9 December 2014
The Lawyer publishes a commentary by Markiyan Kliuchkovskyi on what should be done to attract investors to Ukraine

Ukraine: A lawless land

Ukraine’s identity crisis has pushed lawyers to set personal politics aside to help clients protect assets, restructure businesses and negotiate unprecedented deals with Russian lawyers.

In Eastern Ukraine, lawyers are focused on relocating businesses to places far away from war-torn Donetsk and Luhansk. Clients that can’t move their operations away from the area are facing a difficult choice. Local authorities, considered terrorists by the Kiev-based government, are demanding tax from companies who the risk of criminal charges filed from Ukraine if they are found to be supporting terrorism.

In the South, the situation doesn’t get any less complicated. Rulings from Ukraine’s Supreme Court have no bearing in the newly independent area, which is currently governed by Russian law. This creates an insurmountable conflict for lawyers who see courts unable to enforce judgements in dispute and litigation cases.

Ukrainian lawyers who don’t have a Russian office or a presence on the ground in Crimea are collaborating with Russian counterparts to make sure that transactions are legal under both jurisdictions. This means that for a single transaction, clients get to foot the bill for two sets of lawyers rather than one.

Although the situation is complicated in both regions, lawyers are reluctant to paint Eastern Ukraine and Crimea with the same brush. “It is completely different,” Ilyashev & Partners’ Mikhail Ilyashev says. “In Crimea you have the rule of law – not Ukranian law and not international law, but Russian law. It is not dangerous for a person to go there. In Donetsk and Luhansk there is no law.”

A lot of foreign investors are set back by the situation in the region, but this doesn’t mean that transactions aren’t happening. Some local investors regard the conflict as an opportunity, rather than a deterrent.

Silver Seal Advisers managing partner Artur Yalovyy explains: “Local investors will try to buy cheap assets for nothing, especially relating to Crimea and the Donetsk and Luhansk regions. It is a quite difficult and risky move when you don’t know what you are going to do with them.”

External investment is slow – Yalovyy says “they tend to spend less on legal services and the number of transactions has dropped” – and this means that lawyers are re-focusing their strategies on real estate, corporate restructuring and private client work.

The legal panorama has the potential to change drastically in the coming year. The new coalition government elected in Ukraine in November has the potential to bring forward new legislation that will facilitate transactions in the area. 

EPAM Ukraine partner Markiyan Kliuchkovskyi says:  “If these reforms begin to be implemented then we can expect significant progress when it comes to investment. There will be greater availability of borrowings from Western lenders as well as capital market transactions.

There is great public demand for those reforms. These reforms would make Ukraine into a better country, and the government will be pushed into acting.”

Although many lawyers are waiting for a definitive solution to the conflict, many remain hopeful that there will be more legal work to come and the option to revive current static practice areas.

Vasil Kisil partner Andriy Stelmashchuk says that infrastructure will become more important: “Sooner or later the war will stop and we will rebuild what has been destroyed.”

Natasha Bernal