UKRAINIAN LEGAL SECTOR

LEGAL FOCUS: Lviv legal sector reaps benefits from western Ukraine’s rising regional profile

Capital city of western Ukraine is attracting increasing investor interest leading to legal industry expansion

LEGAL FOCUS: Lviv legal sector reaps benefits from western Ukraine’s rising regional profile
Lviv legal services providers are enjoying expanding options thanks to expanding international investment interest in the capital of western Ukraine and the surrounding region
Markian Malskyy
Sunday, 05 March 2017 23:00

Lviv has long enjoyed a reputation as Ukraine’s EU gateway region and one of the country’s most attractive investment options. Location is not all Lviv has to offer – the region boasts qualified employees and competitive salaries, a wealth of local resources, and available land. Examples of successful investment over the past decade include Nestle (Switzerland), Carlsberg (Denmark), Leoni Wiring Systems (Germany), Kredobank (Poland), FAKRO Lviv (Poland), Danish Textiles (Denmark), AVE (Czech Republic), Halychyna-Zakhid (Denmark), Landkom (Great Britain), Discovery drilling equipment (Great Britain), King Cross Leopolis (Italy), Siemens (Germany), Henkel (Germany), Volksbank (Austria), GlobalLogic (USA), Austrian Airlines Group (Austria), and many others.

 

Economic rollercoaster ride

Since the turn of the millennium, Lviv has been home to one of Ukraine’s most dynamic regional economies. The period from 2004 to 2007 saw rapid growth in M&A and RE transactions. Sectors including agriculture, light industry and machinery, leisure, and food production developed dramatically. Legal advisors will remember this period as a time of booming investments that transformed the Lviv legal market. Local law firms focusing on litigation and corporate consulting ceded the limelight to legal advisors specializing in international law and boasting experience of cooperation with foreign clients. Leading Ukrainian law firms opened branch offices in Lviv to meet this demand, while joint ventures between local and foreign consultants appeared, headed by lawyers with a foreign education and experience in international law firms. These developments helped to improve service standards throughout the Lviv legal sector.

The 2008 global credit crunch hit Ukraine particularly hard and brought this period of progress to an abrupt halt. Law firms had to switch their focus away from investment projects and towards bankruptcy, litigation, and a growing number of distressed asset transactions. The recovery began in 2010 and continued until 2013, albeit without ever returning to the levels of the boom years in the early 2000s.

The historic events that rocked Ukraine in late 2013 and early 2014 derailed this revival. Law firms found themselves forced to focus on market exits, investment withdrawal, downsizing, tax litigation, debt collections, corporate disputes and other types of commercial litigation, while also addressing the problems of banks in liquidation. Most investors switched to survival mode or sought to sell businesses with minimal losses. 

 

Robust recovery

Since 2015, the Lviv market has witnessed a relative stabilization followed by a return to growth as companies with foreign investment that survived the crisis look to consolidate their positions and new investors steadily enter the west Ukrainian market. This process has benefited from investment-friendly measures implemented by the municipal and regional authorities. Lviv region boasted an international trade turnover exceeding USD 2.65 billion in 2015. Prominent recent investment projects in Lviv include the opening of new production facilities by Fujikura (Japan), Nexans (France), and Bader (Germany), together with the construction of a modern business park by European developer CTP.

Manufacturing is one of the key trends fueling the growth of international investment in the Lviv region. It is not hard to see why – the region is on the EU’s doorstep while also offering a range of advantages including resources, land, raw materials, cost-effective human resource opportunities, and attractive logistics. The devaluation of the Ukrainian currency, the hryvnia, has created a unique opportunity to secure new market niches and gain revenues in a short-term perspective. In addition to manufacturing, other sectors of the Lviv economy regarded as most promising by investors include IT, agriculture, infrastructure development, tourism, and hospitality.

 

Legal sector adapts to investor needs

The robust recovery of the Lviv investment climate has had a significant impact on the west Ukrainian legal market. Interest continues to grow in services related to a wide range of fields. Key services include Corporate and M&A, focusing on the establishment of companies, corporate and transaction structuring, and advising on a whole range of corporate governance matters. Advising on corporate taxation in Ukraine as well as the application of international double taxation treaties is also becoming more popular. There is rising demand for finance and currency control services. Many firms see growing interest in real estate due diligence and support in the acquisition of properties and land plots, construction, and leasing. Many clients seek advice on labour-related documents including internal policies, contracts, schedules, the employment of foreigners, and labour disputes. Others are increasingly seeking antitrust and competition services. Trade is a growing area for the entire west Ukrainian legal sector, with clients seeking consultations on all trade-related and customs issues, while requiring advice on the implication of international treaties. With more and more international companies looking to establish themselves in Lviv region, regulatory services are very much in demand, coving the full scope of legal support to obtain the necessary licenses and permits required to operate in Ukraine. Finally, this is also fresh interest in dispute resolution services, particularly in relation to client representation in national and international arbitration.

 

Rising international profile

The positive trends driving Lviv’s investment appeal look set to continue in the coming few years as the Ukrainian economic recovery gains momentum and trade ties with the nearby EU strengthen. Lviv is already very much in the international shop window. The city regularly features in the international media as an up-and-coming European business and leisure destination, and already hosts a range of business events including a popular annual International Economic Forum, IT conferences, and the West Ukrainian Legal Forum. Then there are a range of more informal networking events such as the Alfa Jazz Fest, which attracts a wide range of national and international corporate players to the city. As the investment climate improves, this will lead to additional demand for legal services from international companies entering the west Ukrainian market.

 

About the author: Markian Malskyy is a Partner at Arzinger law firm and Head of the West Ukrainian Branch. His is also Honorary Consul of the Austrian Republic in Lviv.

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