3 October 2011
The modernisation of the Belarus economy could see commercial lawyers no longer being able to represent clients in court. Dale McEwan asks: is this just par for the course for an up-to-date legal system?
The legal profession in Belarus is facing a draft law that could see the representation of clients in courts - including commercial courts - performed exclusively by advocates. Under the law, commercial lawyers who work in commercial firms would not be able to represent clients in court.
Although this law would bring the country into line with a range of others, it represents a significant development in the Belarus legal market, which some may say is still in its infancy. The country is home to approximately 170 licensed law firms and it is unclear whether the law will be adopted as it stands or if there will be amendments.
“Initially the draft law envisaged that commercial lawyers would cease to exist as a class - all of them had to either become advocates or stop their activity,” says Sergei Makarchuk, managing partner at Cerha Hempel Spiegelfeld Hlawati’s Minsk office. “This drew objections from commercial lawyers. Later the legislator agreed to
save commercial lawyers but deprive them of the right to represent clients in court. Presumably this would create an incentive for commercial lawyers to become advocates.”
“The idea to unite the two institutions has been there about as long as I’ve practised law - more than 10 years,” says Maksim Salahub, office managing partner at Sorainen’s Belarus branch. “The government may think this will eliminate unnecessary barriers for legal service providers - ie we all become advocates able to practise in all areas and represent clients in all courts. However, I think the reform hasn’t been thought through or implemented with due care.
“Many law firms will lose a considerable share of business. Few advocates will be able to represent clients at commercial courts as efficiently as private lawyers.”
These sentiments are echoed by Alexander Korsak, a partner at Arzinger & Partners. “The real problem is that, from the beginning of the sovereignty of Belarus, there’s been a division of cases between advocates, who handle civil and criminal cases, and private lawyers, who do economic cases,” says Korsak.
Economic disputes constitute a tasty morsel for the state advocacy.
“We’re not sure that advocates have enough qualifications to handle economic cases on an appropriate level,” Korsak warns.
Law Group Argument partner Dmitry Matveev also offers thoughts on the proposal’s motivations. “Advocates are interested in this law,” he says. “[They] have lobbied their interest and somehow they influenced the legislative process,” Matveev says.
“Frankly speaking, the underlying reasons for this draft law are unclear,” states Makarchuk. “However, it’s clear that the draft law’s targeted at the monopolisation of the legal services market by advocates.”
If the law is implemented private lawyers will either have to go to the bar to become advocates or hire advocates to represent their clients.
Korsak says his firm has yet to make a decision, but his team may cooperate with advocates and hire them for relevant projects.
Matveev thinks his firm will have to have its own advocate, while Salahub says that some of his firm’s associates from the litigation practice may become advocates.
Development of the legal market is clearly intertwined with the development of the economy. While the Belarus economy has become more liberal, there is still much work to be done in this area.
According to Salahub, most progress has been made in areas such as corporate law. A limited-liability company can now be created in five days and online registration is being introduced. This places the country seventh globally with regard to the ease with which a business can be started, according to rankings from the World Bank’s ’Doing Business’ project.
Tax reform is also producing results, says Salahub. The simplified taxation system, whereby small and mid-sized businesses pay a single revenue-based tax, is becoming more popular.
“But yet we have to admit that a lot of work should be done,” concedes Korsak. “In particular, the economy’s ruled by administrative methods - it’s far from the concept of a market economy. We believe that the most important steps in the process of liberalisation will be connected with an abatement of the role of the state in the regulation of the economy and the minimisation of risk. One such aspect is the increasing denationalisation of enterprises and demonopolisation in certain economic spheres.”
As Belarus undergoes a mass privatisation programme, increasing interest is being shown by the Baltic states. Earlier this year, pan-Baltic firm Varul opened an office in Minsk, for example.
“Yes, our Baltic neighbours are really interested in establishing businesses in Belarus,” says Korsak. “Lithuania’s not rich in natural resources and doesn’t have its own developed heavy industry.”
He says the sectors of most interest are raw materials processing and heavy industry.
If Belarus is compared to neighbouring markets, such as those of the Baltic states, it would be fair to say that its legal market still has potential for growth, says Salahub.
“The economy, which is around 75 per cent state-owned, attracts a limited amount of foreign and domestic private investment, which is a source of work for law firms,” explains Salahub. “Another challenge is the immature legal culture. Local businesses, both private and state-controlled, see little value in quality legal support.”
Firms are in agreement that the instability of legislation in Belarus is a significant hurdle and that liberalisation means constant change.
“At present the rules of the game are changing often and very fast,” muses Makarchuk. “This fact is perceived negatively by all investors, both foreign and domestic.”