Date of publication: 20 August 2021
Year of 1997. Leonid Kadeniuk flies into space, McDonald’s opens its first restaurant in Kyiv, Ukraine ratifies the European Convention on Human Rights. And particularly at this time Mikhail Ilyashev sets up a firm, which in the course of almost 25 years will become one of the most recognized legal brands in Ukraine. It all started with a small two-room office. In his interview to the Yurydychna Gazeta the Managing Partner of Ilyashev & Partners lays out how it all came about and what results it had.
– Was everything new and unknown to you in 1997?
– I cannot say that we started our business totally from nothing, but the legal business was really built from scratch. As far back as when I was studying at the university, I and my friends decided to follow the path of what, in fact, we entered the university for – to become lawyers. At that time, the existing law firms “huddled together” in apartments, at the premises of nursery schools, research institutes, so the “stakes” were not high for us. We could expect earning USD 300 in one of such law firms established by one of our university lecturers who were practicing law.
Having established our own law firm, we started actively putting into practice what we knew mainly only in theory. By the way, the problem with law schools drawing much attention to theory and very little to practice is still very acute. A lot has changed over the years, of course, and graduates become more prepared in a practical sense, but, nevertheless, they remain at the initial stage of the profession. And only the real practical work makes real and genuine lawyers, not theoreticians, of them.
Our first office was in a privatized two-story Soviet-era communal office building, and we rented two rooms there. The founders held their meetings immediately after the completion of the renovation works, the rooms were not even furnished yet. When we opened, we were constantly keeping watch over the office phone, because there were no websites, messaging apps and e-mails then to contact us.
– And the practical work started with …
– One of my friends, a publisher of a pharmaceutical magazine, approached the partner of our firm with a proposal: he offered to publish our adverts in exchange for the legal services he required. And our first clients were associated with the pharmaceutical industry, because they were coming across the info about our firm in the said magazine to which we contributed the professional legal articles.
Then in 1998 the country was hit by crisis, the hryvnia went down crushing in value, there were many problems with payments, the enterprises started amassing huge debts… It was the moment when we offered our commercial “know-how” for the potential clients: we offered legal services on collecting debts for 50 % of the sum of penalties. The clients eagerly accepted our proposal, since they actually took what was owed to them and did not risk anything, and the sanctions at that time used to be not as small as they are now. Back then it was possible to enforce collection of annual 50-60 % of debts in fines or penalties, and with substantial amount of the indebtedness one could earn a pretty penny.
Afterwards, we started taking on new clients outside pharmaceutical sphere – our firm got recommended between mutual acquaintances, and we started to grow. In 1998 we hired our chief accountant (and she still our colleague), in 1999 we were joined by the attorney Yevgen Solovyov, who is now a partner in our firm. And then we changed our address – moved to the office at Staronavodnytska Street located in the so-called “Tsarskoe Selo”, where there was an opportunity to rent an office on the ground floor. There were 5-7 lawyers working in the firm, and we became more visible in the then-existing legal market. We published no adverts in any media apart from the mentioned magazine, but it was quite a lucky move, because it was the source from which the owners and managers of pharmaceutical companies, representative offices of foreign firms used to discover our name.
It needs to be reminded that we studied international law, had good command of the English language, and at that time there was a noticeable shortage of English-speaking lawyers on the market, so knowledge of the language distinguished us among 99 % of practicing lawyers, making it possible for us to render services to non-residents and representative offices of foreign companies.
– Many describe those times as “the tumultuous 1990s” …
– Today everyone is badmouthing the present, but if you compare it with what it was then, it turns out that it is not so bad now. The present-day courts and the law enforcement system in general are much more in order now. In the late 90s, the companies started to engage lawyers for debt recovery in Ukraine who would file claims, win the cases and enforce the judgments through courts of law. In the course of those years until approximately 2002 I traveled all over Ukraine – I was on business trips several days a week. I visited the courtrooms of all commercial courts in Ukraine (which were called arbitration courts then). There hardly was any flight connection at that time, and all the travels were mainly made by motor or railroad transportation, which was in very poor condition. Frankly speaking, I would not wish to go this road again.
– Do you reminisce about those times today with a smile or sadness?
– People now see what you have achieved, and do not know how this road started. But you have to go all the way. Someone manages to bridge it in five years, someone in fifteen; there may be a whizzkid for whom only a year will be enough. This is exactly the path that you need to trudge to become a real “litigation attorney”. You will not become one if you have not attended 100, 200 or 300 court hearings. I can say for sure that I do not have nostalgia for those years.
– How many employees were initially at the company?
– When we set it up, there were only three founders. We had an “outsourced” (as this kind of activity is referred to now) accountant. Then one of the partners left the firm, and there were two of us left. About a year later, a secretary and an accountant joined us, after a while we hired two more lawyers and met 1999 in this very crowd. At the same time, we opened an office in Kharkiv. It is still active. We were apparently the first company from the capital city to open an office outside Kyiv. There were already ten of us, including five lawyers. Now we may boast of having 60 of them and many offices.
– What has the Ukrainian legal market achieved over the quarter of a century?
– The key point is that today the Ukrainian legal market is completely under control of Ukrainian lawyers. By contrast with the 90s, there are no more “paratroopers” who were “dropped” from Germany or the United States to head the companies here. Indeed, there are foreign law firms and their offices in Ukraine, but 99.9% of them are headed by Ukrainians. Now everyone has understood that we are good at what we do, and it is better to hire a smart, efficient person at the local market, than to appoint someone who failed to be of use, for example, in a European or American office. If we compare ourselves with some neighboring countries, where international law firms have the upper hand, in Ukraine the key roles are played by Ukrainian firms.
The domestic market is developing dynamically, law firms are changing, someone is losing momentum, some new firms are sprouting. In 1997 we were one of the youngest law firms, and now we are among the oldest. Lawyers started to get divided by specialization, there is a noticeable trend towards the development of full-service law firms, in which various specialists focus on certain narrow fields, and this specialization is getting narrower. This is the main trend in the development of the legal market. For a certain period, establishment of boutique firms was in demand, but it seems to me that it did not work out, since the boutiques must compete with the full-service law firms. Each boutique firm has to redirect its customers to other boutiques, and about 20 of them must be formed, each having very deep particular expertise, to be able to compete with the full-service law firms. In fact, this is not happening today anymore, and boutique firms over time reorganize themselves into full-service companies. The market in Ukraine is generally very civilized, unlike many neighboring countries. We have a professional community, specialized media that our neighbors cannot boast of.
– And what has the legal market lost throughout all this time?
– Firstly, its status has little downgraded. Because of their behavior some law firms cease to be something treasured, elitist and turn into petty sellers trying to impose their services. If earlier clients sought legal advice from a lawyer as from a respected and respectable person, now some colleagues behave in such a fashion as if they would agree to run errands buying cigarettes. I do not think that the high reputation of a legal profession has been irretrievably damaged, but it has significantly lost its weight. Secondly, the system when it was the law firms who dictated the terms to the client has been lost. It used to be a market for the law firms, and each of them took advantage of it in its own way. Now it transforms into the market dominated by clients dictating their terms. It is especially difficult for young law firms, because, being a leading attorney in judicial practice, I, for example, can set my own terms, but not everyone is comfortable even with such our position, let alone new law firms.
– And have the clients changed over the years?
– It is quite hard a question to give an answer to. We have clients as back as since the late 90s, they have walked all the path and lived through all these times together with us. Some of them have worked the same way up from renting two-room offices to owning their own buildings. We maintain personalized relations with our clients, strive to retain each of them, aim to expand the range of services and cover all their needs. In general, our company pays more attention to the existing clients rather than potential ones. Some colleagues have a different strategy aimed at attracting new clients. These are particularly the law firms that, in my opinion, have “spoiled” the customers, and they are now trying to dictate their own, sometimes onerous, terms. Many firms work using fixed fees, and we work, almost exclusively, using hourly rates. But the tasks posed by the clients have changed – less and less they are likely to pose trivial, simple tasks. In the late 90s we could be asked to draw up a kiosk lease agreement or cafe equipment purchase agreement, but everything is much more complicated now.
– Has the client changed in terms of affiliation with the state power?
– Not in the context of our firm. State officials do not request our services very often, because those who have a government leverage do not need good lawyers. But they are always needed by the opposition. Our fate among Ukrainians is to always work primarily with those who either earlier belonged to or is going to join power circles, but is not wielding power at the time of cooperation.
– What has changed over almost a quarter of a century in terms of company management?
– The further it grows, the more we learn to delegate management powers. When you go back thinking about the initial stage with five employees, everything was simple then: the one who runs the company runs all processes: starting from the terms of contracts with the clients and up to supply of stationery. The growth led to the structuring of the departments, an increase in the quantity of the administrative staff, business development, and to our being able to delegate powers.
In addition, the processes have significantly accelerated. In the 90s, if, for example, we needed the services of an Australian lawyer, we would leaf through hard-copy legal directories, look for the section listing Australian law firms, study their specialization, and send a fax. Then we waited three days for an answer. If there were additional questions, we sent a follow-up fax or arranged a phone call. Then e-mail communication appeared, and the waiting time shrunk to one day. And when instant messengers were invented, everything became instant. No one is ready to wait until you get back from vacation or weekends. By the way, this already brings up a question if office phones are needed any longer. If we compare the number of calls to a desk and a mobile phone, there are days when the first will receive only one call, and the second – one hundred and one. Due to the said, the speed of decision-making processes has also increased. And the main thing here is to make yourself not to succumb to this frenzy and rush into making rash decisions where they should not be made.
– How would you characterize the 90s, 2000s, 2010s, 2020s?
– 90s – turmoil and devastation, 2000s – dawn, followed by a ray of hope, 2010s – a day, good or bad, in the 2020s – twilight, after which either dawn will come quickly, or there will be a lengthy night.
– Ilyashev & Partners has long been considered a Lamborghini in litigation practice. How do you succeed to be in front of the peloton?
– In the litigation sphere, we are definitely not Lamborghini, because the number of our litigations by far exceeds the number of cars of this brand. As to being a leader, the ship moves faster if its sail is filled with the wind. In particular, it is easier to hire a good lawyer, because he understands that there will be a chance to fulfill his ambitions and handle the best high-profile cases. Good cases draw good lawyers, and good lawyers make it possible to deliver high quality services and draw in good cases again. It’s like a snowball: it will grow once it is handled correctly.
We have never been afraid of anything. Even despite the fact that the litigation is always associated with conflicts. Large conflicts usually look scary, and in the early 2000s we threw ourselves into them without hesitation, totally devoted ourselves to the cause and fought tooth and nail for our clients, regardless of the possible adverse implications. A lawyer is an instrument and it is his responsibility to render due and proper legal assistance. The more high-profile the matter is, the more it advertises the lawyer’s professional qualification. He cannot turn back on his position and the party he represents.
I will repeat myself, we are in no way centered around any political structures; therefore, we are not influenced by any political situation. At the market we are perceived exclusively as a commercial law firm that is not involved into politics. We can demonstrate that in our portfolio there are clients from all political sectors. Someone may charge us of having no principles, but I strongly disagree, because the principles actually manifest themselves in something else. When a lawyer says that he will not take on a client because it may project a negative image on him, I think this is wrong. It is the same when a doctor will decline a terminally ill patient, because he will die anyway, and this will ruin his reputation as a doctor. In Ukraine, by the way, identification in the public opinion of a lawyer with a client is a very challenging problem. It is difficult to do in relation to us, because if you analyze all our clients in their entirety, they are completely incomparable. And principles manifest themselves when you will not sell your client, will not work against him for the benefit of his enemy, and much more.
– Are the new law firms different, more flexible? Do you feel the competition on their part?
– Of course, we do. We look at the firms that are now being set up by young lawyers and reminisce about ourselves. The main thing for us is to remember that in the 90s other companies were looking down on us and did not regard us as a competitor, and we considered them to be big. And then they ceased to be big, although someone keeps thinking about themselves as such. We do not want to morph into such a company, we do not want to grow old. We constantly monitor the young lawyers working for us, because this is our future. We are the present, which will someday become the past. It is important not to lose a sense of reality and energy. If the founder no longer holds personal energy, it will be accumulated in the company.
In Ukraine, by the way, there is one more difficulty. If we analyze the domestic market, all law firms occupying the top ranks are managed by their founders. Some are trying to cede control to the next generation, but no one has succeeded so far, and those who tried to do it went down in ranks. The decline of the company begins when the founders step down. We hope we will be able to break this trend. Once we had no experience of establishing a law firm, but now we have no experience of passing the powers on to the next generation. The main thing is to motivate young and enterprising people to stay in the company, so that they become its owners tomorrow, so that the founder may retire, and they take over the company, run it with dignity and develop it further. If you do not see yourself as the owner of the company, you will not create the same company from scratch. This is the task we are working on – to find people and raise their profession level. We are in our mid-40s, we can actively work for a maximum of 15 years. Now we tell them that at 25 we already had a company and clients, completed the Stockholm arbitration, rendered legal services to a state-owned enterprise, and were listed in the international ratings. This is what should be a stimulus for them.
– And your opponents will reason with you: “It’s not those times anymore”, “Stop working for somebody else”, and they will go establishing their own business.
– We, lawyers, all work for somebody else. We work for our clients. I render services, the client hires me, gives me tasks. It’s not for myself I am buying a plant for, but for my client. As for “being one’s own boss” I will answer as follows: in our company we are striving to ensure that a person sees the prospect that this is his business as well. When I hear people talking about lawyers of the same law firm having established successful new companies, and they are proud of it, I would not be proud if I were them. Because every successful firm, which was set up by a lawyer originally from another company, speaks for a big mistake of the management of such company, which failed to keep the specialist, distinguish his faculties, motivate, and, as a result, let him go.
– Where do you see your firm, Ukraine and its legal market in ten years’ time?
– Domestic law firms are very dependent on the processes currently taking place in Ukraine. If we take a look at the global experience, we may see that the greatest growth was achieved by law firms from those countries where entrepreneurs have achieved great success. The law firm is, in one way or another, a suckerfish following the business shark. If Ukrainian business expands globally, Ukrainian law firms will also be nearby. We are even ready to advance and meet Ukrainian business in the target point. As for Ukraine, a lot, unfortunately, depends on external factors. Lost territory means a lost piece of legal business. People who moved abroad are also a lost part of the legal business, because the legal services are consumed by people. The bigger the population is, the larger the economy will be, and the more legal services will be provided. It’s fair to say that our law firms are developing contrary to the current trends.
The events currently happening in Ukraine testify to the fact that the legal business is supposed to go down, because the Ukrainian territory and the number of Ukrainian enterprises is shrinking. But law firms are finding the strength to expand. This process cannot be stopped because the law firm is either going up or down. If it goes down, a question comes up who should be “discarded”. Who? Lawyers. But novices or veterans? The veterans have clients, they are experienced, and if you discard the young lawyers, you will put your future in danger. If the company continues to work, it must be sure that everything in Ukraine will be growing, or, at least, stay the same. Why are we here? Because we believe in Ukraine, believe in its future, believe that everything will eventually work out, and we have got used to the circumstances that exist. At the same time, you clearly understand that Ukrainian population will not grow up to 55 million, that it is unlikely that its territory will grow within five coming years. You dwell on this and try to preserve what you have today, because when others are going down, and you stay firm as you are, this is a victory already.