Established in 2014, Aequo not only helps local and foreign investors identify opportunities in Ukraine and guides them through the legal landscape; it is also taking an active part in drafting legislation as part of the ongoing reforms to improve the investment climate. In this interview, Aequo managing partner Denis Lysenko discusses the company’s investments in legal tech, how it is supporting parliament to draft legislation aimed at optimizing the environment for private business, and the landmark land reform bill, which he says represents “the largest untapped economic potential in Ukraine”
With 20 years experience assisting foreign investors, you established Aequo at a very tumultuous time in Ukraine. Can you tell me how the political situation at the time helped influence the principles that Aequo follows as a law firm?
Back in 2014, when we launched with our long-standing and closely-knit team of 22 lawyers, it was a time when the country was reshaping and turning towards the European Union and the US. Ukraine was focused on signing association agreements with the EU, as well as transforming many of its outdated post-Soviet industries and creating new sectors that could attract more international investment, such as the IT sector, agriculture and energy, which was subject to major changes as Ukraine looked to free itself from Russian influence and liberalize the market.
This inspired us to launch the firm of a completely new format with three strategic priorities in mind: innovation, client care and industry focus. Now we advise both Ukrainian and international business investing in Ukraine and looking for opportunities, but also contribute to the implementation of legislation and regulation that would see the country’s economy become more liberalized. Moreover, we have grown to 55 lawyers and never regretted we have accepted the challenge five years ago to establish the firm.
You have a strong focus on innovation, and the firm was named among Top 20 most innovative law firms in Europe by FT Innovative Lawyers 2019. What are your goals from an innovation and legal tech perspective?
Innovation was one of our strategic priorities from the very beginning. Our idea was to bring the legal business we are involved in to a completely new level, offering new products and new possibilities to the clients. The idea was that we would work both on our internal structures, as well as create and encourage the market generally, including the legal market in Ukraine, to come up with new solutions and new ways of delivering services.
A couple of products and events that we are supporting, just as an example: we have an innovative online internship for law students from all over Ukraine and other regions of the world – Aequo Friends. That was a tool that brought us additional talent from the market, and also we see it as our CSR and contribution to legal education. We feel this platform can be useful for a lot of different businesses – not necessarily in the legal profession.
The second project that we are very proud of is our annual innovation competition in legal services – Aequo Legal Tech Challenge. It challenges traditional views on the provision of legal services, bridges the gap between talents from legal industry, IT and other spheres and builds a strong legal tech culture in Ukraine. This contest has been quite popular as we have been getting more than a hundred applications every year, mostly from Ukraine but sometimes from other countries. This year 112 ideas were submitted. During an intensive Acceleration programme a set of mentors in legal, finance, sales, marketing, tech and IT work closely with the teams to unlock the potential of the selected projects. The winner that stands out every year is awarded a grant to develop the product. The very first winner in 2017 was ‘Court on the palm’, an analytical tool for search, analysis and visualization of lawsuits, a very promising local project that – once developed fully – can compete outside of Ukraine. This year the winner is ‘Mister Register’, a fully automated independent trademark registration system.
The new administration’s target is to implement as many industry 4.0 topics as possible across the whole of Ukraine. But as companies transition to Industry 4.0 an Industry 5.0, what are things that businesses need to keep in mind from a legal stance as they switch to these new technologies?
Well, businesses first need to keep an eye on their primary business – which is to make sure that whatever they do is cost-efficient and forward-looking. And I think the government is offering opportunities for businesses to optimize by allowing them to cut on bureaucratic procedures. In any event, businesses have to focus on compliance rules, which is an area that also needs automation as the requirements are ever growing on a global scale.
These things need to be closely monitored, and each corporation now needs to be aware of a multitude of local and global regulation to be consistent. To that effect we are offering our services here in Ukraine, and because we’re working a lot on cross-border projects, we are very aware of the various requirements in, for example, US or UK legislation for the bigger corporations that are present here.
One of international investors’ biggest concerns here is rule of law. We have seen many new rules and regulations appearing. How does Aequo help foreign investors to navigate this changing landscape and legal environment?
We’re trying to be proactive. So for our clients we’re not just trying to explain whatever new legislation is on the agenda. But we’re also trying to bring to their attention some opportunities that arise. Whenever there is a new reform from the government they are typically inviting feedback from the market – constructive proposals, how to deal with this or that topic, how to make it more business-friendly, how to ease some of the burdens. We’re trying to come up with solutions that can be put on the table during multilateral meetings with trade associations, business associations and other industry-specific chambers that are working with the government.
Also as lawyers with experience in drafting legislation, we are supporting parliament in the drafting of laws and also offer our own insights as to what needs to be optimized. For example, our lawyers were involved in drafting the law to make public all the decisions of the Ukrainian competition authority, and now each and every decision is fully published and available to market players. We’re supporting corporate law reform in Ukraine too. Our partner, Anna Babych, was one of the initiators and a key driver of this reform, including being a co-author of the draft Law “On Limited Liability and Additional Liability Companies”, as a member of the focus group at the Ministry of Economic Development and Trade of Ukraine. This LLC Act was successfully passed in February 2018 and dramatically improved the legal environment for business law in Ukraine.
And in many other sectors, for example in the banking sector reform, we have also contributed. We’re striving to be one step ahead and offer both our clients and also the governmental stakeholders some solutions that would be a win-win for both sides. We’re bridging this gap between what the entrepreneurs need in order to invest in Ukraine as opposed to other countries in the region and the governmental policies, which are changing from time to time but still need to take into account the competitive landscape in Europe for Ukraine to grow and remain an investment-friendly destination.
You have acted as a guide to cross-border transactions in greenfield and brownfield operations. We know that Ukraine’s land might open up to investors next year and it’s very mineral-rich. How do these recent transactions demonstrate the state of FDI today and how do you see that evolving if we do get that move to open up the land market?
The land reform is a very important development and is also one of the milestones for international donors such as the IMF, the European Union and other international stakeholders. This is the largest untapped economic potential here, and it is very important that the ongoing legislative reform of agricultural land takes account of the needs of not only the local economy but also of the global and regional economy.
Ukraine’s industries are now part of a global market. Ukrainian agricultural land is also part of the global market in terms of, for example, commodities trading. So it would make much more sense for real competition if we invite into this process international investors that are strategically investing in land and have experience in building capital-rich businesses in this area. International investors need to be allowed to enter the market for it to be regionally and globally competitive.
Do you have a final message for investors as to why they should be looking at Ukraine now and why Aequo is the key partner for them when entering the country?
Ukraine presents a number of opportunities because of the reforms that are ongoing and different sectorial changes that are liberalizing investments here: for example in energy, in agriculture and in IT as well. Working with multinational corporations and large local companies, we can be of assistance thanks to our experience in dealing with local legal issues as well as with working with all the stakeholders here to make sure any new investment is legally protected. This is one of the most important things investors are looking at. But we are also able to contribute to the business targets of the client by suggesting to them areas to look at and subsectors with high potential inside the country, based on our own data and rich industry knowledge.