Ukraine has broadly seen an improvement in its economic outlook since the 2019 election of comedian and actor Volodymyr Zelenskiy to the presidency. After years of turmoil, culminating in the 2014 defenestration of pro-Russian president Viktor Yanukovych and the Russian invasion of the Crimea, Ukraine has deepened its ties with the EU, adopting reforms that closely map those of European legislation. This has encouraged foreign investors, while legislative reform continues apace, with a new capital markets law coming into effect in 2020 that implemented the provisions of key EU law, including MiFID II, MiFIR, and CRD IV. There are also ‘grandiose governmental plans for the privatisation of state property and large-scale infrastructure projects’, in the words of Armen Khachaturyan, senior partner at major domestic firm Asters, while the legalisation of the gambling industry in July 2021 is also driving client activity.
Ukraine frequently competes with Moldova as the poorest country in Europe, despite its huge agricultural exports, though this is partly due to a lack of transparency in the economy, in which much economic activity goes unreported. Since 2014, the National Bank of Ukraine (NBU) has closed a huge percentage of the country’s commercial banks, partly to clamp down on corruption and money laundering, but state control of banks is part of the reason why inflation and interest rates remain high.
In terms of key practice areas, Khachaturyan says: ‘As the business complications caused by Covid-19 expectedly led to a larger number of commercial disputes, litigation and arbitration practices became visibly busier. However, their work was subject to serious challenges due to the pandemic’s restrictions. The economic crises spared sectors such as IT and renewable energy and these practices gained momentum. Ukraine has recently introduced new tax legislation implementing anti-base erosion and profit shifting rules and further cross-border tax transparency, which put tax practices in high demand.’
Another key area for legal work is white-collar crime, an area woven into the wider developments within the region. Since the state gained its independence more than 20 years ago, corruption has remained a significant issue in politics, in business and in the judiciary. There have been recent moves to reappoint judges and to empower and reinvigorate the anti-corruption bureau, though reports of how successful this has been are mixed. The result, however, is that some specialist law firms focus on this area, and it has become an increasingly important practice for some.
There is also a growing focus on international trade and EU issues, as the country moves slowly and steadily towards EU accession. This remains a contested topic, not least because of the corruption issues and mixed sentiment among the populace. Ethnic Russians are more aligned with the east but much of the country is keen to align with the west.
‘The Ukrainian legal market remains dominated by local players. We have established strong working relations with a large number of international law firms.’ Armen Khachaturyan, Asters
On that note, the conflict in the eastern region continues, and there are contested regions around Donbass, with unrest happening that has been accepted as part of the background noise in a country with a turbulent past. It does, however, show the problems that the country embodies – caught between east and west.
In the legal market, a number of domestic full-service firms dominate, including Asters, the largest by headcount, and other players such as Avellum, while many international firms such as Baker McKenzie, DLA Piper, and CMS also operate in Kyiv, alongside strong regional firms such as Kinstellar. ‘The Ukrainian legal market continues to be dominated by the local players,’ Khachaturyan explains, ‘international law firms without their own offices in Ukraine usually team up predominantly with local law firms for any transactional work or otherwise when they seek advice under Ukrainian law. Asters has established strong working relations with a large number of international law firms.’ This trend towards cross-border work being handled by local firms is likely to continue, though international firms will remain active within the market.
Firms with strong ties to Russia are also finding it hard to maintain a market position. A good example is Magisters, which merged into Russian firm Egorov Puginsky Afanasiev & Partners a decade ago. This firm maintained its position in the market for a while after the Maidan revolution, but in the last few years it has drastically cut back its position in Ukraine. New law firms are regularly formed and re-formed, many being boutique firms in areas such as white-collar crime, disputes, tax. The proliferation of such firms is one driver of merger activity. LB