The Legal Industry Edition, March 2023
The year 2021 was a period of steady growth for the Ukrainian legal market. However, the war has changed the landscape dramatically. The World Bank has predicted Ukraine’s economy would contract by up to 45% in 2022, which in fact gave a 35% drop. The EBRD estimated that in the beginning of the war, 30–50% of businesses had stopped their operations completely. In spring, the National Bank of Ukraine has predicted that Ukraine's economy will contract by a third in 2022. The economic losses due to the ongoing military offensive may exceed $1 trillion, while the unemployment rate has tripled to 30%.
In spring 2022, according to the Ukrainian Bar Association's survey half of in-house counsels (49%) said their companies suffered severe losses (29% decreased more than twice, 20% suspended operations), while only 14% – reported that their businesses were fully operational. Consequently, most law firms (87%) saw a dramatic drop in their workload and revenues – by over 30%, a survey by the Association of Law Firm Executives showed.
Now, over the course of a year, those unprecedented challenges are seen as the best MBA ever. The business, including the legal market, had to take decisions fast.
Aequo has imposed comprehensive austerity measures to continue working under the prevailing conditions. Our firm ensured appropriate security measures and provided support to colleagues. Within a week, we had organized relocation of the teams and their relatives to a safer, western part of Ukraine and then partially abroad. The firm continues to pay salaries.
The firm's strategy has been adjusted to the new context, which is still changing in a war environment. We re-opened the office in Kyiv in June and continue to work to the extent possible, supporting Ukrainian businesses and being involved in pro bono initiatives. We have redirected resources to support teams, the Army and Pro Bono initiatives. Thanks to our long-standing relations with the leading international law firms, Aequo has arranged secondments for a number of colleagues in other European countries.
Despite the war, there is high activity in dispute resolution – both local and cross-border litigation and arbitration. The reparations disputes and claims for damages from Russia become a new workstream. We also have compliance requests since there have been many legislative changes due to martial law. Another active topic is business relocation requests. On the transactional side, the IT industry of Ukraine illustrates incredible resilience and even growth during the war year. The M&A activism is still happening around IT companies originating from or with substantial R&D presence in Ukraine. Finally, both the military tech and the private healthcare/ prosthetics shall become the new niches, promising Ukrainian unicorns to see the world in a couple of years.
These days, almost every Ukrainian business is business with purpose. Aequo continues our humanitarian aid and support to the Ukrainian Army. Our colleagues are involved in pro bono projects for their clients or NGOs with a humanitarian purpose. Since March 2022, Aequo has supported SpivDiia, the largest Ukrainian government- affiliated and technically advanced platform helping connect relocated persons and socially vulnerable groups, suffered from war, with officials and volunteers, securing safety for both sides. Aequo also acted as legal advisor for two large-scale, first of its kind projects aimed at providing access to quality education to rebuild Ukraine – Ukrainian Global University (UGU) and IT Generation.
Practice Area News
The New JSC Law. The new law of Ukraine “On Joint Stock Companies” No. 2465-IX dated 27.07.2022 entered into force on January 1, 2023. This law aims to raise corporate governance level up to European standards, to help protect investors' rights, and expand opportunities for raising capital. This law would achieve its stated objectives, as believed by 82% in a survey conducted by the Ukrainian Bar Association.
Notably, Anna Babych was involved in drafting this law, having previously succeeded in the LLC Law reforming.
The law on forced seizure of property of the Russian Federation and its residents. In March 2022, the Law of Ukraine “On the Basic Principles of the Forcible Seizure of Objects of Property Rights of the Russian Federation and its Residents in Ukraine” No. 2116-IX dated 03.03.2022 came into force. It allows to seize both property rights that require registration under Ukrainian law – i.e. movable and immovable property, funds, bank deposits, securities, corporate rights, other property (assets) located (registered) in Ukraine; and other property rights.
Diia City regime. In early February 2022, Diia City officially started operating in Ukraine to provide its residents with a specifically developed favourable tax regime, handy tools of English law facilitating new investments and advanced corporate governance solutions. It has been elaborated by Anna Babych’s team on the instruction of the Ministry of Digital Transformation of Ukraine.
Diia City is regulated by:
• The Law of Ukraine “On Stimulating the Development of the Digital Economy in Ukraine” N 1667-IX from 15.07.2021,
• The Law of Ukraine “On Amendments to the Tax Code of Ukraine to Stimulate the Digital Economy in Ukraine” No. 5376 from 13.04.2021.
Resolution of the Cabinet of Ministers on Certain Matters related to State Registration during Martial Law. Due to the russian invasion and for security reasons, the operation of the unified and state registers administered by Ukraine’s Justice Ministry was temporarily suspended, according to the Resolution of the Cabinet of Ministers of Ukraine “On Certain Matters related to State Registration during Martial Law and Amendments to the Resolution of the Cabinet of Ministers of Ukraine No. 164 dated 28 February 2022” No. 209 from 06.03.2022.
In the Firm
• Aequo has a large premier corporate and M&A practice, top-ranked by Chambers Global/Europe, The Legal 500, and IFLR1000.
The practice is led by executive partner Anna Babych, Ukraine and English law-qualified lawyer.
Regarded by industry experts as one of Ukraine's leading transactional lawyers, Anna has been named the Legal Innovator of the Year in Europe by FT Innovative Lawyers.