Ukraine: EVRIS Launches New Services In The Field Of International Trade. Interview With The Key Partner Sergii Papernyk.

Last Updated: 19 March 2019
Article by Evris Law Firm

The working location of Evris law firm can be identified as an office of a law firm by the number of people wearing business clothing. While Sergii Papernyk, partner and head of banking and financial and FinTech practice in Evris, was accompanying journalists to a meeting room, he told, that a rapid expansion of the team was nothing but a technology-related factor, or maybe the atmosphere was special. So technology is an integral part of activities of this law firm. The subject of interview for «Ukrayinsʹkyy Yuryst»  was the launch of a new business area of cross-border trade, but we could not but touch upon technology and innovations during the conversation.

Why was it cross-border trade?

When entering the market, Evris has always been guided by the needs of its customers. We started as a boutique company engaged in dispute resolution, but it turned out that litigation matters were not the only demand of our customers. For example, they needed to structure their business or get advice on matters of a foreign jurisdiction. So, having assessed the demands of our customers, we decided to expand the scope of our expertise to include four practices: in addition to litigation, we had corporate, tax, banking and finance practices. Being guided by the same logic when our customers started to apply to us with relevant requests, we launched an independent intellectual property practice.

Launching a new business area by a law firm is no news. The company changes with changes in the legal market as a whole. We are in a constant search: we are probing the market, and the market is probing us.  Sometimes we do not succeed and see that the ways we've chosen are wrong. However, we are always open for new opportunities, based on market analysis and guided by our own intuition.

Ukrainian business has been in a search for new alternative markets for a long time, so the European direction turned out to be more attainable than one could imagine. A usual example of the present day is that while it was only yesterday that Ukrainian agricultural producers shrugged off the EU market (lots of certifications and product quality approvals reduced the competitiveness of their goods), now the situation is absolutely different. There has been an increase in exports to the EU thanks to agricultural products. Ukrainian farmers know how to sell their goods on the European market; moreover, they can offer a unique product. On the other hand, foreign companies began to consider Ukraine as an individual state and a promising partner on the world map.

After organizing several events, in particular jointly with the Ukrainian Chamber of Commerce and Industry, our company has noticed that business is greately interested in cross-border trade and export opportunities.  We have already received requests from our customers who need help in resolving legal issues in structuring their exports. So we understood that we needed a specialized service area that would meet the demand for such requests.

Therefore we are launching the cross-border trade area within our banking and financial practice. We understand that these areas may not match very well in terms of positioning, but it is more important what the practice will offer to business than its name.

What is it about?

We are expanding our practice through engaging lawyers specializing in cross-border trade. Currently, we are focused on providing legal services to agricultural producers, traders and exporters. Subsequently, we will expand this list. If we talk about services, it is, first of all, about contract activities. Even standard contracts need a thorough legal analysis, especially when it comes to international cooperation. Secondly, we are willing to provide legal support to logistics. If it comes to grain crops, it is storage on elevators, transfer of title, transportation.

Thirdly, our experts are good specialists in the area of raw materials arbitrations — the Grain and Feed Trade Association (GAFTA) and the Federation of Oils, Seeds and Fats Associations (FOSFA). The use of such arbitration clauses is a common practice in cross-border trade of grain or oil crops. We already have experience in providing support in arbitration disputes in those institutions.

Fourthly, we offer agricultural producers the service of certification for the so-called supply chain of products used for biofuels — this is specialized certification under an individual EU Directive. It is about the need to confirm that oil crops (such as rape used for biofuel production) meet certain requirements. I strongly believe that such certification is extremely important to national producers, since now they sell their products to foreign traders, and the latter, having passed certification, mix certified and uncertified products and sell them at a higher price. Thus, certifying the products in Ukraine, producers can increase their value by at least 10%. The certification itself is not too expensive even for small producers.

These are the very services we are ready to provide to Ukrainian business right now. In addition, we cooperate with export agencies for other certifications to bring Ukrainian goods to the European market. We have the relevant experience of entering the French market, and, believe me, it is quite complicated.

Last year, Evris law firm attended various conferences in different parts of Europe and the East. We have spent and still are spending a lot of our time representing our state and calling on foreign business to enter Ukraine, invest in problem assets, land, technology, privatization and much more.

However, it turned out that one could do quite the opposite thing: to help Ukrainian business to enter Europe, and I believe that it is a more dignified task in terms of patriotism. I consider it as a great way to promote Ukrainian products abroad, of course, with a certain commercial interest to us, lawyers.

What is your competitive advantage?

Traditionally, this area is narrow in Ukraine; there are few legal companies that are able to provide good cross-border trade services. Usually, all foreign economic activity of agricultural producers is concentrated in their in-house legal department. Leading specialists in such operations work not for law firms, but for agricultural holdings. That is why we recruited the team in this area not among law firms, but among the business, and we have already achieved some success. That is professionalism and proven practical experience that is our competitive advantage.

Currently, the focus is on the agrarian sector, isn't it?

Yes, currently it is. There is the highest demand here, and it is the sector where we have the greatest experience. For better or worse, the export potential of Ukraine is in agricultural products. Heavy industry has not stayed in the thrifty hands of Ukraine. Information technology is a potential area of the economy and a source of export. It is extremely important to realize the IT potential of Ukraine, but we should export intellectual property abroad, rather than intelligence.

It is also worth noting the development of technical and industrial production in Western Ukraine. Many foreign companies are building factories to produce automotive electronics there. Logistic proximity to the border, low labor cost (for now) and high qualification of employees prompt foreign businesses to consider the territory of Ukraine as a territory to place their production. I hope that political developments do not hinder such initiatives. At least Western Ukraine has high chances to become a technological cluster for Europe.

In your opinion, what other reasons have prompted stimulation of Ukrainian agricultural export: legal regulation, the EU Association Agreement, etc.?

I would not say that the Association Agreement has caused any substantial changes. Moreover, there is an opinion that it has made the things even worse, because, having received quota at low rates, Ukrainian producers have lost the opportunity to sell more at usual customs rates. It is not the legal component that was the greatest impetus for development, but the awareness of Ukrainian business about potential opportunities, and the awareness of foreign companies about a potential trading partner. Ukraine has always had a great potential, it has always produced huge amounts of agricultural products. However, western buyer has learned it only recently.

We need to continue this information campaign. We must talk about capabilities of Ukraine, rather than just about our problems. Fighting corruption by 1, 2 or 3 percent is no reason to be proud. We should be ashamed even for the very existence of such a notion as "corruption". Business counts in money, and political instability and corruption risks discourage business.

What are the conditions for the cross-border trade practice to become independent?

These are two conditions: the presence of customers, hence the financial ability to be independent, and the presence of a person capable of heading this practice, that is, a personnel component. But we will be able to analyze such conditions only in a year.

Is the cross-border trade area the only new thing this year?

As you know, the main mission of Evris and its brand component is the talent development. We have implemented many policies to develop talents of our personnel, but we are not going to stop at this. We constantly structure the firm inside to ensure its integrity and adaptiveness. It is about such a hype trend as the development of new approaches. This is not necessarily about technical or organizational or even administrative issues, it's all that would enable us and other companies in our sector to work more efficiently.

Thus, we decided to establish an internal technical unit to develop software solutions for the needs of the company. I am the head of this unit. The personnel will include software developers and technical auditors. They will be engaged in implementing various technical and organizational solutions, as well as cybersecurity standards.

Here is an example. To arrange our meeting with you, I need to call my secretary and say that I would like to arrange a meeting on a certain day and at a certain time. The secretary checks whether the meeting room is free at this time and enters our meeting in the calendar. It would seem that there is nothing difficult, but it takes much time. All this can be arranged using an application or a chat bot that will help to optimize the secretary's function and save time and resources. Or another example. When we need any analytics, we can order services of an analytical agency. Or we can write a code that would survey Internet pages and provide the necessary information. This will make us one step faster than those, who order analytics from an agency. We are currently working on the development of our own CRM system. Thus, it would be quicker to buy it ready-made, but it is more efficient to customize it for the needs of our legal business with the possibility of further adaptation. We are not unique about our own CRM system. We are not unique in the existence of a technical unit in a law firm. But that is good, because we will be a great competitor to our colleagues in the future. After all, our target for 2019 is the desire to be faster and more efficient.

The cross-border trade and the technical units are opened within your practice. In particular, you are in charge of FinTech. Is there a standstill in this area?

No, not at all (laughs – note of the editor/journalist).

Actually, FinTech came to our firm along with me, I always liked various technical initiatives in financial activities. It happened so that after we started to provide legal services in this area, there was a hype about cryptocurrencies. As a result, many people associate financial technologies with cryptocurrencies and blockchain. But that is not the case. FinTeh by itself has existed for seventy years already. The first payment cards were FinTech, the first money transfers were FinTech as well. It is a long history.

The fundamental difference in the present is that FinTech has stayed only a technology all these years. And its primary users were banks.   The current level of technology development has reached the level that FinTech solutions allow providing financial services without engagement of the banking system. That is, FinTech has become a separate industry and an independent business.

FinTech has competed with the banking system for the past 10-20 years. And banks understand that they can't keep up with the rapid development of the industry, they understand that they lose competition. Some are trying to co-operate with FinTech companies, some acquire the latter.  However, both the way of competition and the way of cooperation is a good chance for a FinTech startup to succeed. And it is especially true in our market.

There are no serious competitors in Ukraine, there are no suppressing strict rules of a banking association with the centuries-old history; instead, there is a huge market of developers and IT talents. These are excellent conditions for the development of FinTech startups.

That is, we have everything except legislation. It in this area that the FinTech industry needs support from the regulator — the National Bank of Ukraine, which would allow to legalize certain approaches and activities. I am impressed, but the NBU has substantially liberalized our legislation in recent years: the Laws of Ukraine "On Currency and Currency Transactions" and "On Electronic Trust Services". There is a draft law on payment systems that will allow of free issuing electronic money, opening accounts not only with banks, but also with financial companies. Also, the regulator intends to engage startups into cooperation. The only thing is that we should not just talk about it, we should do it, and we should have done it yesterday. Ideas can not be allowed to stay just ideas for too long. Ideas are bought for big money and sold out somewhere else abroad, allowing to earn even more money.

As you have mentioned cryptocurrencies... There is an opinion that cryptocurrencies do not need any regulation, but what is your opinion on this matter?

I am a supporter of this opinion to some extent. We do not need a special law on circulation of cryptocurrencies. We are lagging behind. While we were thinking of cryptocurrencies as currencies, they have become an investment tool. While we were thinking of them as a tool, utility tokens have become popular. The legislator will never be able to catch up with this industry. What really needs to be done is simply to implement the use of blockchain solutions in sectoral legislation: tax, currency, securities and stock market, consumer protection...

What about cybersecurity with the development of the technologies we are talking about?

Cybersecurity and its component — personal data protection — are the most urgent issues in this context. And the problem is that it is also a hype thing. There has been so many events on cybersecurity, and there are so many specialists in this area these days! But the problem of cybersecurity is similar to the problem of regulation of cryptocurrencies: the legislator will never catch up with the industry as the latter is far ahead. The more we develop the technology, the more gaps we find there because of which the technology can be broken.

As for cybersecurity in a law firm, the main thing here is not to go beyond the comfort line. The line between the security requirements and comfort of an employee is very thin. When we want to protect the office from network threats, we can install a separate computer with Internet access, and disconnect the rest of our computers from the network. But who needs it? We can install firewalls to watch our employees and charge several IT specialists with monitoring it all. But is it about comfort? We either trust our colleagues or not. If we do not trust them, why should we work with them at all? And if we trust them, why should we watch them?

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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