Ukrainian legal market is undergoing constant changes. Renewal of political elites and related changes in legislation and regulation of processes have become commonplace and have an impact on the work of lawyers. Along with the development of economic and other social relations, civilizational development of society, all this causes changes in such a conservative sphere as jurisprudence and justice. Vladimir Vashchenko, co-founder and head of Dispute Resolution practice in VB PARTNERS told us about legal evolution and revolution.
– In recent years, there has been increasing talk of a significant complication of business disputes. Volodymyr, what are some of major trends in practice over the last year, and why do you think disputes are becoming more complex?
Procedural changes have created new opportunities. On the other hand, in view of the over-regulation of process, effectiveness of judicial protection depends directly on professional legal work and sometimes on the capacity of a party to a case to advance significant legal costs.
In commercial and civil proceedings court becomes an arbitrator and neither collects evidence on its own initiative, nor establishes in full all the circumstances, but should evaluate the evidence presented by parties. This approach is not accepted by all and remains a topic of discussion even with the representatives of judicial system and lawyers.
In administrative process, the topic of court interference in the discretionary powers of authorities has been repeatedly raised. Now administrative court has the right to oblige a subject of power to make a decision, if all necessary conditions have been met. We had expectation about an efficient judicial protection, but administrative courts are still reluctant to investigate necessary conditions.
Overall situation in criminal justice has not changed – it is as simple for investigative bodies to obtain the rulings from investigating judges, as difficult for defense and other litigants to achieve the respect or restoration of their rights. This policy of double standards may only be overcome by a change of minds of investigating judges.
Business has no request for procedural institutes and opportunities. Its area of interest includes an economic growth, purchasing power and clear and transparent rules of game. But investment climate in Ukraine does not allow you to be in comfort zone. However, if previously business was an object for law enforcement agencies, there is now an opportunity, if not to moderate, then at least to influence or even manage difficult situations.
– What range of measures, which may be taken by an external consultant, is today included in Dispute Resolution practice? It seems that it is no longer just a matter of filing a lawsuit with the commercial court and representing client’s interests thereat.
Our Dispute Resolution practice includes, in addition to litigations, friendly negotiations with competitors and authorities, participation in meetings of parliamentary committees and control commissions, use of tools of the American Chamber of Commerce and the European Business Association to defend interests and protect business, active position in anti-dumping investigations, etc., that is, a settlement of a conflict by the most efficient way for client. Protection of foreign investors’ rights in international arbitration and the European Court of Human Rights became of a particular importance.
In White-Collar Crime practice, we focus on protecting business from the pressure of law enforcement agencies. Despite all the inequality of litigants in criminal proceedings, in most cases client may take a proactive position and be the subject rather than object of relations. A separate area is the fight against corporate fraud. We believe that, broadly speaking, these areas of legal aid relate to dispute resolution.
– What is the difference in approaching such a client case for a boutique company? What are your professional “specific features”, which competitors may not offer?
A large company requires a significant degree of formalization, mechanization and bureaucratization of processes, which leads in the external manifestation to the impersonation of service, and undoubtedly affects the quality. The vulnerability of full-service firms lies in lack of individuality.
Our specialists are largely involved in internal processes and interpersonal communication, and participate in the formation and implementation of a vision. There are the rules and policies, but company achieves the best result for client not through formal approaches and hierarchical control, but by sharing common principles and vision. Any situations are compared with the generally discussed and developed principles, and employees make appropriate decisions independently, within their competence.
The relationships correctly and lawfully built by judicial authorities, including pre-trial investigation bodies, analytical work and modeling of situation may prevent in many cases negative scenarios. Business is interested in sales, but not in successful repulsion of attacks by law enforcement agencies, competitors, etc. As a result, we are often involved in the process of making not only legal, but also business decisions of our clients. Final decision is left to a client, but independent recommendation is rewarded.
We forecast, evaluate and help to prevent risks. Accordingly, we do not expect a tender for legal services, but create a project ourselves and present its value to client.
– What are the problems which clients most often bring to you and who are your clients?
Boutique companies may benefit from Dispute Resolution and White-collar crime practices, since in these practices the degree of partners’ personal involvement plays a very important role.
Global firms have an undeniable advantage of multi-billion dollar mergers and acquisitions. But they were incorporated to serve and move capital around the world. The owner, who has built his business from scratch, is interested in final result and he will favor a highly specialized company, with partners of which he is familiar, or are recommended to him. This creates the preconditions for developing Private Client direction.
In our judicial practice, we have focused on litigations with the state in the areas of privatization / re-privatization, taxation, leasing, land use, etc.
In addition, the politically motivated and economically unfounded decisions, as taken by the central bank, have largely related WCC. Clients’ requests are based on personal trust, as they often risk not only property but also freedom.
One group of our clients is formed by multinational public companies and their representative offices, which have existed in Ukraine for many years and successfully continue their business. The other group consists of foreign investors which have lost their assets or control over them due to the lack of rule of law and judicial protection, criminal proceedings and decisions taken by authorities. Politically motivated and economically unfounded decisions as taken by the National Bank led to creation of a new market. Banking institutions, their ultimate beneficiaries and top management have become our clients. This is the third group.
Another group is formed by the individuals, who solve with our help the complex issues in relations with the state and business partners.
– Are the clients of Dispute Resolution practice connected with WCC practice which is the second determining area of focus for VB PARTNERS? (Цього речення немає в українському варіанті). Are the cases related to lifting sanctions, as imposed in Ukraine on foreign companies, accompanied by criminal proceedings, in which your colleagues protect clients?
If US OFAC publishes official press releases on sanctions, then the initiators and causes of imposing sanctions in Ukraine are in the sidelines. Their actions may conceal commercial interests that have nothing to do with national security. Therefore, a part of decisions may either be a means of pressure on business, or a means of market re-allocation (for example, gambling), or be aimed at indirect expropriation of assets.
Due to turbulent international events the sanctions legislation of most countries has started to develop rapidly in recent years. But such a development has actually resulted in a massive attack on individual rights and freedoms. Blurry boundaries of national interests and security, covered by state secrets, have become a universal justification for state interference in private-law relations.
Ukraine has not become an expulsion from general trend. Judiciary position came down to the fact that the rights and freedoms were not absolute. In my view, legitimacy of objective in such cases should be verified by the Supreme Court as to whether or not the decisions are in line with the criteria of justification, objectiveness, fairness and ratability. Only in this way we may enforce the principle of the rule of law as stipulated by Art. 8 of the Constitution of Ukraine.
New sanctions legislation, lack of experience and good judicial practice give rise to a wrongheaded view of an unlimited state interference in rights and freedoms. Therefore, there is an urgent need for public authorities to explain the reasons for imposing sanctions in each unobvious case, as well as for an efficient judicial protection of individual rights from the government interference which does not pursue a legitimate aim.
– In recent years your company is increasingly involved in investment disputes, but not in Ukraine. Tell us in detail about the prospects for developing this vector of Dispute Resolution practice.
Sometimes, due to different circumstances, it is not possible to rely on effective judicial protection in Ukraine. Therefore, a judicial appeal may only be used to bring a person’s problem into the public domain or to apply to international authorities for further action. For example, filing a complaint with the European Court of Human Rights is possible after the national remedies have been exhausted.
Foreign investors may also seek international arbitration on the basis of investment protection agreements. The latter allow a broad interpretation of direct and indirect expropriation of assets, as well as compensation of fair value. And, first of all, this applies to sanctions against European companies. The reasons for their inclusion in the list of sanctions are not only obvious, but sometimes too vague, which raises reasonable doubts about the legitimacy of goal.
The main one may be a dispute as to whether or not such expropriation takes place, since the assets of a foreign investor are not directly transferred to state ownership. But some decisions, as taken by the Ukrainian state bodies on the procedure for imposing sanctions, deprive an investor of not property rights, but of the ability to manage and control the assets.
Similarly, criminal proceedings, seizures and arrests of property are used to remove owners from effective control. Under previous presidential cadences, all means were used simultaneously by law enforcement agencies and other authorities. However, they did not serve the state interests, but rather served the private ones.
– This year you were recognized as the Best Tax Dispute Lawyer. Does this mean that the largest opponent to business in Ukraine today is the state, in particular, its fiscal authorities?
Many lawsuits are initiated by prosecutors, State Property Fund, State Labor Service of Ukraine, etc. More than 80% of our cases result from their actions, which I attribute to the incompleteness of reforms (police, financial investigation service) or imitation of reforms (prosecutor’s office, State Bureau of Investigation). Reforms have to be done quickly, but many historical opportunities have been lost. Therefore, in recent years, we have met with a reaction in the bad meaning of this word.
Most often, officials and law enforcement officers do not pursue state goals, but set a task to create a problem. But not always afterward they are able to solve it. However, the general consequence of abuse of power is a significant contribution to the “improvement” of the investment climate in Ukraine.
– What prospects for the development and possible transformation of the Dispute Resolution practice may be expected in this context in the near future? What is topical today and what is professionally attractive to you?
Many issues were evolutionarily referred to tax consultants, auditors, investment bankers and … an artificial intellect. And only in court practice professions were monopolized. Litigation is constantly getting complicated and it becomes increasingly difficult to exercise the right to judicial protection without professional assistance. And such a complication of an access to justice is not at all the idea of national legislator.
However, on September 3, the Parliament sent to the Constitutional Court Bill No. 1013 abolishing the lawyer’s monopoly. I do not exclude in the near future the return to court cases of law specialists (if you remember one of the decisions as taken by the Constitutional Court) who do not have the status of lawyer.
On the other hand, there is a tendency to reduce business appeals to the courts. In 2011-2013 decrease was associated with the construction of rigid vertical in all government institutions, when court ceased to be an arbitrator and protection against pressure for business. In 2014-2015 reduction in the number of appeals for judicial protection resulted in an economic depression. Difficulties in accessing justice and ultra-high court fees have affected the situation after the last judicial reform of 2016-2017, but the main reasons, in my opinion, are the lack of confidence in court and politicization of state courts.
At present, I am more focusing on investment arbitrations, where our company is acting as a national advisor, protection of business in criminal proceedings, judicial protection of corporate shareholders’ rights, appeal of unjustified decisions on imposing sanctions and legal acts on the procedure for their imposition.
I have built together with my team a legal boutique with a specialization in resolving various disputes and conflicts of business with the state, in criminal proceedings (including in matters of Interpol and extradition), and we have a large judicial practice. We are working on engaging young and ambitious attorneys in our team, strengthening senior management skills, and expanding our analytical potential with involvement of academics. But the slogan “Challenge Accepted!” still remains relevant to us.
Vladimir Vashchenko in an exclusive interview for “Ukrainian lawyer”