Year I, Issue 3 CEE June 2014 Legal Matters

In-Depth Analysis of the News and Newsmakers That Shape Europe’s Emerging Legal Markets

The 800 Pound Gorilla in The Room: Western Sanctions on Russia

Across the Wire: Summary of Deals and Cases in CEE Market Spotlight: Russia Experts Review: Privatization and PPP/Infrastucture The Glass CEEling (Part II) CEE Legal Matters Round-table: The Future for International Law Firms in CEE Roots in Revolution: Miller Canfield in Poland CEE Preliminary Matters

Legal Matters CEE Legal Matters Editorial: The Lingering

In-Depth Analysis of the News and Newsmakers That Shape Europe's Emerging Legal Markets Legacy of Russia Russia, it need not be of large law firms that serve it. In our report on said, is enormous. the subject in this issue, Bill Reichert, the Manag- ing Partner of K&L Gates in Moscow, describes Russia is bigger than the Western sanctions on Russia as “The Gorilla Pluto. in the Room” – impossible to ignore, dangerous, and all anyone can talk about. Russia is huge. Similar adjectives can be used to describe Rus- I lived in Russia from sia itself, of course. And our Market Spotlight in 1995-1998, first in a this issue shines brightly on Russia, and includes small community out- interviews with several Russian General Counsel, side of Vladivostok an Expat on the Market Q&A with Dentons Sen- – eight hours ahead ior Partner and Russian expert Doran Doeh, and of the country’s capital – and then in Moscow more. itself. I was able to experience the excesses and wonders of that chaotic period, and I left for law In addition, just as the countries of CEE find it The Editors: school in the United States just as the ruble col- difficult to fully escape Russia’s shadow, many of David Stuckey lapsed and the country entered one of its darker the other articles and features in this issue seem [email protected] periods. affected by the history, power, and machinations Radu Cotarcea of the region’s – and the world’s – largest country. [email protected] But my memories are neither chaotic nor dark. The Experts Review feature in the issue focuses From the kind school teachers I worked with to on Privatization – a process which in many CEE the bright and eager young kids in the beach-side markets still, now decades after the fall of the Letters to the Editors: community I lived in, I was astounded by the Berlin Wall, involves the ongoing dismantling of kindness, hospitality, and hearts of the people I lingering communist (and primarily Moscow-im- If you like what you read in these met – obviously as large as the country they beat posed) infrastructure. The Top Sites feature con- pages (or even if you don’t) we in. I was changed by the experience, and I con- siders law firm websites in Hungary and Russia. really do want to hear from you. sider it a priceless and powerful part of my life. A Russian lawyer in Turkey takes over as Country Please send any comments, Manager of a Russian company in that country. criticisms, questions, or ideas to My personal experience is, perhaps, not particu- And the fascinating story of Miller Canfield’s be- us at: larly relevant – but the truth is, it’s impossible for gin- nings in Poland involve the Polish Solidar- [email protected] me to edit an issue focusing on Russia without ity movement in the late 1980s, as that country reflecting on those memories, those experiences, strove to break free of the Soviet grip. those people. And, after all, living in Russia ex- posed me to Eastern Europe for the first time – I Of course, there’s other important content in Disclaimer: also traveled to Prague during my stay in Moscow this issue as well. Part II of our “Glass CEEl- At CEE Legal Matters, we hate boilerplate – and I don’t doubt that my presence in this part ing” report on women in private practice in CEE disclaimers in small print as much as you of the world now can be tied to its affect on me. provides the perspectives and explanations of do. But we also recognize the importance of the “better safe than sorry” principle. law firms in the region on hiring practices and So, while we strive for accuracy and hope I’m not the only one who watches Russia, and partnership promotions. The 2014 CEE Legal Matters General Counsel Best Practice Handbook is almost here. This year’s guide will to develop our readers’ trust, we nonethe- we transition awkwardly from the personal to contain useful information gathered from leading in-house counsel throughout the region on best practices, less have to be absolutely clear about one thing: Nothing in the CEE Legal Matters the professional: from Russia’s affect on a young And the issue is, as always, full of news about time management strategies, and other advice on how best to succeed at this most critical role. This year’s GC magazine or website is meant or should American in the mid-90s to Russia’s affect on the law firm office openings and closings, new alli- be understood as legal advice of any kind. global business community in the middle years of ances, practices, and business models, our regular Advisory Board consists of: Readers should proceed at their own risk, and any questions about legal assertions, this decade. summary of all the deals from CEE reported in Florin Dumbrava: Legal Director at Dalkia Romania Gordon Finlayson: General Counsel at HBO Europe conclusions, or representations made the last two months, and much more. The issue in these pages should be directed to the person or persons who made them. In fact, the tremors that affect the Russian econo- is packed with valuable information, and the pro- my and its powerful political and business leaders Oraz Dursyev: Legal Director, Compliance Officer Pal Kara: Vice-president for Legal and General We believe CEE Legal Matters can serve cess of gathering it, compiling it, and presenting CEE at Anheuser-Busch InBev Russia Counsel (Chief Legal Counsel) at MOL Group as a useful conduit for legal experts, and are felt far outside of Russia’s enormous borders. for our readers it has been exciting. we look forward to expanding our capacity And as a result, the sanctions that the West has to do so in the future. But now, later, and Agnieszka Dziegielewska-Jonczyk: Country Legal Andras Mohacsi: Global Commercial Compliance for all time: We do not ourselves claim to imposed on Russia in recent months as a result of Now. Enjoy the World Cup. Enjoy the summer. know or understand the law as it is cited its accession of Crimea, and the possibility of ad- And enjoy this June issue of the CEE Legal Mat- Counsel at Hewlett-Packard Poland Counsel at British American Tobacco in these pages, nor do we accept any re- sponsibility for facts as they may be as- ditional sanctions that may appear in the future, ters magazine. The 2014 CEE General Counsel Best Practices Handbook belongs on every lawyer’s desk. Contact CEE Legal serted. are of enormous significance to the global busi- ness community -- and therefore to the dozens David Stuckey, Executive Editor Matters to advertise or pre-order today. CEE Legal Matters 3 Preliminary Matters Contents

Guest Editorial: Expect the Unexpected Preliminary Matters 2 - 5

sian or Ukrainian or both when looking Rethinking the subjective feeling of 2 Editorial: The Lingering Legacy of Russia into merger control scenarios in a current comfort transaction on the group level? Ignoring 4 Guest Editorial: Expect the Unexpected the authority of either of the two may Until earlier this year, I, for one, had the have a negative impact on your client’s impression that the current international remaining business in Ukraine or Rus- framework provided reasonable pro- Across the Wire 6 - 17 sia, whichever authority has been disre- tection for investments in CEE. Most On The Move garded. countries had signed a reasonable num- 6 Legal Ticker: Summary of Deals and Cases ber of BITs and had already experienced Hogan Lovells and Norton Rose The muddy crystal ball their first ICSID trials. With the events Fulbright Give Up in Prague (Page 12) 12 On the Move: New Homes and Friends in Crimea, I have had to rethink my sub- The events in Ukraine and in particular in jective feeling of comfort. How should Crimea remind us that in CEE even the one proceed in case of an expropriation Legal Matters 18 - 37 most diligent research will not guarantee of assets located in Crimea? Go against the ability to anticipate what will happen Ukraine, which in fact does not exercise even during the relatively short period of power there anymore? Against the Rus- 18 Legal Matters: The Frame time that typically takes place between sian Federation, given the fact the signing and the closing of a pretty 21 Inside Insight: Interview with Ilshat Timeryanov standard M&A transaction. This makes that no EU country has recognized the The last couple of months have taught it even more important to provide con- splitting off of Crimea and its integration 23 Roots in Revolution: Miller Canfield in Poland legal practitioners in CEE (including tractual mechanisms that offer reason- into the Russian Federation? One could Russia and Turkey) that this region re- able protection for both parties to a deal: argue that protection and justice may cur- 26 Moving In, Moving On The Glass CEEling quires quite a bit of foresight when ad- the purchaser will need to have some say rently only be sought in the courts of the vising on transactions of any kind: the once certain assets of the transaction are Republic of Crimea and of the Russian 28 Behind the Deal: LEGO’s New Plant in Connecting the Dots: Part Two of The de-facto occupation and integration of suddenly in a territory over which the Federation. I am not sure how comfort- Nyiregyhaza Crimea into the Russian Federation is un- central government no longer exercises ing that thought is for a client, though. Glass CEEiling Survey (Page 30) likely to have been reflected in the SPAs control and the government that in fact 30 The Glass CEEling: Connecting the Dots or long-term contracts that were negoti- exercises control is not recognized by Pragmatism, the core quality in CEE 34 CEE Legal Matters Round-table: The Future for ated in late 2013/early 2014. The occupa- the purchaser’s own government; at the International Law Firms in CEE tion of a significant portion of a coun- same time, the seller may argue that the Having raised all these questions, I am try sharing a common land border with relevant assets operate as usual without still very optimistic about the region and four EU-member states is something few disruption and that there is no impedi- its future development due to CEE’s Market Spotlight: Russia 38 - 55 people would have thought of as a real- ment to going ahead with the inked deal. unique pragmatism in dealing with situa- istic scenario at that time. Well, that has All of us are in a position to bring sound tions that in other parts of Europe would changed now. arguments under law and equity for both likely create insurmountable problems. 39 Guest Editorial: A Reasoned Perspective sides here … While it may take quite a while until the Direct impact national and international legal frame- 40 Bad For Business: Western Sanctions Impact But how would such contractual protec- work is formally adapted to the factual International Law Firms in Russia But what does this development mean tion work in practice? Will standard ma- situation, business across the region will Bad For Business for legal work? How do you deal with a terial adverse change clauses (MAC) from continue more or less as usual and busi- 46 Inside Insight: Interview with Alexander Kotlyar de-facto change of borders and control now also include the factual disintegra- ness transactions, also with foreign part- Western Sanctions Impact International over a territory that is not recognized by tion of countries, or is this situation cov- ners, will continue as before. The one key Law Firms in Russia (Page 40) 47 Inside Insight: Interview with Dmitry Popov the EU, the US, or any other significant ered anyway as a force-majeure event? I difference from before? Today we are economic power – but is by Russia? How tend to lean towards MAC language that more aware of the fact that the unexpect- 49 Inside Insight: Interview with Anna Gritsevskaya do you deal with assets located in Crimea also covers to a reasonable extent the po- ed can happen at any time in this region. 41 Inside Insight: Interview with Irina Novikova and the power of Russian authorities ex- litical risk of the region, a risk of which Marcus Piuk, Partner, ercised there: do you consider them Rus- we have just been reminded. Schoenherr Attorneys at Law 54 Expat on the Ground: Doran Doeh Write to us Experts Review: Privatizations and 56 - 73 If you like what you read in these pages (or even if you don’t) we really do want to hear from you! PPP/Infrastructure

Please send any comments, criticisms, questions, or ideas to us at: [email protected] Experts Review 63 CEE Experts Review Round-up

Letters should include the writter’s full name, address and telephone number and CEE Experts Review Round-up on may be edited for purposes of clarity and space. Privatization (Page 63) In Closing: Top Sites 74

CEE Legal Matters 4 CEE Legal Matters 5 Across The Wire Across The Wire

Date Firms Involved Deal/Litigation Deal Country covered Value Legal Ticker: Summary of Deals and Cases May 15, Karanovic & Nikolic Karanovic & Nikolic advised Mid Europa Partners on the sale of SBB/Telemach Group to N/A Bosnia, 2014 Kohlberg Kravis Roberts & Co. Croatia, Macedonia, Date Firms Involved Deal/Litigation Deal Country Montenegro, covered Value Serbia, and April 11, Schoenherr, Fenech & Schoenherr advised Osterreichische Volksbanken (OeVAG) on the sale of its fully-owned sub- N/A Austria Slovenia 2014 Fenech sidiary Volksbank Malta, to Malta-based Mediterranean Bank, which was advised by Fenech & May 23, Boyanov & Co. Boyanov & Co. advised Citigroup Global Markets Limited as underwriter of new notes issued by EUR 185 Bulgaria Fenech Advocates. 2014 Glasstank, a Dutch SPC of the Yioula Group. million April 24, CHSH Cerha Hempel CHSH and Schoenherr advised on negotiation and completion of a shareholders’ agreement N/A Austria June 4, Velchev & Co The Bulgarian Velchev & Co law firm is representing the GANT clothing brand in Bulgaria. N/A Bulgaria 2014 Spiegelfeld Hlawati, between Osterreichische Industrieholding and America Movil relating to shares the two hold in 2014 Schoenherr Telekom Austria. May 16, Wolf Theiss Wolf Theiss Zagreb successfully assisted Split-based Adria Steel in enabling customs-free exports N/A Croatia April 24, Dentons Dentons advised Gortz Beteiligungsgesellschaft in the company's obtaining of investment from N/A Austria 2014 of Croatia-produced steel products to Algeria. 2014 AFINUM Management. May 20, Divjak, Topic & Divjak, Topic & Bahtijarevic law firm advised the Dogus Group on its assumption of majority N/A Croatia April 29, Baker & Mckenzie Baker & McKenzie advised on a "New Strategic and Financial Partnership" between Store Elec- N/A Austria 2014 Bahtijarevic control of Tenos Ltd. 2014 tronic Systems and iMAGOTAG. April 16, Divjak, Topic & Divjak, Topic & Bahtijarevic advised the Turkish Dogus Group on its purchase of a majority N/A Croatia, April 29, Luther, KWR Karasek Luther and KWR Karasek Wietrzyk Rechtsanwalte advised MUT Holding on its acquisition of N/A Austria 2014 Bahtijarevic stake in the Villa Dubrovnik hotel from the Croatian Heruc Group. Turkey 2014 Wietrzyk Rechtsan- the Austrian Theysohn Extrusionstechnik, as well as its German subsidiary Extruder-Kompo- walte nenten Salzgitter, from Diligenta Holding and RLB – Beteiligungs- und Treuhandgesellschaft. April 23, Chadbourne & Parke Chadbourne & Parke represented the Bank of Cyprus Public Company on the sale of its EUR Cyprus, 2014 and Baker & Ukrainian subsidiary, PJSC “Bank of Cyprus” (and associated debt), to Alfa Group, which was 202.5 Ukraine May 2, Hogan Lovells Hogan Lovells advised Ivanhoe Cambridge on the disposal of a European portfolio of 18 hotels N/A Austria McKenzie represented by Baker & McKenzie. million 2014 operating under the IHG brands of Crowne Plaza, Holiday Inn, and Holiday Inn Express. April 19, CMS Cameron CMS advised LMS Outlets on its sale of the Fashion Arena Outlet Center, a 25,000 square metre EUR Czech May 6, Binder Grosswang Binder Grosswang advised the Poell family on the sale of the Salzburg Schokolade company to N/A Austria 2014 McKenna outlet centre consisting of 110 stores. 71.5 Republic 2014 Viennese investors Philipp Harmer and Christian Schugerl. million May 7, CHSH Cerha Hempel CHSH, bpv Hugel, and Clifford Chance advised IMMOFINANZ and BUWOG on capital mar- N/A Austria May 30, Clifford Chance Clifford Chance advised the Constellium Group on a May 2014 private offering of two high- EUR 700 Czech 2014 Spiegelfeld Hlawati, ket aspects and financing in connection with the IPO of BUWOG. 2014 yield bonds, in both Euros and Dollars, and a revolving credit facility. million Republic Binder Grosswang, Linklater, bpv Hugel, June 3, Gleiss Lutz Gleiss Lutz advised AVIC Electromechanical System Co. (AVICEM), on its acquisition of the N/A Czech Clifford Chance 2014 German automotive supplier KOKINETICS. Republic May 15, CHSH Cerha Hempel CHSH advised the HERZ group in connection with its acquisition of the majority of the shares N/A Austria June 3, Edwards Wildman Edwards Wildman advised GTS on the completion of its sale to Deutsche Telekom EUR 546 Czech 2014 Spiegelfeld Hlawati in HIRSCH Servo. 2014 million Republic, Poland, May 15, Schoenherr, Dorda Schoenherr and Dorda Brugger Jordis advised on establishment of a mutual capital interlinking EUR 220 Austria Romania, 2014 Brugger Jordis between PALFINGER (and individual selling PALFINGER shareholders) and SANY Heavy million and Slovakia Industries Co.. May 2, DLA Piper DLA Piper advised EVRAZ on the auction sale of its wholly-owned Czech subsidiary EVRAZ USD 287 Czech May 20, Wolf Theiss Wolf Theiss advised the Helvetia-Group on its purchase of Basler Versicherungs-Aktiengesells- N/A Austria 2014 Vitkovice Steel to a consortium of private investors. million Republic, 2014 chaft. Russia May 22, Linklaters Linklaters advised buch.de internetstores on the squeeze-out of its minority shareholders by N/A Austria May 28, Squire Sanders Squire Sanders announced that it won a significant international arbitration for the Slovak Re- N/A Czech 2014 Thalia Holding. 2014 public against the Dutch company Achmea. Republic, May 27, Wolf Theiss and Wolf Theiss advised lifebrain, a medical diagnostic laboratory group headquartered in Austria, on N/A Austria Slovakia 2014 Latham & Watkins its acquisition of the Italian Guidonia Group. May 8, CMS Cameron CMS Cameron McKenna and Allen & Overy advised on MOL Group sale-purchase agreement N/A Czech May 28, Hogan Lovells Hogan Lovells is advising Mitsubishi Heavy Industries (MHI) on its participation in a global joint N/A Austria 2014 McKenna, A with Eni for Eni's downstream businesses in the Czech Republic, Slovakia, and Romania, includ- Republic, 2014 venture between Mitsubishi-Hitachi Metals Machinery and Siemens. llen & Overy ing a retail network currently under the Agip brand. Slovakia, May 30, Binder Grosswang and Binder Grosswang advised the Scout24 Group on its acquisition of Austrian IMMOBILIEN. N/A Austria Romania 2014 Dorda Brugger Jordis NET real estate portal from sellers Markus and Alexander Ertler, who were represented by April 24, VARUL VARUL advised Pigu on the acquisition of remaining shares of DLB e-shop. N/A Estonia Dorda Brugger Jordis. 2014 June 4, Binder Grosswang, Binder Grosswang, Milbank, and Eisenberger & Herzog advised on the sale of Software AG's N/A Austria April 29, TRINITI The Tallinn office of TRINITI advised Ducto with regard to its expansion in Estonia and en- N/A Estonia 2014 Milbank, and Eisen- Austrian SAP Consulting business to the Scheer Group. 2014 trance into the Finnish market. berger & Herzog April 30, LAWIN, Lextal LAWIN successfully represented the Government of the Estonian Republic in a dispute against N/A Estonia June 4, Dorda Brugger Jordis Dorda Brugger Jordis advised the Frauenthal Group on its acquisition of all shares in OAG, a N/A Austria 2014 the City of Tallinn, the City of Narva, and a father of a pupil from Narva, who demanded that 2014 leading Austrian wholesaler of sanitary and heating products. upper secondary schools continue using Russian as a language of instruction. The cities were May 8, Hengeler Mueller, Hengeler Mueller and Linklaters advised on Axel Springer sale of regional newspapers, TV pro- EUR 920 Austria, represented by Lextal. 2014 Linklaters gram guides, and women’s magazines to Funke Mediengruppe. million Czech May 6, Hedman Partners Hedman Partners advised the founders of the Taxify smartphone app in drafting the financ- USD Estonia Republic, 2014 ing and shareholders' agreements under which angel investors from the USA, Europe, and Asia 100,000 Hungary, made a USD 100,000 seed round investment into the company. Poland, May 9, Red, Sorainen RED Attorneys-at-law advised the EPI Baltic I real estate fund on the sale of 100% sharehold- N/A Estonia Russia, 2014 ing in subsidiary DLG Holding to Lepidus Invest, represented by Sorainen. Serbia, Slovakia May 23, Hedman Partners Hedman Partners is advising the Estonian Uuskasutuskeskus on employment and labour law N/A Estonia 2014 issues to help the NGO revise its employment contracts with its staff. May 22, Sayenko Kharenko Sayenko Kharenko advised Capiton in connection with its acquisition of a Ukrainian subsidiary N/A Austria, 2014 of the Finnish Dynea-Group. Romania, May 26, Red The Red law firm advised UAV Factory in cross-border financing for development of unmanned N/A Estonia Ukraine 2014 aerial vehicles and platforms.

CEE Legal Matters 6 CEE Legal Matters 7 Across The Wire Across The Wire

Date Firms Involved Deal/Litigation Deal Country Date Firms Involved Deal/Litigation Deal Country covered Value covered Value June 5, LEXTAL LEXTAL advised Tallegg and Rakvere Lihakombinaat, Estonian subsidiaries of the HKScan N/A Estonia May 26, Borenius and Cravath, Borenius advised the Helsinki-based Paroc Group in connection with an offering of high-yield EUR 430 Lithuania, 2014 group, on a merger and business name change. 2014 Swaine & Moore notes to international investors as part of the Group's refinancing. million Russia June 3, Mannheimer Swartling Mannheimer Swartling and Borenius advised on Intersnack Group acquisition of Estrella N/A Estonia, May 1, Eversheds The Court of Appeal in Lodz dismissed the appeal by mBank in the class action brought by a N/A Poland 2014 and Borenius Maarud from Herkules Private Equity Fund II. Latvia, 2014 group of 1,247 consumers, which Wierzbowski Eversheds represented. Lithuania May 2, Chadbourne & Parke Multimedia Polska announced on March 26, 2014 that it is seeking to sell 49.2% of its stake in its N/A Poland April 18, LAWIN, Sorainen, LAWIN, Sorainen, Linklaters, Soltysinski Kawecki & Szlezak, Slaughter and May, and Gorrissen EUR 360 Estonia, 2014 and Weil, Gotshal & TV operations in an IPO scheduled for June, 2014. 2014 Linklaters, Soltysinski Federspiel advised on sale of RSA Insurance Group companies in the Baltics and Poland to the million Latvia, Manges Kawecki & Szlezak, Polish Powszechny Zaklad Ubezpieczen insurance company. Lithuania, May 8, Greenberg Traurig Greenberg Traurig advised on Cyfrowy Polsat's acquisition of Polkomtel, the operator of the N/A Poland Slaughter and May, Poland 2014 “Plus” mobile network. Gorrissen Federspiel May 13, Wardynski & Partners Wardynski & Partners, acting pro bono, obtained hearing of cassation appeal in civil rights case N/A Poland May 5, Papapolitis & Papapolitis & Papapolitis advised Intracom Holdings in the sale of its 49% shareholding partici- EUR 47 Greece 2014 by The Supreme Court of Poland. 2014 Papapolitis pation in Intracom Telecom to investors in Dubai. million May 13, Bird & Bird Bird & Bird is advising Lexmark International Technology on its recommended cash offer to the EUR 133 Poland May 14, Kyriakides Kyriakides Georgopoulos advised on new agreement for the construction of ten public schools EUR 52 Greece 2014 shareholders of the Swedish ReadSoft company. million 2014 Georgopoulos in Attica, made via Public Private Partnership. million May 16, Wolf Theiss Wolf Theiss obtains significant victory before the Polish Supreme Court EUR 2 Poland May 26, Linklaters, Baker & Linklaters and Baker & McKenzie advised on formation of Bundesdruckerei joint venture with N/A Greece 2014 million 2014 McKenzie Giesecke & Devrient. May 16, Greenberg Traurig, Greenberg Traurig and Allen & Overy advised BNP Paribas Poland and its French main share- EUR 55 Poland June 6, Papapolitis & Papapolitis & Papapolitis advised Goldman Sachs International and Morgan Stanley & Co. In- EUR 2.5 Greece 2014 Allen & Overy holder, BNP Paribas, in the public offering of shares of BNP Paribas Poland. million 2014 Papapolitis ternational as joint global coordinators and joint book runners in connection with an offering of billion 1,136,363,637 new ordinary shares.by National Bank of Greece May 16, CMS Cameron CMS advised Zabka (MEP portfolio company) on the acquisition of Spolem Zabrze N/A Poland 2014 McKenna April 18, Sorainen Sorainen Latvia advised the London branch of Deutsche Bank on financing it provided Baltics N/A Latvia 2014 Credit Solutions Latvia, the buyer of performing and non-performing credit portfolios from May 23, Greenberg Traurig Greenberg Traurig advised the PZU Group in the tender procedure for selecting an HR manage- N/A Poland Latvijas Krajbanka, which is in insolvent liquidation. 2014 ment & payroll system supplier. May 14, Sorainen SORAINEN's Latvia office is representing BIGBANK in a dispute with the Consumer Rights N/A Latvia May 23, Studnicki Pleszka Studnicki Pleszka Cwiakalski Gorski represented Enterprise Investors in negotiations concerning N/A Poland 2014 Protection Centre of Latvia. 2014 Cwiakalski Gorski the taking-up of shares in Nu-Med Grupa. May 16, Sorainen SORAINEN advised Sanoma, a European consumer media and learning company, on the divest- N/A Latvia May 28, K&L Gates K&L Gates obtained a costs award and a dismissal of all claims for the Republic of Poland in an USD 1.2 Poland 2014 ment of its Apollo online news service in Latvia. 2014 investment treaty dispute with U.S. investors David Minnotte and Robert Lewis. million May 19, Spilbridge, LAWIN, Spilbridge Spilbridge, LAWIN, Sorainen, and BLS Kronbergs & Cukste argued in Latvian court N/A Latvia May 29, Studnicki Pleszka Studnicki Pleszka Cwiakalski Gorski advised the PTE Warta pension fund on the sale and trans- N/A Poland 2014 Sorainen, and BLS on validity of freezing injunction and receivership order by the English High Court. 2014 Cwiakalski Gorski fer of its management to PTE Allianz Polska. Kronbergs & Cukste June 3, Studnicki Pleszka Studnicki Pleszka Cwiakalski Gorski, Hengeler Mueller, and Vinga advised on Shiloh Industries USD Poland May 19, Spilbridge Spilbridge prevailed in the Kurzeme Regional Court in dispute between the Latvijas Naftas Tran- N/A Latvia 2014 Cwiakalski Gorski, acquisition of 100% shares in Finnveden Metal Structures. 56.5 mil- 2014 zits company and the Ventbunkers oil products transfer terminal at Latvia's Ventspils port Hengeler Mueller, and lion Vinga June 3, TRINITI Riga-based Partner of the TRINITI law firm is participating in the reform of State-Owned N/A Latvia 2014 Enterprise governance in Latvia. June 4, BWW Law & Tax The Polish BWW Law & Tax firm advised New Media Ventures and Paszport Korzysci in the N/A Poland 2014 “Paszport Korzysci” project – a new loyalty program for the clients of Cyfrowy Polsat, Polkom- June 5, Sorainen Sorainen convinced the Latvian Competition Council not to initiate a case of possible abuse of N/A Latvia tel, and Plus Bank. 2014 dominant position in the activities of TV3 Latvia. June 4, Binder Grosswang, Binder Grosswang, Wolf Theiss, Wardynski & Partners, Domanski Zakrezewski Palinka, and N/A Poland June 5, Sorainen Sorainen successfully obtained merger approval from the Latvian Competition Council for the N/A Latvia 2014 Wolf Theiss, War- Pillsbury Winthrop Shaw Pittman advised on sale of MeadWesvaco Beauty and Personal Care 2014 merger of the Polish Powszechny Zaklad Ubezpieczen and the Latvian Balta insurance compa- dynski & Partners, Folding Carton Business to the ASG Shorewood Group. nies. Domanski Zakreze- June 9, FORT Baltic FORT law firm's complaint filed on behalf of the Latvian Renewable Energy Federation N/A Latvia wski Palinka, Pillsbury 2014 (LREF) resulted in action from the European Commission. Winthrop Shaw April 28, Sorainen The Lithuanian and Latvian offices of SORAINEN advised Novaturas on its acquisition of N/A Latvia, Pittman 2014 shares in Novaturas, the company's Latvian subsidiary, from minority shareholders. Lithuania June 10, Dentons Dentons' Warsaw office advised ERG Renew on its purchase of shares in EW Orneta 2 from the EUR 65 Poland June 10, LAWIN LAWIN advised the Danish Ingleby Farms & Forests on the acquisition of shares in SIA Agro N/A Latvia, 2014 Vortex Energy Group. million 2014 Duo, a subsidiary of the Danish company Agro Duo. Romania May 20, Schoenherr, Domanski Schoenherr advised VB-Leasing International, on the sale of VB Leasing Poland and VB Leasing N/A Poland, May 6, Sorainen The Lithuanian office of SORAINEN successfully represented Zalvaris and Baltical in signifi- EUR Lithuania 2014 Zakrzewski Palinka, Romania to the Polish company Getin Holding, which was represented by Domanski Zakrzewski Romania 2014 cant tax disputes with the Customs Department. 290,000 and Tuca Zbarcea & Palinka and Tuca Zbarcea & Asociatii. Asociatii May 7, Tark Grunte Sutkiene Tark Grunte Sutkiene represented AB City Service, a shareholder of Ecoservice, in a sale of its N/A Lithuania 2014 shares in the company. May 13, Debevoise & Debevoise & Plimpton, Latham & Watkins, and Clifford Chance are advising on Clayton, Du- EUR 1.2 Poland, 2014 Plimpton, Latham bilier & Rice agreement to acquire Mauser Group from Dubai International Capital. billion Russia, May 7, FORT The Lithuanian office of the FORT law firm is representing 262 plaintiffs in a class action EUR 1.7 Lithuania & Watkins, Clifford Turkey 2014 against the state-run Deposit and Investment Insurance Company (DIIC). million Chance May 21, GLIMSTEDT Glimstedt's Lithuania office advised SweDeltaco on its agreement to acquire 100 % of the shares N/A Lithuania May 19, Buzescu, Tuca Zbar- The Buzescu law firm secured a victory in the Romanian High Court on behalf of Wizz Air in N/A Romania 2014 in UAB AG Trade from UAB Topo Grupe. 2014 cea & Asociatii, Vilau a dispute against Timisoara Airport and Carpatair. Carpetair was represented by Tuca Zbarcea & May 23, Sorainen Sorainen advised Amber Grid on the acquisition of 38.9% of the shares of EPSO-G from EUR Lithuania Mitel Asociatii, and Timisoara Airport by Vilau Mitel. 2014 E.ON Ruhrgas International 49.76 June 5, Kinstellar Kinstellar’s Bucharest office advised ERBD on a EUR 57 million loan for the development of EUR 57 Romania million 2014 the Topolog-Dorobantu wind park in the South–East of Romania. million June 4, GLIMSTEDT GLIMSTEDT in Lithuania advised E.ON Ruhrgas on "a major energy deal" that closed on May N/A Lithuania May 26, Allen & Overy Allen & Overy advised on a EUR 66 million financing of Azomures to be used for modernizing EUR 66 Romania, 2014 21, 2014. 2014 its plant in Targu Mures, Romania. million Czech May 7, Tark Grunte Sutkiene Tark Grunte Sutkiene advised Baltic Champs in structuring and implementing a merger with the EUR 30 Lithuania, Republic 2014 Agrowill Group. million Poland, Ukraine

CEE Legal Matters 8 CEE Legal Matters 9 Across The Wire Across The Wire

Date Firms Involved Deal/Litigation Deal Country Date Firms Involved Deal/Litigation Deal Country covered Value covered Value April 24, Nektorov, Saveliev & Nektorov, Saveliev & Partners advised the Russian MIR management company on an investment N/A Russia May 12, Hedman Partners Hedman Partners is advising the Estonian Uuskasutuskeskus on employment and labour law N/A Turkey 2014 Partners agreement with Koltech. 2014 issues to help the NGO revise its employment contracts with its staff. April 28, Liniya Prava Liniya Prava succeeded in having a Decision and Order of the antimonopoly authority for the N/A Russia May 16, Baker & Mckenzie Baker & McKenzie advised ING on a covered term loan facility to Izmir's Metropolitan Munici- EUR 55 Turkey 2014 north Caucasus on the alleged imposition of loan repayment through annuity payments by 2014 pality. million Sberbank of Russia to its borrowers overturned and invalidated by the Arbitrazh Court for the May 21, Baker & Mckenzie Baker & McKenzie's advised the Marubeni Corporation on its acquisition of a 49% stake in N/A Turkey Rostov Region of Russia. 2014 Temsa Is Makinalari Imalat Pazarlama ve Sati from TEMSA GLOBAL Sanayi ve Ticaret. April 29, Gleiss Lutz, Akin Gleiss Lutz, Borenius, Akin Gump, and Hengeler Mueller advised on Sistema JSFC joint venture N/A Russia May 22, Mayer Brown Mayer Brown advised Standard Chartered Bank and BNP Paribas on a five-year loan facility to USD 3 Turkey 2014 Gump, Borenius, and with Fresenius Kabi to establish a pharmaceuticals joint venture for operations in Russia and the 2014 Canadian-based First Quantum Minerals. billion Hengeler Mueller CIS. May 28, Baker & Mckenzie Baker & McKenzie advised Nafiz Kerim Kotan and Murat Zorlu on the acquisition of 99% of N/A Turkey May 2, Squire Sanders Squire Sanders advised Ozon Holdings on a fund raising from Sistema and Mobile TeleSystems. USD 150 Russia 2014 the share capital of Arma Portfoy Yonetimi. 2014 million May 30, DLA Piper DLA Piper completed the financing for the USD 4 billion Third Bosphorus Bridge Project, act- USD 4 Turkey May 26, YUST The YUST law firm represented the Russian Public Library and the Russian Ministry of Culture N/A Russia 2014 ing for the sponsors, IC Holding, and the Astaldi Group. billion 2014 in their claim against the United States for return of books from the rare Schneerson Collection to Russia. May 30, Vinson & Elkins, Vinson & Elkins, Allen & Overy, Paksoy, and Yuksel Karkin Kucuk advise STAR Rafineri on USD 5.6 Turkey 2014 Allen & Overy, Paksoy, development and financing of a greenfield oil refinery on the Aegean Sea. billion May 26, Monastyrsky, Zyuba, Monastyrsky, Zyuba, Stepanov & Partners lawyers protected the interests of Uralvagonzavod in N/A Russia YukselKarkinKucuk 2014 Stepanov & Partners patent litigation in the Ninth Appellate Court. April 24, Asters Asters acted as Ukrainian counsel to the EBRD on secured lending to the New Europe Property USD 40 Ukraine May 28, Debevoise & Plimpton Debevoise & Plimpton advised Titan Group on the establishment of Poliom, a joint venture N/A Russia 2014 Fund, which is managed by NCH Capital. million 2014 based on the Omsk Polypropylene Plant. May 9, Sayenko Kharenko Sayenko Kharenko advised on a binding agreement pursuant to which Hapag-Lloyd will take N/A Ukraine May 28, Nektorov, Saveliev & Nektorov, Saveliev & Partners advised Ozon on antitrust issues related to its acquisition of con- N/A Russia 2014 over the container division of Compania Sud Americana de Vapores. 2014 Partners trolling shares in the LitRes and Best-book online bookstores. May 13, Egorov Puginsky Egorov Puginsky Afanasiev & Partners Ukraine advised Dynea Chemicals in the sale of 100% N/A Ukraine May 30, FBK Legal FBK Legal participated in an audit of the Bank of Russia. N/A Russia 2014 Afanasiev & Partners of the shares of its subsidiary Dynea Ukraine to the German Mellifera Zehnte Beteiligungsge- 2014 sellschaft. June 3, Slaughter and May, Slaughter and May, Wiersholm, and ALRUD are advising on a long term Investment and Co-op- N/A Russia May 15, Integrites Integrites advised Olam Ukraine on legal regulations and other aspects of grain trading activity, N/A Ukraine 2014 Wiersholm, and eration Agreement between North Atlantic Drilling (NADL) and Seadrill Limited with Rosneft. 2014 including on currency issues, risk hedging, and warehouse activity. ALRUD May 22, Vasil Kisin & Partners Vasil Kisil & Partners announced that it provided legal advice to the EBRD on its April 2013 USD 10 Ukraine June 3, Integrites Integrites acted as Russian legal counsel to the London and Utrecht branches of Rabobank EUR 120 Russia 2014 loan to UBC-Promo. million 2014 International in connection with revolving facilities. million May 22, Vasil Kisin & Partners Vasil Kisil & Partners acted as sole legal advisor to the European Commission on its granting of EUR 610 Ukraine June 4, FBK Legal FBK Legal prepared notification on controlled transactions in 2013 on behalf of client Alexion N/A Russia 2014 macro-financial assistance to Ukraine. million 2014 Pharma. May 26, Sayenko Kharenko Sayenko Kharenko advised Pamplona Capital Management in its acquisition of a majority stake N/A Ukraine June 5, FBK Legal FBK Legal assisted SEVERALMAZ in the placing of additional shares in the company by open RUB 16 Russia 2014 in Alvogen. 2014 subscription. billion May 27, Egorov Puginsky Egorov Puginsky Afanasiev & Partners and Baker Botts advised Richmont Holdings on its N/A Ukraine June 6, Orrick Orrick advised Sberbank CIB as the arranger on a complex refinancing for MLP Group, a lead- USD 500 Russia, 2014 Afanasiev & Partners acquisition of Agel Enterprises. 2014 ing warehouse distribution operator in Russia and Ukraine. million Ukraine and Baker Botts May 6, JPM Jankovic Popovic JPM Jankovic Popovic Mitic advised the owners of Milos Klinika on the sale of 100% of its N/A Serbia May 29, Integrites Integrites is advising the Ecopharm manufacturer of herbal medicines on its search for project N/A Ukraine 2014 Mitic stake to the Blue Sea Capital Investment Fund. 2014 financing. June 9, Karanovici & Nikolic Karanovic & Nikolic assisted Croatia's Agrokor in successful applications for merger clearance in EUR 240 Serbia, June 2, Lavrynovych & Lavrynovych & Partners and DLA Piper defended Swissport International in the Kiev Economic N/A Ukraine 2014 relation to its combination with Slovenia's Mercator. million Croatia, 2014 Partners, DLA Piper Court against Ukraine International Airlines Slovenia June 4, Sayenko Kharenko Sayenko Kharenko acted as legal counsel to the EBRD on its provision of a EUR 35 million EUR 35 Ukraine April 17, Cechova & Partners, Cechova & Partners, Snell & Wilmer, and S. Horowitz & Co. advised AFS Technologies on its N/A Slovakia 2014 loan to Danosha, a major Ukrainian pig farming company. million 2014 Snell & Wilmer, and S. acquisition of 100% of Visicom. Horowitz & Co. June 5, Sayenko Kharenko Sayenko Kharenko advised the EBRD on a USD 26 million loan to the Ukrainsky Grafit public USD 26 Ukraine 2014 joint-stock company. million May 19, bpv Braun Partners bpv BRAUN PARTNERS is providing legal advice on the construction of a multipurpose City N/A Slovakia 2014 Arena complex in Trnava, Slovakia. June 10, Egorov Puginsky Egorov Puginsky Afanasiev & Partners in Ukraine obtained regulatory approval for H2 Equity N/A Ukraine 2014 Afanasiev & Partners Partners' acquisition of a major European producer of fresh frozen vegetables, fruit, and potato May 14, Asters Asters advised on Memorandum of Understanding signed between Eustream and Ukrtransgaz N/A Slovakia, products. 2014 on transmission of gas from Slovakia to Ukraine. Ukraine April 29, Schoenherr Schoenherr advised a group of shareholders of Slovenia's Helios Domzale and pledgees in He- EUR 106 Slovenia Full information available at: www.ceelegalmatters.com Period Covered: April 11, 2014 - June 10, 2014 2014 lios shares in the sale of a majority stake in Helios to Ring International Holding, a Vienna-based million industrial group. May 14, Schoenherr, Wolf Schoenherr advised Slovenian creditor financial institutions in the debt restructuring of the EUR 330 Slovenia 2014 Theiss Lasko Group, a major regional beverage manufacturer and distributor, which was represented by million Did We Miss Something? Wolf Theiss May 16, Wolf Theiss Wolf Theiss advised the Slovenian Pivovarna Lasko brewery on debt restructuring. EUR 300 Slovenia 2014 million May 6, Allen & Overy, Atim Allen & Overy advised the Industrial and Commercial Bank of China on its proposed acquisition USD 316 Turkey We’re not perfect, we admit it. If something slipped past us, and if your firm has a deal, hire, promotion, 2014 & Atim of 75.5 percent of the issued share capital of Tekstil Bankasi from GSD Holding (which was million represented by Atim & Atim). or other piece of news you think we should cover, let us know. Write to us at [email protected] May 7, White & Case White & Case advised GMR Infrastructure and its group companies on the sale of their 40 EUR 209 Turkey 2014 percent stake in Istanbul's Sabiha Gokcen International Airport. million

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Merger Between Sinanides & Sinanides and General of South Korea and the USA, as well as Heads of Legal and senior managers from foreign companies doing business in the On the Move: New Homes and Friends Drakopoulos in Greece Far East, and senior figures from companies in the region.

The alliance is designed to take advantage of Russin & Vecchi’s Firm Moves Squire Sanders in Global Merger with Patton existing office in Vladivostok and the Pepeliaev Group’s strong Boggs reputation in tax and other matters. The firms, combined, have Hogan Lovells and Norton Rose Fulbright more than 170 lawyers and more than 1,500 clients in Moscow, St Petersburg, Krasnoyarsk, Vladivostok, and Yuzhno-Sakhalinsk, Give Up in Prague among other cities.

Maalouf Ashford & Talbot Opens in Russia

On June 1, 2014, the merger between Squire Sanders and Patton Boggs became official, and the firm began operating under the name Squire Patton Boggs. On June 10, 2014, the Drakopoulos Law Firm in Greece an- The new entity – which added Patton Boggs’ 300 lawyers to Squire nounced that it had merged with the Greek Sinanides & Sinanides Sanders’ 1300 – has 1,600 lawyers and 45 offices in 21 countries, law firm. Sinanides & Sinanides has been active in the Greek legal which the firm claims places it squarely among the top 25 firms market for over 35 years. globally by headcount, and 8th in number of offices around the Norton Rose Fulbright closed its Prague office on May 1, 2014 world. According to a jointly-issued press release announcing the Hero Sinanidou-Sideridou, the founder and Managing Partner of – and Hogan Lovells announced it will be following suit shortly merger in May, “the combined firm will bring together Squire Sand- her eponymous firm, is a leading authority in Gaming law. She thereafter. ers’ top ranked global legal platform and Patton Boggs’ preeminent will lead the Drakopoulos Gaming law practice across the firm’s public policy, white collar and other practices to provide clients 11 jurisdictions in Southeastern Europe, based out of the firm’s This marks the second time that Norton Rose has closed in Prague, Athens headquarters. as it also withdrew from the Czech capital in September, 1996, be- with unparalleled geographic reach, breadth and depth of practice fore re-opening 10 years later. Corporate Partner Milana Chamber- capabilities and unmatched knowledge in matters where law, gov- George Sinanides, the co-founder at Sinanides & Sinanides, is a lain has returned to the firm’s main office in London, while Czech ernment and business intersect.” prominent litigator in Greece, as well as a Lecturer in Civil Pro- Partner Pavel Kvicala and his team have joined Havel, Holasek & cedure at the Athens Law School and Deputy Director of Legal Maxim Tafintsev, Head of Moscow Office, Maalouf Ashford & Talbot Jim Maiwurm, the Chair and Global CEO of Squire Sanders, was Partners – making that firm, the largest in the Czech Republic, Services at Alpha Bank. He joins Drakopoulos as Of Counsel, and unsurprisingly enthusiastic about the news on the day the merger even larger. Havel, Holasek Founding Partner Jaroslav Havel stated will be the Head of the firm’s Litigation practice, while Maria Sina- Maalouf Ashford & Talbot has opened an office in Moscow. The was announced. “Today marks an important day in the history of that: “Joining forces with prominent Partner Pavel Kvicala and his nidou, also joining as Of Counsel, will lead Drakopoulos’s Copy- firm, which now has offices in 7 countries (and is affiliated with our firm. Patton Boggs is the premier public policy firm inthe experienced team will give us an opportunity to provide expert right practice. another 30 offices globally) will be led in Moscow by Russia House world, and this combination establishes us as the ‘go-to’ firm for legal services to a number of global and local clients.” International Lawyers law firm Managing Partner Maxim Tavin- public policy work. We also gain a leading position in the Middle stev, who will wear two hats. Hogan Lovells announced that its doors will close on July 31, 2014. East and several new locations in the United States, while deepen- Senior Partner John Maalouf, based in New York, says that MAT At the moment, the office has 14 fee earners, including Partners ing our bench in a number of important practices areas, all of Pepeliaev Group and Russin & Vecchi In focuses primarily on international financial transactions and oil & Miroslav Dubovsky and Pavel Skopovy, and 14 support staff. Da- which strengthen our service platform,” he said. “Through our Strategic Alliance For Russian Far East gas – he calls his firm “one of the leading oil & gas firms in the vid Harris, Hogan Lovells’ global co-CEO, stated: “We have taken discussions we have gained a great deal of respect for the partner- world,” and says the decision to open a formal Moscow office was the decision to close the Prague office following a review of the ship and culture of Patton Boggs. We are very pleased to combine The Russian Pepeliaev Group and the Washington D.C.-based necessitated by the substantial amount of work they’ve had in Rus- market and our investment priorities. The partners in Prague un- leading global and public policy firms with diverse and strong prac- Russin & Vecchi have agreed to form a strategic alliance for Vladi- sia in recent years. derstand the decision and are considering the possibility of the of- tices and client bases, strong regional positions and international vostok, the Primorskii Krai region of Russia, and the Russian Far fice becoming an independent local firm with an informal referral orientations. Together we will be uniquely positioned to respond East. The alliance’s representatives will provide legal support in Tavintsev founded the Russia House International Lawyers law relationship with Hogan Lovells. We are very grateful to all of our to the needs of business clients around the world.” areas such as the fuel and power industry, natural resources law, firm back in 1997. He maintains his separate role as Managing people in Prague for their hard work over the years.” transport, construction, tourism, healthcare, pharmaceuticals, tel- Partner of that firm, which retains its offices in Moscow, Vladiv- Ed Newberry, the Managing Partner of Patton Boggs, shared ecoms, marine law, agriculture and timber processing. ostok, Luxembourg, Petropavlovsk-Kamchatsky, and Kazan. He is In Prague, Miroslav Dubovsky, the firm’s local Managing Partner, Maiwurm’s confidence. “Squire Sanders is recognized as a one of also the Co-Founder of the Arab European Lawyers Association, confirmed the news: “Hogan Lovells has operated in the Czech the industry’s leading global law firms with practice and industry The firms report that they have already started to collaborate ac- and he hopes to hire several Arab lawyers and expand his firms’ Republic since 1991 working for both domestic and international expertise in key financial markets spanning the Americas, Europe, tively in the context of the alliance: in early April they held a semi- services for clients from the Middle East this year. clients. Obviously, global and local markets and priorities have Asia-Pacific and the Middle East,” he said. “The platform and col- nar in Vladivostok on the “Legal Aspects of Doing Business in the changed since then. We firmly believe that we have a good practice lective expertise created through this combination provide consid- Russian Far East in 2014.” During this event, the firms discussed Maalouf Ashford & Talbot continues to plan additional expansion and that there are market opportunities that we can take advantage erable opportunities to access new markets, engage clients in new tax difficulties, amendments to the Civil Code, and issues occurring as well, and John Maalouf notes that his firm is doing a lot of of, including working with Hogan Lovells in the future. We look ways and attract and retain top talent. I couldn’t be more excited as a result of the move towards deoffshorization, along with many work in both Poland and Turkey, and that he and his partners are forward to the new challenges.” for the future of our firm.” other matters of interest to businesses in the region. Those taking “strongly considering” opening offices in both countries. part in the seminar included representatives from the Consulates

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Gide Loyrette Nouel’s Co-Managing Partner in Budapest Eszter Budapest Gide Co-MP and Team Leave Firm Kamocsay-Berta and a team of lawyers from the firm have left On the Move: New Homes and Friends and Launch Boutique and will set up a new boutique in Hungary under the name KCG Partners.

Eversheds Hires Former White & Case Calls and e-mails addressed to Kamocsay-Berta resulted a simple Director of HR notice of her departure devoid of any other details. Human Resources specialist Moira Slape has agreed to join Ever- A source that asked to remain anonymous informed CEE Legal sheds as HR Director. Slape joins the firm from White & Case, Matters that Kamocsay-Berta left the firm with colleagues - Lev where she was Director of HR across Europe, Middle East and ente Csengery, Head of the office’s Employment and Litigation Africa (EMEA). practice, Gabriella Galik, a senior lawyer in charge of the Real Es- tate practice, Rita Parkanyi, a key lawyer in the Employment and Slape has over two decades of experience in the legal sector. She Litigation practice, Marton Hajnal, key lawyer in the Projects and worked at White & Case since 2010, initially as the London HR Tax practice, and Klaudia Ruppl, a junior lawyer expert in Data Director before being promoted to Director of HR for the EMEA Protection. region, where she had responsibility for 2000 people and 250 part- ners, as well as the leadership of the EMEA HR team. Before Neither Kamocsay-Berta nor Gide would comment on the move. White & Case, Slape spent nine years at Linklaters, where she was Nikola Jankovic, Senior Partner, JPM Jankovic, Popovic & Mitic Global Head of Learning & Development before being promoted This is the second team that the firm looses in CEE this year after to Head of HR for Global Business Services, where she had re- with the region and require support for multi-jurisdictional pro- it close down the office in Bucharest in February (reported on by sponsibility for HR services to Business Services in London and in jects as the primary target. “Those difficulties would be overcome CEE Legal Matters on February 10, 2014). the definition and implementation of global initiatives, practices, by establishing a reliable alliance with strong internal structure and and policies for Business Services. close cooperation of the members,” he added. When asked why JPM opted to create a new alliance rather than According to Eversheds, “in her new role as Eversheds HR Direc- join an already existing one, Jankovic commented: “The main idea tor, Moira will be responsible for people strategy, covering talent, was to be a part of a legal network providing exceptional legal CEE Legal Matters Proudly Supports reward and employer brand as well as global integration across the services to clients within a ‘one-stop shop’ concept but with add- firm’s offices.” ed value gained by connecting top-tier only law offices from the Commenting on her appointment, Slape said: “I am thrilled to be Adriatic region, bringing together more than one hundred lawyers taking up the role of HR Director at Eversheds, a firm which over operating as one team. As such an alliance did not exist, the only Electronic Evidence the last few years has been at the forefront in tackling important industry issues such as diversity, social mobility and corporate re- “There are some law firms that try to cover the region as a Computer Forensics sponsibility. I look forward to working collaboratively with teams whole already, but aiming to be tier 1 in all of the markets across the globe in devising and promoting best practice in HR is simply not feasible. across Eversheds offices.” ” Cyber Security - Ales Rojs solution was to create one.” Ales Rojs, Managing Partner at Rojs, Legal Technology Adriatic Firms Gearing Up For Regional Peljhan, Prelesnik & Partners, further explained that “there are Alliance Launch some law firms that try to cover the region as a whole already, but aiming to be tier 1 in all of the markets is simply not feasible. Our firm did have a subsidiary in Belgrade in the past, for example, but we closed it because our operation was simply too small and we October 19 - 21, 2014 wanted something bigger which our clients could use as a real one- Clarion Congress Hotel, stop shop solution. Our idea is to bring the absolute best of each of these markets together.” Prague, Czech Republic Law firms in Bosnia and Herzegovina, Croatia, Macedonia, Mon- tenegro, Serbia, and Slovenia are preparing to launch a new legal Jankovic is enthusiastic about getting started: “Our main goal for alliance: Top-tier Legal Adriatic (TLA). the following year is to introduce TLA to the business community and international legal professionals and to present it as the unique The six firms participating in the alliance – one from each mar- legal network on the Adriatic market whose legal experts, although ket – are: Tkalcic-Dulic, Prebanic, Rizvic, Jusufbasic-Goloman in from six different jurisdictions, are operating synchronously.” He Media Partner: Bosnia and Herzegovina; Savoric & Partneri in Croatia; Debar- also identified being able to “correspond in the same or similar na- liev, Dameski & Kelesoska in Macedonia; Law Office Vujacic in tive languages” as facilitating this ability. With regards to his expec- CEE Montenegro; Jankovic, Popovic & Mitic (JPM) in Serbia; and Rojs, tations for the same timeframe, Rojs commented: “To be honest, Peljhan, Prelesnik & Partners in Slovenia. I do not know yet – we will see what will happen. I am hoping we Legal Matters In-Depth Analysis of the News and Newsmakers will receive great and useful constructive feedback from clients to That Shape Europe's Emerging Legal Markets According to Nikola Jankovic, Senior Partner at JPM and one of help us shape this up into an excellent project.” the initiators of the TLA alliance, the “main driver was the grow- ing need of clients and international law firms which are con- The projected official launch of the new alliance is set for Septem- CEE Legal Matters readers can use the following code for a 15% discount: fronted with uncertainty when they are choosing their local part- ber 2014. ner.” He pointed to global players who are not necessarily familiar NW-YKGG

CEE Legal Matters 14 CEE Legal Matters 15 Across The Wire Across The Wire

Summary Of New Partner Appointments Firm Practice Area Launches

Date Name Practice(s) Firm Country Date Firm New Practice Headed By Country Covered Covered April 15, 2014 Szabolcs Mestyan Hungary Lakatos, Koves & Partners Hungary April 16, 2014 KIAP International Commercial Arbitration Konstantin Astafiev Russia April 29, 2014 Przemyslaw Kucharski Real Estate CMS Cameron McKenna Poland May 19, 2014 Wardynski & Partners New Technologies Anna Pompe Poland April 29, 2014 Assen Georgiev Litigation/Dispute Resolution, Regulatory CMS Cameron McKenna Bulgaria June 4, 2014 Pepeliaev Group Korean Desk Cheong Noh-Chung Russia April 29, 2014 Martin Wodraschke Litigation/Dispute Resolution, Regulatory CMS Cameron McKenna Hungary April 29, 2014 Lukas Janicek Energy, PPP/Infrastructure CMS Cameron McKenna Czech Republic April 29, 2014 Valeriy Fedoreev Labor CMS Cameron McKenna Russia May 2, 2014 Julian Hansen Corporate/M&A, Energy DLA Piper Russia Summary Of In-House Appointments May 2, 2014 Yury Bortnikov PPP/Infrastructure VEGAS LEX Russia May 6, 2014 Alexia Hatzimichalis Banking/Finance Watson, Farley & Williams Greece Date Name Appointed to Company Moving From Country May 8, 2014 Simona Marin Project Finance, Real Estate CMS Cameron McKenna Romania covered May 8, 2014 Loredana Mihailescu Energy CMS Cameron McKenna Romania April 17, 2014 Marian Radu Head of Legal ID Group GRIVCO Romania May 15, 2014 Mihai Nusca Litigation/Dispute Resolution Biris Goran Romania May 15, 2014 Ana Fratian Corporate/M&A Biris Goran Romania April 22, 2014 Umit Bilgen Head of Legal AssisTT TTNet Turkey May 21, 2014 Anton Dzhuplin Banking/Finance ALRUD Russia April 24, 2014 Isil Yilmaz Legal Director Multi Development Alstom Transport Turkey June 4, 2014 Ibrahim Yamakoglu IP/TMT Yuksel Karkin Kucuk Turkey May 10, 2014 Andras Mohacsi Global Commercial British American British American Tobacco United Kingdom June 4, 2014 Onur Yalcin Litigation/Dispute Resolution Yuksel Karkin Kucuk Turkey Compliance Counsel Tobacco (Formerly Assistant Gen- eral Counsel for Western Europe)

Summary Of Partner Lateral Moves

Date Name Practice(s) Firm Moving From Country Other Appointments covered April 15, 2014 Raul Mihu Competition, Life Sciences Dentons Voicu Filipescu Romania Date Name Firm Appointed to Country Covered April 24, 2014 Pavel Kvicala Corporate/M&A Havel, Holasek & Partners Norton Rose Ful- Czech Republic May 12, 2014 Alex Cook Clifford Chance Managing Partner in Prague Czech Republic bright May 15, 2014 Stanislav Gerasy- Arzinger Chairman of the Real Estate and Construction Committee Ukraine May 8, 2014 Varinia Radu Energy CMS Cameron McKenna RVR Energy Romania menko of the Ukrainian Bar Association May 10, 2014 Igor Panshensky Competition Antitrust Advisory Dechert Russia May 16, 2014 Natalia Meshcheri- Astapov Head of Intellectual Property and Advertising Law Com- Ukraine akova mittee at the Ukrainian Bar Association May 10, 2014 Alexander Egorushkin Competition, Corporate/ Antitrust Advisory Dechert Russia M&A May 16, 2014 Burkhart Goebel Hogan Lovells Managing Partner for Continental Europe Croatia, Russia Hungary, Poland May 13, 2014 Ruslan Nagaybekov Corporate/M&A Liniya Prava Kirovskiy Zavod Russia May 22, 2014 Beata Gessel-Ka- GESSEL President of the Lewiatan Arbitration Court affiliated with Poland May 15, 2014 Alexander Dolgov PPP/Infrastructure Hogan Lovells Gide Loyrette Nouel Russia linowska vel Kalisz the Polish Confederation of Private Employers May 16, 2014 Viorel Dinu Litigation/Dispute Resolu- Bondoc & Asociatii Musat & Asociatii Romania May 22, 2014 Cristiana Stoica Stoica & Asociatii Vice-President of the World Link for Law legal Network Romania tion May 22, 2014 Vitalii Kasko Arzinger Deputy Prosecutor General of Ukraine Ukraine May 20, 2014 Julia Semeniy IP/TMT Asters Konnov & Ukraine Sozanovsky May 26, 2014 Oleksii Reznikov Egorov Puginsky Afa- Member of the High Council of Justice of Ukraine Ukraine nasiev & Partners June 2, 2014 Harald Stingl Corporate/M&A CHSH Cerha Hempel Wolf Theiss Austria Spiegelfeld Hlawati May 28, 2014 Roger Gladei Gladei & Partners Amcham BoD Moldova June 4, 2014 Michalis Kosmopoulos IP/TMT Drakopoulos Giannoulas & Greece May 28, 2014 Alexandru Munteanu PwC Moldova Amcham BoD Moldova Kosmopoulos May 28, 2014 Octavian Cazac Turcan Cazac Amcham BoD Moldova June 4, 2014 Despina Doxaki Banking/Finance, PPP/In- Chadbourne & Parke Kyriakides Greece, United June 6, 2014 Philip Carrington Herbert Smith Freehills Head of Disputes in EMEA United Kingdom frastructure Georgopoulos Kingdom June 9, 2014 Irina Nazarova Egorov Puginskiy Chair of the Ukrainian Bar Association's Alternative Ukraine June 9, 2014 Rosario Sapuppo Italy Desk Schoenherr Gur Law Firm Turkey Afanasiev & Partners Dispute Resolution Committee

Full information available at: www.ceelegalmatters.com Period Covered: April 11, 2014 - June 10, 2014 Full information available at: www.ceelegalmatters.com Period Covered: April 11, 2014 - June 10, 2014

CEE Legal Matters 16 CEE Legal Matters 17 Legal Matters Legal Matters

CEELM: Of the three NNDKP Tax co-heads, two are originally accountants, not legal professionals. How Taylor Wessing e|n|w|c Celebrates Legal Matters: The Frame common is this in the Romanian market? What are 10 Years in The Slovak Republic the unique advantages/perspectives that accountants NNDKP Introduces New “Legal & bring to a law firm’s tax practice? Tax” Tagline NNDKP: In some European jurisdictions, only lawyers can act as tax consultants. In others, including Romania, economists can also On June 2, 2014, Romania’s Nestor Nestor Diculescu Kingston provide tax advice. Petersen (NNDKP) announced that the firm is fine tuning its brand message and identity by introducing a new “Legal & Tax” While lawyers benefit from a holistic legal approach, which is es- tagline. The move, the firm explained, does not reflect a new capa- sential in addressing a tax issue, the value added by professionals bility, but is instead designed “to emphasize its professional leader- with accounting background resides in their good understanding ship in these areas.” of basic accounting and financial management aspects, rounded- up by the macro-economic know-how and 360 degree perspective NNDKP Partner Ana-Maria Miron, who co-heads the firm’s Tax (especially considering the higher number of projects where tax Advisory Services division, agreed to sit with CEELM and discuss issues derive from accounting rules). the significance of the new tagline. CEELM: What are the most complex tax projects that Raimund Cancola, Managing Partner and Andrej Leontiev, Bratislava Managing CEELM: Is this primarily a branding/marketing ex- your firm has advised on recently? Partner, Taylor Wessing e|n|w|c Attorneys at Law ercise - emphasizing an integrated approach - or does Taylor Wessing e|n|w|c’s Slovakia office celebrated its 10th an- NNDKP: Among our most recent projects there can be men- the new emphasis refer to a genuine organizational or niversary in May, 2014, with a large public gathering and a private tioned significant deals in several industries: structural change in the firm? firm event for the firm’s lawyers, both in Bratislava. The first event, Ana-Maria Miron, Partner and Co-Head of the Tax Advisory Services Division, Assistance provided to an important international bank in a cross- on Thursday, May 15, was designed for clients, and featured 150 NNDKP: This initiative did not involve structural or organization- Nestor Nestor Diculescu Kingston Petersen border merger between its Romanian subsidiary and the UK head- guests and a speech by Slovakian Minister of Finance Ivan Miklos. al changes. However, given that it aims at emphasizing a perfectly quarters, where we advised on all tax implications including the The next morning some 80 Taylor Wessing e|n|w|c lawyers from mature synergy between our legal and tax consultancy, our strategy CEELM: What is the history of the firm’s tax practice? implementation advice. across CEE gathered in the Bratislava office for a day of meetings focuses extensively, in the long run, on a better integration of these Was it part of the firm’s original offering, or was it add- and trainings – which concluded with a large party into the even- services across all the levels of the organization, so that every at- ed subsequently? During the last post-privatization stages of a major automotive ing. torney, whether a legal consultant/litigator or a tax consultant, can player, the tax assistance included the final tax restructuring of the better tailor the optimum solutions from both perspectives. NNDKP: Although legal advice on general tax matters has been privatized company, as well as complex negotiations with the State Taylor Wessing e|n|w|c Bratislava Managing Partner Andrej Le- provided to clients since 1997, the specialization occurred gradual- authorities for finalizing the process. ontiev, who opened the office in 2004 with colleague Radovan In other words, we do things similarly, but we micro-manage all ly, so that a distinct tax practice was established in the firm in 2006, Pala, notes with pride that it has grown from two lawyers and a processes in the firm in the context of a stronger internal emphasis under my coordination. Two years later, the business challenges Design of tax procedures in relation to the inventory management secretary into the 3rd largest international law firm in the country, on the elements that differentiate us in the market - which we also and opportunities on the legal and tax consultancy markets created and stocktaking for a major player in retail; our delivery consisted with a team of 25 employees, including 19 lawyers. In that time have chosen to communicate formally (among these, authentic the perfect framework to capitalize on the firm’s existing capabili- of a procedures mapping dealing with relevant profits tax and VAT he has witnessed Slovakia’s accession to the European Union, the know-how and resources which translate into strong teams of 23 ties, with the addition of a highly-experienced team of tax consult- aspects. country’s adoption of the Euro, the enactment of “modern” laws tax consultants and tax lawyers, 115 attorneys, consistent support ants, former managers of companies in the Big4, led by Alina Ti- Advice to a major real estate developer in selling two office build- and creation of special anti-corruption courts, and the establish- from our mixed teams not only when the client makes the decision, mofti and Marius Ionescu. Thus, 2008 was the year which marked ings totaling a value of above EUR 120 million; we were involved ment of public registers, all of which the firm claims “have led to but also when he implements it, etc.). the beginning of the NNDKP legal and tax synergy, through the in structuring the transactions, the advice during the negotiations, a high level of legal security,” in the country, “comparable to that creation of the Tax Advisory Services division affiliated with the drafting the tax-related clauses in the sale-purchase agreements, of ‘western’ standards.” CEELM: Is this a response to client feed-back that the law firm. previous approach was unsatisfactory, or was this sim- etc. Leontiev is pleased not only by his office’s increased size, but also ply an internal decision that a more closely integrated Advice related to the restructuring of an important agribusiness CEELM: The firm has managed to build the largest tax by its growing reputation – he points to the decision last year by approach would be more effective? investment, restructuring caused by the Cypriot banking crisis. We consultancy in terms of revenue in Romania outside former two-time Slovakian Minister of Justice Lucia Zitnanska to provided not only legal and tax advice, but also tax assistance in the Big 4. What were the keys to its success? join the team – and brand strength, after the 2013 tie-up with in- NNDKP: As a result of a six-year close collaboration between our relation to the compliance component of such a restructuring. legal and tax teams, this was a natural step in our development ternational player Taylor Wessing. Leontiev says, “we were a very strategy and a response to client demands - in a context where the NNDKP: It was not without challenges that we created this and David Stuckey strong CEE firm, but to acquire clients from the top segment of value added came from the consultant’s ability to harmonize the developed the tax division from three professionals to 23 tax spe- American and French and English companies we needed some- pressure on fees with the same quality of legal and tax services and cialists and an impressive client portfolio for a “young” entrepre- thing more. Taylor Wessing has helped us a lot.” a team structure that would continue to provide the optimum and neurial venture. Our long-term business strategy encompassed most viable recommendations for their businesses. a series of key strategic aspects that we first designed and then But that goes both ways, and the office now is reported to generate implemented, such as: measurable performance indicators, good 11% of total Taylor Wessing CEE revenue. And Leontiev is hardly CEELM: Will clients need to request an additional re- talent management translated into the selection of the best tax resting on his laurels. He emphasizes that the office is building an view of tax implications, or will those implications be professionals on the market and optimum retention strategies, IP/IT department, and he is intent, he says, “on becoming the automatically factored into any advice you give them? adaptive account management, focus on brand growth and reputa- leading firm for startups in Slovakia.” tion management of the newly created entity. NNDKP: Technically, our team is fully equipped and dimensioned In the meantime, he and his colleagues are looking forward to the to factor any legal advice from the tax perspective as well. How- And the initiative launched six years ago did not only pass the test upcoming celebration of the firm’s 10-year anniversary in Warsaw ANY NEWS YOU THINK WE SHOULD ever, this will not be done automatically, but depending on the pro- of time, but proved that we made the best possible choice, con- this fall. ject specifics, as we’ll effectively manage, in an adapted manner, the firmed in terms of team strength, evolution of turnover, and the COVER? WRITE TO US AT tax implications of the requests we receive. client portfolio. [email protected] David Stuckey

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Glimstedt Launches New Website for Start-Ups in Estonia Interview: Ilshat Timeryanov Chief Legal Advisor, Iraq at Lukoil

Originally from Western Siberia, Ilshat Timeryanov gradu- ated from Saint-Petersburg University in 2002. His career started with the TNK-BP division in Siberia, where he spent 3 years as a junior lawyer. In 2005 he joined Schlum- berger as a regional legal counsel. In 2008 he was invited to join Gazprom as its International Head of Legal. During aged by Estonian lawyers, Veerpalu believes his time with Gazprom he travelled within Europe, Africa, “A lot of my clients are start-ups, I love them, I love the great majority of the information it and Latin America, negotiating petroleum agreements them for being so innovative. I think they’re changing contains is of general value, and useful to with national oil companies and governments, while man- us as much as they’re changing the world, and in this start-ups in other jurisdictions as well. And aging his international legal team. In 2011 he joined GE as though “powered by” Glimstedt, Veerpalu sense we’re really grateful to them for making us see a Senior Counsel for Russia & CIS and a year later returned our services and wanting to be better every single day, insists that, “it wasn’t meant to be a market- to the oil and gas sector. He joined Lukoil as a Chief Legal wanting to be more transparent, wanting to be more ing tool, and I’ve kept it as much as possi- ble not being a marketing channel.” user-friendly.” Anne Veerpalu, Senior Counsel in Dubai, where he managed projects throughout Associate, Glimstedt the Middle East. His management of the West Qurna 2 Entrepreneurs rarely lack enthusiasm or preneurs. progject brought Timeryanov to Iraq, where he has been passion. What they often do lack, how- The website’s content reflects what’s hap- living and working for a little over one year. ever, is information about best practices, pening at the moment, Veerpalu explains. sources of capital, and applicable laws and “We are using all of the experience that we regulations. To address this need, the Esto- gain every day in our practice and trying to of the specific industry but about the busi- CEELM: Indeed, you have quite an nian office of the Glimstedt law firm has put it into words and share it with the start- ness itself: its operations, the technology international career, having worked in launched the new “LegalBooster” website, up community. For example at the moment involved, the processes from extraction to Russia, the Netherlands, UAE, and now which claims to provide “all the legal stuff we have lots of option agreements com- refining and transportation, the people and in Iraq, to name a few. From your expe- you need to know to get your start-up go- ing in ... and we are seeing a lot of differ- main players in the industry both within a rience, in which of these markets is the ing.” ent kinds of option agreements or option specific country and worldwide. As an ex- life of a lawyer most difficult and why? ternal counsel you tend to work on a spe- Anne Veerpalu, one of the the Glimstedt terms, and then we blog about what we see cific issue with a fixed, clear goal. I do enjoy I.T.: [laughs] It is probably not a surprise lawyers behind the LegalBooster site, de- and what we experience, and how it’s better working in-house a lot but, in all fairness, I that the top of that list is held by Iraq. It scribes the venture as “basically a knowl- to do it, and at what point it’s best to intro- do not really have any experience working is a very complicated and difficult market edge database for start-up companies, in- duce the template, and so on.” as an external counsel. and there are a few specific reasons for this. cluding not only template agreements, but The team of lawyers behind the project Firstly, we are talking about “New Iraq” basically using everything we’ve done be- (including Veerpalu, Glimstedt Partner Priit CEELM: You have spent your whole – after Saddam Hussein. At the moment, fore, meaning all the training materials that Latt, and Associates Merit Lind, Triin Tuu- career working in the oil and gas and there is little, if any, stable legislation or are relevant, and explanations regarding lik, Mari-Liis Orav, and Maarja-Liis Lall, as energy sector – what do you find most general principles of business in place in how to use them, as well as all the videos well as Auditor Liis Laanesaar) isn’t wor- Priit Latt, Partner, Glimstedt exciting in this industry? the country. This ambiguity is very difficult for trainings we’ve provided, presentations, to handle for a lawyer but it does present an ried about providing the information free But that’s not to say its completely discon- blogs, and so on.” I.T.: I think that the energy sector is a incredibly interesting opportunity to be in- of charge. Veerpalu explains that, “I think nected from the firm. Partner Priit Latt sees Ilshat Timeryanov, Chief Legal Advisor, Lukoil the trend of the legal services market is go- leader in many ways. Especially in Russia, volved in shaping all of it as it is being built. The user-friendly site is divided into four LegalBooster as another demonstration of ing towards transparency ... and I think this CEELM: You have been working as an Oil, Gas, and Energy represent some of sections: Blog, Materials, Videos, and Fund. Glimstedt’s commitment to its clients – and I would say that Iraq has a fascinating is the way it must be done – it has to be in-house counsel for over 12 years now the most important sectors and I think that The home-page contains regular updates the community at large. He says, “Legal- culture. People have a good moral stand- done.” She points out that, “what start-ups in TNK-BP, Schlumberger, Gazprom, some of the most interesting legal work re- of cautionary and/or success stories, as Booster delivers our message really clearly ard that make it easier to build bridges for actually do a lot when they start is they go GE, and Lukoil. What would you high- volves around them as well. well as useful tips and recommendations. - keep your IP safe and take care of your communication. They want to grow, to co- around talking to other start-ups. This is light as the main differences between Templates for useful and common proce- investment proactively. Glimstedt is an in- operate with foreigners, and, the country the same sort of information they would this and working as an external coun- The other aspect that I like about it is the dures like a Power of Attorney form and novative law firm mostly due to the boom- is open for international exchanges. It is a collect anyway from the market. So basical- sel? mobility it presents. You get the opportu- a Transfer and Licensing Agreement are ing technology sector pushing us lawyers to very interesting period in the country at the ly what we’re doing is collecting it into one innovate our services. LegalBooster serves nity to participate in main local and inter- provided, as is information about upcom- I.T.: I believe the main difference is related moment and I am excited to be a part of it. place and putting it in a structured form.” as merely one example of it. national projects, discover other markets, ing presentations, conferences, and other to the specific, in-depth knowledge that countries, cultures, and people much more CEELM: Having worked in so many events of potential interest to new entre- Although the site is created by and man- David Stuckey you gain not just about the legal aspects often than in most industries. places around the world, what did you

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“borrow” from other cultures? The first international law I.T.: Working out of Russia has taught me firm to open an office in that the world tends to be different outside Poland – one of the first to of it – which is really hard to grasp while open an office in any East- stuck in one country. I felt first hand the ern European country – had fact that there are no two countries in the world that are the same but I also learned headquarters not in New that, fundamentally, people do share pretty York or Chicago, nor in the much the same objectives: to be happy, to closer European capitals of continue to grow, and to leave peaceful London, Vienna, or Paris. lives. Naturally, I did grow professionally Instead, the first internation- immensely throughout my experiences as well, but at the end of the day, it is this un- al law firm to open an office derstanding of multiple cultures that I be- in Poland was based at 150 lieve was key for me. West Jefferson in downtown … Detroit. CEELM: You have moved with Lukoil from UAE to Iraq to provide Legal and Compliance support for the West Qur- And the story of how and na 2 Project in Iraq. What type of work why that Detroit firm’s first does that entail specifically for you? office outside Michigan was I.T.: This is one of the biggest ongoing pe- in Poland, some 4300 miles troleum projects in the world. And it is not away, is ultimately a story just about drilling and extracting oil. It rep- Roots in Revolution: of two people, and a shared resents a huge investment to the country commitment to a fledgling – with Lukoil committing itself to spend- Block 10 and the West Qurna-2 megaproject Source: lukoil-overseas.com republic. ing USD 25 billion by 2025, after having tions, and so on. international law principles for the same Miller Canfield in Poland already invested USD 4 billion to date. Date unknown. Members of the Solidarity Foundation and Fund signing a deal with unknown US company in Gdansk. Sitting, from left: Andrzej Spiker (Vice President reason. We are, of course, in the process of the Solidarity Fund); Jerzy Kobylinski (President of the Solidarity Fund), unknown American partner on project. Standing, from left: Unknown, unknown, Wojciech Working with locals is also a dimension that of hiring local lawyers because we do need As I mentioned, it involves a lot of aspects Babinski, Andrzej Kozakiewicz (President of the Solidarity Foundation), Unknown, unknown. takes up a lot of time. There are commu- their local expertise and legal knowledge. from building up an infrastructure in the nities who have lived historically in some The decision to open a law office in a for- Richard Walawender’s Polish parents ish student groups in Poland and Western country, building processing facilities, pipe- parts of the huge contract area and they CEELM: On a lighter note, what is your eign country is not ever a purely economic emigrated to the United States after be- Europe in what he describes as “an infor- lines, water intake facilities, training cent- need to be communicated with, and we fondest memory of each of the coun- analysis – it inevitably involves personali- ing deported to Siberia during WWII. mal student Solidarity underground sup- ers, living spaces for employees, developing need to reach agreements with them and tries in which you worked so far? ties, history, personal enthusiasms, connec- Walawender studied Political Science and port network.” After completing his un- training programs for local personnel. Sim- compensate them accordingly. Building tions, client base, and more. Miller Can- Russian/Eastern European Studies at the dergraduate education and then obtaining ply put, it represents an integrated green consensus with them takes a lot of com- I.T.: African countries, although I know bet- field’s offices in Poland can be traced to d: University of Michigan, and he followed his law degree – also at the University of field project where the end goal is not just munication and negotiations and this is ter than to overgeneralize between them, I all of the above. the news of the Lech Walensa-led Solidar- Michigan – he joined Miller Canfield’s Pub- to extract oil, but to build a whole new pe- particularly important because failing to do remember fondly because of their people. ity uprisings in Poland closely. The call to lic Finance practice in Detroit. troleum industry in the country from the so can stop our operations all together at Libya, Algeria, Nigeria, Namibia, in all of In fact, Miller Canfield’s reach into Poland action was irresistible: “So in 1981 I went ground up. any point. these markets I met lovely, kind people who can be traced primarily to the passion and over there and enrolled in the Jagiellonian had a very rich and interesting culture. The The nature of Iraq does complicate things commitment of one young American law- University in Krakow, spent a summer and CEELM: Why was it preferable for the natural scenery as well from some of these considerably. It is a rather unsafe work en- yer. semester there, but … you know, my real company to have you move there as a countries is also breathtaking. vironment and we need to look out for a Russian lawyer rather than hiring a lo- motive at that time was to support and join team of over 1000 people, both Russian cal legal advisor? The Netherlands has a fascinating history the movement and help out the revolution. expats and local workers. Safety considera- which I enjoyed discovering while on the I studied during the week, and would hop tions end up taking a lot of coordination – I.T.: There are two broad reasons. The first ground but the main reason I will always re- on a train every Thursday night or Friday and time and resources – with simple meet- is that Lukoil, like any other global compa- member the country is because I rediscov- morning and go to where the strikes were ings with custom officials, for example, ny, prefers to have its own people in a top ered the joy of riding a bike there. Really, I taking place and the factories were being requiring that we put on body armor and positions – someone who knows its poli- would advise anyone visiting Amsterdam to taken over. And then in the late summer of travel in armored vehicles on designated cies and internal workings well and whose discover it by biking rather than walking or 1981, when I had a little more free time, I routes accompanied by bodyguards. track record can be tracked. any other means of transportation. went to Gdansk and volunteered my ser- vices with Solidarity’s press office. Literally, There are also a lot of legal and compliance The second aspect is related to the local Dubai, looking back at it, feels like a holi- every weekend was spent at some sit-in or issues that need addressing. This is made legal market in Iraq, which, much like the factory strike. It was pretty intense.” Michael McGee, CEO, Miller Canfield particularly difficult because, as I men- rest of the country, is at its early stages. day. Everything there seems to be built to tioned, there is no real system of legislation There are very few legal professionals on make it as comfortable as possible – really, Walawender returned to the University of In July of 1989, shortly after the first free in place. There are considerable sources the ground able to work in a big interna- good living and safe. Iraq...[laughs]..radical- Michigan in the fall of 1981, only a few Polish elections, Jerzy Milewski, the new that need to be considered from local regu- tional company at a very senior level. Many ly opposite but I enjoy the people, culture months before martial law was declared Ambassador at Large, then traveling exten- and my work there. Richard A. Walawender, Principal and Corporate lations or official orders/letters, sharia law of them need to improve their English lan- Group Leader, Miller Canfield in Poland. As President of the university’s sively to rally support for the new govern- in some parts, central government regula- guage skills and even fewer are familiar with Radu Cotarcea Polish Club, he collaborated with other Pol- ment, contacted Walawender for help in

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Gee is less uncertain. “Rick has always been a person who projects a lot of confidence, and the truth is that he was a star associate, he was a person that the firm was happy to have, is and was regarded as a really smart guy. His work was very highly regarded, so that when Rick Walewander brought this forward, I think the partners at the time said, ‘you know, this kid’s pretty smart, why don’t we see where this goes?’”

And McGee’s pride in the result is obvious. “I don’t know that it’s possible to know who might have been the first foreign consultants to be formally engaged by the new Republic of Poland with the task of assisting the new government, but it’s fair to say we were among the first, because this all happened so quickly. To some ex- tent Solidarity coming to power was quite Summer 1990, in the United States. From left to right: Jerzy Kobylinski (President of the Solidarity Fund), unexpected, even within Solidarity, so all Andrzej Kozakiewicz (President of the Solidarity Foundation); Wojciech Babinski; unknown. of a sudden ‘they have to run a country??!’ starting a bank and in helping find other set up an office in Gdansk, with Wojciech It’s not as if there had been a great deal of mechanisms to finance the government’s Babicki – he was Solidarity’s lawyer – sort advance planning in terms of having peo- plans for change. Walawender says, simply, of across the street from his office. We ple thinking about a transition. That’s one “so we described for them how the Polish didn’t even have a phone line, I remember, point of pride that we have institutionally, bond program could raise money for the so he had to use the phone in his house.” is that there certainly weren’t many – very new government ... and they said ‘ok, can many at all – who were asked by the Poles you get on a plane?’ So we did.” Miller Canfield CEO Michael McGee to help before we were, and we were flat- laughs at Walawender’s use of “we” to de- tered and still are flattered to have been Summer 1990. Jerzy Kobylinski (President of the Solidarity Fund) and Wojciech Babinski standing next to the the US Constitution. scribe the firm’s start in Poland. He says of The immediate success of the bank and asked so quickly.” Walawender that, “Rick wasn’t just person- to Solidarity’s call. He recalls that, “I just tually David Chase, a Polish Jew who left history with both lenders and manufactur- bond projects caught the attention of other ally involved; he did it. As a second-year as- Of course, international firms need to con- wanted to do something. I wasn’t a freedom Poland for Connecticut after WWI, agreed ers, including – unsurprisingly for a firm investors. Walawender says that “after we sociate.” nect and cooperate with strong, connected, fighter, but I wanted to do something, be- to invest, and in July 1991 the Solidarnosc based in Motown – with the automotive did that, after we worked on the bank pro- and competent lawyers on the ground. For cause it was a great time in Poland.” At the Chase D.T. Bank (named with Chase’s first industry. The firm’s Poland presence has ject and so on, it got quite a bit of publicity When asked why he was entrusted with Miller Canfield, Wojciech Babicki was the time Babicki was working for the Solidarity and middle initials after Chase Manhattan grown over time as well, of course, and in the Detroit area, and as companies start- such authority and autonomy at such a obvious choice. Fund and the Solidarity Foundation, and objected to the version without them) was Miller Canfield now has over 40 lawyers in ed realizing that the Solidarity government young age, Walewander – now a partner was one of the team of lawyers on Lech established in Gdansk – in the building three offices in the country: the headquar- was there to stay, they called us up, and we himself – laughs “I don’t know!” But Mc- Babicki, like Walawender, had been drawn Walensa’s Presidential campaign (“the first which had until recently been occupied by ters in Gdinia (where Babicki sits), one in one – the one he won,” he laughs). He re- the provincial headquarters of the Com- Wroclaw, and the largest in Warsaw. calls seeing the Solidarity Fund and Solidar- munist party. “And that’s how we met,” ity Foundation flooded with new proposals Babicki recalls, “because David Chase hired And despite the firm's beginnings in Po- – “some of them to- tally crazy, some of Miller Can-field to do this deal for him in land as an offshoot of Walewander's com- them very interesting, some of them simply Poland, and that’s how I met Rick and that’s mitment to the Solidarity movement and stupid” – but the sug- gestion that the new how I first heard about Miller Canfield of to helping the new government off the government set up a bank resonated. Even- Michigan, and after the deal was done, my ground, McGee laughs that the firm has current partners called me and said ‘look, “absolutely” been profitable in the coun- maybe we can do something together in try. “We did not open offices for the sake Poland.’” of opening offices. The offices and the attorneys are successful and profitable on Babicki smiles at the memory of the early account of the work we are asked to do days. “In the very beginning I tried to prac- by our clients. The clients come first; they tice normal law – in terms of going to the drive what we do.” courts, like any Polish lawyer – and tried Undoubtedly. Nonetheless, it's difficult to to work on Miller Canfield projects which see the profit motive as the only considera- were not at the time very huge. I did eve- tion. And everything taken together, as law rything from home, and I just bought a fax firm expansion stories go, Miller Canfield's machine, and that’s how it started.” is a pretty good one. Miller Canfield today has 17 offices in five All 1990 photos courtesy of Wojciech Babinski. Summer 1990, in the United States. At a plant manufacturing items to commemorate Solidarity. From left to right: Unknown American partner; Wojciech Babinski; An- Wojciech Babicki, Principal and Polish Managing countries, and the firm remains known for drzej Kozakiewicz (President of the Solidarity Foundation); Jerzy Kobylinski (President of the Solidarity Fund); Frank Tsamoutales (US advisor to the Solidarity Fund Partnr, Miller Canfield its strong public finance practice and a long David Stuckey and Foundation).

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gas drilling equipment and manages some 100 employees. She laughs that the nature of the industry makes for some unique challenges: “There are only two ladies Moving In, Moving On: working with the company in Konya. Me Natalie Petrushevskaya Enters and Emre Derman Departs … and one working in the kitchen. That’s it.” From Non-Lawyer Positions in Turkey Strength of character, at least, should not be an issue. Petrushevskaya admits to hav- ing driven a junior lawyer to tears at a pre- vious position, but that same fierceness should work to her advantage with Eriell. She says that “In Konya if you don’t super- vise everything is so slow. It’s amazing. You have to be there physically and push and push and push, otherwise it won’t work. That’s why I feel comfortable there, be- cause that’s who I am.”

The company has no in-house legal team in Turkey, and part of Petrushevskaya’s job is to select external law firms – most of the company’s work is divided between Experienced lawyers sometimes take non-lawyer Country Manager Bogazici Avukatlik Burosu and Bezen & Partners in Istanbul and the Turkmenoglu positions, where the challenges, responsibility, and autonomy may be Hukuk Burosu in Konya – and supervise Erme Derman, Former Managing Director and Senior Country Manager Turkey, JP Morgan greater. Natalie Petrushevskaya and Emre Derman have been Coun- their work. She’s still adapting to the non- try Managers of multi-nationals in Turkey. But while Petrushevskaya’s legal aspect of the role, however. “I feel the administrative side. And I had a passion Morgan is a great place, but it’s also a very adventure is just beginning, Derman’s has come to an end. different, to be honest with you. I feel dif- for the administrative side, I felt that I was big place, and because of its size, JP Mor- ferent, but I like my new position, because good at it, so I was seeking some sort of a gan has, justifiably, a very large bureaucracy. taxation and property ownership issues in it’s more challenging. Of course there are management role.” So the role that I took on was more of an Kazakhstan, Turkmenistan, Turkey, and more responsibilities now, but it’s more in- ambassadorial and less of an actual man- Of course, he doesn’t deny that JP Mor- Russia. In 2010 Petrushevskaya started in teresting. I can use a lot of my knowledge, agement role. So in that respect I didn’t get gan’s appeal lies beyond the purely practical. private practice with the Gur Law Firm, because after practicing here for 7-8 years, as much of [the management responsibil- “When the role at JP Morgan came up, ob- where she helped the Istanbul-based firm and knowing commercial law and the way ity] as I wanted. But again, and I am always viously there were a couple of other things. open its Moscow office and expand its Rus- Turkish people work, for me it’s easier now at pains to stress this, that is no fault of JP JP Morgan is a very prestigious name. The sian client base. Two years later she joined to lead the company through the Turkish Morgan, it’s just the way the bank is, and position itself was very prestigious. I was the Akinci arbitration boutique. And in Jan- ways of working.” given the regulatory pressures on the bank uary of 2014, having grown dissatisfied at looking forward to perhaps proving to my- and given the size on the bank, I now un- Akinci, she joined Bezen & Partners. self, and to others, that I was not just a law- derstand why it is that way, and why it prob- yer, I was someone that could do a bit more ably has to be that way. But I can say that Shortly thereafter Eriell, a Bezen client, On May 29, Erme Derman, the Managing than that, if given the opportunity.” from that narrow perspective it fell short asked her to come on board as Country Director and Senior Country Manager at JP of what I was trying to do.” Manager, and she leapt at the opportunity. Morgan in Turkey, sent out a short email Mission accomplished. Derman explains to his contacts. The email, titled “Change that, as Senior Country Officer, “the job And, as he was in 2008, Derman is san- Petrushevskaya says that Eriell had been is Good”, stated simply that: “Tomorrow was essentially to be the face of the bank guine about departing from one position searching for someone like her – Russian, is my last day at JP Morgan. It has been a vis-a-vis regulator and clients and to act without having another set. “I like the flex- multi-lingual, and familiar with the Turkish great 3 years and I am grateful for your sup- as the interface between the head office in ibility associated with putting yourself out legal system – for some time. She explains port and custom. It’s time for me to seek London and the bankers on the ground.” and saying, ‘ok, I’m unemployed, I’m en- that “for Russian lawyers it’s always difficult other challenges.” Derman oversaw a staff of 60 and business joying myself, and I’m open to all kinds of to understand the way the system works in lines that included investment banking, discussions, ideas, etc.’,” he explains. “That Turkey. They need someone who can really Derman’s departure from JP Morgan fol- corporate banking, and treasury services. allows people to approach me without any Natalie Petrushevskaya, Turkish Country Manager, Eriell Group explain it from the perspective of a Russian, lows several years after a similar departure And, though he occasionally used his legal hesitation and to discuss all kinds of inter- In May 2014, Russian native and lawyer the Bosporus Strait – asked her to move to you know? Everything’s super slow here in from White & Case, which he led in Istan- skills and knowledge to help his colleagues esting ideas, and one or two of them might Natalie Petrushevskaya became Turkish Turkey (“without even an office, without Turkey, and quite different, and sometimes bul for almost a decade. When he left that (“or at least steer them in the right direc- be interesting enough for me to put my Country Manager at the Eriell Group, a anything!”, Petrushevskaya laughs). When it doesn’t speak to a Russian lawyer mind, firm in 2008, Derman recalls, he felt slight- tion”), Derman emphasizes that “it wasn’t mind to it and pursue.” Russian-based manufacturer of oil drilling the project ended and it was time to go so you need to explain it.” ly stifled in the law firm world. “As much a significant part of my job, actually, and on as I enjoyed being a manager in a law firm, equipment. But Petrushevskaya has lived back to Russia, Petrushevskaya recalls, “I paper it wasn’t part of my job at all.” So one of Turkey’s best known lawyers is Petrushevskaya’s home remains in Istanbul, law firms are very horizontal structures, and worked in Turkey since 2006, when her said no, I’m staying.” on the market. One assumes he won’t be but she spends most of her time in Konya, and do not easily lend themselves to active Russian employer, the Mosmetrostoy con- Nonetheless, Derman ultimately found unemployed for long. struction company – having won the tender She joined Tekfen in Istanbul, and for sev- where she oversees the production and sale management. It was more about practicing, the particular structure of JP Morgan not to build the Melen hydraulic tunnel under eral years she advised the company on its of the company’s Turkey-produced oil & doing the business, as opposed to doing completely conducive to his interests. “JP David Stuckey

CEE Legal Matters 26 CEE Legal Matters 27 Legal Matters Legal Matters

When asked about the particular challenges she faced while advising on the deal, the Behind the Deal: first examples that came to Kamocsay-Ber- ta’s mind were practical in nature. “For ex- ample, the 100-hectare area where the plant LEGO’s New Plant in Nyiregyhaza was to be built was incredibly segmented – it had over 100 land owners. All of them had to be reached out to, negotiated with, and draft individualized contracts for, all of which leading up to a lot of contract work and quite a logistical challenge to coordi- nate,” she recalled.

She also points out specific characteristics arising from LEGO’s preferences, which at the time were rather particular: “Most companies, for a project of this magnitude, would prefer to identify one construction partner and contract them as relevant. LE- GO’s approach was different. It segmented the different aspects into five main areas of specialization and aimed at identifying the best possible specialists in each of them. This meant coordinating with not only one general contractor but selecting, signing up, and coordinating/following-up with at least five of them.” She also added that “it Kamocsay-Berta said. Projects and In- was fascinating to see this huge global com- “Witnessing it first hand makes me be quite optimis- frastructure lawyers were needed, as were pany that specializes in toy manufacturing, Real Estate lawyers, Energy lawyers, and managing something completely different tic with regards to the country’s ability to welcome and lawyers to deal with general Ccorporate – actual construction of a manufacturing accommodate future foreign investments of this magni- matters. The project was fully self-funded facility.” by LEGO, Kamocsay-Berta pointed out, tude. thus finance lawyers played a minimal role The really interesting challenges, however, ” -- though a project fund manager was kept stemmed not from the scale and complex- Eszter Kamocsay-Berta On March 25, 2014, in the presence of ity of the deal but from the nature of the an in-house plant rather than a contractor.” on-board to satisfy statutory requirements The Danish culture, famous for its empha- her first hand how “different cultures can the Hungarian Prime Minister, the newly stakeholders involved. In many ways, Ka- Kamocsay-Berta advised LEGO on the for a project of that size. Even now that the sis on clean hands, also raised challenges radically shape the direction of a project – rebuilt LEGO plant in Nyiregyhaza, Hun- mocsay-Berta described the role of the legal 2008 acquisition of the plant from Flex- plant is finalized and the opening ceremo- when, as Kamocsay-Berta put it, “that drive especially an eye opener since cultural dif- gary, had its grand opening. The new com- advisors on the ground as that of a “bridge tronics, and in 2011 LEGO returned to her nies have taken place, there is still a lot of for a high standard of integrity was faced ferences is such a broad and vague concept plex, located on a 100-hectare site, created between stakeholders with considrably dif- for assistance in rebuilding the plant. “As “post-build” legal work that is keeping the with the realities given.” She explained that, that it only really becomes visible when you 250 new jobs, increasing LEGO’s head- ferent cultures.” She elaborated: “Danish a Danish company, in line with most Nor- legal team busy. “what you need to understand is that this get to contrast two cultures in proximity to count to 1,500 in Hungary, and was built in culture, again, like most Nordic countries, dic Countries’ culture,” she recalls, “LEGO project was going to add a lot of jobs in each other.” She added that her main takea- just under 12 months – a record in Hungar- tends to be heavily focused on consensus valued the trust and relationship built with an otherwise rather under-developed part way was one that made her feel proud for ian construction for a project of that mag- building by involving all possible stakehold- specific counsel rather than the law firm of the country, and it wasn’t even just the Hungarian people: “It was great to see nitude. The head of the legal team advising ers in the dialogue to ensure that everyone brand.” about the 1,500 jobs since it also created how resourceful and inventive the Hungari- LEGO on the EUR 354 million project to is ‘onboard’ with what is going on. While other ‘side industries’, it generated work for an culture can be – it definitely helped mas- expand the plant in Nyiregyhaza was Eszter Kamocsay-Berta praised the assistance this is great for the morale of those stake- contractors, and developed the lo- cal in- sively in working in this project. Witnessing Kamocsay-Berta, then with Gide Loyrette provided on the 2011project by colleague holders – and, personally, I believe it tends frastructure. As a result, it was very much it first hand makes me be quite optimistic Nouel in Budapest, who was happy to re- Gabriella Galik, who “had a critical op- to generate better results in general – it did, welcome by the Government – both cen- with regards to the country’s ability to wel- flect on the deal and its main challenges. erational/executive role throughout the at times, frustrate local partners because of tral and local – but the corporate culture come and accommodate future foreign in- deal.” Galik wasn’t the only lawyer putting its well-considered nature for something of LEGO dictated that it would actively vestments of this magnitude.” Kamocsay-Berta started by pointing out in hours, of course, and Kamocsay-Berta that mattered far less in their minds,” she distance itself from anything that might re- that LEGO’s presence in Hungary actu- noted that, “the team fluctuated consider- explained. Accordingly, the legal team was motely affect its neutrality towards political ally dates back several years. Until 2008, the ably throughout the various stages of the expected to approach the project as more institutions.” It was, in Kamocsay-Berta’s As CEE Legal Matters reported on June 13, plant in Nyiregyhaza had been operated by project from 4-5 lawyers working on it at than just another lawyers’ assignment: “It view, the need to navigate between these 2014 (see page 15), Eszter Kamocsay-Berta and Flextronics, which was producing toys for certain points up to 10-15 in more intensive wasn’t about purely managing legal risk. We two drives that required her to focus heav- several colleagues have recently left the Gide Bu- the Danish company under contract. That periods.” had to act like real business partners who ily on the “building bridges” aspect of the dapest office. Both she and Gabriella Galik are year, Kamocsay-Berta pointed out, “LEGO did not focus on the ‘why we shouldn’t’ but project. now partners at the newly-formed KCG Partners on the ‘how can we get this done?’. In the decided to take over the full operation, as- The deal also involved a lot of cross-prac- Law Firm. sets, and staff, as it is always much easier tice coordination -- “as is to be expected end, this approach was highly appreciated In retrospect, Kamocsay-Berta explained, to supervise standards of productions of in such a large scale greenfield project,” Gabriella Galik by the client.” working on this kind of a project showed Radu Cotarcea

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Bulgaria you do not see much of the ‘house (0%): “While we are in a lucky position in wife’ phenomenon, which I would explain countries like Germany or Austria that it based on the communist period of our his- is generally far more common for women tory when one salary was not sufficient to to have full time jobs and a strong career, feed a family. As a result the tradition is it may to some extent probably be a cul- that male and female are generally equally tural issue in other regions.” This may be active in searching for a job position includ- true – but it is nonetheless worth pointing ing the legal profession.” Also referring to out that according to the data, Austria has the communist era, Manuela Nestor says: the lowest percentage of female partners in “Romania evolved from a socialist political the region, with an average of 14%, while regime. During that period of time, the ac- Turkey was as high as third, with a percent- tive population, both male and female, was age of 34%. It appears cultural stereotypes obligated by law to perform a ‘useful activ- and assumptions are of limited usefulness ity for society’ – therefore to be employed in explaining the numbers. in various sectors of activity. At both politi- cal and social levels for 50+ years women Martin Brodey, Partner, Dorda Brugger Jordis were not discriminated in terms of the claim. Martin Brodey, Partner at Dorda possibility of being hired or promoted in Brugger Jordis in Austria (4%), asserted decisional positions. On a contrary, they that: “We have an approach strictly focused were obligated to work and be involved in on performance and gender is completely the political activities, as limited and im- irrelevant for that.” He noted that “in fact posed as they were. As a result, culturally, the firm was co-founded by one of the Romanians have always been accustomed first and most respected female lawyers in in the past 60 years to seeing women in all Austria, Theresa Jordis, who unfortunately kind of professional positions, from simple The Glass CEEling: passed away in September 2013.” worker to the highest decisional positions “Romania evolved from a socialist political regime. During that Connecting the Dots period of time, the active population, both male and female, was obligated by law to perform a ‘useful activity for society’ ...At both Patricia Gannon, Senior Partner at Karanovic & political and social levels for 50+ years women were not discrimi- Nikolic nated in terms of the possibility of being hired or promoted in Job Markets and Education Part 1 of the CEE Legal Matters 2014 matter insisted that the numbers did not decisional positions. report on women in law firm partnership reflect an explicit policy vis-a-vis gender ” The percentages of men and women in job across CEE appeared in the April 2014 is- equality. Even Manuela Nestor, Co-Man- - Manuela Nestor markets as a whole was also highlighted as sue of CEE Legal Matters, and provided aging Partner of Nestor Nestor Diculescu The Issue of Culture in the state.” This could explain why Roma- playing a role. In Romania, Gutiu claimed the number and percentages of female Kingston Petersen (NNDKP) in Romania nian firms have the highest percentage of that “anywhere between 65-70% of lawyers partners at leading law firms across CEE. – the firm with the highest percentage of One of the primary aspects all commenters female lawyers (44%) and why Bulgaria reg- in Bucharest are female and I think that In this Part 2 of our report, managing part- female partners in CEE (84%) – stated pointed to is the effect of national or re- isters a relative high number as well (33%) – rolls out throughout the entire country – at ners of law firms from across the region that, “NNDKP did not propose itself to gional culture on the partnership track for but of course these were not the only CEE least the feeling we get.” Similarly, Nestor provide their perspectives on the data. hire or appoint as partners female lawyers,” women. Patricia Gannon, Senior Partner at markets exposed to a communist regime. pointed out that “statistically, the Romanian and asserted that the firm’s selection criteria Karanovic & Nikolic in Serbia (40%), said female population was constantly outnum- All Partners who agreed to speak on the for hires at any level never included gender. that, “I believe as the only foreign/woman And indeed, in apparent contradiction to bering the male population. This triggered Instead, she said, the firm’s partners look partner that the issue is predominantly cul- the “communist history explains female a certain situation as regards the number of at “the professional skills, attitude, loyalty, tural with women in this region still rather participation in the law” theory, many employed and promoted women.” [and] reputation” of prospective candi- governed by local cultural expectations lawyers believe that women in Germanic dates, and any gender imbalance is simply regarding the family.” Similarly, according or Northern European countries are less And the percentage of women pursuing because, “it happened that at every selec- to Ayse Herguner Bilgen, Managing Part- conflicted about pursuing partnership. Me- legal educations may turn out to be a sig- tion, the female lawyers meeting the criteria Tomasz Wardynski, Managing Partner, Wardynski & hmet Gun, Managing Partner of Mehmet nificant influence on how the percentages Partners ner of Herguner Bilgen Ozeke in Turkey outnumbered the male lawyers.” Similarly, Tomasz Wardynski, the Managing (50%), “though there has been much pro- Gun & Partners in Turkey (50%), stated of women in partnership may change in the Partner of Wardynski & Partners in Poland gress on women entering the legal profes- that “by the age of making partner – 30- future. In Bulgaria, Djingov said, “I would Sebastian Gutiu, the Managing Partner of (45%), stated that while “women have al- sion, we believe that there is still the stereo- 35 – women tend to focus on building a not be surprised if the percentage of fe- Schoenherr in Romania – the office with ways played a vital part in the life of our type of gender roles, unfortunately.” family, versus men who are culturally ex- male law students in Bulgaria is higher than the second highest percentage of female firm we have never differentiated between pected to bring home the bacon. If you male.” The same is pointed out for Roma- partners (63%) – made the same claim: women and men when promoting our law- Some partners are less convinced. Partners were to compare Turkey to Sweden or nia, as according to Nestor, “the number of “it might simply be a coincidence that we yers to partnership positions.” in both Bulgaria and Romania, for instance, other Nordic/Germanic states, the differ- female graduates of the law faculties was simply ran into a higher number of highly claimed that no such stereotypes exist in ences are considerable in this regard.” A and still is higher than the male graduates.” skilled professionals and high potentials And on the other side of the spectrum, of- their markets. Assen Djingov, the Managing similar suggestion was made by Konrad In Turkey too, according to Bilgen, “the Manuela Nestor, Co-Managing Partner, that were women. It is not like we went out fices with relatively low percentages of fe- Partner of Djingov, Gouginski, Kyutchuk- Groller, Partner in charge of recruitment at number of female students in the legal pro- Nestor Nestor Diculescu Kingston Petersen there and only recruited women.” male lawyers in partnership made the same ov & Velichkov (40%), explained that: “In Freshfields Bruckhaus Deringer in Austria fession has largely approached very close to

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tunities for women the obvious first step naturally soon.” Bilgen pointed to such not force female lawyers to make a hard generally to an ability to retain their female Comparing countries in terms of partner- in avoiding sexist hiring practices is avoid- helpful options as “offering telecommuni- choice between ‘my family or my job.’” associates for longer than most. For exam- ship numbers might also be an exercise of ing gender bias in the creation of a formal cating and home offices as flexible work- ple, Wardynski took pride in the fact that comparing apples and oranges. As Groller career path. And not surprisingly, as already ing premises for both single and married his firm has, “created a working atmos- pointed out, “there are considerable differ- highlighted, all firms that we spoke with female associates.” phere and a culture at W&W where women ences in what the title of Partner means explained that productivity and job per- feel that their knowledge and qualifications across different markets.” He explained: formance are the main drivers for hiring/ are appreciated and rewarded and that no “Freshfields has a worldwide full lockstep promoting partners. “Becoming a partner distinction is made between women law- system. This means that there are no re- in our office is based on clear criteria and yers and their male counterparts.” gional or specific office partners – rather performance reviews,” said Bilgen in Tur- only global equity partners – meaning that At the end of the day, systematic change key, for instance. “This corporate structure global numbers for firms are far more rel- rarely happens overnight. According to allows a female associate to be evaluated on evant.” As a result, he pointed out, some Groller, while positive steps are being equal grounds with any other associate – firms in general have a smaller number of made, “this is a theme that really only came whether female or male – minimizing the partners relative to the total number of in the focus in certain regions in recent ‘glass ceiling effect’ for our female associ- lawyers when compared to other firms who years and it will likely take a while before ates.” Nestor as well insisted that “produc- would sometimes call associates that qualify Ayse Herguner Bilgen, Managing Partner, Herguner real change will be visible. It is however, tivity is the main driving principle” in her as lawyers partners, even if they share an Bilgen Ozeke without a doubt, very much at the top of firm’s partnership/promotion evaluations. equal remuneration and responsibility sta- that of the number of male students. The the mind of a lot of partners of law firms.” Mehmet Gun, Partner, Mehmet Gun & Partners tus as associates in other firms. female applicants who apply to our office Many of the commenters, however, believe Owen too emphasized this: “It is early days have among the best GPAs and other traits in terms of assessing the long term impact that a passive “we will not discriminate” The Difficult Choice when compared to the male applicants.” approach is insufficient given some of the Assen Djingov, Managing Partner of Djingov, of such initiatives but we will continue to According to Gun, this growing trend of particular challenges women face in pursu- Gouginski, Kyutchukov & Velichkov Of course, to some extent there’s only so support and find ways to track our progress increased percentages of women graduat- ing both motherhood and career. Gutiu ex- According to Gun, firm cultures as a whole much law firms can do to minimize the of our firm and the wider profession in ing high school can also explain the gap plained that: “One of the main reasons why need to adapt: “We believe in work-life bal- demands made by BigLaw on those who achieving greater diversity at all levels and between the current percentages of female women are behind men is simply because ance for all our members, not only female practice within it. Groller noted that life in in all jurisdictions.” associates versus that of female partners a law firm is by its nature dynamic. Asa in most instances it is a matter of choice. In lawyers. A constant push to bill creates a The reasons for the need to increase the in Turkey: “My general impression is that result, he said, the real challenge is keeping most cases, if they choose to grow a family need to spend a lot of time in the office, number of women partners is also bottom- the percentage of female law students is female lawyers with the firm long enough with 2 or 3 children, as harsh as it sounds, meaning you tend to sacrifice on the per- line focused. As Gutiu explained: “It is actually higher than male at the moment. to get them promoted to partner: “We have it is hard to make partner or compete with sonal life front. The reality is that even only normal to not have any form of gen- In Turkey, at least, entry into law school is a strong commitment to promote female male partners because of the 6 to 9 or so men, if pushed hard in such an environ- der bias in your selection/promotions – it based on an exam in which female students lawyers to partners and do not see any rea- month breaks. The reality is that maternity ment, stop being productive and turn into can only mean that you have a larger talent seem to generally be doing better. This did son why this should not work. We actively packages still tend to be primarily taken mindless zombies churning away.” Hugh pool to select from.” Groller made a similar not use to be the case in the past and is a support female lawyers to extend their ca- by women.” And Wardynski explains that Owen, Partner and Head of South Eastern link: “It is reasonable to expect that talent trend that is a few years old – law schools reers with us in order to broaden the pool “women often feel that the existing corpo- Europe Desk at Allen & Overy, explained is spread evenly between men and women. were traditionally a lot more male-heavy. for female partner candidates. It is a myth rate model at many law firms means that the path his firm is taking towards achiev- As a result, if a firm had a talent pool of for This means that while it then is natural to that a senior lawyer life cannot be com- Hugh Owen, Partner and Head of South Eastern they have to give up some of their ambi- ing its goal of 20% female partnership by example 90% males, you are sure to miss Europe Desk, Allen & Overy expect an increase in the percentage of bined with that of a family and we clearly tions if they want to have a family life.” 2020: “In 2010, Allen & Overy introduced out on great talent. Fortunately, we are able women at the associate level, it might take see in our Associate base that this is by no formal arrangements for full equity part- to attract a balanced talent pool.” He also Another aspect that might skew the statis- some time for that to resonate at partner Of course, firms are taking active steps to means a women only topic.” ners to work part-time. These arrange- pointed out that it becomes a business is- tics, Groller suggested, is the nature of the levels as these young professionals move minimize the impact of this. Gannon em- ments have the key aim of retaining more Owen too referred to this almost unavoid- sue since this is not just a topic at the top firms considered, as “one could expect that up the ladder.” phasized: “We take a very flexible approach women through to partnership. Open to able fact of big law firm life: “It is a com- of law firm partners’ minds, but clients’ as if one looks at the legal market as a whole, to the needs of women and family balance all partners globally, part-time partnership plex issue taking into account the nature well: “A lot of our clients have legal teams the ratio of female partners might be much aims to provide a genuine option for men of Allen & Overy’s client work which is led by women, who can be very picky with higher.” This is certainly possible – though “The number of female students in the legal profession has largely and women to adjust the amount of time mostly transactionally driven, which is not regards to this as well aside from the usual the opposite could be true as well. approached very close to that of the number of male students. The they work, while continuing to progress as appealing for all female lawyers striving for law firm performance metrics.” Finally, Owen explained that, “this is not female applicants who apply to our office have among the best an equity partner, for a maximum period of work-life balance.” eight years.” Beyond the Numbers just a CEE issue, it is a profession-wide and GPAs and other traits when compared to the male applicants. And, of course, alternatives to the partner society-wide issue.” ” And law firms aren’t operating in a vacuum. track do exist. In Turkey, Bilgen explained, The data presented in the survey was gath- - Ayse Herguner Bilgen Lawmakers in many CEE jurisdictions are “it is very common for female associates ered from law firm websites. Aside from Conclusion: taking steps as well to liberalize labor regu- working in law firms to opt for different the natural limitations of this methodology, Patricia Gannon has the last word: “My Brodey, however, noted that high female to ensure that they remain with us.” Brodey lations and expand options for both moth- roles (such as in-house counsel) as opposed several other interesting points were raised graduation rates have been the norm in noted that his firm is also committed to erhood and career – though some lawyers strong recommendation is to encourage to being a law firm partner since one can by the partners we spoke to. law firms to deal flexibly with female part- Austria for decades, despite the persistently spearheading a proactive approach: “We sound conflicted about the overall effect on argue that an in-house role offers more low percentages of female partners, so it’s are front runners in offering flexible time efficiency. Djingov, for instance, comment- The first was that looking at individual of- ners at certain stages of their lives but at flexibility in balancing work and personal the same time to have strong expectations not clear that the two phenomena are inevi- schedules or part-time solutions, which is ed that: “Bulgaria (bad for business in gen- life because there are no billable hours per fices, especially in the case of international tably connected. really attractive. This has increased female eral) has one of the most liberal employ- law firms, might not always yield the most as to what they can achieve. Lowering the se.” Brodey commented on a similar trend goal posts is not in the interest of the busi- Life in a Law Firm lawyers presence in our firm and at the lev- ment law regimes during pregnancy and the in Austria as well. accurate results. As Owen explained: “Giv- el of associates, we are leveled out – more length of maternity leave – 2 years with an en the smaller size of some of these offic- ness or ultimately the female partner in the When it comes to actions law firms can take even than male associates. We expect this option for an extension of one more year. Thus, not surprisingly, firms that registered es, in some cases two partners, the numbers long term.” themselves to increase partnership oppor- will be felt amongst the partnership ranks It is obvious that such a liberal regime does a high number of female partners link it can vary quite considerably.” Radu Cotarcea

CEE Legal Matters 32 CEE Legal Matters 33 CEE Legal Matters Round-table: The Future for International Law Firms in CEE

News that an international law firm has closed a CEE office is becoming routine. In the first six months of 2014 alone, Gide Loyrette Nouel and White & Case closed their offices in Bucharest, and Norton Rose Fulbright and Hogan Lovells closed theirs in Prague. With this as a background, CEE Legal Matters invited partners from four international law firms in London to a roundtable discussion about the future of the region for international firms.

Philip Abbott, Denise Hamer, Matthew Jones, and Simon Cox convened at the Rich- ards Kibbe & Orbe offices in London on Tuesday, April 29, 2014, for a wide-ranging discussion on the markets of CEE, prospectives for growth, and the ability of local firms to satisfy the needs of international clients. What follows is a short excerpt of a much longer conversation.

Denise Hamer is a Partner with Richards Kibbe & Orbe, concentrating Philip Abbott is a Banking and Finance Partner at Field Fisher & Wa- in the areas of financial restructuring, distressed debt, asset disposi- terhouse, with a strong focus on funds finance, real estate finance, and tion/acquisition, and special situations, with a particular focus on de- restructuring, as well as acquisition finance, receivables finance, and veloping markets. She has, in her diverse career, held senior positions lending in the TMT and life sciences sectors. He has a significant focus with Citigroup, Societe Generale, Weil Gotshal and Manges, White & on emerging markets, in particular Libya, Turkey, and the Middle East. Case, Arthur Andersen, Schoenherr, and the Austrian bank portfolio Field Fisher & Waterhouse has 9 offices around the world. company of Cerberus Capital Management, BAWAG P.S.K. She has lived and worked in CEE and CIS for many years. Richards Kibbe & Orbe has offices in New York, Washington D.C., and London.

Matthew Jones is a Partner with Taylor Wessing’s Construction and En- Simon Cox is a Partner with McGuire Woods, where he advises on UK gineering team. He advises primarily on aspects of construction legal and international M&A, securities, private equity, privatization and matters, particularly procurement, drafting and negotiation of building joint venture projects, across a wide range of sectors (including ener- and engineering contracts, consultancy appointments, and related con- gy & utilities, financial institutions, automotive, real estate, brewing & struction agreements. His clients and work are global, with projects in distilling, shipping, hotels and natural resources). In his 25 year legal the UK and also from time to time in other jurisdictions, including Aus- career, Cox has worked on transactions in the UK, Central and Eastern tralia, Italy, Romania, Norway, Egypt, Turkey, Libya and Nigeria. Tay- Europe (principally in Bulgaria, Romania, Czech Republic, Ukraine, lor Wessing has offices around the world, and has been in CEE since its Russia, and Turkey), and in the Far East. McGuire Woods has offices 2012 merger with Vienna-headquartered ENWC Attorneys at Law. across the United States, as well as London and Brussels. Legal Matters Legal Matters

work or M&A work, big projects, and they can’t do half the things that they want to just are not continuing. But the region’s not do there. done. From the whole M&A finance side Denise Hamer: The worst thing you can it’s now rolling over to distressed debt and have is mediocre or inconsistent services restructuring. So, there’s definitely a - de across the jurisdiction; it sullies the entire mand for legal services in the region, just brand. Another thing is that when you have that it’s changed and they’re not necessarily a full-service firm with such a diverse client enough to sustain offices on the ground in base, you’re regularly constantly conflicted each location. In addition, local firms are on matters as well. more capable of handling the more sophis- ticated matters than they used to be in the Philip Abbott: I would agree with that, past. They’ve hired laterally. They’ve hired and also endorse the need to be able to se- Anglo-Saxon lawyers. If you look at the lo- lect the best lawyers that you can to work cal firms, they also have very sophisticated with you in a particular jurisdiction. A cli- local lawyers, who are politically connected. ent won’t necessarily stay with the same firm all the time. It depends on the type Matthew Jones: Many local lawyers have of work that they’re doing. I’ve found in trained at the international firms. They’ve the last couple of years bank clients being been on the ground with an international much more selective about who they want local office of an international law firm. So to act for them internationally. They know many will have had quality background and the London market, they’ve obviously gone From left to right: Simon Cox, Denise Hamer, Mathew Jones From left to right: David Stuckey, Simon Cox, Denise Hamer, Mathew Jones training. Some should then be capable of out and done due diligence on the firms main, whether international or local, there there, but you guys are quite expert on Tur- handling international deals. There has also CEELM: You all operate regularly with don’t need the office on the ground. that they plan to use and the individuals of should be reasons for hope, with signs that key. Do you see this as a bubble that’s going clients from across CEE, despite not hav- been a greater focus on pricing in recent Denise Hamer: At my former firm, we those firms that they’re prepared to use. In some EU countries are emerging from the to implode very shortly? ing offices on the ground. So your clients years and local firms may have greater abil- economic crisis. And If you look for in- had a Ukrainian office, but not a Russian other jurisdictions, sometimes the clients Philip Abbott: It hasn’t imploded. I think are sitting in CEE, investing into the UK ity to absorb fee pressures than say Magic stance at macroeconomics, I know people office. And it was a big debate, because tell me who they’re going to use. At my it’s run into buffers politically. But there’s or on an international basis. How are you Circle or large international firms. that think the UK is leading the developed there’s obviously a lot of synergy between previous firm, there were a couple of situ- 70/80 million people there. It’s done very pitching your know-how, if you don’t have world in terms of a recovery. But if you Russia and Ukraine, but on the other ations where I used other offices of other well. It’s got a good infrastructure. It’s get- a local office? look there are other parts of Central and hand everybody understands that invest- ting better. If it can settle down and get Eastern Europe which are doing well – the Philip Abbott: We have the know-how, so ing in Russia is a whole different thing all over its exchange rates issues, and follow GDP economic growth is the say the same far as the CIS is concerned. We have a legal together. It’s commitment, and it’s a huge suit as to its currency, I think Turkey’s still in Poland and Hungary as it is in the UK team of Russian lawyers, based in London. financial resource commitment. You need got a long way to go to grow. International presently. But I don’t think people would They’re not practicing Russian law from some very strong anchor clients before you law firms – there aren’t that many there. I’d necessary see that. London, but they are Russian, and there- do that. say probably fewer than 20. fore have Russian clients and clients from Simon Cox: The bigger firms focus on a Simon Cox: I treat Poland differently Denise Hamer: other jurisdictions in the region. So, what Is it a language issue? couple of places, and they probably have from the rest of CEE, like Russia. I think we’re not doing is trying to sell local law What is it that’s holding the firms back? a Moscow office. You have the smaller re- if you’ve ever been to Central Europe as services. We’re advising the local client base gional firms and the newer regional firms a big firm, you’ll be in Warsaw. And there Simon Cox: It was a bar issue originally. on English law. Then if a client in the re- who are in some ways spin-offs with the are some very well-known people and in- The Turkish bar doesn’t allow Turkish law- gion is investing in, say, France, we’ll gen- experience of international law firms. They From left to right: Denise Hamer, Mathew Jones ternational firms in Warsaw that are doing yers to work with international law firms. erally work with either our local offices or can offer a cohesive regional offering at a From left to right: Phillip Abbott, Simon Cox quite well. But I think if you look at Prague So, they set up dual practices. Plus I think with a partner firm there. international firms because that’s what the much better price. There may be one or or Bucharest or the former Yugoslavia Re- it’s a market that people haven’t really fo- Simon Cox: I think a couple of questions client required me to do. I think that clients Matthew Jones: We have offices in Aus- two big international firms who seem to publics, or all the different regions, I think cused on until relatively recently. I was first that international firms are asking increas- are much more sophisticated now. tria, Poland, Slovakia, Hungary, Czech Re- have the government work, or they’ve got the war for talent is the issue. International asked to look at it eight years ago now, and ingly often is “do you need to practice local public and Ukraine. We don’t have a pres- the high-end bonds work or similar, work- Simon Cox: You can also have a situation law firms cannot go to set up an office in I thought it was a great opportunity. And law, or do you want to practice English law ence in Russia but we don’t see that as a gap ing in some of the CEE markets. But as a where a client refuses to work with Office CEE and throw money at it. It has to earn when I was looking at it White & Case were only?” You can see a couple of examples of necessarily. We have staff across the office model, I don’t see it as having a long-term X, because they have had a bad experience its own money. And to attract good part- the only international firm with an office international firms, in Turkey for example, network who can service our Russian work. future. in the past. That can undermine the wider ners or stars, you have to pay top bar, and on the ground. They were asked by the who initially have said that they will only offering as well. you can’t pay top bar if you’re not earning government of Turkey years ago to go to Denise Hamer: In Bucharest, for instance, Simon Cox: You have to tailor your of- practice English law – and then changed enough to pay them. Part of this is simply Turkey to do all of the government’s work. the local champions have really grown very fering to meet the client’s needs. You can’t tack. The question is, what services are you Matthew Jones: Coming back full circle to that the home offices are much more fo- They’ve made a massive success with it. strong. There’s huge fee pressure, and say “we can’t do work locally, but we could going to provide? And I think that most your proposition whether CEE is no longer cused on the particular reasons for opening They’ve suffered that problem of being the outside of the UK and CEE in particular find a firm that you’ve maybe never heard firms in London are deciding that they are valuable for international law firms, I don’t a foreign office. They’re saying: “We want ‘only show in town’ so when people get to there’s also competition, not only from of that’s a local firm, not an international not going to do everything. You need to be think that’s necessarily the case. The mar- a good year. We want to take some money a certain level and are not promoted, they the local champions, but also from the Big firm.” I’m looking for clients coming out very good at what you say you’re going to ket has been re-shaping itself to be fit for out of our practices this year. We want to go somewhere else and set up a competi- Four, who have captive legal practices, and of these countries and expanding interna- do, and not average. So, apart from prob- purpose and there have been some interna- sort of refill our coffers after having fund- tor. So, the market has sprung up with lots are doing the low-to-medium end work. tionally. For example, Turks looking at set- ably four or five firms, most firms are no tional law firm exits in this time. Law firms ed another office opening.” I think office of White & Case alumni, founding new law So, it’s not a sustainable structure to have ting up in the UK, or Russians buying stock longer ‘full-service’ in London. In that case have traditionally had a lag between adapt- openings are – you see far fewer these days. firms in Istanbul. But it’s a much nicer place exchange funds, or a stock exchange listing. as many resources being spread across that how can you be full-service internationally? ing market conditions and right size so I see to go and work than some of the Central For that we need some Russian experience, large a region. Most of these firms opened Perhaps that’s the reason for withdrawing. any re-shaping as evolution with the eco- Denise Hamer: What’s happening in Tur- and Eastern European countries. and we need Russian language skills. We up local offices on the back of privatization They can’t support having an office that nomic cycle. For those law firms that re- key, obviously there’s been a huge boom David Stuckey

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Guest Editorial: A Reasoned Perspective

Russia is the largest market in Europe However, even prior to the confrontation over Ukraine the Rus- with more than 140 million people, a sian economy was slowing down. This and the increasingly asser- growing middle class, and GDP per tive middle class presented a political challenge. Mr. Putin and his capita twice that of China. In Central team were struggling to identify a theme that would consolidate and Eastern Europe, Russia’s average society and be a political boost. In this respect, the “blitzkrieg” in annual household income of USD the Crimea turned out to be exactly what was needed, propelling 23,000 is surpassed only by Slovenia Mr. Putin’s popularity and approval ratings to unprecedented highs. and the Czech Republic. In recent The price paid so far has been limited to insignificant sanctions years the Russian government has against a small group of government officials and businessmen, been very conservative in managing plus a large neighbor whose people may be expected for decades its financials and the country’s budget to fume over the loss of territory. It remains to be seen what addi- deficit is currently less than -1.0 per- tional price Russia will pay economically if Western investors turn cent, and public debt stands at about 12 percent (compared to away. So far, many capital markets transactions in Russia have been 80–100 percent in most European countries). put on hold, it has become difficult or more expensive for Russian In the past decade, Russia has been one of the most profitable companies to raise funds from Western banks, and access to certain markets in the world for foreign investors with growth rates in high-end technology has been cut. Mr. Putin has publicly shown double digits. Many multinational companies that entered this in- willingness to de-escalate tensions and refrained from threatening creasingly competitive market early have a turnover in excess of retaliatory sanctions, putting on a pragmatic hat. He signed a major USD 1 billion. Russian consumers appreciate quality in goods and deal to supply gas to China, in an effort to compensate for losses services and are prepared to pay a premium for established brands. in trade with the West. The message to foreign investors has been In addition, Russia is still one of the best markets for human talent. that those who continue to expand their business in Russia, despite negative signals from their own governments, will be appreciated. Market Russia’s image in the Western press has never been good, as the country has historically received a disproportionate share of nega- Despite the negative rhetoric in the media, most multinational tive coverage as successor to the Soviet empire – primarily due to companies are looking for ways to grow their Russian operations wide-spread corruption and the government’s unwillingness to ac- and locally it is business as usual. It may be expected that the eco- cept certain liberal Western values. nomic slow-down and political tensions with the West will prompt In March 2012 Vladimir Putin swapped roles with Dmitry Medve- the Russian government to focus on further structural reforms and dev, winning an election, and became Russia’s President for a third rely on its own resources, as well as be more welcoming to those Spotlight: term. Many in Russia were dismayed by this swap, thinking that a foreign investors who decide to invest in this uncertain environ- new Brezhnev-style era was looming and that Russia would be gov- ment. Russia may be expected to continue to cooperate with its erned by a for-life ruler quietly aging and losing touch with reality. European partners (to the extent they are willing), but will also It looked as if this would give a boost to the opposition and help increasingly try to diversify economic ties with China and other create an alternative to political dominance by Mr. Putin. Street regions in Asia. At the same time, Russia is increasingly assertive protests in Moscow and a few other cities, primarily by the grow- of its interests and local businesses (including subsidiaries of mul- ing middle class, heightened expectations of change and structural tinational companies) are highly competitive and prepared to fight Russia reforms. Mr. Putin, however, was quick to react to the demand for their market share. for changes, launching a publicized anti-corruption campaign and In general, Russia is a big, complex emerging market which may be introducing some of the changes proposed by the opposition. Un- quite profitable if developed in a sophisticated and focused way. fortunately, none of Mr. Putin’s political opponents were able to Many multinational companies have been very successful in this challenge him and gradually the opposition was discredited, mainly market. The Russian government is continuing efforts to improve because of their own inability to connect with voters and also due the legal environment, address corruption, and make doing busi- to pointed campaigns in the state-controlled media. ness easier, and it may be expected to embark on several large in- The latest stand-off with the West over Ukraine has made Russia frastructure developments. All this offers opportunities for inves- an international pariah. In the past few months the business com- tors who are prepared to give priority to economic interests and munity – both Western investors and local business people – has not be overwhelmed by short-term political risks. watched with alarm, fearful of industry-wide Western sanctions and a shut-down of access to Western financial institutions, as well Our firm has been on this market for 25 years – longer than any as retaliatory measures which may be expected from the Putin gov- other international law firm. We thought we had witnessed it all – ernment. the uncertainties and boom years of the 1990s, the crisis of 1998, the crisis of 2008, and now the threat of sanctions. However, we Despite this threat to business, support for President Putin has are still Russia’s largest international law firm, and we are confi- surged to record highs, including among local business people who dent that our people and experience will help us grow and navigate stand to lose most from Western economic sanctions, as many through the current uncertainties. Russians welcomed his tough stance on Crimea and swift actions in taking it. Sergei Voitishkin, CIS Managing Partner, Baker & McKenzie

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“Sanction”: noun: an action that is taken or an order that is given to force a country to obey international laws by limiting or stopping trade with that country, by not allowing economic aid for that country, etc

Bad For Business: Western Sanctions Impact International Law Firms in Russia

The prospect and then the reality of the sanctions imposed on Russia by Europe and the United States have been the primary concern for the many law firms with offices in Mos- cow – both Russian and foreign – since the secession crisis began on the Crimean peninsula in late February. As the ef- fect of the sanctions imposed by the West became real, and as the likelihood of additional sanctions loomed, anxieties deepened, and the prospect of military engagement in East- ern Ukraine raised those anxieties into even higher relief.

Conversations with Managing Partners at leading interna- tional and Russian firms reveal that the fears of the early spring appear to have calmed somewhat as a geo-political status quo has developed, and as the prospects of a Russian intervention into Eastern Ukraine have lessened. But to a man, each Russia expert we spoke to conceded that the sub- ject remains front and center in their focus – and the primary concern of their clients.

Thus, the questions lawyers in Russia have become familiar with answering for the past three months – what’s happening with sanctions, what’s going to happen next, and how will they or might they effect my business – remain an unavoid- able part of the daily routine. Nobody seems to think those questions will go away anytime soon.

A history of the recent events in the Crimea is provided on the longer version of this article found at www.ceelegalmat- ters.com.

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whether a client’s business was involved a little weight. Maybe down to 650 pounds concern elsewhere than there was here. But with what the US calls a “specially desig- or so? He is still a big beast and he’s still maybe we are simply naïve here! nated national” and the EU a “designated in the room. It’s definitely still an issue – I person” – a process which often required think it has calmed a bit, but it’s still on the substantial research into corporate trees, front of people’s minds. But whereas be- sometimes murky documentation, and fore it was a lot of posturing on both sides multiple shells – then decide what actions … now there’s been a sort of understand- were necessary or recommended. ing as to where the line is in the sand. Both sides – Russia and the West – don’t want to And the initial mood in Moscow after the push any further. sanctions were issued mood was – if not grim – at least nervous. In mid-April, Bill CEELM: Are clients responding positively to the Reichert, the Managing Partner of K&L current calm? Gates in Moscow, described the issue of sanctions as the “800 pound gorilla in the You know, investors want stability. More room,” and said “it’s all anyone’s talking importantly, they want predictability. They about.” He reported that new business was don’t want uncertainty. If you’re deciding Russia General Figures on hold, as clients and lawyers alike waited to invest or not, and you’re really not sure, that’s the worst thing. You can’t plan for GDP USD 2.5 trillion to see what would happen. what you can’t expect. Now that there’s a Sebastian Lawson Inflation 6.9% Sebastian Lawson at Freshfields reported bit more calm, perhaps a bit of predictabil- that his team was being kept busy answer- ity out there, which is giving people a bit Sebastian Lawson, Partner, Freshfields Population 143.7 million ing phones. “Ever since the Crimean pro- more comfort. But there’s still a bit of a Bruckhaus Deringer: cess started we’ve been getting calls from wait-and-see approach. Life expectancy at birth 69 years clients to see how sanctions will effect CEELM: Has anything changed? their business.” These calls, he reported, Now, again, while the gorilla is still in the Unemployment 5.4% came from Russian clients as well, inquir- room and still pretty sizable, it’s still early I think the short answer is “not really.” I days in terms of this so-called stability. The think there’s still a great deal of uncertainty Percentage of Global ing about actual or proposed investments 17.2% M&A value in 2013 outside of Russia. And some clients were Ukrainian government has just been elect- as to how events will unfold and therefore ed. It’s going to take them a little while to what implications it will have on the legal Source: International Monetary Fund, Russian Federal Sta- “already starting to think about restructur- tistics Service, Tradingeconomics.com, World Bank, Merger- ing deals or structures to avoid sanctions.” get things in place. It’s still a volatile situa- and business environment. I think the good market tion, and a divided country. But hopefully news is that the perception is that Russia The Current State of Affairs what we’re seeing is that both sides under- has decided to pull back from the brink and America and EU Impose Sanctions sian government-bond issues plummeted that: “It is with pride that I have found my- stand that fighting each other, in whatever certainly no invasion of Ukraine is in the by three-quarters compared with the same self on the black list, this means they have CEE Legal Matters reached out to a num- sense, is counter-productive. cards now, if it ever was, and fears of Rus- As a result of Russia’s March 18, 2014 ac- period the previous year. Novatek, Russia’s noticed my stance on Crimea.” ber of Russia experts in late May for an up- sian aggression were exaggerated. cession of Crimea, Canada, the United second-largest gas producer, was reported date on the current state of affairs. CEELM: Regarding the Russian “pivot” to the States, and the European Union imposed to have lost USD 2.5 billion in market value President Putin’s approval rating among East: CEELM: We’ve seen the worst then? various travel and economic sanctions at one fell swoop out when its shares sank the Russian public increased by nearly 10% Traditionally there hasn’t been a whole lot That’s certainly the hope here, and the way against many members of the Russian- by nearly 10%. since the crisis began, up to 71.6% – the backed former Ukrainian government, as highest in three years, according to a March of cross-investment between Russia and the equity markets in Russia have been ral- well as several mid-to-high-ranking Russian Business News Europe put the potential 19 poll conducted by the All-Russian Cent- Asia, like there has been with Europe. And lying in recent weeks, shows that’s certainly officials. In a second round of sanctions, damage to the Russian economy as high er for Public Opinion Research. The same we’re trying to see if that will change. I sus- the general view of market participants. I the United States expanded the list to in- as USD 400 billion. And on March 14, poll showed that more than 90% of Rus- pect that it probably will, but these things think there is clearly a worry that events on clude a number of high-profile corporate the Financial Times reported that Russian sians supported unification with the Crime- don’t change overnight. If there is change the ground may not improve. And I think entities such as Bank Rossiya and Cherno- companies had started pulling billions of an Republic. it will probably transform over the course a lot of people are worried that – the way moneftegaz (a Crimea-based gas company), dollars out of Western banks to avoid any of a couple years. we had in Bosnia 20 years ago – the two InvestCapitalBank, and others. The Euro- sides are so completely polarized that it be- asset freeze. Another by-product of the Ukraine crisis is CEELM: How high was the level of anxiety in pean Union, to date, has not taken a similar comes impossible to get back to the status Russia’s much-discussed “pivot to the East” the firm in earlier months? action. The unquote private equity specialists claim – the Kremlin’s search for foreign invest- quo. But I think that the general view is that the likelihood of Russia sucked into all of deal flow in Russia and Ukraine dropped ment, sales, and cooperation from Korea, I think everyone, for the most part, wheth- that is much less than it was, and much less A complete list of the individuals and cor- by 42% in Q1 2014 compared to the pre- Japan, India, and China – countries which er through wishful thinking or naivete, sort potential for actual conflict for Russia and porate entities subject to sanctions is pro- ceding quarter – a stark contrast to the rest have stayed away from any sanctions and of assumed this would pass. And I think Ukraine. vided on the longer version of this article of CEE, where Q1 2014 deal flow report- shown themselves less bothered by Russia’s that’s true. If you read certain media stories found at www.ceelegalmatters.com. edly reached a high point in volume terms Bill Reichert accession of Crimea than those countries in the West, and if you have no idea what CEELM: How are Freshfields’ clients reacting? across a five-year sample, and a 38% in- in closer geographic proximity. Russia and Ukraine are really like, you may Bill Reichert, Managing Partner, K&L Sanctions Are Felt – and Resisted crease on the previous quarter. have a tendency to think the worst. So I oc- It’s still very much a holding pattern. And Gates: The Initial Effect of Sanctions on casionally would get calls from others in the in the Oil & Gas sector we see very little Subsequent to the mid-March imposition Still, there was disagreement on whether International Law Firms firm wondering the extent of how bad the impact, and we see deals going on regard- of sanctions, the Fitch and Standard & the sanctions would have any lasting ef- CEELM: Is the “800 pound gorilla” still around? situation was in Moscow, while in reality it’s less. In Oil & Gas there doesn’t seem to Poor ratings agencies downgraded Russia’s fect, and many Russians remained defiant. The effect of the sanctions on internation- pretty much day to day here. That’s one ex- be any impact. What we’re seeing a lot of, credit outlook, Russian banks warned of Sergei Mironov, for instance, the head of al law firms in Russia was immediate. Firms B.R. Maybe the gorilla’s gone on a diet. Lost ample of where there was probably more as you’d expect, is a lot of caution in the a sanctions-induced recession, and Rus- the opposition “A Just Russia” party, stated were often required to determine quickly

CEE Legal Matters 42 CEE Legal Matters 43 Market Spotlight Market Spotlight documentation phase, so people are com- growth. Of course the crisis, and resultant mer. Now that Ukraine has a new president sia. Those companies with large business general perception is that there could be ing up with lots of additional requirements sanctions, has not made the job of “sell- he will need to get on with the difficult in Russia may be expected to carry on as further sanctions in the event of any escala- for documentation in terms of sanctions ing” Russia as a destination for investment job of rescuing the economy. That won’t has been the case in the last three years. We tion of the situation in Ukraine and indeed, warranties, compliance undertakings, all any easier. be possible without unless he agrees some don’t anticipate any major new in-bound the position that Russia may take in respect that sort of stuff, but it’s more limited than sort of modus vivendi with Russia. Asian - investments or acquisitions in the short- of such developments. As such, there are I think people initially feared. and in particular Chinese - investors seem term. However, large M&A deals between still concerns in respect of potential “sec- happy to do business with Russia and this Russian clients may well be expected. We torial” or “industry-focused” sanctions or CEELM: Are you seeing increased business from will underline, for European businesses es- have not seen any down-sizing of mid- sanctions against major Russian companies Asia? pecially, that it doesn’t make sense to disen- market deals, particularly joint ventures. We (including Gazprom, Rosneft, LUKoil, gage from the Russian market. Crimea will also anticipate more deals involving Chi- Sberbank, etc.) which may be implement- Yes we are, absolutely. We’re seeing several remain an open sore but will eventually set- nese companies. ed in case of any further escalation of the prospective projects coming from that part tle down into another “frozen conflict” in conflict in Eastern Ukraine. of the world, so one thing we’re working the former Soviet space. Overall, I expect the Russian government on at the moment for example which was to be more “friendly” towards investors CEELM: How has CMS’s business in Russia announced several weeks ago was a bridge Sergei Voitishkin, Managing Partner who continue to invest in Russia. In the last been impacted? between Russia and China over the Amur CIS, Baker & McKenzie: few days, the official rhetoric has been too River, which is very interesting, so we’re play down the tensions and emphasize that There is an increasing volume of “legal due seeing more and more on the infrastructure it is business as usual. diligence” work being instructed by certain Mikhail Kazantsev side, and there are port developments being US and EU clients prior to entering into the presently enacted sanctions, everybody looked at in the Russian Far East region, Sergey Yuryev, Partner, CMS Russia: new relationships with Russian counter- is waiting what will happen next – either a which would typically be structured as co- parties. Additionally, a number of instruc- cancelation of sanctions as a result of the investments between Russian parties and tions followed the joining of the Crimea Ukrainian elections or a new wave of sanc- parties from either Japan, Korea, or China. Edwin Tham to Russia where internationally operating tions if Russia will not accept the legality clients seek legal advice in respect of struc- of elections. CEELM: Was there genuine anxiety by Fresh- CEELM: Is the effect of the sanctions more clear turing their existing business in the Crimea fields lawyers or was it primarily concern about the now, or is it still somewhat up in the air? in the current sanctions environment. Fur- CEELM: Is the effect of the sanctions more clear effect on day-to-day business? thermore, CMS itself had to undertake an now, or is it still somewhat up in the air? I think businesses are much more sanguine Very much the last one. And obviously additional KYC exercise to ensure compli- about the sanctions. Those which have been Most of the parties effected by the sanc- there was concern about who would get ance with the EU sanctions. imposed so far have had little impact and it tions already received advice from their put on the sanctions list and what form the appears that there is little appetite among US counsel. Although the problem is that sanctions would take, and of course there CEELM: How do you expect things to play out in most EU countries to add to these. The OFAC did not clarify some controversial is still general concern about how long it the months to come? fact that presidential elections in Ukraine points as to how the sanctions should ap- will take to get things back to where it was, have taken place and Russia has said that ply. Most of the interested parties are still but … Sergei Voitishkin As noted, the further development of it is prepared to work with Poroschenko the sanction regime will largely depend waiting for official OFAC clarification. CEELM: Are you hopeful for the next few will make businesses more confident that CEELM: Is the effect of the sanctions more clear on further development of the situation months? things will return to normal. Also, the fact now than it was in April, or is it still up in the air? in Ukraine and particularly the possible CEELM: How has Egorov Puginsky Afanasiev & Partners’ business been impacted? that Russia succeeded in concluding several Sergey Yuryev federalization of the territory of Eastern Much more hopeful than the last time we landmark deals with China seems to sug- There is still a “wait-and-see” feeling. The Ukraine. The Russian Government did The amount of work increased due to the talked. The immediate clamor of clients gest that Russia is not as isolated as hard sanctions that have officially been imposed The issue of sanctions remains quite a hot not take any active steps to join such terri- fact that our firm picked some of the work around sanctions has receded significantly, liners in some Western governments would are unlikely to have any material effect. topic in Russia since they were first im- tory to Russia (due to various political and that was previously done by foreign law so to that extent it’s become almost part of like to believe. The Russian stock market However, the extent to which foreign in- posed. The practical implications on inter- economic reasons) despite numerous re- firms. Russian companies that do not trust the ordinary course, it’s just one of those and ruble have strengthened over the past vestors will curb their activities in Russia as national and domestic business in Russia, quests from within the territory. Currently foreign law firms even though those com- boxes we tick. few weeks and the Central Bank has an- a result of the worsening of relations be- however, have actually been quite limited so the Ukrainian Government is conducting a panies are not on the sanctions list at the nounced that capital flight slowed down - tween Russia and Western countries is still far and have primarily affected banks and military operation in that region leading to Edwin Tham, Partner, Allen & Overy: moment. The risk being that if the com- all of which are positive signs of returning unclear. We will have a better picture in 3 companies directly named in the sanctions the increasing number of human casualties, panies will be put on the sanctions list they confidence. to 6 months. list. Even for these directly affected enti- so Russian authorities are facing serious po- CEELM: Is the effect of US and European will immediately lose legal support. sanctions on Russia still the primary concern for ties, the consequences have been relatively litical and humanitarian pressures that may CEELM: How has Allen & Overy’s business in CEELM: How has Baker & McKenzie’s busi- unremarkable (i.e. no bankruptcies, liquida- your colleagues and clients? lead to various actions by the Russian Gov- CEELM: How do you expect things to play out in Russian been impacted? ness in Russian been impacted? tions, etc). Additions to the sanctions lists ernment. If such steps are not coordinated the months to come? Sanctions are of course still a concern but predictably attracts substantial public and and agreed with the EU and the US, new Capital markets activity is down significant- We have not yet felt any meaningful impact we view them as a temporary issue. For us media attention in Russia, but as noted, af- sanctions will be imminent. ly but our core banking and corporate prac- in Russia – a very minor number of deals It’s difficult to say as this is not the legal the long term concern remains whether the fects only a limited number of businesses. tices do not seem to have been significantly have been put on hold. Overall, there has issue and more on the side of the politics. Russian government will follow through on Mikhail Kazantsev, Partner, Egorov Pu- affected. Business is down slightly from the been a slight uptick in billable hours with We closely monitor the situation and have a the structural reforms needed to improve The Russian government also provides cer- ginsky Afanasiev & Partners: first quarter but still higher that at the same clients seeking advice in connection with plan for multiple scenarios. the business and investment climate and, tain support including preferential regimes time last year. sanctions. of course, the degree of success which it for the affected businesses in order to mini- CEELM: Is the issue of sanctions still something FINAL NOTE: Thank you also to Dentons will have in doing this. This is not a new mize the potential losses and overall poten- everyone’s talking about, or has it died down in Partner Doren Doeh, Morgan Lewis Partner CEELM: How do you expect things to play out in CEELM: How do you expect things to play out in issue - even before the Ukraine crisis the tial negative effect for the economy. recent weeks? Brian Zimbler, and Linklaters Partner Matthew the months to come? the months to come? structural weaknesses of Russia (exces- Keats for their assistance in preparing this article. sive red tape, corruption, weak rule of law, I’m pretty confident that it will be back to I expect work levels to remain flat – as While the sanctions have so far affected It is still a hot topic. But now, as most of etc) were already exerting a drag on GDP business as usual by the end of the sum- investors consider their strategies in Rus- only a limited number of companies, the the people understand the consequences of David Stuckey

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A.K.: I estimate obtaining internal consents pliers, contractors and service providers. noted, but we prefer to attend seminars and discussions with counter-parties relat- Constantly changing Russian legislation which open the floor to speeches of the Interview: Alexander Kotlyar ed to the essential terms and conditions of gives many challenges and promises much regulatory bodies’ officers. contracts as most time-consuming. more in the future, but we know how to deal with them. CEELM: Looking back at your career, Head of Legal & Compliance Department at Danfoss Russia CEELM: From a regulatory stand- if you could go back to give one piece point, what would you identify the main CEELM: Since you mentioned con- of advice to yourself fresh out of law generally prefer outsourcing to external recent or upcoming pieces of legisla- stantly changing legislation in your ju- Alexander Kotlyar is the Head of school, what would it be? counsel and what types of legal matters tion that will impact your business? risdiction, what are the main resources Legal & Compliance for Danfoss do you prefer to handle in-house? Why? you use to keep track of them? Do you A.K.: If that young guy, full of his own im- Russia, the Russian subsidiary of A.K.: We are aligned with both Russian follow direct sources from relevant reg- pressions and expectations, listened to me, the Danfoss Group. Kotlyar joined legislation and foreign applicable laws such A.K.: If possible, I prefer outsourcing IP ulatory bodies, attend seminars, read I would advise him to risk more in looking Danfoss in 2012, after working as a as FCPA and Bribery Act. Moreover, we rights lawsuits and mergers/acquisitions up on legal academic journals, interact for the job of his dreams. Who knows, I Senior Lawyer with Schneider Elec- are an ethical company and do the best to deals support: these do not require deep with regulatory bodies directly, use ex- might have held this position much ear- tric for a little over a year. He began prevent possible unethical steps, which can knowledge of interconnections inside the ternal counsel, etc? lier… his career with Gruzovozoff LLC, Group and the company, and providing be made by our employees, as well as the where he moved up the ranks from counsel with necessary documents is quite breach of our Code of Conduct by sup- A.K.: We do our best to use all sources you Radu Cotarcea a young in-house counsel to Deputy sufficient – unlike the main activity, which Head of Legal. requires keeping abreast of Group activi- ties, and thus must be handled in-house.

CEELM: What would you say was the most complex project you worked on Interview: Dmitry Popov during your time at Danfoss? CEELM: To start, please tell our read- come where they will be forced to defend Vice President Legal & Compliance for Russia at ABB ers a bit about yourself and your back- those provisions to counter-parties or judg- A.K.: Currently we are rendering legal sup- ground leading up to your role with es. It’s critical that they keep this in mind as port to a manufacturing plant construction Danfoss Russia. they work, and to focus on being reason- in Dzerzhinsk, Nizhniy Novgorod Area. The complexity of this project lies in the CEELM: To start, please tell us a bit able, fair, and customer-oriented. Dmitry Popov is the Vice President A.K.: After graduating from the Interna- necessity of suggesting a reasonable bal- about your career leading up to your Legal & Compliance in Russia for tional Law faculty of the Moscow Institute CEELM: According to Danfoss’ web- ance between the interests of all partici- current role with ABB. ABB. His in-house career began in of International Law and Economy named site, the company “is recognised as pants (many of which are major stakehold- 2002 at Nutricia Advanced Medi- D.P.: My background is in fact a technical after A.S. Griboedov, I worked in different a global trendsetter. We passionately ers in their areas) while strongly protecting cal Nutrition, where he worked as one with the first university I attended fo- companies gradually ‘growing up’ from the push boundaries on results and reputa- our interests – but such legal support is giv- General Counsel. He then spent a cusing on engineering. I did start studying role of a sole lawyer, to a senior lawyer, tion.” How would you say this attitude ing a feeling of involvement in the creation little under a year with Renaissance for my law degree in parallel with the first then to a Deputy Head of Legal Depart- is reflected within your in-house legal process from scratch. Insurance as its General Counsel one, which led to me graduating from both ment. The support of daily activity in vari- team? and Vice President. Following 3 universities in 1997. My very first job in the ous areas of business gave me a solid foun- I would like to admit that every project is years in private practice with Baker legal world was in the Prosecutor’s Office dation of the legal profession. A.K.: My team always tries to succeed in both interesting and complex in its own expectations. Even in our conservative way. It is rather problematic to emphasize & McKenzie, he joined ABB in but I found early on that it was much more 2010. interesting to work on civil cases rather than Finally, in 2012 I applied for a position of area (I mean legal practice, in which it is a specific one, because ordinary projects in criminal law, which I personally hate but Head of Legal Department in Danfoss rather complicated to set trends), together are not reflected in memory, whilst unique which was almost mandatory for a career Russia, the Russian subsidiary of the Dan- with daily routine we can take part in the ones have their own aspects and particulari- there. I then decided to leave the office and foss Group, the world leader in the manu- elaboration of unexpected solutions assist- ties complicating a comparison. Notwith- started working with a very small law firm. facturing of energy and heating solutions, ing sales. For example, it was a significant standing this, we succeed in solving both refrigeration equipment, power electronics, relief for sales to use an electronic drafting ordinary and unique tasks equally. I soon realized what a great asset my dual and many other appliances well-known all of contracts – “just fill in the one-page ta- CEELM: Since you mentioned you pre- qualification represented. My technical over the world. Luckily I was chosen, and in ble and click a button – and your contract fer handling elements outside of IP and background helped me understand tech- 2013 I held the position of Head of Legal is drafted”. merger/acquisitions within your legal nically complicated contracts, meaning I and Compliance Department, adding some CEELM: When you need to outsource team, do you handle all aspects related could support my clients much better. A interesting and valuable functions to my work to external counsel, what are the to this new manufacturing plant in- telecommunications company, for exam- current role. main criteria you use in picking the house? ple, is always going to be serviced better by firms you work with? a lawyer who understands not just the law CEELM: You have worked as an in- A.K.: As for legal support at present – yes. but also the technology, and, importantly, house lawyer for over 14 years -- much A.K.: Relying on my past experience I al- But I would leave open the possibility of the core business behind a contract. of which in senior/management posi- ready have a number of external counsels putting some matters to a tender, particu- tions. What best practices have you de- and law firms achieving excellent results larly if these matters by their specific nature Later on, I started my own small law prac- veloped over the years in hiring and de- for a reasonable price. Certainly, I also fol- require the involvement of specialists with tice in Nizhny Novgorod – a city where I veloping a strong in-house legal team? low our corporate policy, which singles out a narrow focus. was living at the time. I then came to the companies with already approbated ser- conclusion that all the interesting law work A.K.: I always instruct my subordinates to vices. CEELM: What types of legal work re- is really done in Moscow so I decided to keep in mind, as they draft or propose any lated to this project end up being most relocate the city, where I worked for a large terms and conditions, that the time may CEELM: What types of work do you time-consuming? European company for 5 years. Within it, I

CEE Legal Matters 46 CEE Legal Matters 47 Market Spotlight Market Spotlight started as an in-house counsel and moved for it to be a growing trend actually since it with my team and update us on some of to meet regularly (even across each other managing the legal department to make come up and reacting to them on the spot my way up the ranks gradually to the po- offers both the advantage of working with the recent updates taking place in relevant at a table in a deal or in courts), but we sure it runs smoothly and in an organized means distractions from other projects and sition of General Counsel. After this ex- lawyers who know the business inside-out legislation – and in Russia, there’s often do nevertheless. I’ve even exchanged best manner. This means managing 9 lawyers a lot of time invested in them. perience I worked briefly for Renaissance and it tends also to save money. Further, quite a few of them. There is also the ele- practices on how to handle various regula- out of a full staff of 18 (we include in the Insurance after which I received an offer from my experience with Baker & McKen- ment of building up internal cases – a sort tory bodies with a direct competitor so ex- legal team other technical staff such as ar- CEELM: On a lighter note, what is your from Baker & McKenzie. zie as well as from my communication with of “externally-powered internal legitima- changing impressions/referrals on external chives or contract managers), their daily favorite item in your office and why? counsel is definitely a useful tool. Disclaim- tasks and long term projects, their interac- other consultants I understand that now in cy” provided by the expert opinion of an D.P.: I have a small model car – a Jaguar XK I have to say, what followed were probably er: in full compliance with antitrust law, tions with other business units, and so on. Russia we have a new generation of lawyers outside consultant. – which is my favorite car in the world. Ob- the most exciting years of my professional nothing to deal with the disclosure of the It also means working constantly to stream- who are highly professional in their core viously, I hope to one day own the car itself, life. When I joined the international firm, CEELM: Since we mentioned external commercially sensitive information [laugh- line processes which involve the legal team law areas. not just a model of it. My team members’ I expressed a strong wish to work on chal- counsel, when you do decide to out- ing] so as to eliminate unnecessary red-tape to favorite item, however, is my table hockey. lenging/unusual cases, which have solu- CEELM: You have worked both in- source legal work, what are the main ensure the legal team operates as a facilita- We actually have a legal department tourna- tions neither in law, nor in court practice, house and spent a considerable time in criteria you use in choosing law firms? CEELM: How does a regular day in the tor, rather than a “sales prevention team” ment twice a year. The prize is obviously and the firm offered a great platform to private practice -- which do you prefer office look like for you? What takes up for the overall business. expose me to such projects. and why? D.P.: It really does depend considerably on the most time of your day? something small, such as show tickets, but the transaction. If I have a specific question The second aspect is hard to describe more they all love it and it is an excellent team I tend to know a lot of good lawyers – and D.P.: Two broad things end up taking up specifically than simply calling it “general builder. “I see two types of General Counsel: there is the “9 to 6 GC”, I am referring here to specific individuals, the greatest part of my day. The first is business troubleshooting.” Things always Radu Cotarcea irrespective of the colors of their brand – who really only acts as a communication tool between external in Russia and would know who is best to counsel and the Board, and the “real GCs” who take advice ask for input. and handle problems themselves.” If I had to pick one criteria, I value a law firm that “monitors” what we do on a regu- Interview: Anna Gritsevskaya In 2010, when the crisis hit firms, I real- D.P.: I would say they are two very different lar basis as a business. For example, now ized that my dream of becoming a partner worlds but that I find both to be quite in- that we are building a new plant, when we Legal Director Russia at PPF Life Insurance within 3 years of joining the firm might be teresting. I would say that one of the main looked for external counsel for a specific real estate matter, it was important for us a bit of a stretch, not because the firm was differences is that, as an external consult- CEELM: To start, please tell us a bit that the counsel knows already how we hurting necessarily, but because the capac- ant, you are most often able to only give about yourself and your career leading work and how we like things done – in ity to assimilate more lawyers within the advice as to a solution. It is rare that an ex- up to your role with PPF Life Insurance partnership ranks at the time did not look ternal lawyer would be allowed in the actual terms of internal processes and such. This so evident. As a result, I accepted an offer business side of implementing a solution, saves both time and money as we waste nei- A.G.: I was born in Moscow and gradu- from ABB to join the company – though I and it would require a long relationship to ther on answering question and clarifying ated from the Moscow State University do not exclude the possibility of returning establish a strong level of trust before that what we need and how we need it, although Law Department. To tell you the truth, to the firm as a partner one day [laughs]. could happen. I will say, it is also up to the “long term relations” is never the main cri- I never wanted to work as a lawyer and attitude of the General Counsel to get in- teria. saw myself as a future law scholar. I was I was also attracted by the idea of joining volved if he/she wants to be a part of the strongly encouraged by my professors to And if I have a complex project which may ABB because I knew they had very good actual solution implementation. By that I devote myself to legal science. However, involve several areas of law, I choose be- Anna Gritsevskaya is the Legal Contracts and Corporate departments – mean to say that I see two types of General the times were rough in Russia in early 90s, tween law firms who are strong in all those Director for Russia at PPF Life but such important (for a large-industry Counsel: there is the “9 to 6 GC”, who re- so I started working in a corporate rather areas, and in this case the “best individual Insurance (formerly Generali PPF). company) areas as antitrust, regulatory (in- ally only acts as a communication tool be- than academic environment. Completely by professional” approach does not play a She has spent over 11 years in the cluding customs and tax), IP, and litigation tween external counsel and the Board, and accident I joined a Russian insurance com- main role. Insurance sector, holding Head of were not covered at the level which I be- pany in 1995 and have been in the insur- the “real GCs” who take advice and handle Legal and Compliance positions in a lieved sufficient. In light of my specializa- problems themselves. ance industry ever since. tion with Baker, I thought those would be CEELM: What are your main sources number of foreign-owned insurance gaps I could definitely plug into and take CEELM: When you used to work as a of information about the capabilities companies in Russia including Allianz, CEELM: Your current role is that of upon myself the challenge of building up. Senior Associate, what practice area(s) of any specific law firm: Law firm web- Aviva, Fortis, and Generali PPF. Legal Director for Russia. In your own In fact, looking back, I take pride in the did you specialize in? Does that special- sites, legal directories, network/refer- words, how would you define the role of fact that I built a small law firm with differ- ization help you directly in your current rals, direct contacts, their track records? a Legal Director/General Counsel? ent practice areas within the company over role? the years, including a two-person litigation D.P.: There are two main ways which I de- A.G.: Perhaps, my role is best described team that now is capable of handling large/ D.P.: The reality is that for a General Coun- veloped when I realized I was slowly be- by the name of my position [smiles]. I do complex litigations in-house. The same ap- sel to be effective, he/she needs to under- coming overly-dependent on a handful of counseling - I advise the company’s man- plies with other practice areas such as IP stand all the legal spheres related to his/her lawyers. The first is attending legal seminars agement and the employees on most com- or antitrust, and even some M&A. Having business from real estate to IP to antitrust, of law firms since it gives me a great op- plicated and tricky legal issues. In other said that, I must say how much I appreciate tax, etc. I personally used to specialize pri- portunity to both update my knowledge words, I am responsible for the peace of the very professional support from ABB marily in antitrust as well as corporate law and to asses that of the external counsel mind of the management. But I am also a headquarters. but that does not mean that I never exter- I am listening to (as well as assessing his manager myself and, as such, I have to or- nalize this type of work. Even if I feel that business acuity). ganize the work of my department and su- CEELM: Do you see this approach as a the greater part of my team is “fluent” in pervise many insurance matters including trend in the market? antitrust issues, which is mandatory with The other can simply be summed up as product design, claims handling, and litiga- all my lawyers, I still would sometimes, for “GCs network”. Granted, we interact con- tion. Corporate, employment, and various D.P.: Indeed, I do. I think it makes sense example, invite external lawyers to sit down siderably less than external counsel who get other general legal issues come on top.

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A.G.: I have 8 people on my team. Each of them has his/her own area of main respon- sibility but I try to give them tasks beyond Interview: Irina Novikova their usual routine. I strongly believe that lawyers must have a wider vision – a sense Head of Legal Russia & Ukraine at Groupon of law if you want. I think one cannot be- come a good lawyer without working on different tasks and always learning some- e-commerce business in Russia? What thing new. As a result, I try giving assign- takes up the most of your time in the ments to my staff beyond their comfort office? zones to develop and to train them. To be fair to the members of my team they un- I.N.: The first thing I do in the morning derstand this and look for new challenges is address my inbox. Our company is quite themselves. widespread geographically, meaning I tend to have a full inbox by the time I get into CEELM: If you need to outsource legal the office. Based on that I plan and prior- work, what criteria do you use in choos- itize my day – both for me and for the rest ing your external counsel? of my team. Of course, there are also quite a few of regular administrative tasks – pri- A.G.: I work in a company that is a member marily basic housekeeping – that need ad- of an international group of companies. dressing and I try to get those out of the The group has preferred legal advisors that way as quickly as possible. These can be it usually uses in various countries. In case anything really from signing off on time I pick external counsels I expect them to sheets to basic reporting for the global le- be very responsive, practical, straight-to- gal teams. After lunch I tend to look back the-point and … brief! I am prepared to at my day to make sure there isn’t anything accept a higher cost but it must present real I do not believe in long hours at the office desk. Certainly, particularly important or urgent that I let “ value for money. there may be cases when it is necessary but then it is a crisis slip through. CEELM: There is a great deal of hype and everybody should mobilize In terms of actual work carried out, I tend ” in Russia at the moment over the vari- to be very hands-on with my team. All the CEELM: You have been working in ments to learn their needs for legal advice, ous sanctions imposed on the market. lawyers on our team are involved in review- the Finance sector for over 11 years in prepare reports for the management team, Do they affect your business in any ing contracts regularly or attending courts senior in-house roles. What excites you and deal with urgent matters. A fair share way? If yes, how? as needed though, naturally, I tend to tackle about the industry the most? of my time is taken by meetings on many the bigger or more strategic aspects. A.G.: As a matter of policy we do not com- Irina Novikova is the Head of Legal of Groupon different topics, brainstorming sessions, responsible for the Russian and Ukrainian mar- A.G.: As I said, it was by accident that I project management, or review meetings ment on political topics. However, I need CEELM: How is your in-house team started working in insurance. But I have to correct you in a sense that no sanctions kets. After graduating from the Law Faculty in St. designed? Do you specialize your indi- where I am often required to give legal ad- Petersburg, she first worked in the securities market never regretted it. Insurance is a service vice on the spot. You will not believe how have been imposed on the Russian insur- vidual lawyers on specific areas or are industry, where the client is always right. ance industry. All our reserves are invested – a field that she describes as being “very trendy in the they all generalists? varied the topics of required legal advice country at the time.” She then proceeded to work in a As a result, I have the challenging task of are sometimes [smiles]! in Russia and we meet our obligations to- keeping the balance between the need to wards regulators and our clients in full. number of industries leading up to her joining what she I.N.: We have a fairly small team – there satisfy the client to the maximum possible CEELM: According to urban myth, describes as the fascinating world of a young, flexible, are three legal team members on site. I see extent and the need to protect the interests unlike lawyers in private practice, in- CEELM: On a lighter note, what is your fast growing e-commerce company. it as a trend to shrink the size of in-house teams. I would say we are all generalists. of my company. At the same time, the legal house counsel wrap up at 5 pm on the favorite thing to do after a long day at CEELM: You have worked as an in- ganization. We use a group e-mail address where we framework for insurance in Russia is rather dot. How accurate is this impression? the office? house counsel almost throughout your receive requests for support regularly and, general, so insurance lawyers often have to entire career. What do you enjoy the It is also great to be able to interact with A.G.: I believe this is not a matter of where based on the morning exercise that I men- make decisions with little or no guidance at A.G.: First of all, I try to not make my day most about this side of things? the other business functions of a compa- the person works. It depends on the per- all. It means responsibility but it also drives in the office longer than I need to. What is ny. You encounter considerably different tioned, we coordinate on who will take over son’s ability to manage his or her time prop- me a lot! my pastime? I have been practicing Yoga I.N.: Early on in my career, I wanted to mindsets and different angles/perspectives what issues/requests. erly. My day is always planned ahead. I try for many years. Together with regular ses- work in what I felt was a “real sector” of of looking at things. Working as an exter- CEELM: You mentioned you believe CEELM: What does a typical day look to spend my working hours on work-relat- sions in the gym it helps tremendously to the economy. I did try working as a free- nal lawyer will rarely allow you to look at there is a growing trend to shrink the like for you as the Head of Legal of an ed matters only and encourage and train my free my brain and to strengthen my spirit, lancer/external counsel but I soon learned the world around you without your “legal size of legal teams. What do you believe insurance business in Russia? What staff to organize their time in the same way. to have a clear mind, to relax. My son has that I was an in-house lawyer at heart. The glasses” on. drives this? Is it because of budgeting takes up the most of your time in the I do not believe in long hours at the office grown up so I have more time for myself. I difference in my mind is considerable, pri- considerations? office? desk. Certainly, there may be cases when it like traveling, exploring new hidden places marily resulting from the fact that, as an Last, but definitely not least, you get to feel is necessary but then it is a crisis and every- especially in Europe. I read a lot of books external counsel, you have to deal with spe- A.G.: I usually start with accessing the close to the business. You feel like you are I.N.: I do think that part of it is the eco- body should mobilize. in English and even take English lessons to cific problems that are passed on to you by scope of work, defining priorities, and a part of something great that creates value nomic reality, indeed, the economic climate practice my spoken language (we usually the client. In contrast, working in-house al- distributing assignments among the team CEELM: How is your in-house team around it. is rather challenging at the moment, both speak Russian in the office). I also have two lows you to focus a lot more on prevention. members. As the day unfolds, I supervise designed? Do you specialize your indi- in Russia and globally. But I think it is more sphinx cats - they amuse me a lot! I am very big on tackling issues proactively CEELM: What does a typical day look the performance of tasks by my staff, con- vidual lawyers on specific areas or are a matter of efficiency than anything else. before they get a chance to impact an or- like for you as the Head of Legal of an sult with my colleagues from other depart- they all generalists? Radu Cotarcea Technology for example, has greatly in-

CEE Legal Matters 50 CEE Legal Matters 51 Market Spotlight Market Spotlight creased the work capacity of smaller teams soever and, if all you do as an in-house law- of the fees we can expect as reasonably than it was feasible to provide in the past. yer is to try to push that into other business possible. Of course, aspects will come up For example, based on input from our US functions, you cannot built a relationship that will bump up the price tag from the The Expat On the Ground headquarters, we have switched to elec- where you are seen as in the “same boat”, original estimates, but we need those to be tronic signatures of documents. One year meaning you lose internal impact whenever communicated in due time, and explained, Interview: Doran Doeh, Partner, Dentons into using this feature we have found that there is something important you need to not surprised by them when we receive the it greatly reduces the workload on legal push through. invoice. down in 1989 … I was part of the team teams – despite the slightly increased risk that set up the firm’s office in Moscow in resulting from the fact that the Russian CEELM: What are the main legal as- CEELM: Looking back at your career, 1993 and, for my efforts, I was appointed market is still very big on having a paper pects that an e-commerce business what are you most proud of ? On the flip head of the office in 1995 – which is how I trail. Even having pre-reviewed templates needs to handle on a regular basis in side, if you had to point to one regret, ended up in Russia. for contracts built into our systems which Russia? what would it be? our sales force can simply use helps a lot as I.N.: As is usual with new industries, the CEELM: What is your role, exactly, it means a lot less time spent on contract I.N.: I think every lawyer has his moments main issues always revolve around blanks in Dentons? Does being an expat in review. We then really only need to spend or deals that they look back to with pride in legislation or too many grey areas. As an the Moscow office involve different re- time on complex and non-standard deals – and I do think that happens to lawyers in-house lawyer in such an industry, you sponsibilities than the Russian partners which are relatively few in a company such more than in most professions. For me, one end up having to navigate using principles, have? as Groupon. particular project that I worked on I felt or the spirit of law, rather than the letter of pushed my professional limits, and I take law because the letter is simply not there D.D.: I was head of the Denton Wilde CEELM: As a lawyer, what best prac- pride in having managed it successfully. It yet. Sapte/SNR Denton Moscow office for tices have you developed for communi- was a squeeze-out of minority sharehold- Doran Doeh is a Partner in Dentons’ Moscow office and a member of the firm’s global twelve years. That is about the maximum cating effectively with your colleagues ers that resulted from a privatization deal. CEELM: If you need to outsource legal Energy practice. He has been working in and with Russia since 1991, first with Allen & that anyone should do a senior role – one from other business functions (IT engi- When it was privatized, shares of a plant work, what criteria do you use in choos- Overy, where he was the Managing Partner in Moscow for many years, then since 1999 of the lessons of Margaret Thatcher’s and neers, finance teams, etc). went to a lot of its workers, meaning that, ing your external counsel? with Dentons, and in its previous iterations (Denton Hall, Denton Wilde Sapte, SNR John Browne’s experiences is to move on when the majority shareholder wanted to Denton), he also served as Managing Partner in Moscow. Doeh is a well-established and while the going is good. I have to admit I.N.: Over the years I realized that face- I.N.: For me it is very important that we un- acquire the full company, over 200 deals widely recognized Energy/Natural Resources expert in Russia, and he is commonly listed that it is a great relief to no longer to be re- to-face communication is critical. It helps derstand each other in the sense in which I had to be made. That took a lot of coordi- among the preeminent practitioners in the market. A longer verrsion of his interview is sponsible for management issues – such as you convey your logic, not just the request, am very demanding with regards to my ex- nation, negotiations, and paper work and I available on the CEE Legal Matters website. overseeing budgets and other partners’ per- if you take the time to talk to stakehold- ternal counsel. If I feel at any point that an pride myself on having spearheaded it. formances– and I am having a great time in CEELM: To start, how and where did ers directly. It lets you explain your train of external counsel is acting superficially and to balance assertion with diplomacy and to the new combined Dentons. thought that allows you to position your- not taking the time to provide sophisticated If I had to point to one regret, I would your legal career begin – and how did reach effective compromises in tough ne- self as someone focused on solutions rath- advice, it is very unlikely that I will work probably skip coming back to the industries you end up in Russia? gotiations, a great advantage in a commer- An important part of my current role is on er than risk breaks. with such outside counsel in the future. that I feel I have exhausted professionally. I cial legal career. the integration of the two Moscow offices am very happy working in e-commerce and D.D.: Having done history as a major at Eventually I was one of the key members resulting from the combination of the SNR The biggest challenge for a graduate fresh The second is a commercial consideration. I find it truly interesting and I regret not Dartmouth, I read philosophy, politics and of the team that privatised BNOC and Denton and Salans practices in Russia. This out of university is also his/her zeal in tak- In a world where no one pays for billing having moved into the sector earlier. economics(PPE) at Oxford – I thought I floated Britoil. That was a great experience has proved to be much smoother than I had ing risks. A lawyer needs to learn quick that hours anymore, I expect an external coun- was far too young to start such a serious which taught me a huge amount about how anticipated. The partners are delightful and there is no business without any risk what- sel to be as open and predictable in terms Radu Cotarcea subject as law … so I spent a year running the political and business worlds interacted we all have a lot in common, not least our luxury tours in Morocco. My father thought in British society, and the lessons are ones aspirations for our firm and office. We now I was on the road to ruin, so he called me that I have been able to apply throughout have the largest international law firm pres- up and suggested that since I liked the old my career. ence in Russia, including the St Petersburg Inside Insight world, why didn’t I think of getting quali- office, and the most extensive network of fied in England, as he had heard they had I joined Allen & Overy as an oil and gas offices in the CIS. An In-depth Look at good lawyers there. That seemed like a specialist in 1986, the year the Financial good idea, so I joined Lincoln’s Inn and Services Act came into effect. I published Another part of my job is to boost the de- qualified as a barrister. an article on how the FSA affected oil trad- velopment of the oil and gas practice. I was the Lives of CEE GCs ing, and the partners at A&O decided that I well known as an oil and gas practitioner in At the time North Sea oil was emerging must be a wizard at financial services regu- London before I came to Russia and devel- and often featured in the press. So, I found lation, and they invited me to join the team oped a similar reputation when I was here myself a job in the North Sea oil industry. of three that advised the whole firm on the with A&O in the ‘90s. I returned to Lon- I joined Burmah Oil (North Sea) Limited FSA. It is amazing how much you learn don after the Russian crash in 1998, and virtually on the day that it was announced about an industry when doing the regulato- joined what was then Denton Hall to be- that it would be taken over by The Brit- ry side of it – what people are supposed to come more focused on pure energy work – ish National Oil Corporation (BNOC). do, what they are not supposed to do, how in that field, the firm was then streets ahead Most importantly for my long term future, they do both kinds of activity and what can of any other firm. It had an extraordinary BNOC was at the centre of development happen when they transgress. I dealt with roster of partners who were energy lawyers of the legal documentation that underlay banking, as well as financial services, regu- recognized by the legal directories – and I the workings of the North Sea oil industry, lation – all in addition to my work as an oil took my place among them. After the ex- and over time these forms became global and gas lawyer. perience of A&O, which as a firm was so standards for the industry as a whole. I en- focused on finance, it was great to be back Subscribers to CEE Legal Matters have access to our Inside Inside section on the website, which joyed the feisty interaction with other law- A&O started their Central and Eastern in the energy sector, and at the highest lev- features regular interviews with General Counsel in CEE markets. yers in the industry – I had to learn how Europe practice after the Berlin Wall came el. Dentons did not hire me to be a Russia

CEE Legal Matters 52 CEE Legal Matters 53 Market Spotlight Market Spotlight specialist, but when there were problems could find and closely supervise their work. dents. There are now lawyers at all levels of with the Moscow office in the early ‘00s, Finding the best talent was difficult – the seniority who have been developed by the they asked me to go back to Russia on a recruitment agents who do this as a matter international law firms. In addition, lawyers temporary basis to head up the office. As of course nowadays were non-existent at in some leading local firms have picked up they say, there is nothing so permanent as the time – and, given that they were coming know-how from international firms and are the temporary, as I found out. I took the from such a different background, manag- able to produce work in certain practice ar- August view, based on my earlier experience, that ing them was tricky. “Never assume” was a eas to the necessary standard. So the legal to build a viable office we needed much good rule of thumb, but to do that you had scene in Moscow is becoming much more more than just an oil and gas offering and to work out what your assumptions were, what one would expect in the capital of a put my back into developing the banking and that was not easy in country where big country, with a mixture of local and and finance practice. Banking transactions the normal ways of conducting business international firms in the market. Univer- Market Spotlight were never my mainstream work, but I had were so completely different to those in the sity students now graduate having learned to cope with a few of them at A&O! My western world. In addition, it was impor- the basics which enables the firms to train earlier experience as a financial services and tant to get to grips with Russian law. them up in a way that was inconceivable 20 banking regulatory lawyer (plus a long term years ago. interest in finance from my PPE days) ena- To make the situation even worse, in the bled me to “walk the walk and talk the talk” early days Russian law itself was inaccessi- CEELM: In general terms, how do you with bankers. ble. When I first came to Russia, there was think the lawyers in Russia compare no standard system of publication of the with those in the more established le- Today, as part of the much larger com- laws, and many of them would just appear gal markets of the UK or US? Have you bined Dentons office, I leave the banking in the newspapers. I used to go around with seen improvement in the market since partners to get on with their practice and a Russian lawyer on our team who, when- you arrived? Are there particular areas I have reverted back to my original role as ever he met another Russian lawyer, would they need to improve even more? an oil and gas partner. I am delighted to say offer to exchange copies of newspaper clip- that this is really going well. I have attracted pings. Fortunately, the new Russian consti- D.D.: My colleagues are all excellent lawyers a good volume of work, including some tution provided that the laws are not valid and very commercial in their approach, so very interesting, cutting edge and challeng- until published, and this required the Rus- I don’t have the problems that I hear about ing deals. sian government to establish a system for from other people. As I said before, there publication of laws. Because old-fashioned has been a vast improvement over the past As an expat and experienced oil and gas printing of publications was so problematic 20 or so years – like night and day – al- practitioner working with a large team of in Russia, the systems normally used in the though it is possible that our firm has been energetic and ambitious younger partners West were soon superseded by state-of-the- more effective at developing our people whose practices focus on other areas, I am art electronic databases that became very than some of the others. often called in to deal with matters where sophisticated. It was then a relatively short my specialist skills are needed. This applies step for the providers to publish transla- Where there is room generally for improve- not only to my Russian colleagues – but tions of the main laws – otherwise getting ment is simply in Russian lawyers having also to the American, French and German translations, which were essential for a law more confidence in themselves – there is partners as well – and an important part of firm in order to prepare legal work of the a tendency to think foreigners do things my offering is not just oil and gas exper- quality required, would have been a major better. It is true that the English legal pro- tise but also my background as a London problem. fession has the advantage that their law is practitioner. English law has become the the default choice for international trans- currency of international legal business in There was also the problem that the legal actions, but that does not mean they are a way similar to that of the US dollar in system was almost totally unsuitable for necessarily better lawyers, cleverer or more international financial affairs, and having a late 20th century business – the Funda- appreciative of client needs. The top Rus- senior practitioner such as myself on board mentals of Civil Legislation of the Soviet sian lawyers in international practice (and provides a degree of assurance to clients. Union was a nightmare to deal with – and I include in this partners in the top local often laws were mutually contradictory or firms) can hold their own with anyone. CEELM: What were the main chal- had very significant gaps. Over time, this lenges you faced when starting to work was remedied by a complete overhaul of Probably what is needed is a sense of es- in Russia, and are those the same chal- Russian law. prit de corps, of being part of a profes- lenges you face today? sion. That is held back by the fact that, Fortunately, all the international firms had apart from advocates, the legal profession D.D.: When I first started working in Rus- similar problems and there was a degree of is unregulated in Russia. There have been sia, it was almost impossible to find locally camaraderie and mutual assistance between government efforts to establish a regulated qualified people who could function effec- competitors in Moscow that would have profession, but there has been strong re- tively in an international law firm. There been unthinkable anywhere else. sistance from the leading private practition- were very few Russian lawyers who could ers. I can understand the reasons for this speak English fluently and of those who The situation now is totally different and and would not seek to impose something could, even fewer had the grasp of com- unrecognizable from what it was in the that so many distinguished lawyers think is mercial and financial affairs at the sophis- early ‘90s. Russian law has been very ef- inadvisable in their country. Czech Republic ticated level that was needed. To build an fectively revised and modernized based office, we had to hire the best people we on German, Netherlands and Swiss prece- David Stuckey

CEE Legal Matters 54 CEE Legal Matters 55 Experts Review Experts Review

Experts Review: Privatizations and PPP/Infrastructure

Top Ranked Practitioners in Each CEE Jurisdiction Discuss and Review Privatizations and PPP/Infrastructure

CEE Legal Matters 56 CEE Legal Matters 57 Experts Review Experts Review

information on the privatization target and sets a deadline for sending Belarus expressions of interest. Privatization in Belarus: A faint wind of change Upon receiving an expression of interest a special commission Belarus is one of those countries within the Committee considers where a good part of key industri- it and sends a draft decision on al assets still belongs to the state. privatization to the President of Changes in regulations on pri- Belarus. Upon approval by the vatization introduced within past President, a privatization contest two years were aimed at making or auction should be announced. the procedures more flexible and Therefore, by expressing interest, investor-friendly. What are the the investor initiates the procedure outcomes? for selecting the best buyer of the shares, and later finds itself bid- Nowadays an interested investor ding along with other prospective may choose one of the following investors. Announcements on contests and auctions are also published ways to acquire a stake in a state-owned enterprise. in the printed media and on the State Property Committee website. First, the investor can become a shareholder in an enterprise in the One should note that there is no specific timeframe for this procedure. process of being transformed into a joint-stock company. Transfor- Naturally, this causes considerable uncertainty since an investor cannot mation is required as the legal form of state-owned companies is a know for sure when exactly the target will be available for privatiza- unitary enterprise (a rudimentary form from Soviet times) which has tion. This in turn may lead to fading of previously expressed interest. no shares to be traded. A prospective investor should wait for contests to be organized by the State Property Committee. From time to time Unlike other economies in the region in their time, Belarus is not likely the Committee publishes announcements about certain major enter- to commence mass privatization, at least in the near future. Howev- prises on its official website (www.gki.gov.by). er, we may see some transactions completed even in 2014. The year has already marked its first transaction: the sale of 99.5% shares in Mass transformation of state enterprises has been under way for sev- BELGIPS to Russia’s Volma Corporation. The largest transactions ex- eral years now in accordance with three-year plans approved by the pected to be signed soon are the sale of Mozyr Oil Refinery shares to Belarusian President. The current plan for 2014-2016 will most likely Russia’s Rosneft and sale of a stake in Grodno-Azot, a large fertilizer include around 40 unitary enterprises. producer, the contest for which was announced recently. In addition, Second, an investor can participate in a privatization contest or auction in summer 2014 we expect several contests to take place within the at which state-owned shares are offered. The procedures for acquiring framework of the “pilot privatization” program administered by the shares through contest and auction are very similar. The difference is National Agency of Investment and Privatization under the auspices that in an auction the only criteria for determining the winner is the of the World Bank, covering eight companies from various sectors acquisition price, while in a contest the conditions include certain ad- (e.g., food & drink, road construction, production of medical devices). ditional investment commitments to be undertaken by the acquirer. Maksim Salahub, Partner, and Nadezhda Fomenok, Legal Assistant, Third, investors can acquire additionally-issued shares of transformed Sorainen enterprises, injecting capital in the company and diluting the state as a shareholder. Quite a few potential acquirers are interested in this Greece option as it implies investment straight into the enterprise rather than Experts Review transferring the purchase price to the Belarus state budget. One should Greek banks: From private ownership to public and bear in mind, however, that in this case local municipal authorities may back in less than … 14 months! The definition of “Privatization” is, simply, the transfer of a company or organization from gov- have a pre-emptive right to buy additionally-issued shares. ernment to private ownership and control. But of course in practice it’s rarely simple, and the Greek banks have successfully at- In early 2012 President Lukashenko cancelled ineffective privatization tracted substantial private invest- complicated process often results in charges of incompetence or misjudgment, accusations of plans and declared a new privatization strategy which may be summa- ment and diluted public owner- corrupt insider trading, and multiple other challenges. rized as follows: if we have an enterprise and an investor is interested, ship, only a few months after their the deal must be negotiated and closed if the state finds it beneficial. recapitalization and ensuing de Our Expert Review feature for this issue focuses on Privatization across CEE. In those jurisdic- The new concept caused some confusion among the authorities in- facto nationalization. volved, as well as investors and advisors, so that for about a year and a tions where privatization is not a current concern our experts turn to the subject of PPP instead, half no deals took place. Although historically conservative as it involves many similar issues and opportunities. Finally, the legal framework was adjusted, the State Property Commit- and well-capitalized, the aftermath tee started to publish lists of potential targets, and the new algorithm of the Lehman crisis and the en- The articles are presented in this issue in the order of the countries’ military and paramilitary to be used by potential investors may now be briefly described as fol- suing Greek sovereign debt crisis lows: took its toll on Greek banks: (a) personnel per thousand people, as of 2009. Thus the article from Belarus, which had the high- depositors feared a potential exit from the Eurozone (Grexit) and the est number of military and paramilitary personnel per thousand people that year out of the A prospective acquirer may either find a privatization target on the list possibility of bank insolvency and about one third of deposits were countries included (49) comes first, with Greece (42.7) coming second, and Serbia (29.3) coming published by the State Property Committee or pick a target of its own withdrawn from Greece, thereby draining the Greek banking system’s accord and send an expression of interest to the government, the tem- liquidity; (b) non-performing loans (NPLs) and related provisioning third. Macedonia’s numbers for 2009 were not available, so its article comes last – just after that plate for which is available on the State Property Committee website. needs spiked; (c) deterioration of Greece’s sovereign creditworthiness of the Czech Republic, which had the fewest people per thousand (2.8) in the military or para- Additionally, the Committee itself sometimes announces a “study of led to a deterioration of banks’ creditworthiness and capital markets military service of those listed and participating. interest” in a particular enterprise. In these cases, the Committee posts borrowing closed; (d) the Balkans and other countries where Greek

CEE Legal Matters 58 CEE Legal Matters 59 Experts Review Experts Review banks had operations (such as Egypt, Ukraine, Albania etc.) experi- arena. Eurobank, the weakest bank, most severely affected and almost lack of political will for crucial economic change in Serbia. rations for commencement of works are under way, while further in- enced similar recessionary trends or political turmoil and the need for totally owned by the HFSF, has now passed 65% of its total capital to vestments by way of concessions and PPP are expected. the financial support and liquidity of such operations increased; and private shareholders, including a group of prime international inves- Real political will for reform of the Serbian economy was demon- Aleksandar Hadzic, Partner, JPM Jankovic Popovic Mitic (e) deleveraging (i.e. accelerating loans and ceasing the provision of tors intending to supervise management. Piraeus and Alpha are clearly strated after the political changes of October 2000, when the newly- new ones) was available only to a limited extent. the two largest players in the market with HFSF participation or ap- formed government created a Privatization Law in 2001. The privatiza- proximately 68 to 70%, whereas NBG now has ample time to prepare tion model was a sale of 70% of shares and transfer of the remaining Ukraine Consequently, liquidity was severely affected and Greek banks became for the sale of its significant Turkish subsidiary, Finansbank. shares free of charge, through two separate forms: (1) tenders for sale wholly dependent on European Central Bank funding. Unprecedent- of the largest and most important socially-owned companies to buyers Privatization in Ukraine ed losses incurred from the restructuring of Greek sovereign debt The Greek crisis has endured drama and it is impossible to predict that had to meet certain qualification criteria, and (2) auctions for all its end. However, the above developments constitute a remarkable and the increase in NPLs adversely affected capital ratios. To sum up, other companies and a large number of interested buyers. Moreover, Privatization was a high priority achievement: the transfer of the Banks from private ownership to Greek banks were a threat to systemic stability and in dire need of trade of the shares issued under previous regimes was enabled at this for new-born Ukraine in the early public and back again in less than … 14 months! Despite the financial recapitalization, and radical measures were therefore implemented. time by establishment of financial market institutions. 1990s. The first Ukrainian privati- turmoil, the Greek banks succeeded in attracting private investment zation act was adopted within the The Hellenic Financial Stability Fund (HFSF) was created in order to and are now on their way to recovery. Through this model some of the largest Serbian companies were first months of independence of supervise the recapitalization and consolidation of the banking sector bought by renowned companies such as Telenor, Lafarge, Hen- Note: An expanded version of this article, with important additional information, our country. The privatization and manage the holding of banking shares. HFSF was funded with kel, Michelin, Veolia, Beneton, Philip Morris, BTA, Stada, and Fiat, can be found on the CEE Legal Matters website. process underwent a great deal EUR 50 billion. among others. of review and scrutiny and faced Cleomenis Yannikas, Partner, Dryllerakis & Associates The Bank of Greece (BoG) did not allow the default of any Greek However, privatization in Serbia has still not lived up to expectations. issuance of “privatization certifi- bank on its deposit obligations and enforced an aggressive consoli- The governments that succeeded the government from 2001 have cates,” a mass sale of state-owned dation agenda whereby weak banks were dissolved and their assets Serbia not inherited its reformative potential, and after the 2003 assassina- objects, forming of industrial and eventually sold to other stronger banks. International banks that de- tion of Prime Minister Djindjic reforms in Serbia were delayed and financial groups, etc. cided to exit the Greek market recapitalized and subsequently sold Privatization in Serbia postponed. Meanwhile, the revenues from the sale of privatized com- The key legislation regulating privatization in Ukraine is the “On Pri- their Greek banking operations (typically for negative consideration). panies were spent and the state was forced to take loans in order to vatization of State Property” Law adopted in March 1993. The Law To-date, only four large banks and two smaller banks have survived. Privatization in Serbia began in maintain the system and implement essential infrastructure projects. envisages a classification of privatization objects based on the number 1989 with the major social and Serbia, as a society struggling to depart from the socialist model, relied of employees, current profits, and strategic importance for the State. To address investors’ mistrust on NPL formation and provisioning, economic reforms introduced on resources from “socially-owned property” for a long time, until it The most interesting for large investors are the objects of the “G” BoG engaged Blackrock Solutions to conduct an independent review. by Ante Markovic, the last Prime finally faced the fact that these resources have been distributed, spent, group, which includes those having strategic importance for Ukraine, Blackrock concluded its work in December 2012 and predicted NPL Minister of former Yugoslavia. or were simply insufficient, and that fundamental reforms were now companies in the defense industry, and companies using unique re- total losses of approximately EUR 31 billion for the next 3 years. Despite Serbian authorities harsh- in order. ly criticizing Markovic’s privatiza- sources (such as know-how, unique production methods, etc.). Privati- The first recapitalization took place between April and July 2013, af- tion program as an impermissible The new Serbian government elected on April 27, 2014, founded on zation of such objects requires an individual approach. ter the Greek government’s debt restructuring and the conclusion of sale of socially-owned property (a just one political party, has been fully empowered by voters to carry The chief governmental authority responsible for the privatization Blackrock’s review. HFSF contributed EUR 25.5 billion and ended up form of ownership used in social- out the reforms it announced in its electoral campaign. At its very process in Ukraine is the Fund of State Property of Ukraine (the holding 81% to 95% of the total capital of all banks while the private ist countries, not quite equal to inauguration the government announced a swift and sharp turnabout FSPU). The FSPU overviews and participates in privatization process- sector contributed EUR 3.1 billion. publicly-owned property as the and reforms in all segments of society, with clear goals and dynamics es, manages state property, and protects and represents the interests of rest of the world knows it), in and the emphasized priorities of decreasing the fiscal deficit, down- Under the recapitalization law, if: (i) the private sector contributed at Ukraine in companies with a State share. least 10% of the total recapitalization amount required; and (ii) the 1991 Serbia enacted a law on transformation of ownership with inter- sizing administration, strengthening the economy, and increasing em- bank complied with its restructuring plan, HFSF would not be entitled nal increase of the capital of socially-owned companies by employees ployment. Privatization in Ukraine is conducted in line with the three-year State with discounts and repayment from workers’ salaries in multi-annual Privatization Program. Yearly reports on the execution of the pro- to elect a bank’s board of directors and its management and would As a result, the government has announced its intention to complete a installments. This concept was painless for the government and did gram are delivered by the FSPU and approved by parliament. The only exercise veto rights. Accordingly, Piraeus, Alpha, and NBG’s in- series of amendments to several systemic laws by July 15, 2014, in or- not endanger established social relationships. The law de facto halt- State Privatization Program defines the goals and expected results of cumbent private management was retained and only Eurobank’s man- der to clear the path for speedy reforms. In particular, amendments to agement was replaced (given the absence of private sector contribu- ed Markovic’s program of privatization, but when the country was privatization, as well as the methods by which they are to be achieved. thrown by war and UN sanctions into a whirlwind – with inflation bankruptcy law and privatization regulations are planned to facilitate tions). swift privatization of the remaining unsold socially-owned companies reaching thousands of billions of percentage points by the end of The Privatization process in Ukraine has been political-driven and re- and over 160 socially-owned companies that have been in the process As an additional incentive, all private investors that participated in the 1993 – companies for which revaluation was carried out once a year flected changes in the power elites of the country. One of the most of organizational and financial reorganization for a long time, and are recapitalization of the aforementioned three banks were allocated free were privatized en masse and the shares were paid by employees from illustrative cases is the double privatization of ArcelorMittal Kryvyi of particular strategic importance for Serbia. All such companies will warrants, a listed security granting a call option with a 4.5 year duration inflated salaries. When Serbia brought inflation down to 0% in Janu- Rih (former Kryvorizhstal), in which the new government cancelled now either be sold or declared bankrupt. These companies include the on HFSF’s shares at the original issue price (plus interest). ary 1994, payment for shares ceased and the privatization process was the sale of the company to the son-in-law of the former President. halted; the subsequent law on revaluation of paid shares almost an- Zelezara Smederevo steel mill, the Simpo Vranje furniture factory, the After the completion of the first recapitalization, market conditions Prva Iskra, Zorka, Petrohemija, and Azotara chemical industries, the started to improve, international markets became optimistic, political nulled the effects of the privatization and the percentage of private The company was privatized for the first time in 2004 when it was capital in companies was decimated. Krusik and Magnohrom special-purpose industries, the IMT and IMR purchased by two Ukrainian tycoons (the son-in-law of the President instability and the Grexit talk subsided, and investors began returning agricultural machine factories, the Jumko and Niteks clothes factories, to Greece. BoG commissioned a second review by Blackrock, which and another oligarch with substantial support in the government). In Noting the advanced state of privatization in other countries, in 1997 and large agricultural companies with tens of thousands of hectares the result of the purchase agreement more than 93% shares of the was released in early March 2014 and depicted a more positive outlook of agricultural land such as PIK Zemun, PKB Beograd, Agrobacka, than expected in the market at the time. Serbia launched a new privatization concept with a system of issu- company were sold for USD 800 million. Following the Orange Revo- ing and distributing shares in two rounds. In the first round, 10% of and others. The government has announced that privatization pro- lution that year the privatization and its results were cancelled by the The banks quickly seized the opportunity that arose to: (i) raise addi- shares were transferred to state funds without consideration, while up cesses will be initiated for most state-owned companies at the very new government, and the money returned to the unsuccessful pur- tional capital; (ii) strengthen capital ratios, particularly given the appli- to 60% of shares were distributed to employees free of charge. In the beginning of the government’s term of office, and that the Telekom chaser. Return of Kryvorizhstal to State ownership and then re-sale cation of Basel III reforms; (iii) address capital deficiencies under the second round the remaining shares were sold to the shareholders from national telecommunications operator, parts of the Elektroprivreda were among the key promises by new President Victor Yushenko and second Blackrock review; and (iv) with respect to Alpha and Piraeus, the first round with discounts and a 6-year payment period. However, Srbije state electric company, the Serbian Zeleznice Srbije railways, the his “comrade-in-arms” Yulia Timoshenko. The new government kept partially repay state aid received in 2009. this concept was unattractive, as individual rights to free distribution Dunav Osiguanje insurance company, and the Galenica pharmaceuti- its promise and re-sold Kryvorizhstal at an open auction to Mittal Steel and to discounts in payment for shares were based on employees’ cal company will be up for sale. Strategic partners will be sought for Germany GmbH for USD 8 billion (10 times more than the price paid The second recapitalization took place between April and May 2014, years of service, and according to the official exchange rate for the the Belgrade Airport and the Serbian Lottery, as will a solution for the by the first “investor”). raising EUR 8.3 billion from the private sector and resulting in the Deutschmark, while the actual exchange rate for the Deutschmark ac- RTB Bor mining complex and Srbijagas gas company. The govern- HFSF’s dilution. cording to which the company was evaluated was several times higher. ment is preparing new energy projects with value of up to EUR 8 Unfortunately, in 2010-2013 Ukraine faced another difficult period of The second recapitalization dramatically changed the Greek banking Like the one before it, this privatization model was also the product of billion. Infrastructure projects have already been arranged and prepa- business history related to the governance of criminal President Ya-

CEE Legal Matters 60 CEE Legal Matters 61 Experts Review Experts Review nukovich and the concentration of key business assets in the hands of the agenda mainly in this context. Thus, contestation of the cadastral value of land plots (as bases for (involving a share deal), as opposed to direct privatizations (which are the President, his family, and other close associates. calculation of the repurchasing price of a site during privatization) usually asset deals)) first undergo a restructuring. Once this process The applicable privatization procedure of land plots by the owners of in most cases is quite successful, but the process itself takes a lot of has been completed companies are offered for sale to private inves- The privatization processes during this period were mostly unfair, un- these buildings is rather simple. The most commonly-disputed matter time. Quite often after a successful contestation of the cadastral value tors. The potential investors then have two challenges: (a) limitations clear, and heavily corrupted. The most prominent case was the pri- in this procedure is the question of the repurchase price: by law, it is a competent authority initiates a new revaluation within an administra- on acquisition of 15% of the shares in the company; and (b) subse- vatization of the Ukrainian telecommunications giant Ukrtelecom. defined as equal to the cadastral value of the land plot. tive procedure that eventually ends with return to the original cadas- quent management of the process of acquiring shares from dozens or Notably, the process was restricted to those companies in which a tral value after all. Modification of the legislation regulating the state in some cases hundreds of shareholders. The question of how to determine the price of a privatized land plot state had more than a 25% stake and those companies which already cadastral assessment is planned now to limit the use of such revalua- has become especially pertinent now because, after July 1, 2012, the had a substantial share in the Ukrainian telecommunications market. tions in administrative proceedings, and also to increase the term of The first challenge – the legal limit on acquisition of shares – prohibits ability to apply for preferential price at privatization is only rarely avail- As a result the company was sold to the only participant – the Aus- contestation of determination results of cadastral value in the com- employees (including farmers and fisherman) from disposing of their able, though before that date it was a matter of right. trian company EPIC – that then indirectly re-sold Ukrtelecom to the mission and to establish obligatory pre-judicial consideration of the shares for 2 years after the State Treasury disposes of the first portion oligarch supporting the former President. of its shares in the company. This is a sort of non-competition clause Current legislation determines corresponding disputes in the commission. imposed in favor of the State Treasury. This obstacle is manageable, as The expected result of privatization for the State is an additional boost that the cadastral value of a land Sergey Patrakeev, Partner, and Irina Dyubina, Associate, Lidings there are several legal instruments which may be used (individually or to the budget, and the benefits to the privatization object include de- plot can be established either as a in aggregate) to secure the position of the investor until the right time velopment and modernization. By signing a privatization sale-pur- result of carrying out the state ca- Poland comes to definitely purchase the shares from the employees. chase contract the purchaser undertakes to preserve the main activity dastral appraisal or upon the reso- types of the target, to conduct technical modernization, to settle any lution of a dispute regarding the Challenges of Privatization Manage the second challenge – the necessity of acquiring shares from debts of the company, to ensure social guarantees of the employees, determination of cadastral value. a great number of shareholders – requires both legal expertise/expe- etc. Grounds for the termination of such contracts include non-pay- Cadastral value is relevant as the Is has been almost 25 since the rience and psychological and sociological skills. The minority and at ment of the purchase price within 60 days following execution of the basis for calculation of land tax, privatization program in Poland the same time numerous shareholders do not usually constitute one agreement, non-execution or improper execution of the privatization rent payment rates, land privati- was launched. However, despite solid conglomerate. Various competing interests come to light in the conditions for the development of the privatization object, and non- zation rate, and other payments of the length of the period the process of acquiring shares from those shareholders. Transactional fulfillment of contractual obligations due to insolvency of the object collected by the State acting as the process is still ongoing. And it lawyers dealing with this issue often need not only basic transactional or the purchaser. owner of land. also looks like we will be involved skills, but also some familiarity with inheritance regulations and family in privatization and post-privatiza- law. Ukraine is now facing difficult economic and financial times due to The basis for carrying out a state cadastral appraisal is a decision made the plunderous policy of the former President and his cronies, and tion transactions for many years to by a relevant regional executive authority of the Russian Federation – It can be difficult – but at the same time it can also be also very excit- the annexation of Crimea and unrest in the East of Ukraine fueled come. or, where so authorized by legislation of the Russian Federation, by ing and challenging. Either way: it is doable. by the hostile actions of Russia. According to information from the local government. The appraisal is carried out en masse, rather than In Poland there are still 24 State- official web-site of FSPU there are 560 companies in which Ukraine on particular land plots – so particularities of specific plots of land owned enterprises, 172 State- Thus, privatization involves many aspects beyond the strictly legal. As holds stakes of different sizes. Privatization of State-owned objects are not taken into account – and the results are approved by the State owned companies, and 47 compa- such it also brings M&A transactions much closer to society and to may serve as a good source of budget revenues. Privatizations of authority which initiated the appraisal. nies in which the State Treasury holds a majority stake. everyday life. And this is the real challenge lawyers should be prepared many small and middle-size objects are almost complete, and a num- to face. ber of large strategic state-owned companies are expecting their turn Cases often arise in which the re-established cadastral value of the But the number of entities to be privatized is not the only reason why Marcin Jakubaszek, Partner, Miller, Canfield, Paddock and Stone to be sold to potential investors. Among them are the Odessa pre-port land plot is several times higher than its real market price. Market price the legal and non-legal aspects of privatization are and will remain plant, a huge machine-building complex in Mariupol (Azovmash), a is determined by the results of an independent appraisal and – unlike so crucial to transactional attorneys. Instead, the many elements of chemical giant in Sumy (Sumykhimprom), the Kharkiv turbomachin- the cadastral appraisal – is established not en masse, but individually the Polish privatization and post-privatization process are so diverse Moldova ery producer Turboatom, and others. Large-scale privatization (in- for the specific land plot. and challenging that in Poland some say that you have not lived as an cluding privatization of coal mines) is among the IMF’s demands to M&A lawyer if you have never done a privatization or post-privatiza- Privatization in Moldova: Opportunities Still Available The owner applying for privatization of a land plot has the ability to Ukraine in exchange for substantial financial support to our country. tion transaction. challenge the declared repurchasing price of the land plot when he Election of the new President of Ukraine, as well as the shift in for- Are there any special laws re- believes that the basis for establishing the repurchasing price (100% There are several reasons for this, most of which relate especially eign policy of Ukraine from Russia to the EU, brings a hope that for- garding privatization in Mol- of cadastral value) was incorrect. To do so he must obtain the market to post-privatization transactions. Whatever the reason, being a true eign and national investors will find Ukrainian State-owned objects dova or are the ordinary private cost of a corresponding site by means of carrying out an independent transactional lawyer requires some experience with privatization pro- attractive and will participate in fair and competitive privatization pro- M&A laws applicable? appraisal, and then he may appeal to the court or to the commission cesses. cesses in Ukraine for the mutual benefit of all parties. tasked with considering disputes regarding determinations of cadas- Similar to all post-Soviet coun- Timur Bondaryev, Partner, Arzinger tral value at the territorial administration of the Russian State Register. One reason which deserves special attention is the participation of tries, Moldova adopted privatiza- Within any of these procedures the establishment of cadastral value employees in the privatization process (a right ensured by Polish law). tion laws to facilitate the transi- Russia of a land plot equal to its market cost is imposed. This also applies to farmers and fishermen as suppliers in cases of tion from a planned to a market agricultural product processing or seafood processing enterprises. economy. The first regulation of In case of a successful contest of cadastral value and formal recogni- Privatization in Russia: Contesting Determinations of the early 1990s allowed for pri- tion of the market price, the price of the land plot and tax payments Employees’ participation includes three substantial rights: (a) the right vatizations to be carried out in all Cadastral Value in Privatizations of Land will be calculated from its market price. to acquire up to 15% of shares in the share capital of the company set economic sectors, including the social sector. up as a result of the commercialization of a State-owned enterprise Unlike in most European juris- As establishment of market value of a land plot is almost the only (i.e., a stock option); (b) the right to appoint some of the members of dictions, land plots and buildings instrument for defining a fair repurchasing price of a land plot now, Today, all privatizations are regulated by the Law on Administration the supervisory board; and (c) the right to appoint a member of the aren’t considered uniform real currently a large number of claims are raised before the court chal- and Divestiture of Public Property of 2007, with the exception of management board. estate objects in Russia, and as a lenging the cadastral value of land plots – and that number continues the privatization of public newspapers, which is regulated by a law specific to it. result there are situations where to increase, as a majority of cases succeed, causing the cadastral value The first of these rights may be the most crucial in the subsequent a building and the land plot un- of land plots to decrease. Thus it should be noted that within consid- transformation and M&A processes. Someone who has never gone What are the most important past privatizations of Moldova? der it have different owners. In eration of similar affairs questions may arise on which there haven’t through the management and acquisition process of former State- many cases, the State owns the yet been decisive precedents. For example, whether the tenant plan- owner enterprises transformed into State-owned companies may not The energy sector was the first in the privatization wave. The initial land, while individuals own the ning to redeem the land plot can challenge cadastral value. Generally imagine challenges it brings. goal was to break up the existing monopoly and share out the activities buildings or other constructions tenants are refused in their claims, but several recent judgments have of generation, transmission, and distribution among different entities. thereon. As a result, privatization sustained the claims of tenants of land plots regarding the determina- Many of the commercialized state-owned enterprises (commerciali- In 1997, the state company Moldenergo was divided into entities for of land plots in Russia remains on tion of cadastral value proceeding from their market costs. zation constitutes the first step of so-called “indirect privatizations” electricity production (i.e. CET-1 Chisinau SA, CET-2 Chisinau SA,

CEE Legal Matters 62 CEE Legal Matters 63 Experts Review Experts Review and CET-Nord Balti SA) and distribution (i.e. RE Chisinau SA, RED registration certificate and the incorporation documents and financial process. Nord SA, RED Nord-Vest SA, RED Center SA, and RED Sud SA). A statements for the previous year, the offered price and commitments Croatia cash privatization followed in 2000, when the Spanish Union Fenosa to be undertaken, as well as a detailed investment program. In addi- Major Privatizations of 2013 company acquired three of the distribution companies: RE Chisinau tion, the bidder must provide a bank guarantee of at least 50% of the Sale of Crown Jewels Although numerous real property assets were privatized (often in re- SA, RED Center SA and RED Sud SA. The transmission function has initial price, which, for investment tenders, must cover at least 25% of turn for small amounts of money) in 2013, it was primarily a year of The recent revival (2013-2014) remained under state control. the total investment value. There is also a participation fee of MDL energy privatizations. With the privatization of the last eight distribu- of privatization in Croatia is, 200,000 (about EUR 10,600) for each property/asset bid for. paradoxically, not driven by the Despite countless efforts at de- tion companies, the privatization of all state-owned electricity distri- country’s recent membership in monopolization, the gas sector is The investor is entitled to carry out full financial, legal, and technical bution companies was completed and USD 7.3 billion was generated the European Union, but instead still dominated by a single suppli- due diligence of the target. The investor also has the right to receive for the State. Additionally, several electricity generation assets and a by a simple desire to save the state er. In 1995, the major public com- access to privatization documentation, visit the company, and request significant natural gas distribution company (i.e. Baskent Dogalgaz budget. The budget deficit was pany Moldova Gaz was converted that management discloses all material information. Dagitim) were privatized in 2013. (and still is) so huge that the cur- into a joint-stock company. Later, A list of major 2013 privatizations in Turkey can be found in the version of this rent Government has been forced since gas prices did not reflect the As of 2008, a sale and purchase agreement cannot be negotiated di- article that appears on www.ceelegalmatters.com to put its crown jewels on the ta- high costs of gas provision, the rectly. The sale of public assets, irrespective of the method of pri- vatization, is subject to competitive bargaining that takes place in the ble and try to sell them as fast and state offered company shares on Surprisingly, none of the completed privatizations constituted the presence of all participating investors. Nonetheless, the APP may end as efficiently as possible. the basis of its public debt – a most important privatization news in 2013. The cancellation of a ten- the process at any stage without selecting a winner if the offered price novel privatization approach. As a der made more impact. The PA cancelled the tender for the privatiza- Accordingly, the largest Croatian insurer (Croatia osiguranje), the last is unsatisfying. The sale and purchase agreement shall be signed within result, the Moldo-Russian company MoldovaGaz SA emerged in 1998, tion of eight highways and two bridges which had been held in De- remaining state-owned bank (Postanska banka), a network of motor- 30 days after a winner is designated. with 51% of shares owned by the Russian Gazprom and 35% by the cember 2012. The highest bid was USD 5.72 billion for the operating ways – a source of national pride – were offered to investors in the Moldovan state. Octavian Cazac, Partner, and Diana Ichim, Junior Associate, rights for 25 years. middle of 2013. The results have been quite ambiguous. Turcan Cazac Law Firm Recently, state minority stakes in Hotel Jolly Alon (34.96%) and the Major Privatizations of 2014 The insurance company sale was closed on April 22, 2014 and the new meat manufacturer Carmez SA (0.110%) were sold. owner of 39.05% of shares is Adris – he largest Croatian tobacco pro- As of May 2014, the total value of privatizations completed in 2014 ducer. The sale price had the largest premium on share in Croatia ever What are the assets that the state is not willing to privatize? Turkey is USD 725 million. So far, the most significant privatization of 2014 (the market price was around USD 700 and the purchase price was Recent Developments on Turkey’s Privatization has been the privatization of Salipazari Port (Galataport), with an ap- The Moldovan Government has established a list of assets excluded around USD 1350) which makes the premium on share 87.4% (the proximate bid value of USD 702 million. The winning bidder now has from privatization. The list, which is subject to amendments by the Adventure average premium was around 46.5%). Also, the new owner is obliged the operating rights for Istanbul’s only cruise port for 30 years. The Parliament, includes the national Cricova SA wine manufacturer (100% to make a capital increase of around USD 150 million, whereupon Turkey started its privatization initial tender in 2005 resulted in an offer of EUR 3.5 billion that was state ownership), the Franzeluta SA bakery (52.51%), the MoldovaGaz Adris will hold a majority stake (60%), and the State will remain able adventure in 1984, with the trans- eventually cancelled the following year. SA gas supplier (35.33%), the Moldexpo SA international exhibition to affect only a few major shareholders’ decisions (by holding 28%). fer of incomplete facilities to the Intriguingly, Adris won the tender in competition with a potential stra- center (100%), the Moldova-Film SA film production studio (100%), Additionally, the privatizations private sector for completion or tegic investor – the Polish insurance company PZU, which, though and the Chisinau heating power stations (100%), among others. of (i) Kemerkoy Thermal Power establishment of new facilities in being more skilled in the relevant industry, was not ready to offer such Plant (“TPP”), Yenikoy TPP and Notably, in February the Government suspended the privatization their place. Since 1985, Turkey’s a huge premium. Even more interestingly, Adris has in the past five Kemerkoy Port Area for USD of 13 of the largest companies, citing a lack of transparency in the privatization portfolio has in- years invested significant amounts of cash in the tourism and agricul- 2.671 billion; (ii) Catalagzı TPP process of privatizing sizable companies. These included the national cluded shares in 270 companies, ture sectors, and is now entering a fourth, completely different indus- for USD 351 million; and (iii) airline Air Moldova, the Moldtelecom telecom monopoly, the Tutun- 22 incomplete facilities, 1439 real try sector! These moves raise the eyebrows of insurance experts who Fenerbahce-Kalamıs Marina for CTC tobacco company, the Aroma and Barza Alba spirits companies, property assets, eight highways, are concerned about whether the company will be able to, in light of USD 664 million, are all still in the and the national circus Circul din Chisinau. two bridges (i.e., the Bosphorus its potential over-stretching, preserve its market-share. and Fatih Sultan Mehmet Bridg- approval phase. In the past few What are the current efforts of the state in Privatization? es), 120 operation facilities, six ports, and the licenses for the national weeks, the final bids for many pri- The tender for sale of Postanska banka was a different story. Initially, lottery and vehicle inspection stations. In addition, certain companies vatizations were submitted to the plenty of interest was shown by important players from the regional Large-scale privatization is over. The state currently focuses on PPPs and real property assets in the portfolio were removed from the pro- PHC. Among these are the April banking market who lined-up for the tender. However, over time – and on developing a list of goods, services, and works to be supplied cess for various reasons. In the past 29 years, more than half of the 30th privatization of the assets and operating rights of Yatagan TPP, and after due diligence – interest started to dim, and at the end, only through public-private partnerships. Such projects are already under- companies in the privatization portfolio have been privatized. Today, the May 9th transfers of the operating rights of Esendal and Isiklar Erste & Steiermaerskishe Bank and OTP Bank remained in the race. way in the healthcare sector (equipping the radiology, hemodialysis, 23 companies, 565 real property assets, 37 operation facilities, two Hydroelectric Power Plants (“HPP”), the Kayakoy HPP, and the Dere In December 2013 only Erste & Steiermaerskishe Bank submitted a and rehabilitation sections of medical institutions with modern tech- ports, eight highways, two bridges, and the licenses for the national and Ivriz HPPs, and the May 28th transfer of the operating rights of binding offer – and it was around USD 37 million lower than the nology), sports (building a multi-functional national stadium with a lottery remain in the privatization portfolio. the Derince Port. non-binding offer (USD 180 million). The Government decided to re- capacity of about 30,000 seats), new technologies (creating a techno- ject this offer as inadequate because the offered share-price was 24.5% In addition, the PHC has announced the closing dates for submission logical park with at least three local companies by the end of 2014, The total value of privatizations completed between 1985 and 2014 lower than the market price at the time. Since then, the Government of final bids for the following privatizations: The National Lottery which is to become a “smart city”) and public transportation (modern- is USD 59.3 billion. Between 1985 and March 2014, while the net has been striving to find another model (or another buyer) for the (June 27), Hidrogen Peroksit Sanayi (July 14), and Anamur, Bozyazi, izing the bus station services offered by the public enterprise “Garile proceeds generated from privatizations totaled USD 52 billion, the bank. si Statiile Auto”). total revenue (including dividend income, interest and other income) Mut Derincay, Silifke, and Zeyne HPPs (August 6). is USD 58.2 billion. The generated total revenue reached its peak in Finally, the largest and the most important privatization (formally How can an investor keep track of privatization opportunities 2013, with USD 12.5 billion. According to the Turkish Statistical Institute, over the past decade, called “monetization”) regards a 12500-kilometer network of motor- in Moldova? Turkey has experienced stable economic growth with an average an- ways across the country. The State engaged various advisers who, at Overview of Legal and Regulatory Framework nual real GDP growth rate of 5%. One of the main drivers behind the end, concluded that a concession model would best fit the needs Privatization opportunities are announced by the Agency of Public this economic success is privatization. Considering that there are still and expectations of the State and potential investors. The level of Property (“APP”) on its website: www.app.gov.md Turkey’s first piece of legislation related to privatization was enacted many significant items in its portfolio (especially the package of eight expectations is fairly high – the Government expects to receive around in 1984. When the need for comprehensive and fundamental legisla- highways and two bridges), and that this portfolio is expanding each USD 4.2 billion for a 30-50 year concession. Though this number is How can an investor engage in a privatization? tion became obvious, the Privatization Law was enacted. Under the year, it seems that Turkey’s privatization agenda may continue to be widely considered as unrealistic, the line-up of bidding consortiums is Privatization Law, the Privatization High Council (the “PHC”) and Foreign investors may participate in local privatizations as long as they active in the upcoming years. impressive, and 4.2 billion may not be unreachable after all. Compa- the Privatization Administration (the “PA”) were established to carry fulfill customary legal criteria and provide the requisite information. nies such as Goldman Sachs/Vinci, Macquarie, Cintra, and Strabag de- out privatization procedures. While the PHC is the ultimate decision- Okan Demirkan, Partner, and Burak Eryigit, Associate, An investor would first submit a request for participation alongside a serve high respect and promise tough competition and an interesting making body, the PA acts as the executive body for the privatization Kolcuoglu Demirkan Kocakli Attorneys at Law

CEE Legal Matters 64 CEE Legal Matters 65 Experts Review Experts Review auction for the winning prize. However, despite the interest of con- the proposed law back to the President for promulgation, the Presi- those municipalities and state institutions. sortiums armed with an army of top international and local law firms dent would no longer have the right to ask the Parliament to recon- Hungary and financial advisers, the tender process hit a snag. Reportedly, due sider it further. The Government initiated a complete revision of the contractual to internal disagreements and other administrative problems, the data PPPs In Hungary framework of all completed and existing PPPs. They announced that If it is passed in the form of the current draft, the proposed law would they were considering the termination of all PPP contracts and the room is still empty, no other transactional documentations have been During the early 2000s, the Hun- replace the existing 2010 PPP Law in its entirety. As such, the pro- takeover of the projects by the state. They proposed to establish a offered for review (such as, in particular, the concession agreement), garian Government strongly sup- posed law should be a step forward in general, in providing a single co- separate fund in the central state budget to cover the termination costs and there are no firm indications when the process will be started in ported the implementation of herent (and, hopefully, stable) legal framework for PPP projects, not- of PPP contracts but, as far as we know, this action has never been earnest. Such postponements of process (which in this case started in public-private partnership pro- withstanding that there is political debate over some points of detail. implemented. autumn 2013), usually bring a “the magic has gone” sentiment to the grams (PPPs) in Hungary. At that bidders, and passion for the deal evaporates rapidly. It should however be noted that the proposed new law appears to time, PPPs were considered to be Currently, we are only aware of a few projects that have been termi- be limited in scope and that it will not regulate all PPP projects. The instrumental in the revival and nated. The contracts of the most important projects (for example the With public perception of the monetization as a sale of national pride, new law is apparently intended to regulate specifically only those PPP the required upward surge of the M6 motorway project) were left unchanged and appear to be running and upcoming parliamentary elections in 2015, the current Govern- projects in which the revenue of the private partner will primarily de- Hungarian economy. Thus, Hun- smoothly. Some of the terminated PPP contracts are subject to on- ment has less and less time to successfully close this demanding deal. pend upon payments from the public partner, such as the provision of gary took the lead in the imple- going legal proceedings launched by private investors challenging the On the other hand, if there are no proceeds from this privatization, prisons, public hospitals, and defense facilities. PPP projects in which mentation of PPPs in the CEE right of the state to terminate their contracts and/or the amount of what will save the budget and how will the gaps be closed? Will the the private partner’s revenue will be derived mostly or entirely from region. compensation offered by the state. inevitable need for money be more important than the political future payments from users appear to fall outside the scope of the new law of the current coalition government? The European Union also promoted PPPs in Hungary by providing and will presumably continue to be covered by the existing legislation In our view it would not be appropriate to judge all PPPs in the same guidance and support to the Hungarian Government in order to en- on the concession and operation of public assets. Classic models of manner. It is fair to say that there are a number of projects which are There are only a few jewels left to be offered instead. One of those sure compliance with applicable EU legislation. Most of the projects such projects would be toll roads and bridges. It will be interesting to probably rightly considered to be unnecessary, expensive, and not of- is ACI, the largest network of more than 20 marinas on the Croatian were structured and documented in line with the EUSTAT require- see whether the Romanian government regards projects which depend fering value for money. However, other projects are undeniably for the Adriatic. The sign that something may be cooking with ACI is the ments so that the projects did not increase the deficit of the state partly on shadow tolls and partly on actual tolls as falling within the benefit of the country as a whole, since they provide value for money. recent announcement that strategic legal, financial, and operational budget. In addition, there were remarkable changes in Hungarian law scope of the existing concession regime or under the proposed new We believe that it is uneconomical to terminate a project if it serves due diligence of the company has been initiated. Then there is the with a view to creating a robust legal framework for PPPs. Changes law. the needs of the people of Hungary and contributes to the develop- Croatian Electricity Company (HEP). Only Only the production seg- included amendments to the State Budget Act, the Civil Code, the ment of our country. However, any PPP projects which do not fulfill ment of the company can actually be sold under the law, but one may As is the case with many pieces of Romanian legislation, it is expected Municipalities Act, and other fundamental laws of Hungary. these principal criteria and thus are not true PPPs should be revised ask if even this is realistic at all, since HEP is the largest state-owned that the implementation of the proposed new PPP law will depend and restructured as soon as possible. We saw a number of successfully completed projects in the infrastruc- contributor to the state budged. upon detailed subordinate legislation (norms). At the time of writing ture, education, cultural, and healthcare sectors as well as in judicial ex- Laszlo Hajdu, Partner, HP Legal | Hajdu & Pazsitka Law Office no draft of the norms was available and it is understood that they are Damir Topic, Senior Partner, Divjak, Topic & Bahtijarevic ecution. The most successful projects were the motorway projects (for still being worked on, which may explain the apparent lack of progress example, the M6 motorway stretching from Budapest to the southern of the proposed law itself since March 2014. The new law envisages Lithuania borders of Hungary), student dormitories, cultural centers, and pris- Romania that the norms will be approved by a Government decision within 90 ons. Privatization In Lithuania: Current Trends and New PPP Legislation In Romania: When It Will Come days of the new law itself entering into force. As Romania is in com- petition with other countries for funding for PPP projects, it is to be Perspectives And What It Will Cover As PPPs became more popular in Hungary an ever greater number hoped that the passing of the new law and the issue of the norms will of State and Municipal projects were intended to be implemented General It appears that, after many delays be coordinated, so that potential private PPP partners and investors in this scheme. This artificial promotion of the PPPs proved to be in Parliament and a rejection by can consider them as a coherent whole. I would certainly not expect unsustainable when the global financial crisis arrived in Hungary at The privatization process in Lith- the President, Romania should any potential PPP investors to make any decision about investing in the end of 2008. Realizing the serious contagious effects of the crisis uania – which lasted for more soon have a new PPP law. Romania until both the new law and the norms are available. Legisla- on the Hungarian economy, the Government of the time suspended than 20 years – is about to end. tive instability is also the curse of investors and it is to be hoped that all ongoing PPPs. The most hectic period has al- Although in other countries PPP the Government will take time to ensure that the new law and the ready passed and the biggest ob- projects are organized as ordi- norms do form a single coherent and stable package which will not In 2010, there were general elections in Hungary and the new right- jects have already been privatized. nary commercial contracts under require changes to be made by Emergency Ordinance, as was the case wing Government (winning 2/3 majority in the Parliament) cancelled As the Lithuanian state-owned general public procurement leg- with the existing 2010 PPP Law. all ongoing and future PPP projects. Furthermore, they declared all Property Bank and State Property islation, Romania has chosen to PPP projects to be among the biggest failures of the previous left- Fund, which are authorized to In conclusion, the new law is unlikely to be successful unless it recog- provide a specific legislative struc- wing Government, and accused the program of significantly under- perform privatization procedures, nizes that the risk in a PPP project where the revenue flow is derived ture to regulate this. The current mining the growth potential of the Hungarian economy. This ap- do not have the high amount of from the state is primarily borne by the private partners, particularly legislation was passed in 2010 and proach completely accorded with the economic program of the new privatization work they did 20 years ago, the merger of these enter- the finance providers. Many models of PPP projects work in other EU has since been amended. It is fair to say that it has not been a resound- Government. They announced their intention to strengthen the state’s prises is expected in the near future. ing success in attracting PPP projects to Romania and drafts of new countries in which it has been recognized that in order to be bankable, position and to minimize the participation and influence of the private legislation were circulated for the comments of the legal and business the project must commit the public partner to pay for the asset or ser- sector in the economy. They were of the view that the global crisis was Current Privatization Trends vice over an extended period. Private partners and their bankers need community some while ago. Progress of the proposed new law has a consequence of the failure of the efficient operation of the markets, One of the recent major privatizations was performed in 2012 when to be convinced their revenue stream is assured over the full payback not been without difficulties and political controversy: the President which could only be cured if the state became a key player by acquiring the Lithuanian embassy building in London was privatized and the period, regardless of which political parties are in power from time to refused to promulgate the new law when it was sent to him by Parlia- a dominant position. They started nationalizing the key sectors of the state budget was replenished with more than EUR 6 million. Lithu- time over that period. ment in December 2013 and asked Parliament to review the draft, par- Hungarian economy (for example, the energy sector) and increasing ania is also trying to sell its embassy building in Warsaw. However, the ticularly as regards concerns on rights to terminate PPP projects early Neil McGregor, Managing Partner, McGregor & Partners the weight and influence of state institutions. building in the Polish capital – initially valued at EUR 2.6 million – has on the grounds of public interest. Since then, the Senate has however gone unsold for a few years now, and real estate experts are advising As part of its first actions, the State Budget Agency investigated the fi- re-adopted the proposed law without changes and it has now passed the government to reduce the price. If the government follows this nancial and legal background of all completed PPP projects. The most back to the Chamber of Deputies for a final review. For expanded versions of our advice this might be the next interesting privatization object. Another important conclusion published by the State Budget Agency was that interesting object is a huge territory of 1,8191 hectares in the very The last active steps to pass the law appear to have been taken in interviews and articles and other PPPs in Hungary were extremely expensive and imposed significant heart of the Vilnius old town – the former territory of the Red Cross March 2014 and, bearing in mind the impending summer parliamen- burdens on the central budget and the budget of local municipalities. hospital – which the purchaser may transform into commercial and tary recess and the presidential elections later this year, it is not clear premium content visit: The report also asserted that the operation of certain municipalities residential real estate. It will be sold by public auction. when the new law will be issued, although there appears to be political www.CEELegalMatters.com and state institutions was limited by the maintenance of PPPs. As a will by the Government for this to happen. When Parliament sends result, the report concluded, the Government should provide relief to Also in the local market minor objects like apartments, garages, ware-

CEE Legal Matters 66 CEE Legal Matters 67 Experts Review Experts Review houses are popular among buyers, as the prices are usually reasonable in the country. cern is certainly not negligible and increases the lack of trust in foreign construction of Olaine prison, and such objects require low maintenance costs. Privatization of the investments, which at the same time appear to be one of Slovenia’s where procurement documenta- remaining large and more expensive real estate objects is pretty slow as Two of the fifteen companies to most convenient emergency exits from the economic crisis and in- tion was already drafted. Howev- real estate objects are sold along with land plots and the banks refuse be privatized, Helios and Fotona, debtedness. er, a last minute decision stopped to finance such transactions – banks do not finance acquisitions of have already been sold, while the further PPP progress. The prin- land – therefore, many public auctions fail. sale of Adria Airways, Aero, Aer- The European elections of May 25, 2014, will probably be an indica- cipal argument for this turn was odrom Ljubljana, Elan, Cinkarna, tion for the national parliamentary elections to be held later on (cur- that direct and exclusive allocation Common problems of privatization NKBM, Telekom Slovenije, and rently the date is not yet set). The latter will however be decisive and of finances from the state budget Privatization of the few remaining state objects is problematic. Ac- Zito are currently in progress. will surely set the pace and direction for future developments in the would allow more transparent su- cording to a report prepared by the National Audit Office of Lithu- Companies to be privatized oper- field of privatization in Slovenia. pervision of expenditure as well ania in 2013, many of the objects are not formed as separate units, ate in various sectors, including as a more predictable realization or formal registration has been performed improperly, or real estate communications, transport, bank- Mojca Muha, Partner, and Dalia Cerovsek, Attorney Trainee, of the project than entering into Miro Senica and Attorneys objects are illegally occupied by natural persons and eviction of them ing, food & beverage, chemicals, a public-private partnership to implement it. In addition, that decision is complicated. electrical equipment, industrials, coincided with the unsuccessful purchase of vehicle speed traps for and health care. Noticeably absent from the list of companies to be the state police, which was often publicly (and incorrectly) referred In addition, the National Audit Office of Lithuania has stated that Latvia privatized are Luka Koper (Slovenia’s largest seaport and logistics to as a PPP project. The conclusion has to be that a clear need ex- the land plots needed for exploitation of the object have not been company), the Krka pharmaceuticals company, the Peko shoe manu- ists for a win-win test case to prove not only to the public but also to formed and properly registered within the state. According to the ju- PPP Cautiously Revives in Latvia facturer, and the Petrol gasoline retailer decision-makers themselves that PPP is an effective tool for involving risprudence of the national courts, it seems that the latter problem is The beginning of the PPP story additional investment. quite common. The other common problem is that the object may be Uros Cufer, the Minister of Finance, recently stated that the last two in Latvia can be dated to February situated on a plot possessed by natural person or private legal entity. of these companies are included in the current plan for the sale of 16, 2000, when the first Conces- Currently, effort in the PPP field is being concentrated on its tradi- This situation usually necessitates negotiating lease conditions or even state assets, which has not yet been passed by the National Assembly. sions law entered into force. Part- tional track, in particular on infrastructure development. For example, going to court to establish easements. According to unofficial information, the government is now preparing nership in 70 concession projects two larger projects are in the spotlight, in particular the Kekava by- Most state entities do not conduct any activities or are being liquidated to sell state equity investments in 80 different companies. were launched on the basis of that pass road project and the Riga by-pass road. Preliminary investment in or bankrupt, and therefore do not interest potential buyers. law until October 1, 2009, when these projects could start in 2017-2019. However, decisions to process The largest profit is to be expected from the sale of Telekom Sloveni- the Law on Public-Private Part- them through PPP procedures have still not been made. Privatization of strategic companies je, the largest provider of communication services in Slovenia. Al- nership broadened PPP options As mentioned above the core reason for slow progress in decision- There are several major state-owned strategic companies which could though the sale of a 75.5% stake of the company will open the Slo- as well as confirming decision- making is very likely uncertainty and unpredictability of a project’s be privatized. It is believed that the privatization of these companies venian market to foreign investors, the government’s decision to sell makers’ interest in developing that course. One way of simplifying the legal element of cooperation is could improve the current condition of these objects and the mon- the equity investment in Telekom Slovenije has sparked controversy, as style of partnership. However, the making standard legal documentation more available, both for pro- ey obtained would help finance other strategic state projects – and Telekom Slovenije is among the biggest tax payers in Slovenia, with an 2009 PPP reform coincided with the start of the global economic curement and for entering into an agreement. Nevertheless, the rest relieve taxpayers from the burden of maintaining them. Such major annual profit of several million EUR even in times of recession, and crisis, which hit Latvia even more than other CEE countries. The sub- depends on the ability of the state or municipality to follow project state strategic companies as Klaipedos Nafta (the state oil company, is also among the least indebted European telecommunications com- sequent international loan program for Latvia contained a prohibition development through all its stages. one of the most up-to-date terminals in Europe), Lietuvos Energija panies. Regardless, the announcement of the privatization of Telekom on state and municipalities entering into any long term PPP relation- (the state energy company), and Lietuvos Gelezinkeliai (the national Slovenije had a major effect on the stock market, as the sale of com- ship. In fact, all decisions on further PPP projects were frozen for Theis Klauberg, Partner, and railway) would be of great interest of private investors. It must be pany’s shares increased significantly. Deutsche Telekom is expected to three years and were allowed again only recently after closure of the Esmeralda Balode-Buraka, Senior Associate, bnt Attorneys-at-Law noted that these strategic companies have special status provided by be the most likely buyer of Telekom Slovenije. international loan program in 2013. Thus a new start is awaited for law, and investment into them must satisfy certain requirements (e.g., PPP projects. Twenty potential investors showed interest in buying Aerodrom Lju- Bulgaria a potential investor must be a member state of the EU or NATO). bljana, the company operating the largest airport in Slovenia. Another The majority of the projects in the first decade of this century were Also, it is not possible to acquire a controlling stake of shares of such company to be privatized is Elan, one of the top manufacturers of connected with public transportation services for regional municipali- The Special Rights of State’s Preferential Share in companies, as the law requires that the state possess more than half skis and snowboards in the world. The biggest controversy with re- ties. The others related to public utilities such as heating and waste Incumbent VIVACOM: Revoked. What Now? of all voting shares. Moreover, privatization of strategic companies spect to Elan is the recent entry of the Finn Jari Robert Koivula into management services, construction and management of public always attracts public attention and involves long political discussions; the sales process, interrupting the key stage of sale coordination with schools, municipal data processing services, and so on. Accordingly, therefore, the process is inevitably drawn out. As political discussions the American financial fund WAB Capital. Koivula introduced himself given the local nature of those projects, their total value was a mere are still continuing, a decision on a possible sale of these companies as an interested party and was given permission to conduct due dili- LVL 31 million (approximately EUR 45 million). Importantly, no road has not yet been reached. gence of Elan. Shortly after being given insight into company’s pro- construction or similar scale projects have so far been carried out in Ruta Radzeviciute, Partner, and Aurelija Grigoraviciute, Lawyer, FORT prietary and confidential documentation, Koivula disappeared without Latvia. The task of boosting PPP infrastructure projects is expected to submitting an offer and is supposedly being sought by the police. be one of the most challenging for decision-makers during the com- ing years. Slovenia Many potential buyers of state-owned companies, from financial Privatization in Slovenia investors to strategic buyers, became worried by the recent resigna- During the PPP moratorium period, voluminous research was carried tion of the Slovenian Prime Minister, Alenka Bratusek, under whose out in cooperation between the Latvian Investment and Development In 2004, 65% of the capital of the incumbent telco Bulgarian Tel- Almost one year since the Sloveni- leadership the privatization process was approved. The Minister of Agency and the Norwegian Financial Mechanism regarding the pro- ecommunications Company (VIVACOM) was sold to Viva Ventures an National Assembly gave a “go- Economic Development and Technology, Metod Dragonja, reacted motion and development of PPP in Latvia and the impact of PPP Holding by the Bulgarian Government in a privatization procedure. ahead” to the sale of state equity immediately and assured the investing community that all privatization on the quality and accessibility of public services. This research pro- In 2005, a public offering of the remaining shares was launched with investments, the privatization pro- processes will remain intact and will be carried out as planned, regard- ject lasted from 2008 until 2011, and included within its framework 34.78% of the company’s capital being offered on the Bulgarian Stock cedure in the country is generat- less of political perturbations. several different feasibility studies, including the development of pro- Exchange. During the next few years the company went through sev- ing critical reactions from experts. curement documentation for a PPP project on the construction and eral major restructurings, in the process becoming, it claimed “leader While the majority of European Closely monitoring the privatization process are Slovenian workers’ maintenance of Olaine prison, a study for a project on constructing in developing modern telecommunication services.” countries are still struggling to and maintaining custody spaces in Skirotava and Kurzeme, and a study unions, which draw attention to a common pitfall of privatization – Although the company was fully privatized, the State retained some recover from the economic crisis, for the project to develop infrastructure and maintenance for the main layoffs after company acquisition. Such consequences unfortunately special rights through the holding of the so-called “golden share.” A the success of current privatiza- state universities: the Technical University, the University of Latvia, are not rare, and are reported to have happened in one of the recent golden share is a commonly-used type of special right which is typi- tion in Slovenia is being called and Riga Stradins University. sales, despite the buyer’s promises that layoffs would not happen. cally enshrined in a company’s Articles of Association. Its alteration into question, especially in light of Investment in those studies was particularly significant regarding the is subject to governmental consent and it is usually held for a definite recent affairs connected to the sale processes and political turbulence Considering the current high unemployment rate in Slovenia, this con-

CEE Legal Matters 68 CEE Legal Matters 69 Experts Review Experts Review period of time. Typically, the golden share enables the State to veto Although the OIAG is dependent on a privatization mandate of the economy, opening the door to the process of privatization. In addi- specific events and structural changes in the company. Austria Austrian Federal Government, it is free to determine the specific tion, a series of laws were adopted to provide a further regulatory structure of an individual privatization, within the scope the OIAG– layer and to sanction the creation of private property and subordinate The existence of a preferential share in the Articles of Association of Privatization in Austria Act. Additionally, the OIAG has to consider the interests of the re- rights. VIVACOM entailed the limitation of certain significant rights of the State-Owned Enterprises in spective company and the Republic of Austria in all privatizations it shareholders, related both to resolutions of the General Meetings of Austria undertakes. Law no. 7501, “On Land”, dated Shareholders and to decisions of the company’s boards. The prefer- July 19, 1991, and law no. 8053, ential share could only be held by the Ministry of Transport, Infor- In order to renew its largely de- Privatization Waves in Austria “On Transfer Without Com- mation Technologies and Communications, a State body, or another stroyed industries after World War pensation of Agricultural Land Austria has a long history of trans- representative of the State. The golden share entitled the State to veto II, the Republic of Austria has ex- Ownership”, dated December 21, ferring governmental responsibili- a broad range of decisions of the Managing Board, such as resolutions perienced an extended period of 1995, stipulated that agricultural ties to publicly-held companies. on the disposal of assets of strategic importance for the business of strong governmental intervention, fields, which had been previously For example, Austria’s road pric- the company, approval of employee support programs, execution or in particular due to nationalization controlled by collective and state ing and road maintenance is han- amendment of agreements between VIVACOM and any of its share- measures of important industry farms, were to be divided into dled by a publicly-held company holders, persons with an interest in a shareholder, or affiliated par- sectors including manufacturing plots and distributed to the collec- called ASFINAG. Although not ties to the shareholders. The special rights of the State also included and energy. tive members and farm employees privatization per se, the transfer the right to veto resolutions regarding amendment of the company’s in a system of family ownership. of governmental responsibilities name, its place of business and address, its term of existence, the Although Austria has successfully privatized the majority of its large to publicly-held companies is of- scope of its activity, the share classes, number, and percentage of the manufacturing industries, it is estimated that it still holds capital own- Law no. 7652, “On State Housing Privatization”, dated December 23, ten an important first step for a State’s shares, to name but a few. ership in more than 100 state-owned enterprises (“SOE”), in particular 1992, required residential properties, including apartments and houses on the regional level of its federal states (Bundeslaender). Austria also subsequent privatization. with small land plots, to be transferred into the ownership of their In the past two years VIVACOM has undergone a major transforma- owns other public institutions in their entirety, such as the Austrian na- occupants. In particular due to Austria joining the EU and in order to increase tion in that it changed its capital owner and the State’s special rights tional public service broadcaster ORF (Oesterreichischer Rundfunk). were obliterated. The Articles of Association stipulated that the pref- income for the Austrian budget, there have been several waves of pri- Law no. 7698, “On Restitution and Compensation of Properties to erential share could be redeemed (buy-back) at par value, at the option OIAG vatization in nearly all kinds of state-owned areas, including telecom- Former Owners”, dated April 15, 1993 (which was revised by law no. munication, the cultural sector, public transport, and the research and of its owner or the company, by serving a 14-day prior written notice In 1967 Austria established a state-owned holding company to hold 9235, “On Restitution and Compensation of Property”, as amended, development sector. During the last 15 years, OIAG alone handled 24 to the other party. The transfer was possible only upon meeting the and govern a significant part of Austria’s nationalized post-war in- dated July 29, 1994), enabled families that had owned land and prop- privatizations, including some major SOEs such as the Austria Tabak investment commitments according to the Privatization Agreement. dustry. This holding company underwent several reforms and re- erty prior to 1945 to claim restitution of their non-agricultural proper- cigarette manufacturer, the Dorotheum auction house, the Vienna The holder of the golden share was obliged to accept the company’s structurings, and is now called Oesterreichische Industrieholding AG ties, or alternatively to receive other property or financial compensa- Airport, and the Oesterreichische Postsparkasse postal bank. This offer to redeem the preferential share subject to provisions of the (“OIAG“). tion. law and the Shareholders Agreement executed between Viva Ventures provided total placement and privatization gains of around EUR 6.3 Holding, the Ministry of Transport, Information Technologies and The OIAG focuses on two core functions on the basis of a special billion, mostly via the Vienna Stock Exchange. The following five years saw successive governments engage in a pro- gram of accelerated privatization; the process was carried out under Communications and VIVACOM back in 2004. Considering that the act – the OIAG-Act. Future Perspectives of Privatization in Austria preferential share played its historical role, the Ministry of Transport, the guidance of the World Bank and the International Monetary Fund. Pursuant to this act, the OIAG is primarily an investment manage- Information Technologies and Communications proposed that the The OIAG currently holds no privatization mandate for a specific During this period, the majority of small-and-medium-sized enterpris- ment body and administers its Austrian shareholdings. The OIAG has Council of Ministers adopt a decision in favor of revoking the State’s SOE. From our point of view, there still is a considerable potential for es in the country were sold, leased, or liquidated. By 1996, much of to ensure the maintenance of influence over its SOEs by either hold- special rights materialized by the golden share. privatization of SOEs in Austria, including both full privatizations as Albania’s economy had shifted into private hands. ing at least 25% plus one share of the voting share capital in each well as the complete sale of partly privatized/partly state-owned com- company (giving OIAG certain statutory approval rights) or by exert- A mass privatization program, enabling citizens to buy equity in public Hence, in September 2013 the General Meeting of the Sharehold- panies. Since the OIAG only holds three major participations, there ing influence on the basis of shareholder agreements. enterprises, also began in 1995. However, this process proved difficult ers voted to revoke the special rights of the golden share. They also are two possibilities for its development in the immediate future, both agreed upon delisting the company from the stock exchange and to implement, and it was halted in 1997. Secondly, the Austrian Federal Government can issue a privatization mainly dependent on the outcome of political discussions: Either its changing the company’s name from BTC AD to BTC EAD, as a result mandate to OIAG authorizing the OIAG to further privatize the com- role as primary state-owned holding for SOEs will be reinforced and The process suffered from lack of strategy and organization in the of the acquisition of all shares of the company by the majority share- panies it owns. other SOEs such as ASFINAG will be transferred to OIAG, or the liberalization of the market. The lack of capital available, due to an holder Viva Telecom Bulgaria EAD. Thus, VIVACOM is no longer a concept will be abandoned altogether and the remaining participations underperforming financial and banking system, also impaired the pro- publicly traded company and the State is not entitled to exercise any Currently the OIAG holds a minority share in the international oil, will be transferred back to the Republic of Austria. Either path will cess. special rights as regards the management of the company. gas and energy company OMV (31%) and the telecommunications lead to an interesting future for privatizations in Austria. provider Telekom Austria Group (28%). OIAG also owns 53% of In April 1998, the government approved the Strategic Sectors Privati- Two major consequences stem from this resolution. First, the State Rainer Wachter, Partner, and Oliver Werner, Attorney-at-Law, the shares of the postal service provider Oesterreichische Post AG. In zation Strategy and began privatization of strategic sectors, including has finally come in line with the prescriptions of the European Com- CMS Reich-Rohrwig Hainz terms of recent developments, OIAG just concluded a shareholders large, state-owned industries. Law no. 8306, dated March 14, 1998, mission and the case law of the Court of Justice of the European agreement with America Movil in order to ensure Austrian interests in provided a privatization strategy for sectors considered to hold signifi- Union in that special rights – while not completely ruled out – should Telekom Austria Group for the next 10 years. OIAG’s total sharehold- cant importance for the country’s economy. be employed only in special cases and to the extent that they do not Albania ing portfolio is currently valued at around EUR 5.6 billion. distort the free movement of capital. Second, VIVACOM has made Privatization in Albania: A Snapshot Examples include: telecommunications; posts; mining; oil and gas; for- the final step towards being a completely independent private entity At present there are political discussions about either transferring oth- ests and waters; airport; insurance companies; and state-owned second whose development is shaped by standards set by the company itself. er major SOEs to the OIAG or winding down OIAG and selling off The privatization era in Alba- tier banks. State enterprises and companies with state-owned capital its shareholdings. An amendment of the OIAG-Act could also lead nia began in 1991, following the operating in strategic sectors were, as a result of the law, also open to It is not exaggerating to say that by virtue of revoking its special rights, to the OIAG taking on new responsibilities such as the promotion of adoption of the country’s new privatization. In order for a state-owned enterprise to be privatized, the State removed the last obstacle to the independent development of small and medium-sized businesses. This is ongoing and has not been Constitution and the “On Sanc- a specific law had to be approved by the Albanian parliament. This the company subject to the rules of free-market competition and regu- decided yet by the Austrian Government. tioning and Protection of Private practice remains in force today. lation. Over the years, the preferential share proved itself an effective Property, Free Initiatives, and Pri- Legal Framework of Privatizations tool for restraining the impulses of private investors and protecting vatization” Law In the years following law no. 8306, numerous companies operating in public interests. Ultimately, every privatized company should emerge Pursuant to the Austrian privatization act (Privatisierungsgesetz), all strategic sectors were entirely or partially privatized. from the shadow cast by the State. In this regard, the revocation of The provisions of this new law privatizations of SOEs have to be based on a privatization concept the preferential share was the final step for the incumbent VIVACOM. laid the foundations for the transi- The privatization of the energy sector was a special focus in the last and must be authorized by the Austrian Federal Government. For any tion from a centralized state- con- decade, and it remains so today. Between 2005 and 2010, the Albanian privatization of companies currently held by OIAG, the OIAG-Act Sergey Penev, Managing Partner, and Ivo Emanuilov, Associate, trolled economy to a free market government unbundled the industry’s transmission and distribution Penev Attorneys at Law has also to be taken into consideration.

CEE Legal Matters 70 CEE Legal Matters 71 Experts Review Experts Review systems, introduced a new power market model, and granted conces- The Czechs have recently been Czech state will use these favorable conditions to put some of the (OJ 38/93) and the Law on Privatization of State-owned Capital (OJ sions for the development of new hydropower plants to private inves- painfully reminded of some of remaining assets on the block. Current debates over past privatizations 37/96). Both laws provide foreign investors with equal rights to do- tors. the failures of the past. A case in might make the government proceed with additional caution. mestic investors in the tendering and privatization process for sale of point is the privatization of coal Government’s shares in state-owned enterprises. It is very likely that The privatization of the Transmission Operator System was followed mining company Mostecka uhel- Lukas Janicek and Radim Kotlaba, Senior Associates, the privatization will be organized similarly to the sale of EVN, which CMS Cameron McKenna by the privatization in 2013 of four existing medium-sized hydro- na spolecnost, which for many was organized through an international public call for a trade sale in a power plants on the Mat and Bistrica rivers, which have a combined Czechs still symbolizes the dark- one-round bidding process. The ranking criteria for the received bids capacity of 76.7 megawatts. The four plants were privatized through side of the “wild privatization” of Macedonia were the purchase price and a three-year investment commitment. In competitive international tenders. the 90s. It took until late last year Privativation of JSC Macedonian Power Plants the case of MPP, it is reasonable to expect that the Government will for five Czechs held responsible also apply an investment commitment criterion, as it has announced However, the wave of privatization seen in previous years has declined for “tunnelling” that company to Overview of Privatization in that it expects the successful bidder to make additional investments in recently as Albania, like many countries, was hit by the global eco- be finally sentenced by a Swiss the Energy Sector the development of electricity generation facilities. nomic crisis. The failed sale of the shares held by the Albanian state in court, which seized USD 725 million from the accused in the process. INSIG SHA, the only state-owned insurance company, is a particular The energy sector in Macedonia What will be the main legal concerns? example of the effects of the financial crisis. The Albanian parliament Through some of its ministries the Czech government still controls has been one of the areas where Any attempts by the Government to “clean” or restructure MPP prior authorized sale of the state’s shares in 2006; there were also attempts various companies, including the famous Budvar brewery and compa- privatization has progressed with to its sale (e.g. write-off state debt, debt-to-equity conversion, and to offer the shares to strategic investors in the international markets nies in the weapon industry, but also more traditional state assets such the most difficulty. Up to 2004, capital increases before privatization) will in many instances constitute – and later in the domestic market, too. The offering did not attract as the Czech Post, the National Rail, and the key oil distribution and the vertically-integrated and state- state aid if they are not compliant with the “market economy inves- investors, however, and the company, which has subsidiaries in the electricity transmission infrastructure. The Ministry of Finance alone owned JSC Macedonian Electric- tor principle” (i.e. if a public authority invests in the enterprise on Republic of Kosovo and FYROM, continues to be owned entirely by owns a share of over 40% in 26 companies, including the CEZ energy ity Company (MEC) exclusively terms and in conditions that would be acceptable to a private investor the Albanian state. producer, the Cesky Aeroholding aviation holding, and the CEPRO provided the generation, trans- operating under normal market economy conditions, the investment fuel distributor, representing a combined share value of about CZK mission, distribution, and sup- Genc Boga, Senior Partner, and Sabina Lalaj, Senior Associate, is not considered as state aid). The Government’s enthusiastic efforts 100 billion. ply of electricity, as well as imports, transits, and maintenance of the Boga & Associates to attract foreign investment by providing various incentives to in- integrity of the electricity system. In 2004, MEC was split into two ternational corporations are well known. Therefore, it is of critical It has been the policy of successive governments to reduce the num- independent new joint-stock companies. Its legal successor MEPSO importance for the Government to organize the privatization through Czech Republic ber of state-controlled companies, especially those without much assumed the transmission function, while ESM assumed the electric- a well-publicized, transparent, unconditional, and competitive tender- strategic importance. But in recent years the actual number of state- ity generation, distribution, and supply functions. In 2005, ESM was Privatizations: The Czech Government Proceeds ing process, to provide prospective bidders with access to all relevant owned companies is only slowly declining, and mostly as a result of further unbundled into two independent joint-stock companies: Mac- with Caution information for valuation of the share package and to ensure that either mergers or the liquidation of smaller companies. edonian Power Plants (MPP), which assumed the electricity generation there is no discrimination based on the nationality of the prospective part of the company, and ESM, which retained the electricity distribu- Since the last large-scale privati- The current government, which is a coalition between the Social bidders. tion and supply parts. In 2006, ESM was privatized by Austria’s EVN zations in the Czech Republic Democrats, the Christian Democrats, and the central right Action of AG and was rebranded into the EVN joint-stock company. As a result almost a decade ago, the sales of Dissatisfied Citizens, is not pursuing a very active privatization agenda. The Government will remain the majority shareholders in MPP (51%) of the restructuring and privatization process, therefore, the key play- state-owned enterprises have been Although there have been rumors around private companies being and will therefore retain control of management. The successful bid- ers in the electricity market currently are three separate and regulated few and far between. The most re- interested in acquiring the Czech Post or some of the military equip- der will want to ensure that it has a voice in MPP’s management and monopolies: (i) generation – the state-owned MPP; (ii) transmission cent headline privatization was the ment producers, it might take some time for such deals to come to that there is an effective dispute resolution mechanism in place. The – the state-owned MEPSO; and (iii) distribution and supply – the pri- 2013 sale of a minority stake in fruition – if they do at all. memory of the dispute between the Government and EVN AG in the national airline CSA to Korean vately owned EVN. connection with EVN’s sale is still fresh. In 2009, EVN was ordered Air. The sale had become some- However attractive it may be to sell off some of these assets, the an- Privatization of MPP by the Macedonian courts to pay EUR 200 million to MPP on the what crucial as the government no nual incomes they generate currently make a significant contribution basis of a debt deriving from unpaid electricity bills from consumers, longer wanted to support the loss- to the state budget. Czech Finance Minister Andrej Babis is trying Recently, the Government has announced its intention to privatize the before the privatization. Not long after EVN AG filed a claim for making airline. Despite the nomi- to maximize the contribution to the state budget from state-owned 100% state-owned MPP by increasing its share capital and offering arbitration against the Government alleging a breach of the Bilateral nal price paid for the stake, the government successfully secured the companies, including the Czech Post, the National Forestry Company, private investors the opportunity to purchase up to 49% of newly Investment Treaty between Macedonia and Austria, the parties settled. future of the airline and potential new business for Prague Airport. and oil pipeline operators MERO and CEPRO. He publicly called for issued shares. The process for hiring a privatization consultant is un- Gjorgji Georgievski, Partner, ODI Law Firm With a new government in place since January 2014 there has been a full dividend pay-out by the CEZ energy company, in which the state derway, and it is therefore likely that the international public call for talk of privatizing some of the remaining state-owned assets. How- holds about 70%. The proposed State budget for 2015 is based on a the privatization will be published in 2015. ever, for the time being the government seems to want to hold on to contribution of several billion crowns from state-run companies. Next Issue’s Expert Review: Why is the privatization of MPP important? the most profitable assets. Attracting Foreign Direct Investment Moreover, in an effort to save some of the struggling coal mines na- MPP generates more than 90% of the nation’s electricity. It owns and The first wave of Czech privatizations in the early 90s was not with- tionalization is back on the agenda. A particular case is that of the operates the main national generation facilities: (i) the thermal power out its challenges. Like in other post-communist countries the state OKD coal mining company, owned by New World Resources, a UK- plants in Bitola and Oslomej, with a total installed capacity of 800 was the dominant sector of the national economy. In a neo-liberal listed coal miner based in the Czech Republic. OKD’s loss-making MW; and (ii) seven large hydropower plants, with a total installed ca- market economy, the belief of the politicians at the time resulted in Paskov mine is threatened with closure by its owners, putting 3,000 pacity of over 500 MW. It also acts as the wholesale electricity supplier an “all-must-go” sale of state enterprises. The Czech government jobs at risk. In the end the government has offered financial support for the retail supplier EVN. The estimated value of 49% of MPP’s had set itself the goal of privatizing a majority of the state-owned to keep the mine open for three more years, but nationalization had shares is approximately EUR 750 million. Therefore, this will be the companies within 3 years. Taking into account the number of com- been on the table as a serious alternative. The situation is politically largest privatization in Macedonian history (the largest Macedonian panies concerned, the lack of available domestic capital, and hesita- sensitive as many hold current Prime Minister Bohuslav Sobotka, who privatization to date was the EUR 388 million sale of Makedonski Tel- tion among foreign investors, it was not possible to achieve this goal was the Czech Finance Minister at the time of OKD’s privatization in ekom to Hungarian Matav in 2001). For now, the largest privatization through standard means such as direct sales and auctions. As a result 2004, responsible for selling the government’s stake in that company in the energy sector remains the sale of EVN’s shares in a transaction the so-called voucher privatization – under which all citizens had the far below market value. The European Commission is currently inves- of EUR 225 million and an investment obligation amounting to EUR opportunity to get shares in state-owned companies - came to be one tigating whether the sale was indeed undervalued and as such could be 96 million in the three-year period following the sale. of the main methods used. considered illegitimate state aid to the buyer. How will be the privatization organized? Although the government secured the effective privatization of a ma- Although foreign investment into the Czech Republic is expected to jority of the economy, the country lacked an adequate legal framework pick up again over the coming years and many domestic investors have The key legislation that governs the privatization process in Macedo- to protect investors and secure a successful continuation of business. the funds to invest in acquisitions, it remains to be seen whether the nia is the Law on Transformation of Enterprises with Social Capital

CEE Legal Matters 72 CEE Legal Matters 73 In Closing In Closing: TopSite Award Like diamonds in the rough, the finalists of the 2014 Top Sites awards Hungary for the Russian and Hungarian markets stand out from their peers. And the winners – the websites of Lidings in Russia and Jalsovszky and VJT & Partners in Hungary (in a tie) – demonstrate that there’s more than one way for a law firm to effectively communicate its mis- sion and capabilities online. Russia

www.jalsovszky.com

Two firms share the Top Sites Award for Hungary, as the websites of Jalsovszky and VJT & Partners impressed the judges equally. Both sites are more restrained and sober than those of the Russian winners, and though neither site provides news of recent deals or transactions, they are undeniably competent, elegant, and polished. www.lidings.com The Jalsovszky website has an unusual interface on its team page, NONNON which provides a group black and white photo of all the lawyers at the firm, with each individual identified and illuminated into color as The Lidings website is colorful and busy, effectively identifying the the cursor hovers over his or her image. The firm’s site is elegant and firm’s clients and capabilities by both sector and practice group with restrained. attractive design, perfect English, and full contact details for all its lawyers. The firm also presents a full component of press releases and Pal Jalsovszky was pleased to be informed of his firm’s award. He ex- MULTAMULTA,, thought-leadership articles in a creative way, allowing visitors to sort plains that Hungary’s Allison Group designed the website for his firm the information by practice area or industry sector. in 2010, and that, “with the website we tried to reflect our core values: we are, on one hand, young and dynamic but on the other hand deeply Julia Zhabina, Lidings’ Head of Business Development, claims that professional.” The restrained professionalism of the site was no ac- when creating the site in summer of 2012 the firm “aimed at a simple cident, Jalszovsky says, as “we wanted to be informative but without SED yet bright and eye-catching interface.” She explains that, “our website SED using the ‘general bullshits’.” is an essential source of information for both internal and external users, and we invest significant time and resource to ensure that the * information it offers is the most up to date and is presented in a logical and visually attractive manner.” MULTUMMULTUM Zhabina believes that the substantial thought-leadership articles and the provision of full contact details for all the firm’s lawyers are distin- guishing factors in the firm’s marketing efforts. “At Lidings we believe that sharing information rather than purely accumulating it is what truly distinguishes leading law practices today. Thought leadership is one of the top priorities for our website content. The other thing that www.vjt-partners.com distinguishes Lidings is the effort we put into personal branding and The VJT & Partners website is similarly restrained, though in con- marketing of our key employees.” trast to Jalsovszky’s professional photos of lawyers and the office, VJT instead provides whimsical photos of penguins, a feather, and other metaphors of the firm’s focus and capabilities.

Like the Jalsovszky site, the VJT & Partners’ website provides a fo- cused and easily negotiable recitation of the firm’s capabilities and * “Quality not quantity” the profiles and competencies of its lawyers, along with the requisite Gaius Plinius Secundus (Lawyer & Philosopher) thought leadership articles. Alone among this issue’s four finalists, the site does not provide contact details for the firm’s associates, though it does identify them by name and image. www.gblplaw.com Janos Tamas Varga, the firm’s Managing Partner, responded enthusi- astically to the news of the award. He explains that: “This award is a The Goltsblat BLP professional and technologically impressive web- www.harrison-solicitors.com great honor for us. It recognizes our efforts to express our values in site ranked a close second to that of Lidings. Though the firm is proud every tiny detail. We are not satisfied until every sentence, every image, to declare its association with the international Berwin Leightner Pais- every color and the layout of the website are in accordance with our ner firm, the Russian office did not settle for its mother ship’s website values. This is the very simple way in which we made our website and MONTENEGRO but instead created its own, which nicely breaks down the Goltsblat SERBIA ENGLAND Bulevar Svetog Petra how we work in our day to day legal practice.” Bulevar Mihajla Pupina 6 15 Old Bailey BLP partners into their respective areas of expertise and includes an Cetinjskog 1a 11070 Belgrade London EC4M 7EF 81000 Podgorica unusually thorough and impressive client and deal list. David Stuckey Tel: +381 11 3129 825 Tel: +44 203 0088 245 Tel: +382 20 246 166 Fax: +44 203 0088 246 Fax: +381 11 3129 823 Fax: +382 20 246 167 CEE Legal Matters 74 CEE Legal Matters

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