INTERVIEW

Adapting to coronavirus conditions: Ukraine’s legal services industry

Asters Senior Partner Armen Khachaturyan reflects on the impact of a year of unprecedented pandemic-related challenges in the Ukrainian legal services sector 

Adapting to coronavirus conditions: Ukraine’s legal services industry
About the interviewee: Armen Khachaturyan is a Senior Partner at Asters
Business Ukraine magazine
Friday, 12 February 2021 17:36

What impact has the pandemic had on your day-to-day work?

Asters was among the first Ukrainian law firms to react to the COVID-19 outbreak. In early March, weeks before the official announcement of quarantine in Ukraine, we restricted international travel for all employees, limited their participation in external events, and switched scheduled client meetings in our offices to an online format.

Our employees have been working remotely since mid-March 2020. We were well prepared for the introduction of these changes as we had already installed and tested everything ahead of the pandemic restrictions as an emergency precautionary measure. Implementing remote mode for 230 employees was still a challenge, but everything went rather smoothly, both technologically and psychologically.

After the first lockdown was formally lifted, we continued to work in what we call “smart quarantine mode”. This means that while distance work remains the norm, a certain number of employees (initially the quota was fixed at 30) can access the office with all necessary safety measures in place, including masks and disinfection procedures.
What kinds of legal issues has the pandemic created for the business community in Ukraine?

Due to the massive business disruption caused by the coronavirus crisis, labor and employment law advice has been in high demand. Various businesses have opted to impose temporary unpaid leave, shorter working hours, and redundancy lay-offs. This all needed to be neatly documented. A lot of development projects and transactions were put on hold. Business planning and performance under existing contracts was complicated or delayed. As a result, many debt financial instruments required re-profiling, with both debtors and creditors in need of urgent legal assistance.

When parties could not reach a compromise on amendments to their debt facilities and other outstanding commitments, they brought legal actions to resolve their commercial disputes. But this represented another problem. When the first coronavirus lockdown began, dispute resolution procedures in the courts stalled. Court hearings were postponed and some were arranged online. It took some time for the Ukrainian judicial system to adjust to the new realities. Even in November, the courts seemed to be extremely overloaded. This was also a frequent factor in arbitration proceedings. In July 2020, the Ukrainian parliament passed the first reading of a new Law on Mediation aimed at introducing alternative dispute resolution options in Ukraine to ease the pressure on the courts.

 

How has the Ukrainian legal services market reacted to these changes?

The unexpected pandemic forced Ukrainian law firms to consider how best to survive and preserve their business. Many law firms responded to the spring lockdown with temporary reductions in employee compensation or even lay-offs of both lawyers and administrative personnel.

At Asters, we acted very cautiously. This meant choosing a step-by-step approach towards cost-cutting measures, with implementation tied to specific economic triggers. Given the unprecedented circumstances of 2020, the firm’s overall performance has been above our expectations. Consequently, we have managed to keep the financial and benefit packages of our employees intact. We have also continued to look to the post-COVID-19 future and have strengthened a number of practices with important hires in recent months.

Inevitably, lockdown restrictions have changed some of the practical aspects of legal work. Prior to spring 2020, remote work was a rare exception for law firms. However, the experience of 2020 has revealed that remote work can be as efficient as office work. It also has obvious advantages, such as the absence of time spent commuting, which can contribute to a more balanced lifestyle.

Having staff work from home can create savings in office rental expenditure. More and more law firms are now experimenting with a combination of flexible work spaces and home working. This trend is likely to survive the coronavirus pandemic. We are also seeing a dramatic increase in the use of communication technologies. Video and data services are taking over from telephone conferences. This is making e-security technologies a particularly hot product to buy.

Inevitably, distant work is not flawless. It raises concerns over the ability of companies to maintain team spirit and teamwork. This is most evident with tight deadlines when close coordination and rapid communication are essential. However, even these issues are not insurmountable given the right technological solutions and management skills.

 

What trends have you noticed on the legal services market in 2020?

It seems that the recent merger trend has been put on hold due to the uncertainties created by the pandemic. Instead, the market has seen a number of spin-offs. For example, in May 2020, AVELLUM and AGA Partners announced that after joining forces during the preceding year, the two firms would separate but continue as an alliance. More recently, in September 2020 a boutique law firm splintered off from AEQUO.

Law firms were forced by the pandemic to update their business development and marketing plans. While most offline events were put on hold or canceled due to lockdown restrictions, marketing essentially moved online. The lockdown also gave a boost to the use of video content by Ukrainian law firms. Online broadcasts have become the most popular and accessible tool for productive discussions of the hottest topics during this turbulent period.

One of the consequences of the COVID-19 outbreak has been growing demand for high-quality online education programs. We addressed this demand by taking the EBA Legal School (a joint project of Asters and the European Business Association) online. This move allowed the Legal School to become even more inclusive, as representatives of 1017 EBA member companies from all over Ukraine could now participate.

 

Asters celebrated its twenty-fifth anniversary in 2020. What have been the most striking changes in the Ukrainian legal services market during this period?

The most notable change is the relative maturity of the Ukrainian legal market. When our firm was founded in 1995, there were just a few law firms in Ukraine that could work with international clients, and there was practically no competition.

The transition to free market economy required new laws and new law practices. Everything came quickly through intergovernmental assistance, study programs, NGOs, and international law firms which served as a model regarding the professional style and workaholic mentality that shaped the first generation of post-independence Ukrainian legal practitioners. Within a relatively short period, many Ukrainian legal startups were investing in continued self-education, practical training, and degrees from top US and European law schools. Fluency in English and a strong knowledge of Western and Ukrainian law provided unprecedented opportunities for ambitious young professionals.

In the early 2000s, competition started to pick up quickly with new international firms coming to Ukraine and a large number of Ukrainian firms either spinning off from international strongholds or being set up from scratch by entrepreneurs. Challenges also came from the economy, which faced one crisis after another.

Maturing local law firms soon became strong competitors for their international colleagues. The Ukrainian legal market is now dominated by local law firms, which is exceptional for the CEE region. It is also striking to note that the legal services market is now one of the most competitive segments of the Ukrainian economy.

One thing has remained constant throughout all these years - foreign investors still struggle to understand the Ukrainian business and legal environment without qualified legal advice. From the very beginning, Asters has acted as a bridge between international businesses and Ukrainian business realities.

 

What was the thinking behind the charity fun run organized by Asters as part of your twenty-fifth anniversary celebrations?

As we are a long-standing partner of the Tabletochki Charity Fund, our primary goal in organizing the DobroRun charity fun run was to raise funds for vitally important medicines for Ukrainian children fighting cancer.

DobroRun's principal feature was in its inclusive nature. Anybody could participate at any place and time worldwide. Participants were free to walk, run, or ride their selected distance, ranging from 500 meters for beginners to 25 kilometers for skilled participants.

This inclusive approach helped make DobroRun the largest scale charity project ever held by a Ukrainian law firm, with 1,260 participants in 21 Ukrainian regions and 16 countries. Overall, DobroRun helped raise over UAH 1.14 million for the Tabletochki Charity Fund. 400 children fighting cancer in 19 hospitals all over Ukraine will get much needed medicines thanks to donations from DobroRun participants.

 

How do you see the Ukrainian legal services sector developing in 2021?

Forecasting the economic and political situation in Ukraine has always been similar to reading tea leaves. The added complications of the pandemic mean that it is now even harder to make any meaningful predictions. The latest announcements regarding coronavirus vaccines certainly give cause for hope that we will see the restoration of normality in the not-too-distant future. However, even in the best case scenario, collective immunity as a result of mass vaccination will probably take a year or so. Consequently, business planning for 2021 should take this into consideration.

The controversial recent decision by Ukraine’s Constitutional Court undermining the country’s anti-corruption reforms calls into question a number of important commitments that Ukraine gave to its international partners as part of the country’s Euro-Atlantic integration process. The actions of the Constitutional Court are a reminder that the Ukrainian government will have plenty of urgent issues to address in 2021 in addition to the pandemic itself. The situation in the legal services sector, and throughout the Ukrainian economy in general, will depend heavily on the ability of the country’s leaders to handle these challenges efficiently.

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