Challenging Times Ahead

Research 2019: Precise Fashion

Conducted annually for the past 17 years, Ukrainian Law Firms. A Handbook for Foreign Clients (ULF), has become a leading source of benchmarking information for Ukraine. The publication presents the exclusive expert contribution from practicing lawyers, as well as the results of our research conducted during January — May 2019.

Our findings are supported by analytical content, and are based on analysis of corporate submissions, available public sources and individual feedbacks of practicing lawyers. In the fall of 2019, the research team conducted a series of live and telephone interviews across different areas of legal practice and industries. We sent numerous additional requests when the interviewed lawyers (including in-house counsels) confirmed the good market standing of other market players. However, if a firm failed to provide us with corporate submission, and there was no available public information to prove active work in the research period, the firm/lawyer was not able to enter into the ranking tables.

We tried to be scrupulous and precise in understanding competition tiers, referral links in the market, niches and room for development. In response to the comments and suggestions of our readers, the traditional breakdown into practices and industries has been amended by the Private Clients / Wealth Management section.

The rankings are presented as shortlists. In several practices with the growing volumes of high-profile work and extended competition tiers, these shortlists were increased from 5 to 10 firms.

In years past, special overviews have covered information on international law firms working on Ukrainian matters, referrals and regional markets. This year we roughly expanded our contacts with big international counsels without offices in our country, learned their current roles in key transactions and unprecedented representations in international courts and arbitration institutions. In continuation of traditional overviews of transactional practices performed by international counsels, we added two additional surveys, litigation and international arbitration, in 2019.

It was also very valuable for us to discover their experience of cooperation with local legal counsels. We plan to continue this cooperation with a series of interviews planned for autumn 2019.

The current Handbook contains 20 surveys and 31 rankings.

The rankings are based on a combination of a set of criteria, in particular, list of projects for the research period — 2018, complexity and significance of matters, client profiles, practice diversity, team capacity, reputation.

Firms ranked in the category “Other Established Practices” accumulated notable project portfolios, presented accomplished legal teams and substantial pure legal expertise proved by their existing workflow and recognition by peers/competitors.

With the new generation of partners in law firms, and gradual change of roles between young and ambitious generation and founders — fathers of the profession, we had to reveal this in our survey. The category of market authorities (not an organization but a luminary) is aimed at emphasizing practitioners — stumbling figures with a established legacy who are referred as establishing certain standards of work, presently less involved in active practice, but still playing a pivotal role in client relationship and market standing of their firms.

Certain specified areas do not allow us to produce shortlists (both of firms and/or individuals) and identify market leaders. For this reason we show the market landscape in a form of established practices and just notable practitioners lists in alphabetical order.

The annual list of public deals is traditionally summarized in Tables 1-5.



Mergers, Splits and Expansions

In July 2018 AVELLUM and AGA Partners announced their strategic combination. The new firm operates under the AVELLUM brand, with Mykola Stetsenko and Aminat Suleymanova as co-managing partners.

In August 2018 Danevych.Law appeared on the market following termination of the Marchenko Danevych partnership.

In September 2018 Axon Partners and Kharkiv-based Oksana Kobzar Law Office merged. The amalgamated firm works under the Axon brand.

In October 2018 Asters and the Ukrainian team of Egorov Puginsky Afanasiev & Partners (EPAP Ukraine) merged and became Ukrainian largest law firm with offices in Kyiv, Washington DC and Brussels (opened later in November 2018). The firm is managed by a committee of three partners: Oleksiy Didkovskiy, Serhii Sviriba, and Armen Khachaturyan.

Egorov Puginsky Afanasiev & Partners preserved its presence in the market: the Kyiv office is headed by partner ­Oksana Ilchenko.

A new representative office of ­Interlegal has been launched in UK (London). EVERLEGAL opened an office in Almaty (Kazakhstan). The Kramatorsk office of Shkrebets & Partners was opened. Sheverdin and Partners, based in Kharkiv, opened an office in Kyiv. Winner Lex established an office in Dnipro.

In January 2019 Alekseev Boyarchukov and Partners announced it was splitting from the team of Trusted Advisors and that two partners, Vladislav Reznikov and Artem Podolskiy, were leaving.

Spenser & Kauffmann and S.T. ­Partners, which merged in January 2019 and continued operations under the name of Spensers ST recently announced they would split. Both firms continued working under their previous brands.

On the Move

In July 2018 Volodymyr Yaremko was appointed a counsel at Sayenko Kharenko, while Sergiy Smirnov was promoted to partner.

In August Alexander Molotai joined EVRIS Law Firm as a partner, head of intellectual property.

Baker McKenzie announced the promotion of Olha Demianiuk to partner. Yuriy Tsvetkov joined the tax team of the office as a counsel later in October.

Vsevolod Volkov (previously — partner at INTEGRITES) joined EVERLEGAL as partner and head of international arbitration and co-head of the banking and finance practice.

The second half of 2018 was rich for new arrivals and promotions in Asters. Oleksii Reznikov (alternative DR practice) joined the firm as a partner. Sergiy Tsyba, Oleg Lazovsky, Anzhelika Livitska joined as counsels. Marta Barandiy became of counsel and head of the Brussels office. Inesa Letych and Orest Stasiuk were appointed to counsels.

In May 2018 Olena Pertsova and a group of lawyers joined the dispute resolution practice of AEQUO from Pavlenko Legal Group. Myroslava Savchuk and Yevgen Levitskyi were promoted to counsels.

Borys Lobovyk, partner, rejoined the Kyiv office of EY after his three years in Almaty and Astana (Kazakhstan). Iryna Kalyta was promoted to associate ­partner.

In September 2018 INTEGRITES and Pravochyn attorneys at law merged under INTEGRITES brand. Founder of Pravochyn Oleksandr Onishchenko is a partner with his core focus on litigation.

Anna Hryshchenko (Kremnyova) joined Pavlenko Legal Group as head of M&A and antitrust practice.

In October Oksana Olekhova was promoted to partner in the tax and legal department and Olivia Allison in the risk consulting and forensic department of KPMG Law Ukraine. Maksym Zavalnyy and Volodymyr Chyzhykov were promoted to directors. Mykola Mishin, former head of the Transfer Pricing Audit Unit of the State Fiscal Service of Ukraine (SFSU) joined to head the transfer pricing group.

Aleksandr Lugovskiy was appointed a partner and head of the IT-disputes practice at Eterna Law.

In November 2018 Svitlana Musienko joined Sayenko Kharenko as partner and head of tax.

Maryna Hritsyshyna joined the firm as a counsel from Wind Power (DTEK Renewables).

In December 2018 Sergii Shkliar returned in Arzinger to his position as founding partner. He served as Deputy Minister of Justice of Ukraine responsible for the State Enforcement Service from March 2015.

In January 2019 Viktoriia Morozova joined AVELLUM’s energy and infrastructure practice as of-counsel. Vadim Medvedev was promoted to partner. Anton Polikarpov (previously in-house counsel in Roshen) joined the firm in February to develop the IT and IP practice areas.

Tetyana Berezhna and Yuriy Kolos have been promoted to counsels at Vasil Kisil & Partners.

Zoryana Sozanska-Matviychuk was promoted to partner at Redcliffe ­Partners. Michael Davies joined the team as of counsel.

In February 2019 Pavlo Byelousov was promoted to partner at AEQUO.

Yaroslav Ognevyuk with the team of IP practitioners (previously Doubinsky & Osharova) joined Sayenko Kharenko as a partner and new head of IP practice. ­Maksym Nazarenko was promoted to partner of the firm’s antitrust and competition practice.

Olena Omelchenko, Yevgen Solovyov and Oleksandr Fefelov were promoted to partners at Ilyashev & Partners.

In March Ganna Prokhorova (previously — Pakharenko & Partners), joined the IP practice of AEQUO.

Olena Volyanska, head of bankruptcy, was promoted to partner at LCF Law Group.

In April local partners of the Kyiv office of Jeantet Illya Tkachuk and Igor ­Krasovskiy joined INTEGRITES.

In May DLA Piper promoted Alla ­Kozachenko to its global partnership as part of the firm’s annual promotions round.

Tetyana Dovgan was promoted to partner at the Kyiv office of CMS Cameron McKenna Nabarro Olswang.


TOP-10 Market Trends

Merger-mania and Integration

In 2018-2019 the Ukrainian market has been reshaped by a number of sound amalgamations. This past year could be definitely named the year of mergers: combination of Asters and EPAP Ukraine; ­AVELLUM and AGA Partners; Pravochyn and ­INTEGRITES; Axon Partners and ­Oksana Kobzar Law Office; ST Partners and Spenser & Kauffmann. Moreover, several market players negotiated potential mergers. Some of them are still being considered, others are unlikely to happen in the near future.

The scaling of business is usually driven by extension of expertise and client portfolios, enhancing human capacities in competition for big ticket projects, lucrative opportunities for cross-selling efforts. Interestingly, the M&A trend entailed a new form of management co-managing partnership to maintain the parity of managing partners of merged law firms. At the same time, the post-M&A period provokes challenging internal restructurings, changes to management and migrations. Not all firms had a reality check. Therefore, spin-offs and team transfers also took place a lot (please see the timeline of market events in the text box below).

Our observation states that decision-makers at law firms dealing with mergers often underestimate the complexities of the integration process, which definitely require a much more scrupulous action plan than preceding merger agreements and hypothetical assumptions of complementarity.


Legal Boutiques

In 2018-2019 our observation is that the trend for legal boutiques continues to gain traction. The mid-sized and small teams seek to be more efficient when shifting to boutique focus either for a certain service or niche client segment.

Young and ambitious market players attempt to retain their piece of the pie. Being more flexible and often less expansive, they keep established firms on their toes.

In-house counsels explain that they may opt for boutique firms not just to save money, but to get better access to experienced partners who are often directly involved in practice compared to full-service law firms. Quite often relationships are more informal and this may provide clients with a certain level of comfort.


Professional Deficit

Many top-tier law firms confirmed that they suffer from “critical understaffing in particular practice areas”. As in previous years the shortage of experienced lawyers and qualified support staff is quite a significant problem. In light of the threat of losing key rainmaker partners, almost all top firms admit that retention of personnel takes place.

The technical requirements made of candidates are strongly linked to industry-wise experience and good knowledge of IT. Attention to details as a skill of significant importance is regularly sounded by employers during our survey.

Meanwhile, mid-market and regional law firms admit that they are eager to employ university graduates rather than experienced lawyers, because of motivation, knowledge and salary expectations. They need to cherish corporate values and loyalty, above all.


Generation Z

Having on board all three generations X, Y and Z in a single law firm or even practice team, legal counsels had to replenish their HR policies. The representatives of generation Z stand out for rather specific attitude to work, willing to build their career very rapidly and in the most beneficial way. According to feedback from the market, compared to X and Y, Z-employees are keen to grab career opportunities and forward remuneration packages, foster employers to provide them a better work/life balance. In response, law firms introduce new options for compensation and bonuses (opportunity for remote working, corporate psychologist services, additional vacation options, etc.).


Migrations in Traction

We observed migration of lawyers and their teams from small and mid-sized law firms into big full-services companies. Interestingly, there are migrations abroad for those professionals who practice international tax, transfer pricing or other areas that encourage moving.

The year 2018 was also a period of targeted migrations in-house — into legal departments of big corporates (sometimes even abroad), international organizations and to state authorities.

Another trend that is getting more vivid is departures of qualified experienced lawyers for other businesses and professions. This is explained by shortcomings of climbing up the career ladder — consistent pressure of deadlines and permanent stress, professional burnout, which result in fatigue from the legal profession.


Advocacy Monopoly

Reform of advocacy and the introduction of the monopoly of attorneys continue to reshape the legal market landscape, forcing law firms to strengthen their teams of attorneys. Legal counsels who used limited liability companies (LLC) as a form of business organization, have been reorganized and/or established new attorneys at law under the same law firm brand.

Respondents to the ULF 2019 survey suggested that the monopoly of advocacy prompts an inflow of clients from the mid-market. Looking forward, with changes in the refund of legal aid, the rates are anticipated to increase.


In-house Expertise

Our interviews with market insiders from both sides — external and in-house counsels — revealed that outsourcing of legal work remains flat not only because of cost reduction considerations, but as the expertise and, in certain cases, the capacities of in-house lawyers, also increased. No wonder, the desire of clients to solve legal problems via their in-house lawyers may stay relevant and reasonable. This trend is important to bear in mind for the strategic vision on the legal sector.


Creating Experience

Our research revealed that competition for legal work at the high-end tier of the Ukrainian legal market is not limited by the notion — “good value for money”. Clients definitely admire understanding their industry specifics and prefer to be serviced with comfort.

Industry expertise is a key anchor for the client to enjoy a positive experience. In order to provide efficient legal essential input to a project, a law firm should be able to integrate its advice into a complex business solution. It’s a vivid international trend that’s also gaining momentum in Ukraine, when the offering of law firms goes beyond being purely legal and tends to cover business advisory, GR, compliance and other professional services. Furthermore, the leaders of law firms admit their clients appreciate it when a legal counsel not only carries out existing mandates, but also initiates discussions on reshaping legislation.

An additional level of client comfort and further loyalty push legal counsels to introduce digital solutions, innovative tools in managing client relationships, develop knowledge transfer initiatives. For external legal counsels, in practical terms this usually means introduction of new functions, such as business support, project manager, innovation officer, etc.


Being Tech and Secured

The rapid advances in technology have turned into innovative managerial and marketing ideas. Law firms are keen to become tech, invest in digital marketing, Telegram channels and chatbots. But automatization as such is just a tool which really works only with a shift in mindset.

Like elsewhere in the world, cyber-security is a growing area of concern for managers. As past cases from the “Panama Papers” and Petya virus have shown, law firms are becoming weakly protected targets. During our conversations with the leaders of law firms, all of them stated that it’s vital to secure sensitive information about clients and prevent unexpected leakage.


Organizational Experiments

The new generation of law firms is, to a certain extent, provocative and adapting to innovative ideas. It is also the driving force behind many progressive changes. Even traditional big law firms started to reconsider conservative hierarchy structures, moving to product models and even introducing agility.

Economic Objectives

The year 2018 — first half of 2019 was relatively successful for the Ukrainian legal market, adding some growth in terms of volume and value. Our consistent analysis suggests that the structure of demand has not seen drastic changes since the last few years.

Despite being far from ideal, the M&A market enjoyed positive dynamics. Truly progressive changes in Ukrainian ­corporate law added some confidence to both local and foreign investors. Shareholders agreements became, as a new tool, the subject of many requests.

Local companies intensified their move to European markets, particularly throughout outbound investment in EU.

Lawyers argue that the most profitable clients come from agribusiness and the IT industry, as these businesses have a stable source of foreign currency revenue. ­Reform of the energy market and establishment of new market players should also help this sector to develop. The pharmaceutical industry and healthcare sector continued to be the subject of corporate structuring and new opportunities.

A revival has been observed on the real estate market. The residential real estate remained flat, while commercial property market saw enjoyed a boost. The past year was notable for the entry of major international investors, increased activities of world-known retail chains entering the Ukrainian market, and the subsequent boom in the development of new shopping centers.

As Ukraine has secured its position for placing industrial capacities, the market has shown growing activity in industrial and infrastructural real estate. Foreign manufacturers are considering the country’s Western regions and Ukrainian ports for relocating and establishing their industrial facilities.

International tax planning and structuring got a second wind with BEPS. Both foreign and local clients are interested in tax advisory to prevent controversies and avoid tax risks, and invest in sufficient tax planning of business processes.

Many law firms expanded their litigation practices in recent years and reported a strong level of performance to us. The ones in greatest demand are debt recovery and insolvency related disputes, property rights conflicts.

As Ukrainian courts still suffer from a lack of trust, big businessmen prefer to resolve their conflicts in London. By the way, disputes between Ukrainian businessmen occupied a solid niche for commercial law firms in London. Our research suggests that international law firms are increasingly active in dispute resolution involving the State of Ukraine, corporates and ultra-high net worth individuals.

The white-collar crime practice is rapidly gaining momentum too, and appeared to be one of the most profitable in the market. The defense of political figures, state officials and politically-exposed persons transformed into a separate domain of white-collar crime. So-called political prosecutions appeared to be the most challenging in the criminal defense area, and has already seen unprecedented growth due to changes in the political elites.

Lawyers named business security and cyber security, transfer pricing issues as among the concerns of clients that have intensified.

2019 and beyond

The coming parliamentary elections in July and expected change of political elites will determine the market in the second half of 2019 and beyond.

The lack of certainty is preserving a standstill in business activity. It’s not something new for business to operate in “save mode”, postponing expansions, and collaborative initiatives or postponing Greenfield projects. The future could be positive, but this depends on whether stability and certainty are attained as soon as possible.

Currently, there is little interest among international law firms in opening new offices in Ukraine. Meanwhile, the Ukrainian branches of those who are already present maintain strong positions by demonstrating a steady flow of instructions.

The upper end of the legal market retains its clear strategic move towards international tie-ups, which is reasonably good in a strategic perspective.

As pressure on salaries increases and the headcount grows in certain segments of the market, law firms will continue to focus on managing expenses. Some market players believe Ukraine gradually adopts the EU model where some law firms subcontract attorneys for special matters — sometimes called “flex-time” lawyers. This appeared to be a more maneuvering approach in HR.

According to both law firms and their clients, dispute resolution and tax are the most “secured” areas of practice, which are less affected by stagnation and shake-ups. Transfer pricing disputes with notable high sums at stake are another area of anticipated growth. The adoption of the new Bankruptcy Code should also boost bankruptcy practice.

Law firms involved in cross-border assignments and which have close ties with foreign markets suggest that litigation funding for asset recovery mandates may gain spread in the near future.

It goes without saying that challenging times are ahead.