Ukrainian law firms set for reconstruction

“Putin’s terror will not bend us,” says a defiant Mykola Stetsenko, managing partner at Ukrainian law firm Avellum, after the latest Russian attacks on Kyiv. More devastation means lawyers must work harder to calculate the compensation they will seek from Moscow.

During September, Kyiv’s prewar “buzz” had returned. From the 12th floor of the business tower that is home to his 80-strong firm, which counts Novartis, British American Tobacco and Citi among clients, he watched road traffic increasing and customers flocking back to cafés.

“I was frustrated by Kyiv’s traffic jams before the war,” says Stetsenko, who practised law in the US earlier in his career. “But, today, this is a good sign.”

In February, when Russia launched a first wave of missile attacks on Kyiv as part of its invasion of Ukraine, the situation looked more precarious. Avellum lost 90 per cent of its business and was forced to transfer 10 female staff not subject to Ukraine’s military draft to “supportive and accommodating” firms across Europe — including Linklaters, Allen & Overy, Freshfields, and Slaughter and May.

After a busier summer, work at the firm was back to about 60 per cent of prewar levels by September, as staff prepared for an anticipated surge in debt restructuring and mergers and acquisitions. “Some will be selling their business and others attracting investment,” says Stetsenko, who also specialises in servicing Ukraine’s largest agricultural companies, including MHP and Kernel.

I was frustrated by Kyiv’s traffic jams before the war. But today, this is a good sign

Following the initial shock of invasion, lawyers across Ukraine sprang into action, with many gathering evidence that clients need in order to seek reparations for destruction by Russian bombings and artillery fire.

Anna Babych, partner at law firm Aequo, says: “We started reaching out to clients affected by physical damage or lost profits, talking through options with them.” She estimates that Ukrainian businesses have lost at least $100bn through physical damage and loss of profits during the invasion. The cost of damage to infrastructure and residential properties is still higher.

Foreign firms have also suffered. The American Chamber of Commerce, representing 600 US and international firms in Ukraine, reports that 22 per cent of its members have factories or facilities that have been damaged.

“Seizing Russian central bank assets frozen abroad will be the easiest route to enforce,” says Babych of reparations. She is also preparing cases against Russian oligarchs believed to be sponsoring the war.

Among clients suffering direct military strikes are the Novus supermarket chain and Epicentr K DIY chain. “Warehouses in the suburbs to the west, north and east of the city [Kyiv] were all being bombed,” she recalls.

Aequo has experience of successful litigation and arbitration, having secured compensation for Naftogaz against the Russian Federation and its state-controlled energy company Gazprom, which illegally appropriated Ukrainian territory and businesses in Crimea in 2014. Now, the latest invasion ordered by Russian leader Vladimir Putin is creating opportunities, as well as difficulties, for a range of companies.

Ukraine, already known as an IT outsourcing hub for companies such as Google and Amazon, is becoming a centre for the mixing of military technology with AI start-ups. US tech firms, in particular, are adapting peacetime technology for military needs.

“Our American clients see Ukraine as a huge testing [laboratory] for new weapons, adding a completely different dimension,” says Babych. Along with a handful of other leading firms, Aequo worked with the ministry of digital transformation to create a low-tax legal framework known as Diia — “action” in Ukrainian — which matches Ukrainian start-ups to foreign investors in a virtual city. More than 350 “residents” have moved in.

This high-tech reinvention of Ukraine’s legal industry mirrors the vision of Petro Bilyk, chief innovation officer at law firm Juscutum. His firm’s latest project offers digital access to Ukraine’s legal system for smaller companies and has attracted 30,000 business users. Juscutum has also contributed to the Immigration4Ukraine service, through which European law firms offer free online advice to Ukrainian refugees.

The next step, Bilyk believes, is for Ukraine’s legal profession to help with postwar reconstruction by advising multinationals that are keen to invest. Andy Hunder, president of the American Chamber of Commerce in Kyiv, estimates that local investors and multinationals could pump $350bn-$500bn into industrial, infrastructure and property projects as part of an eventual reconstruction.

Juscutum is providing legal assistance to the UA Dream Foundation, which is aiming to rebuild Moshchun — a village, 20km from Kyiv, that was largely destroyed by Russia’s bombardment. This initiative, in partnership with UK accountants Baker Tilly, plans to raise $15mn from international investors.

“These days, in Kyiv, we feel the energy of the people around us,” says Bilyk. “They want to rebuild Ukraine, with the international community playing its part. But the responsibility lies with us to provide legal access and fight corruption.”

This desire to work to international norms and regulations is an enduring theme among the legal community, which draws a distinction between reputable firms and the “fixers” lurking on the “dark side”, who front disputes for some oligarchic groups.

Technology will play a key role in the struggle against corruption, says Volodymyr Sayenko, a founding partner of the Sayenko Kharenko law firm in Kyiv. The firm says its work has brought more than $80bn of foreign investment into Ukraine and counts Coca-Cola, Microsoft, Goldman Sachs and JPMorgan among its clients.

Sayenko’s team has worked as part of a joint venture alongside IT company Pravosud to facilitate a “friendlier interface” for lawyers accessing data on legal proceedings. Using technology, they have analysed public registers of companies, shareholders and legal outcomes, and matched court decisions favouring particular corporate groups with the judges allocated to arbitrate them.

“Sometimes, we could see a pattern emerging of lawsuits submitted by a particular group ending up with the same one or two judges,” he says.

Yet, despite these successes, Ukraine’s conservative clients often resist the innovations of their lawyers.

“We went through a period offering clients various technological solutions, but received negative feedback,” recalls Sayenko. “We just want you to do your job,” one of them told him. “In your spare time, sure you can experiment, but please do it with other clients.”