Ukrainian legal firms shape up to free market
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Ukrainian legal firms shape up to free market
By Lily Hyde
POST STAFF WRITER
Anna Tsyrat began her career as a lawyer nearly a decade
ago, working out of a single, small room packed with people
and desks. The setting did not inspire confidence.
"We preferred to have consultations at clients' premises so
as not to show them where we worked," she remembers.
If the accommodations were more suitable to clerks than to
attorneys, it is because Soviet lawyers were expected to be
clerks, adding the proper legal gloss to transactions
dictated by the masters of a command economy. As a law
student at Kyiv University's Institute of International
Private Law, Tsyrat faced the dull prospect of checking
fine print for a Soviet foreign trade organization.
Then came Perestroika, and with it, private businesses in
need of impartial laws and independent lawyers. The lawyers
came on the scene even before the laws were written, and
Tsyrat was one of the first of this new breed.
Along with a group of fellow students, she registered a law
center under the auspices of Komsomol, the communist youth
organization. In 1989, they founded Jurvneshservice, Kyiv's
first private law firm.
"It was a very romantic time for all of us," Tsyrat says.
"It gave us new possibilities and new ideas."
Today, those possibilities have been translated into a
spacious office she shares only with her assistant. The
smart furniture, bookshelves weighed down with legal tomes
and original paintings are intended to make the most
sophisticated Western client feel at ease.
These days the offices of Ukrainian-owned law firms like
Jurvneshservice look much like those of Western interlopers
like Baker & McKenzie and Altheimer & Gray. "What you see
on the outside is that the trappings of legal practice have
changed as well as the content," says Halyna Freeland,
counsel to the chairman of the Ukrainian Legal Foundation,
a non-profit organization dedicated to legal reform.
Tsyrat is among a burgeoning class of relatively young
private lawyers working the rich new vein of Ukrainian
commercial law. Since 1990, there has been an explosion in
the number of legal practices dealing with accounting,
banking, corporate governance, investment, mergers and
acquisitions, and tax law.
"For the best firms, law is a very good business," says
Freeland.
But the legal scene is as unsettled as the new economy on
which it depends. No one is able to keep track of all the
new law firms hanging up their shingles. The lawyers
themselves have little time for colleagues: they are
desperately trying to keep up with a body of law that's
changing on an almost daily basis. A vast army of state and
local bureaucrats stands ready to punish their clients for
every violation of a contradictory rule of an
incomprehensible regulation.
A new constitution approved in 1996 has spurred current
efforts to overhaul the major codes: civil law and civil
procedure, criminal law and criminal procedure, and
administrative law. A judiciary reared like all lawyers to
obey the will of the Party is attempting to assert its
independence, figure out how to enforce its rulings and
assimilate a jury system enshrined in the new basic law.
In the meantime, confusion - some would say chaos -
continues to prevail as new laws or amendments to existing
ones come into force without commentary or precedents.
Lawyers are left to make sense of the mess.
"It's difficult to work because every day the laws are
changing," says Tsyrat. "You have to be very flexible."
John Hewko, who helped establish the Kyiv office of Baker &
McKenzie, readily concedes how difficult it is to practice
law in Ukraine.
"How do you structure complicated deals with laws that
don't address a large part of the issues?" he asks. "A lot
of times you wing it."
If Ukraine has taught Western attorneys how to improvise,
they in turn have passed on to local colleagues some tricks
of the trade beyond tasteful office design. The most
successful Ukrainian law partnerships have focused on
commercial law, on the correct assumption that where
there's commerce there's money. The two largest firms,
Salkom and Proxen, have even adopted hourly rates rivaling
those billed by foreigners.
The former, with 40 professional staff, charges up to $300
per hour, while the latter bills $150 an hour for the
expertise of its senior partner and $50 per hour for an
associate attorney. Western firms, often working with
Ukrainian associates, tend to charge from $110 to $350 per
hour.
"Firms are specializing in commercial law because they can
get Western wages," says Robert Liechty, a consultant for
the American Bar Association's Central and Eastern European
Law Initiative. "In other areas, they don't get paid."
Ukrainian entrepreneurs, a group that by definition is used
to skating on the edge of legality, have of late taken a
greater interest in rules as they seek to consolidate their
empires. Yet many rely on in-house lawyers, or continue to
try to get by without legal counsel.
"Foreign companies understand that they should deal with a
lawyer, while in Ukraine everyone [believes] they can do it
themselves," says Tsyrat, who nevertheless has a
predominately Ukrainian clientele. "Ukrainians believe a
lot of questions can be settled through personal [ties] or
knowledge, but not through professional knowledge."
In no small part, that stems from seven decades of
"telephone law" practiced by Communist Party officials who
would call judges to ensure desired verdicts. Given the
corruption pervading the young nation's institutions,
Ukrainians today still lack confidence in the fairness of
the judicial system, with good reason.
"There is a great distrust of courts, and it's justified,"
says Freeland. "Old habits die hard. Certainly telephone
law continues to some extent, and the government
administration still has a great deal of influence on
courts."
Law firms thus automatically face an image problem entirely
different from the Western stereotype of aggressive masters
of the universe wreaking havoc with common sense. Here,
they are more likely to be misconstrued as mere bagmen
trying to match the right judge with the right gratuity.
But the economy's opening to global competition and its
painful transition to capitalism are bound to sweep aside
such prejudices in the long run, and international law will
come very much into play as Ukraine enters the global
mainstream.
For now, though, international legal norms are a source of
grief for the country. The Council of Europe, the
continental legal and human rights forum that admitted
Ukraine in 1995, continues to press authorities in Kyiv for
reform of criminal and civil legal codes. The World Trade
Organization seeks enforcement of copyrights flouted daily
by street hawkers of pirated videos and CD's. Where
domestic and foreign practices clash, the lawyers follow.
Once personal incomes start to rise and businesses en masse
stop hiding assets from tax inspectors, tort law should
develop.
"Tort law really becomes important when there is a working
system of insurance and someone has deep pockets from which
to pay," says Freeland. "If the person who does the damage
has limited assets, it's not worthwhile to sue them."
Some firms are already marketing themselves to ordinary
Ukrainians.
Proxen, where foreigners account for 80 percent of the
clientele, is reaching out to the wider market by offering
city residents two hours of free legal consultation with
its lawyers each weeknight.
This is not just about philanthropy.
"We're trying to feel out the market through this
beneficial service. It's one kind of marketing, creating
new clients," says Proxen Director Oleksandr Zadorozhniy.
"I don't want to be dependent on one huge client."
He says the number of citizens with appreciable assets is
increasing, and that this newly emerging class will
eventually form a ready pool of clients for law firms.
For the foreseeable future, though, the law firms are
likely to stick to the business of businesses. "Businesses
are now trying to be as legal as possible, and that gives
us [law firms] the chance to survive," says Zadorozhniy.
In this task, each firm is on its own. Despite the
expansion and change sweeping the industry, law remains a
highly fragmented profession lacking the political clout of
foreign colleagues. Partly this is because the rule of law
is still a fond wish rather than reality. But it does not
help that Ukraine's lawyers, while active in some regional
and specialty groupings, have thus far failed to form a
national bar association that might lobby lawmakers and
foster foreign contacts.
"Ukrainian lawyers are not educated to communicate with
each other on a professional level and with due respect,"
Tsyrat says. "Our new laws are often contradictory, or
issued without commentary, and that sometimes causes
problems that need to be discussed. But there is no
existing forum for that. We need communication between
different firms to give us the possibility to grow as
professionals."
That the profession lacks unity is evident from the failure
of such high-fliers as Proxen and Jurvneshservice to branch
out across the country for lack of reliable partners.
Proxen officials say the firm set up an affiliate in one
city only to find out six months later that associates
there had been quietly pocketing all of the profits.
However, Proxen plans to try again, this time in
cooperation with a leading Ukrainian commercial bank.
When Ukraine's law firms do franchise, they will have no
shortage of recruits to pick from. In a country where a law
career not so long ago had all of the cachet of work as an
insurance actuary, the number of law schools has
skyrocketed within a few years from five to the current 120
institutions. These are educating more than 85,000
students, or 5.5 percent of the total enrollment in higher
education. The practicing attorneys see a glut on the
horizon.
They also wonder whether the schools are teaching
tomorrow's lawyers the analytical skills their elders had
to learn on the job.
Zadorozhniy, who lectures on law at Kyiv's Institute of
Foreign Relations, is most concerned about curricula built
around the rote learning techniques of old.
"They insist that all students should learn by heart the
criminal code and the civil code," he says. "That takes a
tremendous amount of time; it's a huge book. What they
really need is the theory of law. In this country it's the
only way. If you teach a student legislation and tomorrow
all the legislation changes, what will he or she do?"
Perhaps just wing it and bill the client. It's a formula
that's worked thus far