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Law in Latvia: New trends in legal services

By Howard Jarvis. 02.12.2011

Arturs Krauklis
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Latvia is too small for many international law companies, but niche players provide services on a suitable scale. We talk to Arturs Krauklis of bnt Klauberg Krauklis about the changing market.

Along with the rest of Latvia, law firms in Riga have had a rollercoaster ride over the last few years. How’s business looking in 2011?
Business is getting better and better. We have never seen such an increase in turnover since we started. Turnover was up by 100 percent in the first half of 2011 compared to the previous year – it doubled. The pace may slacken in the second half, but still it’s obviously very significant, and it comes on top of an increase in turnover already in 2010.
The recovery has been in all fields of legal services. This is essentially because our clients have more money to spare for legal services. Some of them tell us that they too have seen their turnover double.

How would you describe the nature of the legal services you’re providing now?
There are many more M&A deals in 2011, but the economic crisis kept lawyers busy too, with litigation, arbitration and insolvencies. That was not such pleasant work for us, of course, but now the nicest part of being a lawyer is returning once again. Companies are completing their restructuring and starting to spend, buying up real estate as well as previously insolvent companies.
The Latvian economy is healthier than it was in the boom years. It’s something real, not just a bubble. Projects that have come our way in recent weeks include office buildings and shopping centers being built by foreign investors. Other clients are very successful in high technology, for example, and are seeking legal protection for their innovations. Intellectual property is always interesting work for a lawyer.
Mostly they are not big international companies, but medium-sized local companies with turnover of around €8-10 million.
bnt was launched in order for German clients to be better represented in Central and Eastern Europe, which was an unfilled niche in the market. But one of the ways in which we work with the German market now is to solve the legal questions of Latvian companies selling or protecting their inventions in Germany, by registering a European patent.
Export-oriented businesses in Latvia are booming. Earlier people did business in Latvia because they were driven by the purchasing power of local consumers. Now much of our time is spent advising Latvian companies interested in selling their products abroad.

Speaking about the quality of legal services provided in Latvia in general, do you think law firms spend enough on training to ensure their services are of an international standard?
The quality of legal work didn’t suffer during the recession. Law firms remained very active during the crisis. Our own lawyers travelled to seminars in Sweden and Germany. We used the time to become smarter.
In summer 2010, we organized Baltic Arbitration Days, in which some of the most skilled lawyers from the German Institution of Arbitration in Cologne visited us for seminars and workshops. We meet regularly with our colleagues in Tallinn and Vilnius to compare and contrast our three countries’ legal systems.

Do you think legal fees in Latvia properly reflect the quality of services? Are they rising together with the amount of work you’re doing?
They are certainly lower than those in Sweden and Germany. I can’t say if that’s unfair. They’re dictated by demand and the economic situation. Competition keeps fees as high or low as they are, so they’re not rising quickly with the recovery, but they did not fall significantly under the crisis.

Are there too many lawyers in Latvia?
That’s a sensitive question. There are too many political parties in Latvia, and there are too many arbitration courts. But there are not too many lawyers.

If the quality of legal services needs to be at its very best, is there a “success fee” or contingency fee in Latvia in addition to or replacing the hourly fee?
You’ve hit on a hot topic. Lawyers’ opinions vary on this. Some say that success fees are not allowed in Latvia at all, as it’s against the ethics of law. In Germany, for example, they’re not permitted. The work of a lawyer is traditional work – it’s not a business. We are not providing legal services but legal aid.
A success fee was actually popular among local law firms in the nineties, but it later moved to a fixed hourly fee. For foreign clients it’s not a problem, but local clients sometimes request it.

There doesn’t seem to be much transparency among legal services companies regarding revenues, let alone profit. We asked the law firms represented in our table for a revenue figure, but only three provided it. Why is that?
It’s a matter of confidentiality that goes with the profession – details about clients, cases, and revenues are not disclosed. Law firms are unique in that there is no obligation to be registered in the Company Register. Law firms are registered as taxpayers and in the bar association, but that’s all.

The working environment for law firms in Latvia seems to be on a smaller, more personalized, less intense scale than in bigger countries. Is that something you prefer?
It’s true that in Germany every lawyer has four secretaries and dictates everything. There is the same amount of pressure on lawyers here but it’s hard to compare the two environments.
I’m happy with the Latvian way of working, but I’m also lucky enough to get to work on international cases – even those with no connection at all to Latvia. My specialty is international arbitration, so I get called in to work on cases in Poland, for example, where a foreign client is involved.

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