Paying top dollar for legal help can pay off
Upper-tier law firms are expensive, but sometimes they are the best bet for clients who need help in completing complex international transactions successfully.
This summer Activ Solar retained Egorov Puginsky Afanasiev & Partners for advice in connection with a multimillion-dollar credit from VTB Bank to construct a solar park in Crimea. The law firm has officers in Russia and Ukraine, as does VTB Bank, while Activ Solar has operations in Ukraine and a presence in Austria.
“On a very practical level, top law firms have the resources to ensure that complex, cross-border transactions are run as efficiently as possible,” said Michael Cherevko, general director of Activ Solar. “They can often take advantage of time differences by using staff in offices in different time zones…They can also deal with the large number of documents…as part of a complex transaction or case and they can manage the process so the in-house legal and business teams have a single point of contact...”
And when Metinvest, the giant steel and mining unit of Rinat Akhmetov’s System Capital Management, was getting ready to launch its $1 billion euro medium-term note, it hired Baker & McKenzie.
“We always look for very experienced and highly qualified specialists who are familiar with our tough requirements, Metinvest’s group structure and capable of providing legal services in all jurisdictions of Metinvest’s presense,” Tetyana Balynska told the Kyiv Post, Metinvest Holding’s corporate finance legal adviser.
Serhiy Chorny, managing partner of Baker & McKenzie’s CIS office in Kyiv, has worked on seven of the last eight initial public offerings held in Warsaw by Ukrainian companies. He said the firm’s commercial knowledge combined with its geographical reach allows Baker & McKenzie to work more efficiently, under less stress and with fewer surprises.
“IPOs never come cheap. There’s a minimum amount of work required that can only be done by qualified lawyers… they cost something and you can’t go lower,” Chorny said.
The legal industry is a highly competitive one. Choosing a less experienced, cheaper firm might work out just fine for many clients. But getting the wrong legal advice could also expose a company to risk and liability, leading to a huge monetary loses.
“The cheaper law firms sometimes don’t know what they’re doing. They’ll take chances, which translates into time loss, additional expenses for the client as well as additional lawyers,” said Chorny.
The best lawyers – cheap or expensive – can spot red flags, risks and exposure to certain liabilities where others don’t. “You could win a case with an experienced lawyer (who charges more) and lose a case with a cheap one,” said Dmytro Marchukov, senior associate with Egorov Puginsky Afanasiev & Partners.
Even when a case on the surface seems clear-cut and favors one side, a good lawyer can still tip the outcome the right way for the client.
Marchukov explained how Egorov Puginsky Afanasiev & Partners was hired by a respondent in a multimillion-dollar arbitration case to mitigate impending losses in what seemed like a hopeless situation. Supremely confident on their end, the claimant proceeded with an in-house lawyer that had limited arbitration experience.
“We ended up winning without our client having to pay one cent,” said Marchukov.
The same applies to initial public offerings and other banking and finance deals, which on the surface seem standard.
“An IPO happens once in a company’s lifetime, so it’s important for it be the right type of transaction. It’s expensive and complex,” said Glib Bondar, partner at Avellum Partners. “These issues aren’t purely legal…Ukrainian companies have skeletons in their closet so you’ve got to do proper disclosure so that you don’t expose them to liability or scare away investors.”
In one IPO deal that Bondar worked on, an additional law firm had to be hired because the first was much lower on the learning curve and ultimately couldn’t handle the deal.
In the end, after a company loses a case in a lower court or gets poor service in a real estate deal, the bigger and better firms get retained to clean up the mess.
“I’ve seen prospectuses drafted by other law firms and on other issues like debt…where many risks were missing or not described,” Chorny said. “This is because the law firm took chances and placed the client under the risk of liability, which if they materialize could cost the company millions of dollars. It’s quite painful for the new law firm to work then. It takes a lot of effort and the work is very sensitive.”
And for the company manager under the spotlight who hires the law firm, a top lawyer means added insurance if the desired outcome isn’t achieved.
“This covers the back of the manager on the client’s side. If a legal matter takes an unexpected turn, nobody can blame the manager who chose the wrong firm,” said Yuriy Delikatny, head of tax at Noerr TOV.
by Mark Rachkevych