Law in Latvia: Resurgence in finance
By Howard Jarvis.
02.12.2011
Borenius Attorneys at Law is a full-service business law firm specializing in areas ranging from dispute resolution to banking and finance. We spoke to Partner Lauris Liepa about these topics.
Have legal services in banking and finance been experiencing similar kinds of peaks and troughs as the Latvian economy as a whole?
In general, law firms have all done much better in 2011. In 2008-09, banking and finance came to a standstill. But assignments started to increase in number rapidly from the end of 2010, primarily transactions and corporate advice for clients.
At this law firm we have seen turnover increase by 24 percent in the first nine months of 2011, with the number of assignments rising by 50 percent. There’s a gap between these two because the billable hours come later. It’s a bit like a factory, where the products have been produced but not yet delivered to the customers.
There are two major things that make us stand out as a law firm. Not only do we represent major banks in the Nordic and Baltic market, but we can also defend them in court if necessary.
Also we do a lot of work in securities; this year we represented Citi Group and Credit Suisse as agents in the issue of Latvian government Eurobonds, and we work for a number of companies quoted on the NASDAQ Riga Stock Exchange. I am one of seven independent members of the surveillance committee of the stock exchange, enforcing independent surveillance of the securities market participants.
Is restructuring in the financial sector still happening despite the recovery?
Yes, that will continue for some time. We are working on restructuring projects where animosity is present. Wherever conflict starts we seek proper defense. The number of lawyers involved in litigation is still high, but many have returned too to deal with transactions.
Latvia has a large number of banks for such a small population – around 30 of them. Didn’t the recession bring any consolidation in that area?
There’s no obvious need for consolidation. There are many banks that have a niche, or narrow purposes – a closed group of clients or individual groups. So the number of banks will not decrease.
There is growing interest from foreign investors in the Latvian market. Local financial institutions are strong and sustainable, and are either in the position where they have recovered or are continuing to do well. They are giving loans again to companies, although not so much to individuals.
Venture capital is also booming. It’s an often neglected part of the financial services industry in terms of visibility, but it performs a vital role in extending loans to start-ups with no possibility of a return for a number of years.
Latvia is about to see one very interesting case. The global financial crisis affected Latvia in 2008 when the government had to bail out Parex Bank. The third largest bank in the country was nationalized and subsequently transformed into two banks, owned by the state and EBRD. Now the decision has been made to dispose of the state’s shareholding and also the shares held by the EBRD.
So Parex Bank and Citadele Bank, which is essentially Parex’s former branch network, will both soon be sold, and there is reportedly huge investor interest, from the east as well as from Western Europe, and also from Latvian banks wanting to strengthen their operations significantly.
The transaction must be completed in a relatively short time period. Nomura International has been mandated to arrange the transaction.
With all this activity, are law firms able to raise their fees again?
Definitely not. With M&A fees, which are lawyers’ bread and butter, competition will keep them low. Clients are still cautious about the market. Most assignments are done on estimation, but if they give good results the clients will be happy to extend the finance they give us.
I’ve seen a rise in legal fees for complicated disputes, which often take lawyers several months to prepare. And higher fees always help in pushing both sides into a quicker resolution.
