West Ukrainian legal landscape

  • West Ukrainian legal landscape
Issue 40, November 2011.

As demonstrated on many previous occasions, the eleventh Lviv Economic Forum turned out to be an event where massive flows of information from different sources came together and created a general overview of what is going on in the Lviv region and in Ukraine generally. As usual the most hotly discussed topics were the political and economic environments, investor problems and legal possibilities. We spoke to Arzinger’s Timur Bondaryev and Markian Malskyy about the key themes to arise from this year’s forum and the prospects for the region in general.

This year’s Lviv Economic Forum featured much debate over the region’s Euro 2012 legacy – how do you see the long-term impact developing?
TB: In light of the possible Winter Olympic Games which Lviv hopes to host in 2022, it is high time to learn the lessons from the current preparations both from an economic and legal perspective. For the last couple of years Lviv region faced great interest from many of the world’s leading construction and development companies in relation to the Euro 2012 and with regard to infrastructure development in general. Many were eager to undertake different projects here - some went forward and are operating now, while others held back due to certain problematic legal, political and economic trends in Ukraine. For many years now we have been working closely with municipal and state bodies in Ukraine and are involved as legal advisors in a number of PPP and infrastructure projects, such as the construction in Lviv of the new stadium, airport and a number of roads. Besides, we have provided legal advice to Lviv together with other consultants within the projects of the EBDR as to development of transport and infrastructure networks in Lviv, as well as provided legal support for potential construction of underground parking places and waste management facilities - as you know both much-needed necessities for today’s Lviv. It is no secret that Public Private Partnerships are a comparatively new area in Ukraine with great potential in particular for infrastructure projects. Now is the time to develop the right administrative and legislative framework to allow Ukraine to tap into the country’s vast PPP potential.

How does the contemporary business climate in West Ukraine differ from elsewhere in the country?
MM: I would say that if we are talking about certain barriers to doing business, they are rather similar throughout Ukraine and by now everyone is very well familiar with. In terms of Lviv-specific regional business trends, I would say that before the financial crisis more M&A and real estate transactions took place in the region. During the crisis there was a substantial growth in crisis driven M&A and distressed assets transactions, bankruptcy, white collar crimes, tax and commercial litigations and arbitrations. At present we are locally involved in over a hundred of commercial disputes without even taking into account taxation related court cases. At the same time the West Ukrainian market is rejuvenating following the crisis and there is currently major interest in corporate restructuring, foreign holdings structuring, public private partnerships and infrastructure projects. Local and foreign investors are looking to optimize their activities in order to be more efficient as players in a rather complicated but potentially rewarding market. New tendency among international investors is to look beyond Lviv towards such regions as Ivano-Frankivsk, Rivne and Zakarpatya, which are also fast growing as alternative investment destinations as the region opens up to the outside world.

The Arzinger West Ukrainian Branch office in Lviv recently celebrated its fourth birthday. In retrospect was 2007 the right time to enter the West Ukrainian market?
TB: Our company remains the only leading Ukrainian law firm to have opened offices in the region. This provides us with a local footing which is important to us and our clients. Throughout the four years of our operation here, we have carried out more than 400 client tasks for over 150 clients including flagship players like Nestle, Lafarge, Klingspor, King Kross, Henkel, Dunapack, AVE, Halychyna Zahid and many others. Last year we opened an office in Odessa - we believe that this growing regional network is a strong competitive advantage and do not plan to stop at our current total of three offices in Ukraine.
MM: I would add that being based locally allows you to develop the local knowledge to immerse yourself in original and extraordinary opportunities which would not be apparent when viewed from afar. For example Timur is an advisor to the Lviv City Mayor and I serve as an advisor to the Governor of Lviv Oblast, which gives us the opportunity to share our international experience with the leaders of a regional administration which is open to new business ideas and innovations. Every region has its legal and judicial specifics and this is also a factor weighing heavily in favour of our Lviv office. Upon entering the market we initially concentrated on manufacturing settlement and real estate transactions, which are even today traditional here, however soon we found ourselves facing a massive workload dealing with international arbitration, intellectual property rights, white-collar crimes, antidumping and antitrust activities – many of them totally new legal territory for Lviv region.

Lviv is a human resources Klondike but it continues to suffer from an uncompetitive employment market. What needs to be done to reverse the trend?
MM: Investment in career development is the key factor for any business looking to succeed in today’s Lviv. Like many other businesses in the region we have faced the problems created by the fact that the majority of talented young Ukrainian professionals continue to leave in a search of a better life and greater prospects either abroad or in Kyiv. Our goal remains to maintain the best human resources and we are permanently investing into our personnel - the vast majority of whom are admitted to the bar in Ukraine, have obtained LL.M. degrees abroad and are fluent in at least one foreign language, in practice often more than one language. Language fluency should not be underestimated as a factor in modern Lviv business law, especially when a case involves cross-border legal matters involving a number of jurisdictions and a gaggle of lawyers who have to speak the same language and use the same terminology. The good news is that Lviv has excellent candidates for the right opportunities – the task is to find the right people for your company and make it attractive enough to tempt the best talent to invest themselves into local businesses.

Euro 2012 looms large on the horizon but beyond next summer’s football fiesta what is your prognosis for Lviv’s medium-term investment climate?
TB: The past four years have taught us that Lviv is one of the most exciting and dynamic regions in the entire country. Thanks to my experience in Kyiv I am able to identify numerous growth areas – long since filled in the Ukrainian capital itself – which have yet to be exploited here in the country’s EU gateway region. Beyond this organic growth, Lviv also has numerous unique selling points which make the region special from an investment perspective. West Ukraine has a unique architecture and historical heritage, skilled workforce, extremely advantageous geographical location and many other positive factors, all of which point to an optimistic outlook for the development of the region long after the end of Euro 2012.

“New tendency among international investors is to look beyond Lviv towards such regions as Ivano-Frankivsk, Rivne and Zakarpatya, which are also fast growing as alternative investment destinations as the region opens up to the outside world”.

Interview by Mila Hadzieva