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Latvia's top law firms remain stable amid turmoil

By Nathan Greenhalgh . 02.07.2009

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Operating in the rockiest economy in Europe, Latvia’s legal market is a pillar of stability in the midst of an ongoing crisis.

The recession is having much less of an impact on Latvia’s legal market than the fallout from the Enron scandal in the US, which prompted the legal departments of auditing firms in Latvia to break off into separate firms.
Only one of the leading firms, Loze, Grunte & Cers/TLS Alliance has disintegrated since the beginning of the year. In April, Grunte and Cers formed one firm while Loze formed another. Besides that, all of Latvia’s other largest law firms have not only remained intact but also avoided any layoffs because the drop in the economy has not reduced the amount of work their clients need done. Doctors and lawyers are the lucky ones in a recession. People still get sick and need doctors. Likewise sickly companies still require attorneys to handle their legal processes. «You know the joke, the lawyers have it good in any situation,» Raymond Slaidiņš, a founding partner of Kļaviņš and Slaidiņš/LAWIN, said. Although other sectors of the Latvian economy are being shaken to their core, with millionaires made penniless and captains of industry defrocked, the options for Latvia’s legal services look very similar now to how they did at the peak of the Baltic Tiger boom a year and a half ago.
«Some of the so-called Latvian millionaires, nobody knows about them anymore,» Valters Gencs, owner of his eponymous law firm in Riga, said. «Those who survive will become stronger, and those who don’t – sorry, that’s how life is.»
So the same firms that facilitated the boom are handling the decline as well and have plenty of work on their hands.
«Now it’s actually the same if not increased. It’s the same if not more because of the areas in which we are working. The amount of work has remained the same as in 2007, that’s a general trend for lawyers,» Māris Vainovskis, a partner at Eversheds Bitāns, said.
Legal fees haven’t decreased since the good times, although firms are trying to be as flexible as possible with billing as clients increasingly seek caps on the costs of legal services as opposed to open-ended hourly billing.
«Our observation about the legal market is that today it is not run by problems but by budgets,» Ēriks Blumbergs, a partner at Riga’s Glimstedt and Partners, said. «Typically there is no offer to give open-ended.» The structure of firms remains the same as well. Individual firms typically handle inheritance and family law. The country’s largest firms remain almost entirely Latvian-owned, cover business law for a clientele of mostly foreign investors, handle hundreds of active clients a year and have some kind of alliance with firms in neighboring countries, especially Estonia and Lithuania.
“I guess the ideal situation that benefits the most is the one where the law firm, like us, is in all three Baltic countries,” Pekka Puolakka, a managing partner at the Sorainen law firm’s Riga office. “Many of those clients appreciate the fact that if there’s something going on in all states, they can put the wheels in motion through contacting one person only.”

“It’s a competitive environment; it’s good to keep everyone
on their toes”
Slaidiņš said.

These large firms offer a wide range of languages for potential clients – everything from the compulsory English to Russian to Portuguese depending on the firm, and are geared toward assisting these foreign companies’ business activities in Latvia, covering everything from the initial set-up of a subsidiary here to signing contracts with locals to avoiding unnecessary taxes and government fees.
Most of the top law firms are active members of foreign chambers of commerce, which provide them with numerous opportunities to make contacts with foreign investors.
«You get a very good network of businesspeople,» Gencs, who’s a member of several foreign chambers of commerce, said.
Despite competing for largely the same client base, lawyers interviewed for this article were very congenial toward each other and some even refused to label their colleagues as competitors, saying the term implied too much of a rivalry.
«There’s a list of great firms who operate here in Latvia. I would say that they are good colleagues of ours. We meet quite often, we have a lot of things we discuss,» Lauris Liepa, a partner at Liepa, Skopiņa/BORENIUS said. «Latvia compared to the US is not a litigious society. People would normally try to settle disputes themselves rather than use the courts. We have these sharp, shark-like lawyers but ... most of our lawyers don’t disrespect their clients.»
Slaidinš, who in turn praised Liepa during his interview, said lawyers in Latvia enjoy the competition instead of resenting it.

Business is their business

With the exception of finance law firm Glimstedt and Partners, all of Latvia’s largest law firms offer a wide range of business law services and fashion themselves as a one-stop shop for all their commercial clients’ legal needs.
All of the largest firms are on the lookout for large corporate clients they can serve along with international partners. Potential customers have a wide selection of firms to choose from for the same service, but that doesn’t mean the different firms don’t have one particular specialty out of the many types of business law.

Since the break-up of Loze, Grunte & Cers/TLS Alliance, Kļaviņš and Slaidiņš/LAWIN is now Latvia’s largest law firm with 35 lawyers and 50 total employees. The firm is organized into five practice groups – mergers and acquisition, real estate, litigation/dispute resolution, trade and technology, and finance and tax law. It touts itself as specializing in transactions. Slaidinš said the firm has begun to emphasize its taxation law service more, too. This isn’t a surprise as many of the companies looking to do business in Latvia hail from Scandinavia and seeking to avoid paying the high taxes Nordic countries impose.
The typical client at Kļaviņš and Slaidiņš/LAWIN is a large foreign company, and along with Raidla, Lejins & Norcous the firm has represented arguably the most big-name foreign clients in Latvia. Kļaviņš and Slaidiņš/LAWIN has worked with Pfizer, Merrill Lynch and Nestle, among others.
«We don’t work with smaller companies much ... the practice isn’t geared toward that at all,» Slaidiņš said. «We do a lot of the legal matters for the years for the multinationals, Coca-Cola, IBM.»
We’ve seen the changes in the legislation, we know the politicians,» Slaidiņš said.

«I think that experience along with the team is really the strength of the firm.»

The second-largest firm in Latvia is Sorainen, whose Riga office is one of four in the three Baltic States and Belarus. The firm employs 28 lawyers in Riga out of 42 employees with 150 in all the Sorainen offices. Like Kļaviņš and Slaidiņš/LAWIN, most of Sorainen’s clients are foreign companies and both firms have a similar price range of about 100 to 250 euros an hour. Sorainen’s clients tend to be Scandinavian companies such as Kone, Vaasan & Vaasan and Citycon, but also include the Siemens conglomerate. «I would say that the most of the clients are foreign investors ... mostly from the Nordic countries,» Puolakka said. «Ninety-five percent of our customers are companies.»
The different Sorainen firms are closely connected, and Puolakka said this gave the firm a big advantage among clients who needed services in all the Baltic States and/or Belarus. «We benefit from a quite standardized and unified processes and documents in all our offices,» he said.
Raidla, Lejins & Norcous is the third-largest law firm, and like Sorainen and Kļaviņš and Slaidiņš/LAWIN is pan-Baltic and boasts a wide range of business law services, including corporate advisory, general commercial and M&A. The company has 25 lawyers out of 33 staff members. Clients include Nokia, Mars and Air Baltic. In addition to the Baltic States, Raidla, Lejins & Norcous also has offices in Sweden and Finland. Liepa, Skopiņa/BORENIUS is the fourth-largest firm in Riga and although it’s 100 percent Latvian-owned it has associate offices in all Baltic States and Finland. Since opening the firm has served over 1,200 clients that vary by size and are about half foreign companies and half Latvian-owned. Clients include Nordea Bank and the Latvian Banking Association.
Liepa said an advantage his firm has is its flexibility. As the demand for services has changed with the recession, Liepa, Skopiņa/BORENIUS pivoted from covering mostly transactions to litigation for corporate and bank clients.

«We’re not primarily a transaction company. Now we are more in litigation and disputes,» Liepa said. «We changed our practice quite strongly ... you have to now look at the market realistically. If you receive a litigation assignment, you have to take it.»
Liepa, Skopiņa/BORENIUS stands out from the rest of Latvia’s largest firms for its work in constitutional law.
«I believe there’s no other firm than us that does so much work in constitutional areas,» Liepa said. His firm has taken several cases to the Latvian Supreme Court on ranging from state compensation for young leukemia patients to the restoration of property rights for land nationalized by the Soviet Union.
The fifth-largest law firm in Latvia is Glimstedt and Partners, the Latvian-owned office of the Swedish franchise. It employs 20 lawyers with five additional staff. Unlike the other five largest firms, Glimstedt and Partners restricts its services to corporate and finance law and is avoiding litigation work on debt.
«We see that there is no advantage to being the hunter in insolvency,» Blumbergs said, «if there are more opportunities to help the solvent business.»
The firm has about 200 active clients, 80 percent of which are foreign companies that include names like Royal Unibrew and Maxima.
«We are a niche player,» Blumbergs said. «We do not put our noses in every area of the legal profession.»
He said his dream client is «a Scandinavian client having a subsidiary or joint venture in Latvia.» His firm’s advantage, he said, was that it has taken on many lawyers that previously worked for corporations or banks but were cut loose as companies chose to outsource their legal needs.
Outside of the five largest firms, other major players on the legal market are Eversheds Bitāns, Valters Gencs and BDO Zelmenis & Liberte. Like the top four largest firms, Eversheds Bitāns is also a wide-range business law firm and part of an international alliance, in this case the Eversheds group out of London. The Riga office is locally owned, though. Eversheds Bitāns serves about 60 percent foreign and 40 percent local clients, which include Volvo, Dannon and Oracle. Partners
Agris Bitāns and Māris Vainovskis are experts in intellectual property law and M&A and real estate, respectively.
«Bitans is special expert in intellectual property protection. Not everybody does that. We represent pharmaceutical companies,» Vainovskis said.
Like Liepa, Skopiņa/BORENIUS, Eversheds Bitāns has had to pivot away from doing mostly real estate to taking on litigation assignments.
«We are very busy with litigation work,» Vainovskis said. «In 2007, we did five real estate deals of over one million lats. This year there was not one deal. There have been deals for lesser amounts, but not one with over a million lats.»
Also offering a full range of business law services is the up-and-coming Valters Gencs firm, which recently opened an office in Vilnius and Tallinn. Valters Gencs has 15 lawyers.
One of the firm’s specialities is taxation law. Gencs worked at Ernst and Young for many years and the firm regularly prints publications about updates in tax laws.
«That is why Scandinavian expatriate businessmen come to Latvia,» Gencs said.

«We help them so they can get away from this highly-taxed country. For that reason we make seminars, especially with the Swedes, so they become easy targets and clients for us.»

His clients go beyond Scandinavian tax exiles, though, and include Coca-Cola, Converse and several pharmaceutical companies for intellectual property law.
Similarly to Gencs, the partners at BDO Zelmenis and Liberte hail from an auditing firm, Deloitte Latvia, where they worked before separating in 2007 to start their own firm together.
The staff includes 12 lawyers and four financial tax consultants. Its clients include Latvian Railways, the Latvian Shipping Company and several Latvian municipalities. Although again a wide range of services are offered, the firm specializes in tax law and asset management.
«In Latvia it’s difficult to have a firm do just one area,» partner Vita Liberte said. «We do a lot of insolvencies, of course.»

Same firms, different service

Latvia’s market is too small to allow for large firms specializing in a limited amount of work, like those that can be found in London and New York. With less than two-and-a-half million people, it’s also too small a market to attract a large influx of foreign-owned law firms that ex-Soviet countries like Ukraine have seen.
So most of the large firms offer a broad range of business law services to attract as many clients as possible and not be susceptible to a drop in demand for one particular service. This has served them very well during the downturn, as demand for real estate transactions has dropped significantly and mergers and acquisitions are down as well.
However, as Latvian businesses downsize and fail, the demand for restructuring, debt collection and employment law has skyrocketed.
It’s been raining pink slips all year. Unemployment in Latvia is already at 16 percent and may go higher as the recession deepens. Meanwhile businesses looking to let go of employees often need legal advice.
«The demand for employment law services has increased very much,» Eva Berlaus-Gulbe, a partner at Sorainen, said.
The restructuring is working for some companies but not all.
«Some are successful but there are some areas that are dying off basically. The most problematic is (real estate) developers. If they hadn’t made such a large diversification, they might have more buyers,» Liepa said.

New foreign investment

Most economic analysts have pointed to a recovery for Latvia in about two years and at some point between now and then the real estate market will finally bottom out after its long slide.
According to the Arco Real Estate agency, prices for standard-size apartments in Latvia in March have decreased by 63 percent since July 2007, from €1,620 per square meter to €606. It’s not clear that property prices have hit bottom, though.
«I think it’s going to continue to go down. I wouldn’t exclude that we’ll go down like South Korea in 1981. 80 percent decrease, it could be,» Ralfs Dakters, head of the investment and trade promotion department of the Investment and Development Agency of Latvia (LIAA).

«If you simply ask me, would I buy now or wait, I would wait.»

However, the foreign chambers of commerce in Latvia that many of the top law firms belong to report that they are already fielding enquiries from investors in their home countries about acquiring property in Latvia.
Wages are dropping throughout Latvia along with property prices and although this is causing hardship for many people, there’s a bright side. Eventually the lower costs will begin to attract investment in labor-centered enterprises such as manufacturing.
Daksters said the LIAA will host a press conference in June for a Nordic company, whose name has not been released, that is building a construction module factory in Ventspils.
Meanwhile, Roberts Stafeckis, director of the Latvian branch of the German-Baltic Chamber of Commerce, said he had received numerous enquiries from German companies about building small-scale, high-end manufacturing plants in Latvia.

Devaluation and investment

Lawyers at Latvia’s top firms are closely watching these trends since so many of their clientele are foreign investors. The big question mark looming over any prediction of Latvia’s economy, though, is whether or not the lat will be devalued.
The government remains steadfastly against devaluation because of the wave of loan defaults it would likely cause and because it would push the long-term goal of joining the eurozone further away. Drastic cuts in government ministry budgets are being implemented to avoid devaluation.
However, many top economists including recently Bengt Dennis, formerly the director of the Swedish National Bank and currently an economic advisor to the Latvian government, continue to argue that devaluation is inevitable.
The decision to devalue or not largely hinges on whether Latvia successfully negotiates a higher deficit cap with the International Monetary Fund.
Devaluation would certainly affect the business Latvian firms receive from local companies, as revenues would be complicated. However, Dakters points out that foreign investment would either be helped or unaffected by devaluation.
«Foreigners are coming in with euros or dollars. So that means if the currency is devalued, they’re getting more for their buck here, right?» Dakters said. «But in some cases it would not even change anything, because prices for real estate are set in euros anyway. It would not cheapen land.»
So even if Latvia went down the dark road of devaluation, most of the country’s top law firms that rely primarily on foreign clients would likely remain as stable as they are now.


Russel Tengan 20.10.2018 22:44



Juanita Hornung 01.11.2018 09:22



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