainian M&A market, the global M&A market once Unfortunately, no deals were concluded in the engineering and again looks likely to reach a stratospheric level in terms of total heavy industry sector, and the FMCG segment also reported no transaction value. The USA remains the leader in the value and the intense activity. number of transactions. These transactions sometimes involve Ukraine, if only from the merger-control clearance perspective (if The pharmaceutical market became a noteworthy exception with new financial thresholds are exceeded). Some transactions (e.g., a number of transactions, with Farmak’s investment in Poland IT transactions) are even more tied to Ukraine, since many of the most distinguished. This investment of a Ukrainian company the specialists employed by IT companies are concentrated here. into Eastern Europe became a pleasant exception at a time of low An excellent example of such a transaction can be found in the business activity and general exits by Ukrainian companies from acquisition of Lohika, a premier software development firm, by the Russian and Crimean markets. A vivid example of this exiting Altran, a global leader in innovation and a high-tech engineering 4 CEE Legal Matters EXPERT ESSAYS YEAR END SPECIAL IssUE Economic factors include the low purchasing power of the ma- jority of Ukrainian investors and the absence of high-quality as- sets for sale. On some level, this is a repetition of the situation in 2009 when a great many companies became insolvent, but their owners refused to sell them at actual market value.