CEE to provide rich pickings for foreign players
The accession of Romania and Bulgaria to the EU on 1 January provides opportunities for the many international law firms already operating in the jurisdiction.
EU membership means the countries’ political and legal systems have to meet EU standards, which makes it simpler for international firms to do business in the countries, and in many cases gives them the edge over domestic firms, even with all their local knowledge and experience.
Making the most of the opportunities are mid-tier firms such as CMS Cameron McKenna, DLA Piper and Salans. With lower overheads than the magic circle and a rich vein of local talent within their networks, they are best positioned to make the most of this transitionary phase in Central and Eastern Europe (CEE).
Real estate is leading the boom for many practices outside Russia, although the Russian real estate market has also been coming on in leaps and bounds over the past 12 months or so.
But it is not just the mid-tier firms that have their eyes on the market. Magic circle firms have also been doing their best to take advantage, with Clifford Chance‘s regional managing partner Michael Cuthbert telling The Lawyer that the firm will be looking to ramp up its Romanian office in the first half of this year.
“In our particular case we’re focusing on spreading more English lawyers across the region,” Cuthbert says. “Romania in particular is an office we’ll look to staff up significantly over the next six months or so.”
Freshfields the early bird for Russian PPPs
In Russia the infrastructure PPP market is on the verge of taking off, which has a number of projectslawyers from the UK salivating at the prospect.
The Western High Speed Diameter (WHSD) project is a 46km motorway linking St Petersburg’s trade seaports with Scandinavia and Russia’s highway network. The project’s first stage of the bidding process – the prequalification phase – closed last week (28 February), with a number of international consortia expected to have their bids submitted.
The grantors of the project – the Russian Federation and the City of St Petersburg – have instructed Freshfields Bruckhaus Deringer to negotiate on their behalf for the concession agreement, but it is sure to be a far from straightforward process. The $3bn (£1.53bn) WHSD project is the first major PPP to come under the Russian concession laws, which were introduced in July 2005.
A final concession agreement on the project is expected before the end of 2007, but a number of issues to satisfy financial institutions and sponsoring consortia will have to be thrashed out. It will be labour-intensive and fee-heavy work that already has Freshfields projects partners Bobby Stewart and Innokenty Ivanov smiling.
Rival firms have been aligning themselves with their sponsor clients and the race has now begun to get their teeth into the negotiations, which could shape the future of Russia’s potentially lucrative PPP market.
Stephenson Harwood forges links in Istanbul
Istanbul is a city that is starting to get noticed by the law firms of the West.
The UK’s Stephenson Harwood has capitalised on this emerging market after piggybacking a long-term property client, which has rebranded itself to look at emerging markets.
St Martins Property bought out the 50 per cent stakes of the local Cevahir family and the municipality of Istanbul in the $750m (£382.08m) purchase of a shopping mall, in what is Europe’s largest single-asset transaction in recent years.
The transaction brought Stephenson into contact with local firm Pekin & Bayar. Real estate partner John Pike says the firm would not think twice about working with Pekin again if (or rather when) the opportunity presents itself.
“It was a very exciting, interesting and challenging transaction with the cultural and language differences,” Pike adds. “Pekin & Bayar was a firm that was recommended to us [and] we certainly would have no hesitation in going back to them for another transaction.”
Pike admits that it is very early days for the firm to be targeting Turkey for more work, but now it has an entry it will be keeping a close eye on developments.
Herbies bags Salans’ Russian tax guru
The start of 2007 has seen firms increase their emphasis on bolstering their Russian practices. The opportunities in real estate and project finance – not to mention the continuing energy and commodities sector M&A work and the steady stream of small and mid-cap companies looking to London for financial investment – have firms scrambling to take advantage.
The big winner in January was Herbert Smith, which made a two-pronged attack on Salans’ strong Moscow office, taking on two partners, including tax specialist Oleg Konnov.
Konnov is highly rated in Russia for his tax expertise – an area that is of huge concern to businesses operating in the jurisdiction. It was, after all, on tax-related charges that the Russian Federation jailed former oligarch Mikhail Khodorkovsky.
Konnov is credited with writing the book on Russia’s tax laws and was an adviser to the Russian parliamentary board that developed the federation’s tax legislation. Salans chair Stephen Finch says that the loss of Konnov and his M&A colleague Alexei Roudiak is a blow, but Salans remains one of the strongest UK firms in Russia outside the magic circle.