5 December 2011 | By Dale McEwan
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Football’s coming to Ukraine, but the country’s lack of preparation means some lawyers aren’t benefitting.
With Ukraine set to host the next Uefa European Football Championship (Euro 2012), projects are nearing completion to prepare the Kiev, Kharkiv, Donetsk and Lviv venues for a barrage of tourists. But has the volume of work lived up to the expectations of lawyers?
“Ukraine is fully engaged in construction because of the football championship,” says Tatyana Slipachuk, head of Sayenko Kharenko’s international arbitration and international trade groups.
The firm is involved in several cross-border projects, including advising the Export-Import Bank of China on export financing for the Aerial Express project, a railway connecting Boryspil International Airport and central Kiev. Other work includes representing Credit Suisse on the refinancing of a $465m (£299.2m) loan facility to the State Road Service of Ukraine. The facility was raised for the financing of the construction, reconstruction and repair of highways in general use.
“We’ve worked on some projects that relate to the general infrastructure of the country, especially concerning development of hotels,” says Ilyashev & Partners managing partner Mikhail Ilyashev. “But we’ve also provided legal services to the construction and engineering companies that participated in the preparation for Euro 2012.”
DLA Piper has also benefitted. Senior associate Galyna Zagorodniuk says the firm is advising the InterContinental, Holiday Inn and Crowne Plaza hotel chains in Ukraine.
However, not all firms have seen an abundance of work pouring in. As CMS Reich-Rohrwig Hainz partner in charge Johannes Trenkwalder says: “There’s some impact, but it’s not major.”
The firm has represented a handful of companies involved in the construction of hotels, including an Austrian company providing furniture for hotels, and also won some IP work on preparations for the event.
“Generally legal work related to Euro 2012 was sparse,” says Chadbourne & Parke Ukraine managing partner Jaroslawa Johnson. “There is work but in many cases Ukraine waited too long to start. I was in Warsaw three weeks ago; everything’s in place and it looks beautiful, whereas here, the airport isn’t finished. There’s still a lot to be done.”
The firm advised a Ukrainian football team on stadium construction and a Korean company that is supplying train equipment to move visitors during the matches.
“Attorneys at other Kiev-based firms or offices didn’t fare better,” adds Johnson.
CMS Cameron McKenna Kiev managing partner Adam Mycyk says the firm has seen some financing work stemming from the development of hotels and offices.
“Some of this is spurred on by the upcoming football championships,” he says. “To a large extent there was probably a great amount of hype about how much work would be generated by the preparations for it. There hasn’t been the bonanza of work that was expected.”
Clifford Chance Kiev managing partner Jared Grubb agrees. “I wouldn’t say there’s been a lot of work for firms,” he says.
The consensus is that a lack of PPP projects - despite legislation on the area introduced in 2010 - has contributed to the shortfall in projects passing through firms.
“With PPP and project financing in the English sense, Ukraine’s legislation wasn’t developed enough,” says Magisters
partner Olga Khoroshylova. “It’s still lacking legal protection for investors. For the championships what we’re seeing is plain vanilla borrowing.”
For Johnson, the failure to develop an effective PPP regime is a big reason for the limited legal work, and a PPP project for Ukraine’s Lviv Airport failed because of it.
“I know there were many talks on road construction projects under a PPP arrangement. However, nothing worked out as the construction legislation is too cumbersome and doesn’t allow investors to pursue their goals in a workable deal. Thus, while the PPP law was enacted, further necessary changes to the legislation weren’t made.”
Khoroshylova agrees that legislative reform is required. “Until the government is really interested in this and realises why reform is needed, it won’t get off the ground,” she says. “After the championships there won’t be an incentive for Ukraine to develop PPP in a rapid way.”
“Expectations have turned sour,” adds CMS Cameron McKenna partner Olexander Martinenko. “Ukraine government officials have failed to do what they had to do. They had to launch a PPP but they’ve completely failed on that front.”
“One year on and there are no PPP projects,” agrees Gide Loyrette Nouel Kiev managing partner Bertrand Barrier. The firm has completed a report for the United States Agency for International Development on what Ukraine can do from an international perspective to ignite the PPP sector.
As Barrier explains, it is expected that Ukraine’s Ministry of Economic Development and Trade will prepare the strategy for further development of the legislation based on the recommendations of Gide. It is also expected that the first pilot PPP projects will be structured in accordance with the recommendations.
It was not just Ukraine’s underdeveloped PPP legislation that meant Euro 2012 work was less than expected. “It also seems that many projects were handled locally by in-house counsel,” says Johnson. “The stadium in Kharkiv was financed by the owner Yaroslavsky and managed by his own lawyers. I’d say this was the main reason why there wasn’t much legal work on infrastructure projects, since they were financed and managed internally.”
According to Johnson, other reasons for the absence of Euro 2012 legal work include the global financial downturn and the Ukrainian political environment, both of which have made investors cautious about Ukraine. The UK Bribery Act and the US Foreign Corrupt Practices Act are also making investors more careful about business opportunities with government agencies.
However, if the government sorts out the PPP problems, work is bound to pick up.
As Barrier says: “We see great interest from foreign clients for infrastructure. Everybody’s interested in doing a project.”