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INTERVIEW

Denis Lysenko

Managing Partner, AEQUO
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Created amidst Ukraine’s 2014 revolution, AEQUO law firm has quickly risen to become one of the country’s most trusted and innovative law firms. Representing major American clients and trusted by international institutions, it has established itself as one of Ukraine’s leading industry-focused multidisciplinary law firms and has participated in the country’s recent wave of legislative reforms. Here, the firm’s managing partner Denis Lysenko explains the opportunities that come with Ukraine’s emerging economy and upcoming privatization plans and how the firm can be of assistance to potential investors

What have been some of your greatest successes during your career so far, and how did you come to be involved with the creation AEQUO?

Having spent more than 17 years in private legal practice in Ukraine, I am most proud of the top-notch team of legal professionals working together with me since the early 2000s on the landmark cross-border projects and disputes involving Ukraine. It was an entirely new vision by our partners and associates about how an internationally facing, albeit domestic legal business, should develop that inspired the creation of our new law firm brand AEQUO back in the turbulent summer of 2014, the year of the Revolution of Dignity in Ukraine. We made a strategic decision to focus on innovation and client care in several industries of our focus, and it worked.


What have been the most significant consequences of the 2014 revolution in terms of industry and investment in the country? And how do you evaluate the government’s reforms so far?

I firmly believe that Ukraine’s true independence as a state will be defined in the history textbooks of future through 2014 Revolution of Dignity and events that followed. In my view, notable achievements of Ukraine’s post-revolution government include free trade agreement and visa-free travel with the EU, massive clean-up of the country’s rigged banking system, liberalization of energy market and ending decades-long critical dependence on Russian gas (both accomplished via the corporate governance turnaround in Naftogaz of Ukraine, the country’s largest state-owned company and the key energy sector reformer). A host of reforms still lag behind, opening up of agricultural land market seen among the most vital.


AEQUO
has represented several American companies, including Bunge, Google and DuPont. What are the main challenges faced by American companies coming to Ukraine, and what services does the firm offer them?

Our team has successfully worked with US strategic and private equity investors in Ukraine on an extremely wide range of topics including trade financing, banking regulatory advice, competition and tax law compliance, combatting counterfeit products and other IP rights breaches, data protection and privacy, securities market and corporate governance advice, cross-border M&A and complex disputes in the corporate and media sectors. However different in their corporate culture and industry specialties, American companies are uniquely entrepreneurial and, in our experience, require an extra level of care in their legal and regulatory support on the ground in Ukraine to fully comply with rigorous US laws and business ethics principles while enjoying the benefits of an emerging economy market. This care, we are very happy to provide.

“We are bold enough to lead not only in business transactions but also in wider sectoral initiatives”

AEQUO has won many awards including “most innovative law firm in Ukraine” and has been ranked among the world’s best Arbitration Firms and as a Top-Tier Firm by The Legal 500 all in just 2018. What makes AEQUO so highly regarded?

AEQUO is a healthy blend of domestic and cross-border projects expertise, local industry insights and international connections, sophisticated legal technology and a high-calibre team of lawyers. Our regulatory expertise is relied upon by highly reputable international institutions, such as the World Bank, the European Commission and the European Bank for Reconstruction and Development. Our dispute resolution team succeeds in the most complicated cases, such as Naftogaz arbitrations against Gazprom worth over $100 billion. AEQUO works with industry leaders – both of Ukrainian and foreign origin – in financial services, energy, pharma, agriculture and food, retail, TMT and private equity sectors. And we are bold enough to lead not only in business transactions but also in wider sectoral initiatives, such as major legislation reforms in the banking resolution sphere, corporate governance, energy market sectors, competition and IP protection laws.


One of the things that most troubles investors coming to Ukraine is the perception of corruption in the country. How is that changing from a legal point of view?

Despite a lot of effort by both the government and international donors since 2014, Ukraine, as a typical emerging economy, still has a long way to go in fighting corruption at all levels. Ongoing court reform spearheaded by the major justice-related changes to the Constitution in 2016, selection and launch of a new Supreme Court in 2017 and the anticipated creation of the Supreme Anti-Corruption court in 2018, is perhaps the most systematic exercise of that kind, at least in Europe, which Ukraine’s legal community expects to bear fruit. Importantly, however, structural and functional reforms of other state law enforcement authorities, including the National Police, the State Security Service and the Prosecutor’s office, will need to catch up without delay for the rule of law to finally become a reality. In the meantime, our role as legal advisors is to safeguard our clients’ legitimate interests by employing an evolving number of legal tools and identifying business and legal risks (corruption charges being among them) at the outset to minimize their impact on the clients’ business.

“Our regulatory expertise is relied upon by highly reputable international institutions, such as the World Bank, the European Commission and the European Bank for Reconstruction and Development”

This year, Ukraine is gearing up for a massive wave of privatization. As a specialist in helping foreign companies acquire strategic assets and establish joint ventures in Ukraine, how much opportunity do you see this privatization opening up for foreign investors?

In early 2018 Ukraine finally took a major step in overhauling its privatization legislation and creating proper procedures for selling off state-owned assets in an investor-friendly and transparent manner. Privatizations of so-called “large-scale” assets in 2018-early 2019 to be conducted via internationally-known investment advisors are expected to include major industrial targets, such as Centrenergo (a large energy generation company), Odessa Port Plant (a strategic, albeit debt-rich fertilizer plant), and a number of regional electricity distribution companies that are expected to benefit from the electricity market liberalization and RAB tariffs in particular. Other potentially attractive privatization targets would include Turboatom (a strategic producer of hydraulic and steam turbines for the energy industry, based in Kharkiv) and the President Hotel in Kiev. Importantly, the Ukrainian privatization authority now has more flexibility to further discount sale prices for auctioned assets in case of one or more failed auction attempts and to hold consultations with potential investors about the appropriate level of price upon a third unsuccessful auction.

“Private equity investors with reasonable risk appetite for emerging markets might also have their piece of cake in Ukraine this year, as the country is sustaining moderate GDP growth against a generally stable macro-financial situation and limited local sources of financing for businesses”

The new privatization law introduces the possibility to apply the laws of England and Wales to privatization sale and purchase agreements. Could you explain a bit more about how that would work

The new Ukrainian privatization law approved in March 2018 indeed now allows both for English law to generally govern sale and purchase agreements of large-scale state assets being privatized before 1 January 2021, and for the parties to agree on a neutral international arbitration forum for any related disputes, with the Arbitration Institute of the Stockholm Chamber of Commerce being the default option. Application of English law to privatization agreements will serve to better protect any international investor’s interests, in such important matters as indemnities, warranties and representations of the state acting as the seller, information disclosure process and its legal effects, liability provisions and other key contractual mechanics, with some limited exceptions as per mandatory Ukrainian law rules.

 

A new report from AEQUO and Mergermarket found that the value of deals in Ukraine’s M&A Market climbed 57% in 2017 from the previous year to around $640 million. What does this say about Ukraine’s overall economic performance?

We called our third edition of Ukraine M&A Report (co-produced with Mergermarket in 2018 and covering 2017 deal statistics) Turning Tides.” Indeed, M&A in Ukraine were on the rise since the second half of 2017. Financial services, energy (with a special focus on renewables still benefitting from the highest “green tariff” in Europe), agriculture and food, IT and commercial real estate sectors were particularly active, while the latter four segments are expected to develop their dynamics still further in 2018. Private equity investors with reasonable risk appetite for emerging markets might also have their piece of cake in Ukraine this year, as the country is sustaining moderate GDP growth against a generally stable macro-financial situation and limited local sources of financing for businesses.

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