The Ukraine is currently experiencing stable economic growth of about 7 per cent of annual gross domestic profit with steady inflow of foreign investments.
Recent parliamentary elections on 30 September 2007 confirmed the democratic choice of Ukrainian people and are likely to have further positive effect on the economy and in-bound investment.
The national legal market has seen unprecedented growth as well. However, it seems that the success of the law firms in the Ukraine comes at a high cost. There are about 20 leading firms within the Ukrainian legal market. Their representation is split half and half between international and local firms.
The market is hungry for legal talent, which has heightened competition and headhunting wars between firms, as the only way to hire a qualified Ukrainian attorney who is fluent in English and with solid international experience is to go to your competitors. In turn, this has driven up salaries and compensation packages, which in some cases have reached the level of those in Western Europe.
At the same time the costs of office space in prime locations in Kiev has rocketed far beyond the levels paid in other Eastern European capitals. Yet, while experiencing high costs, firms are also coming under increased client pressure to provide fixed/capped fees on major projects. Under such circumstances the profits of the major players have taken a major hit compared with 2006.
This may lead to a market correction in 2008 and that correction is likely to be on the fee side rather than that of costs. It may well be the case that major firms will increase billing rates by as much as 20 per cent at the beginning of the next year, while pushing clients to pay the hourly rates rather than fixed or capped fees.
Oleg Riabokon is managing partner of Magister & Partners