Ed 2 Vol 2 2012
In this edition: Dr. Jan Lescinsky Skanska Dr. Istvรกn Kocsa OTP Real Estate Dr. Andrรกs Sallay TriGranit Bogdan Blanaru Mivan Development Denis Martynov UFG Real Estate Ogeday Cuhadar Real Hypermarkets Tatiana Marussich GLD Invest Group
-Real Estate & Construction-
Interview with Dr. Jan Lescinsky, General Counsel Czech Republic and Slovakia, Skanska ........................p. 4
Effective Use of Outside Counsel By David Dixon, Norton Rose .............................p. 18
Interview with Dr. István Kocsa, Director of Legal and Governance, OTP Real Estate ............p. 5
January 1, 2014 – An Important Date for the Czech Real Estate Sector By Hilary McDowell, CMS Cameron McKenna .......p. 20
Interview with Dr. András Sallay, Legal Advisor to the President and Corporate Secretary, TriGranit Development Corporation ...................p. 8
Does Hungary really need the ‘Payment Trustee’ in the current economic environment? By Devald Katalin, Kinstellar ....................p. 21
Interview with Bogdan Blanaru, Legal Manager for Romania, Mivan Development ......p. 10
Significant Evolution of the Real Estate Publicity System in Romania By Ioana Niculeasa and Irina Dimitriu, Nestor Nestor Diculescu Kingston Petersen .......................p. 23
Interview with Denis Martynov, Head of Legal Russia, UFG Real Estate .........p. 12
Draft amendments to the Civil Code and their potential impacts on the real estate industry in the Russian Federation By Florian Schneider, Salans .........................p. 24
Interview with Ogeday Cuhadar, Division Manager Responsible for the Legal and Real Estate Affairs Turkey, Real Hypermarkets ......p. 14
Purchasing of Real Estate by foreigners in Turkey made easier - Amendments to Articles 35 And 36 of Law 2644 By Murat Aygun, Pekin & Bayar ..........................p. 25
Interview with Tatiana Marussich, Head of Legal Ukraine, GLD Invest Group ........p. 16
Practical impact of the failure to effectively begin operation of the new register of real estate property in Ukraine By Sviatoslav Belei, Gide Loyrette Nouel .............p. 26
The most common reaction to our decision to focus this edition of the GC Grapevine on the Real Estate was some variation of this: “The Real Estate sector is dead; better to wait for a few years.” After taking some deep breaths, however, we went ahead with our plan. No doubt, the Real Estate market in CEE took a hit, and it has a long way to go before returning to the pre-recession boom. But that’s exactly why we believed the time was right to place it in our sights. The question of how in-house legal departments dealing with RE matters have adapted to the credit crunch is fascinating – and, as in all matters, the way the lawyers profiled in this month’s issue have faced these challenges may assist their counterparts and colleagues face similar challenges of their own. Dr. István Kocsa, General Counsel of OTP Real Estate, spoke to us about the need to get his team in a state of mind of always thinking of the bottom line and how his lawyers can add value to the company. Another, Bogdan Blanarul of Mivan Development, spoke about the dangers of never getting out of the legal mindset, all to prone to constantly worrying about theoretical legal risks. In order to offer a full perspective, we also invited a partner working in Real Estate across CEE to offer his insight on how to use outside counsel in the most effective manner possible, and several tips on how to avoid unpleasant surprises when the bill for legal services is presented. One last note. As we consider real estate – that most tangible of properties – we are also proud to announce that this particular tangible item now has an electronic counterpart. As of July, 2012, the GC Grapevine portal will host all of the articles from past editions as well as exclusive interviews and articles. Please visit us at www.gcgrapevine.com to express your thoughts, communicate with other lawyers across the world, and increase your ability to reach potential clients and counterparts. Please let us know – electronically or by contacting me directly – if you would like to learn more. Orsolya Endrefi Associate Director Emerging Europe and Latin America Legalis
David Stuckey Commercial Director Emerging Europe and Latin America Legalis
Radu Cotarcea Marketing Manager Emerging Europe and Latin America Legalis
The GC Grapevine is powered by Legalis Global, the premier legal recruitment firm in Central Eastern Europe.
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Dr. Jan Lescinsky, General Counsel Czech Republic and Slovakia, Skanska is why when I joined Freshfield Bruckhaus Deringer I had the feeling I was starting all over again. I needed a new challenge, so I started looking for new opportunities, both PP and InHouse. I did not move to In-House intentionally, it just happened that Skanska represented the most interesting opportunity.
pected to generate a number of solutions for a certain legal problem. Instead you need to analyze every issue from a business perspective, be constructive and come up with a balanced approach between business and law.
It is also important that as a General Counsel you are understood by everyone. In order to do L: What was it about the opportunity at so you should keep it short and simple, so that Skanska that was so interesting? you are comprehensible from a business perspective as well. JL: At the time I was the only lawyer in that particular division, so the position was extremely Another challenging aspect of my job is manchallenging and offered me a lot of opportuni- aging lawyers and actually making them coopL: To start, please describe your career path ties to both grow as a professional as well as to erate, as most of them are not really used to shortly for the GCG readers. grow a team of my own. I felt it was up to me working as a team. Usually lawyers tend to be to create legal function so I took the chance. more individualistic - it seems to me it is almost JL: I finished my degree in 2001 at Charles typical feature of any lawyer however contraUniversity in Prague. During my studies I was dictory that might sound to working In-House working with a local law firm, which helped me a lot, as I gained considerable practical experiL: So how exactly do you fix that and ensure ence. Right after I graduated, I joined Freshthat lawyers work effectively as a team? field Bruckhaus Deringer’s office in Prague. However, in 2002, after only 6 months [with JL: One way to tackle this problem is by speFreshfields] I joined Skanska. I became a legal cializing the individuals of the team in complemanager in 2003 responsible for the legal supmentary areas, so that they need to constantly port in the construction technologies division, exchange thoughts and ideas. We have ‘comand by 2007 I was involved with some PPP mon meetings’, in-house conferences, where projects. In 2008 I became General Counsel of L: General Counsels have to wear multiple our lawyers can meet with external counsels or Skanska for the Czech Republic and Slovakia, a hats. They need to be strong lawyers with a simply to share expertise within our own team position I hold today. broad legal perspective combined with an to further encourage this exchange of knowacute business sense, and, last but not least, how. We also allow lawyers to change their inL: Why did you choose to work in-house? need to be able to develop a strong team ternal clients or their specialization in order to Would you ever considering moving back to around them.Which of these aspects do you become more familiar with the company. private practice? Why/Why not? find most challenging? We also try to logistically concentrate the team JL: I do not consider In-House and PP to be JL: The broad legal perspective is actually in as much proximity as possible. I don’t think that fundamentally different. Of course there something that I believe any lawyer should it is ideal to send lawyers off-site to some backare differences, and in terms of working hours have, regardless of whether they specialize in water to work separately from the rest of the contrary to the popular myth, they are gener- PP or In-House. In light of that I do not buy team and have each be responsible for individually the same. From my perspective the differ- into the idea that being a lawyer responsible for al/independent projects. ence is in personal attitude: as In-House you all relevant areas is a real challenge - you defihave bigger freedom so you have to be more nitely have to strike a balance between general L: What is the key to keeping this large self-disciplined and ready to take challenges on understanding and deep understanding but that team together? Do you focus on training or your own while in PP the system makes you is something every lawyer has to do do you prefer exposing them to an actual work hard. experience? The true difficulty rests in trying to combine I learned quite a lot during my 3-4 years of the legal perspective with a business approach. JL: I would say definitely training but it has to PP experience, while I was at university. That As an In-House counsel, you are not simply ex- be put in a broader perspective all the time. Of
“The broad legal perspective is actually something that I believe any lawyer should have, regardless of whether they specialize in PP or In-House.”
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course you have to gain experience as well, but to work with. Additionally, we are interested staff training is absolutely critical. in firms which show strong capabilities, combined with healthy experience in the relevant When conducting these trainings, we tend field, which we usually check either by looking to use external help, either academics or law up their past cases or by asking in the selection practice specialists. Sometimes, however, we process for a case study. Of course, price is also use internal training as well, we try to mix the a factor, but I wouldn’t outline it as the most two approaches. important one. But the key to keeping the team together is in creating a good working atmosphere so they enjoy what they do. L: What are you most proud of in your team? We have an internal evaluation on an ongoing basis from our internal clients. This always helps in terms of generating feedback, and results show that clients are always more impressed with our legal functions relative to any other back-office department within the company. Additionally, we have a relatively streamlined team of around 25 lawyers, supporting the business in various ways. In light of the workload, I am very happy of the level we deliver on as a team. L:When needed, how do you go about selecting your external counsel(s)? JL: Since we are divided into business units by country, a strong local presence is a natural requirement for the external counsels I chose
ding procedure, and we are legally attacking attempts to possible tender manipulations. Hopefully the situation will improve soon even though current crisis in the construction industry does not help us much.
Lastly, we do run, on occasion, into hurdles generated by corruption. Even though this is more of an enforcement rather than legal issue, However, with a team of 25 in-house lawyers, I it is something that my team has to sometimes will say, we do not run into the need for exter- deal with. nal counsel all that often. L: Skanka celebrates 125 years of existence L: What are the foremost legal challenges this year. In your views, what was the key you are facing now and expect to face in the factor in its longevity and success? next few years? Probably it would be ‘prudent risk’. We analyze JL: One of them would be the new Czech civil our clients carefully, in addition to the areas code that will be enforced beginning of 2014. where we want to do our business. Another key focus rests on attracting, training and retaining Additionally, one of the permanent issues, the best talent. To put it briefly, we focus on which we have to tackle on a regular basis, is the trio of right place, right business, and right public procurement, due to a rather large num- people. ber of obstacles along with the ever-present red tape which is actually both in the Czech and L:Would you care to leave the GCG readers Slovak widely abused to manipulate the public with any last thoughts from one GC to the procurement. This situation for us in Skanska other? Any advice? is very unfavorable since the public client is important but we neither use nor tolerate any- JL: I rather share my favorite motto which I thing like corruption, bribery or kick-backs. have learn from my dad: “There are only quick For my legal team this means that we help our or dead”. managers to create transparent public tenders. Therefore we are closely involved in our bid-
Dr. István Kocsa, Director of Legal and Governance - foreign and domestic, OTP Real Estate L: How did your legal career begin and how mainly dealt with international issues, syndilong have you been with OTP Real Estate? cated loans, structured finance, investments and other transactions. IK: I began as a rooky at the National Bank of Hungary in 1994 and spent 7 years there. Due to some requests coming from Brussels HR I practiced as an attorney/partner with the and from Mr. John Hollows who was the CEO Gayer Law Office in Budapest where we es- of K&H Bank at that time, I became a member tablished the Banking/Finance department of of the management committee, meaning the the law firm. That was started by my previous board of the lease company where I needed to boss and one of my senior colleagues from the wear two hats. One being Head of the Legal National Bank. In 2002 I came to K&H Group Department, which I had to restructure with which was a joint affiliate of ABN AMRO and regards to both its activities and personnel. KBC in Hungary. This proved to be the second 7th year employment stint in my life where I In the meantime I became a member of the
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Management Committee and ran the business for 5 years. In the early part of 2009 I moved on to the CIB Bank, the Hungarian Affiliate of Intesa Group, which, at the time was just post-merger with Inter-Europa Bank. We had some reorganizational duties with regards to legal services on a group-wide scale. This meant we had to recruit new colleagues and rebuild our services to be in compliance with new requirements coming from the new era. We should also remember that the time bared a heavy onset of a turbulent economy. Now I am here, since August 2011. Currently, I am rebuilding again and thus it seems in the last 8 years my main focus has been around rebuilding and focusing on new challenges and how to solve issues. I’ve been “re-building” for nearly a decade.
“I have been trained from the very roots in my career at the National Bank of Hungary that we have to know the language of our clients to be ready and able to serve them well otherwise we will shrink to a cacophony.” L: What does a week look like for you at OTP Real Estate? Can you describe it for the GCG readers?
daily dealings of the department(s).
CZECH REPUBLIC
OTP Real Estate currently runs more than 30 companies. Since the business was focused on special purpose vehicle financing, I mean project finance, the real estate engineering and development itself was in Hungary structured by such vehicles. So we do have some project companies in which we have stocks. Besides participating in negotiations, I also deal with work groups and intercompany and inter divisional forums to find the solutions for pertinent issues at hand. Often times this is very much a strategic job, but of course I also prepare and review contract drafts, work together with colleagues on such matters.
Kinstellar
Kinstellar advised Czech Property Investments (a leading Czech real estate group engaged in real property development, investment and management and the most active investment group in the Czech real estate sector in the last three years) in connection with most of its acquisitions, financings, and restructurings L: You have been with OTP Real Estate (more than a dozen projects) ranging in value now for almost a year. In reflection, what from EUR 30 to 65 million, with one project in accomplishments or implementation that excess of EUR 220 million. you made/brought to the team are you most proud of? IK: Unfortunately, or rather this is of course a question of point of view, I shall be very harsh since I had to reorganize the department. But I am proud of it. I made quality changes, meaning cost efficiency, by decreasing the staff number in exchange for higher legal staff who are better qualified and poses the relevant experience/skill set. The competences are really important. I am particularly proud of the enthusiasm with which my colleagues’ serve the other departments. It is truly exemplary. This is what I call legal service. I have been trained from the very roots in my career at the National Bank of Hungary that we have to know the language of our clients to be ready and able to serve them well otherwise we will shrink to cacophony.
IK: Certainly, I can show you my Calendar. For example my previous week is a good example. I was abroad on business for 2 days during the middle of the week. Every Monday we conduct our Management Board Meeting. After L: So by streamlining your Legal Departthe MB ment have you made it more effective? Meeting, I run the same day or very latest on Tuesday the Department Meetings. Of course, you have to prepare yourself for such meetings whenever possible. I am on the move often nowadays as my role is somehow regional and we are present in 8 countries. Technical equipment helps me to stay in touch and be efficient whilst on the go. Of course I have to participate in business negotiations and attend to the
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Kinstellar advises Czech Property Investment on acquisitions in the Czech Republic
IK: I do hope so. Of course I did some outsourcing with regards to litigation matters and implemented a new strategy going forward. Litigation as an activity of the department is not just a legal question. It has a lot of financial connections to the bottom line. We also had to streamline the organizational side of the department and, at the same time, I had to recalculate the ability of my in-house coun-
Kinstellar advises Tesco Stores on Liberec acquisition in Czech Republic Kinstellar advised Tesco Stores (a leading global retailer) in connection with the acquisition of all shares in the company owning Liberec Shopping Centre from its joint venture partner Multi Development in the Czech Republic.
HUNGARY Gide Loyrette Nouel Gide advises LEGO on land purchase project Gide Loyrette Nouel Budapest is advising LEGO, the world’s biggest toy manufacturer, on the purchase of approx. 100 hectares of land in Nyíregyháza for the purposes of developing a new production site. Advising the client on construction, zoning, public proceedings, purchasing and licensing matters.
sels whether they could cope with such a new L: Are you the manager type by birth? Is structure. that just your personality? During my first day on the job, I gathered my reports for a sit down with me and I told them “guys, these are my expectations of you for the next 3 months, this is what we have to get done. I shall discuss your efforts, personally with each and every one of you and we will discuss the plan for the coming 3 months.” This is a very personal process and takes patience. Some people did not measure up after three months. Nevertheless, now we are less in terms of headcount but we are better in capacity and ability.
IK: I really hope that I can convince my colleagues of my knowledge and many years of my experience on one hand and reliability on the other. Someone last year said that I am a good example for them as I am always the first one in the morning and the last one to leave at the end of the day. Unfortunately, my wife and 11 year old son are not on the same platform in this regards. These are really tough things to balance in the day of the life of a General Counsel.
L: Are there any specific criteria that you L: Can you share specifics of why you are are adamant about when selecting your exNOT the A-typical GC? ternal counsel? IK: As I mentioned previously, in the last eight years I have had to train to be so atypical. I had to focus on strategic things and corporate governance; I mean to lead a company as second in charge after the CEO. I am proud of it nevertheless I do not really like to underline it. Since I am not just a General Legal Counsel for the company but, since last December, I have been elected by the General Meeting to be a Board Member. I supervise these other 3 functions and the Customer Service Department and I have to cope with other managerial tasks also. I feel very fortunate that the high level managers of our Division at OTP Group and especially the CEO generally asks for my opinion. L: Any great tips or processes you have implemented that have really made a difference to your legal department?
IK: Since I try to make the legal services as coherent as can be, there is no real differentiation between my in-house counsels and external law firms. Nevertheless, the external legal firms need to be very well grounded in expertise with very good relationships to the practical litigation. I am always keen to know the details. After we come to the same platform, we can cope with the problems and this is the basis of efficiency. I appreciate and expect a fast turn-around time. I like teams who do not try and describe themselves more than what they are. I like solution oriented people, who can define the decision points upon which I can make the best decision. One funny story: There was a law firm who refused to travel to the country-side. Since we have many interests outside of the capital cities in our markets, that was just unacceptable. Another firm wanted to only use their standard contracts. Certainly, I understand they spent time drafting those and invested knowledge in that once upon a time and they must be good docs but I wondered how their templates would fit our project sale & purchase agreement as we develop those project by project.
IK: My door is always open! The open door policy has been really successful. Colleagues can come in any time. I remember the time I was a young lawyer starting out and really needed some help. For example; when reading through my draft documentation, the lawyer made ticks and dots and drew question L: Any final words for our readers? marks but was never available to discuss the document.That is not at all how it works in my IK: To be a leader is more of a challenge than team. We talk through mistakes so the lawyers to be a manager. learn. Everyone learns something every day myself included.
Gide Loyrette Nouel Gide Loyrette Nouel represents hotel in joint venture project Gide Loyrette Nouel Budapest is representing one of the world’s largest hotel and leisure company in a cross-border transaction, on the dissolution of a joint venture and the related acquisition of a budget hotel chain in Europe and the sorting out of the Hungarian project companies.
White & Case White & Case advises AEW Europe on refinancing project Réczicza White & Case LLP recently advised AEW Europe, a leading European real estate investment manager, in connection with the refinancing of 6 shopping centers located in Poland, the Czech Republic and Hungary, with an overall deal value in excess of €200 million.
White & Case advises Globe Trade Centre (GTC) Hungary in lease transaction Réczicza White & Case LLP advised GTC Hungary, one of the leading developers in Central and Eastern Europe, in the largest lease transaction with a Government Agency in 2011. White & Case indeed successfully represented GTC in concluding a 30,000 sqm lease agreement, consolidating the Government Agency’s operations into one single locatio
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Dr. András Sallay, Legal Advisor to the President and Corporate Secretary, TriGranit Development Corporation ing that I was involved in aviation transactions, energy investments, sale of in-house units and a lot of other quite interesting fields. Additionally, I like working closely with external lawyers so I learned a lot and gained experience in many other sectors such as intellectual property or public procurement which we usually outsource.
L: You have been with TriGranit for a long time. How did your history begin with the company? AS: I graduated in 1999 and my first job was with Charles Varga Law Firm. It was a small international firm with a few lawyers and trainees. One of the clients at the time was Mr. Demján (TriGranit’s owner) and I was sent on a secondment to TriGranit after a few months. I translated a lot of documents and I got a better understanding of how an international law office works. Since I was a secondee for the first 2 years, I worked under really close supervision but learned a lot from my cooperation with the rest of the team. When I first joined, TriGranit was a small family business with 20 or so employees. L: How diverse has your legal practice been over the years and how has it evolved? AS: As TriGranit grew, the legal team also had to grow in size. We had more and more contracts and more and more transactions taking place at the same time. In terms of diversity, although I stayed with the same company from early in my career, TriGranit grew and now presents challenges in a multitude of areas since it is involved in many aspects of the real estate sector. As an in-house lawyer we support a lot of administrative functions which include corporate law, labor law for HR and so on. We also do a lot of bank financing, acquisitions, and joint ventures. Since Mr. Demján represents the definition of an antrepreneur, he is also very active in a lot of other investments, mean-
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“When I have to multitask like this and deliver within a challengingly tight schedule I feel I add real value to the company.”
improve it but when you look back after a few years at a document which was negotiated for a much longer period of time it is usually worse because people then tend to focus on small details and the big structure and the transparency of the document gets lost. L: From your perspective, can you describe the Real Estate market and how the economic climate is affecting the sector across the markets in which TriGranit operates?
AS: I believe that real estate is one of the worst effected since the industry is strongly dependent on loans and financing which became a capital issue in these years. At the same time, since the beginning of the crisis was related to it with a considerable loss of value of real estate, many investors lost the confidence in the L: Your average work week - what constitutes sector. However, acquisitions still happen. a busy period? If there is a completed project, then it is still AS: Although I had many management respon- possible to sell it, even if investors are only sibilities over the years, I am still a transaction willing to purchase only a part of the real estate lawyer at heart. I feel best when a closing of a (say 50% or 75%) and developers still have to major transaction is about to take place with remain and hold minority interest and secure long hours of final negotiation of the key trans- the stable operation of the property. action documents, collection of condition precedent documents, organizing the work of Selling finished projects is not the main proba team of internal and external lawyers and lem. The serious challenge represents new providing briefings and advice to the key busi- developments, mostly because new financing ness negotiators of the deal. Each deal usually is difficult to obtain nowadays. Banks want involves travel and short nights in hotel rooms, to be very closely involved and they interfere and a very busy week usually involves several with the development. They want a lot of letransactions closing at the same time, frequent- gal protection against those problems that they ly in the Christmas period. experienced in the past with badly developed properties, which are now bad assets in their When I have to multitask like this and deliver portfolio, and unfortunately banks sometimes within a challengingly tight schedule I feel I add do not take the smartest of decisions. real value to the company. This is also what Mr. Demján appreciates the most since he usually Before the crisis, they were very hungry for believes that lawyers are big risk factors since risk and they took it without proper assessthey can delay and/or ruin transactions. As ment. After the crisis they are very averse of long as everyone is focused, as long as everyone risk but they still do not assess it. They are now is interested to finish it in a short time frame, just reluctant to take it. They usually block reathen there is a much higher chance of success. If sonable development decisions which makes it people just circulate e-mails and take rounds of extremely difficult to proceed. negotiations and try to identify problems, there is never a finished document. You can always The second issue is tenants. They also suffer
from the crisis and require lower rents. They want to share their risks so they are not willing to pay minimum rents, so guaranteed rents. On the other hand in order to sign up for a project, they want incentives, lots of incentives, such as money and rent free periods and other sort of perks. Again, the developers take an increased risk upfront and increase the construction and project development budget. If we accommodate all these demands, then the profit margins become really small and the risks we have to take sometimes are not justified by the bottom line. L: Over the years you have seen so many projects come and go. Is there any one project that you are particularly proud of? AS: I am really proud of the Palace of Arts. It is something extraordinary. We mostly develop commercial properties and it is nice to say that I worked in Westend and everyone knows what Westend is in Hungary. The Palace of Arts in Budapest is something great by any standards. Granted, it is not a legal achievement per se - it is the success of the architect. Still, I performed a small part in it and my contribution in setting up the PPP structure was appreciated. I know that, had it been a simple procurement, a simple straightforward construction ordered by the Government and then sold, it would have simply been built as a cultural institution financed from the state budget and it could not have been the same world class multifunctional hall as it is today. Since it is a PPP, the state has an obligation to fund it and cannot cut down on its costs. This meant that we were not forced to compromise in terms of quality and design which resulted in an extraordinary building.
“Before the crisis, they [banks] were very hungry for risk and they took it without proper assessment. After the crisis they are very averse of risk but they still do not assess it.They are now just reluctant to take it.”
L: What Emerging European Cities would friendly. They try to have a beer together, chityou rank as the top 5 in terms of growth chat and they say the previous was only work from a real estate standpoint? and has nothing to do with how they really are. I have little tolerance for this. To me, such beAS: When discussing potential, one obvious havior is unacceptable. If someone is not behavcriterion is that the city has plenty of room for ing professionally at a table and insulting me or developments so it needs to be a fairly less de- is aggressive then I will not treat him or her as veloped city. Secondly, it needs to be in a coun- a friend afterwards either. try that is registering growth itself. I believe that for these criteria, mostly Polish and Russian cities qualify at the moment, but Ukraine has a great deal of potential as well. It is only due to its political and legal risks that it is currently as hot as the first two. At the same time, if Serbia gets closer to European accession, then I would also include Belgrade because the consumption is very strong and it is not developed at all. For Polish cities, I believe Gdansk, L: Without mentioning any names, is there a Gdynia, Wroclaw, and Poznan. For Russia, I preferred external legal services provider that would include the larger cities but not Moscow you have worked with consistently over the last because it is already developing really fast: St. few years that you are satisfied with and why Petersburg, Krasnodar, Jekatyerinburg, Sochi. have you been happy with them? Sorry, this is already more than five AS: The point is not about the firms. It is about L: What should law firms NEVER do when individuals. There are a lot of great professionworking with TriGranit? als who I like to work with. If I find a great partner in a lawyer, then no matter which firm AS: The first is one that it is very common in he works for and no matter what changes over law firms; we always ask for capped fees, which the years, I tend to work with him or her. In law firms naturally dislike. Very often they en- Hungary but in other jurisdictions as well there ter a deal with a low capped fee and with lots are lots of great professionals and if we have a of assumptions which will certainly fail. After a transaction and if we can collaborate seamlesstransaction is completed or simply later down ly, we will surely work with them again. I treasthe line they argue that their assumptions failed ure these relationships. Of course international and they have to double or triple or increase the firms have standards, good documents and polfee significantly. icies that are important and they also help the training of lawyers. But the end of the day, it is This is one thing that they can do only once always the lawyers, the individuals themselves since they can expect an unpleasant discussion that matter in these selections. about what was their real cost, how much time they really spent, etc. The relationship ends L: Do you have an in-house “mantra”, a phiand it is very unlikely that we will work with losophy that you yourself as Dr. András Salthem again.This is the worst mistake they could lai or that your team work and live by? make. AS: I inherited a good mantra from Charles VarThe second issue is just personally annoying for ga: “If you are running a marathon, the last mile me. It happens that we are on different sides must be run with the same effort and focus as of the table on a deal and, naturally, they have the first one.” their arguments and we have our own. That is fine. However, sometimes lawyers are really My colleagues will surely recognize it. taking it to a personal level and can become really aggressive and impolite and, when the negotiation is over, they come and become very
“If you are running a marathon, the last mile must be run with the same effort and focus as the first one.”
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Bogdan Blanaru, Legal Manager Romania, Mivan Development
L: Why don’t we start off with you telling us a little bit about yourself? BB: I was following in my father’s footsteps when I joined the profession. He worked as a lawyer in various places, from the Ministry of Foreign Trade to Nestor & Nestor, where he ended his career more than 10 years ago.
During the first years I was mainly involved in try after the economic fall-out the labor practice, as the local company employs around 2.500 employees that are always on the “I witnessed situations where move and, with that size of a mobile workforce, external lawyers ruined a labor lawyer is bound to have his plate full of whole deals due to ‘theoretiwork. On the other hand, this allowed me to visit the country, from the extreme south to the cal risks’ or ‘excessive client far north in Suceava, to meet great people and protection’”. face challenging situations. BB: In the last 12 years I have been working In 2007 I decided that it was time for a change mainly in real estate/construction and I simply and moved to Mivan’s development office in love the industry. I simply would not see myself transitioning to anything else. I guess the most Bucharest, where I am still working. valuable thing for me is the fact that we actually L: If you were to name one aspect of being create a physical building - something that, una GC that is particularly challenging what like in most industries, I can see and touch and, at the same time, something that withstands the would it be? Why? test of time. BB: It is exactly the challenge of better understanding the business from inside, to feel it bet- I love it when I get to travel around the country ter. Also to protect it better. As an external law- and get to see buildings and landmarks that we yer, paid an hourly rate, sometimes you have to erected. I actually relive the days of working on add to the mix your personal interest of making each one even ten years back and relive the exa pretty timesheet, sometimes forgetting about citement of the day of breaking ground. the client’s own interest.
I graduated from law school in Bucharest back in 1998, and in 1999 I entered the Bucharest Bar Association. Since I love the city, and we are at the 3rd generation of “Bucuresteni”, I L: When you seek external counsel, what decided that I need to stay here and I joined a characteristics do you look for? What do small practice office. you dislike the most in proposals from law firms?
“As an external lawyer, paid an hourly rate, sometimes you have to add to the mix your personal interest of making a pretty timesheet, sometimes forgetting about the client’s own interest.
BB: We have worked with several important law firms in the country in the past years, both local and international. I personally look for pragmatism since I witnessed situations where external lawyers ruined whole deals due to “theoretical risks” or “excessive client protection”. For example, I have been involved in a 40 million euro transaction, right at the beginning of the current crisis, where lawyers were arguing about the exchange rate - absolutely irrelevant in the overall picture. This is also what I dislike the most.
I soon realized that working as an external counsel implies more compromises than I was willing to make, both in terms of work-life balance and in terms of having the client’s best interest at heart. As a result, I started looking for an in-house role, and in January 2001 I joined Mivan Kier JV, which had just won a tender of $120 million from the Romanian Government, L:While the Real Estate industry was boomconsisting in social housing and water supply all ing in Romania a few years back, the landscape (no pun intended) today is very much over the country. different.What made you stay in the indus-
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Also, it seems that there are signs of improvement on the market. Developers have started to build again, we have new shopping centers currently under construction, new office buildings, and the demand for good residential projects is real, so I hope there is a future in the industry.
“I actually relive the days of working on each one even ten years back and relive the excitement of the day of breaking ground. ”
you will have the full picture of the problem.
POLAND
This is also affecting industrial and residential CMS Cameron Mckenna buildings, not only the shopping centers. The most counter-intuitive aspect is how for individuals, this tax is more than ten times smaller. CMS advises Alpine Group on It is really unusual to have a scenario where it completing National Stadium in is the potential investor, the developer, is the Warsaw one who is singled out and disadvantaged. If it were the other way around, or at least lower CMS has advised the Alpine Group on comrates for developers to the same level, I am pleting the EUR 360 mln project to rebuild sure that the real estate market would pick up Poland’s National Stadium in Warsaw. The firm much faster. worked on all legal aspects of the three-year project including construction, commmercial The second regulatory challenge on residenand public procurement issues. The National tial real estate market is the VAT threshold that Stadium was the scene of the opening match of allows some sales to benefit from a 5% VAT UEFA 2012 championship. instead of 24% VAT.
According to certain provisions of the Romanian Fiscal Code, a sale agreement could include 5% VAT if the value of the apartment (including annexes) is les then 380.000 lei. L: What specific area of the real estate in- This special VAT regime is part of the social dustry do you find to be the most interest- policy and it should help the developers as well ing/challenging from a legal perspective: as the clients to make transactions. residential, retail, etc; and why? This value should be updated to the current BB: They are all interesting in their own way. EUR – RON exchange rate, meaning that this I can say that I have been equally involved in threshold should be around 446.000 RON the retail as well as residential. And they are and not 380.000 RON. This could mean more both currently struggling to overpass the hard transactions on a frozen residential market. times. L: Talking about the immediate time horiL: For the Romanian market, what do you zon, what do you expect the greatest chalconsider to be the greatest regulatory lenges to be for Mivan? challenge in the real estate sector? BB: The challenges are obvious. The market is BB: I could say that there are two: One in the not in its best shape at the moment and that retail sector and one in the residential one. puts a lot of pressure on the Romanian subsidiary. I will say, the overall company is doing First is the local tax on buildings, which for great so I am quite optimistic about our longcompanies can be at 1.5% per year of the book term perspectives. At the same time, as I menvalue of the building. Taking into consideration tioned, the market is slowly but surely picking the high values of the most of the retail build- up. Furthermore, there is real potential here ings, it is a huge amount of money that needs since there is plenty to be built in retail, industo be paid by the retailers that is reflected in trial, residential, even infrastructure, there is the service charges. still a gap between Romania and most of the EU which means that there definitely is a marTake, for instance, the declared value of the ket demand and, once the market unfreezes, new shopping center, Palace Iasi, that was just there will be plenty of fruits to be reaped by opened last week, which is 260 million euro, those committed to the market. and calculate 1,5% year as building tax, and
The Private Practice Strip
Even if over time that building was sold, I still feel a great sense of pride of knowing that it was our company that built it. This was the main element that made me stay, although, admittedly, the current number of projects is not as challenging as it used to be.
ROMANIA Kinstellar Kinstellar advises on major farm and forest acquisitions Kinstellar advised a specialized investment fund (designed to facilitate investments in forest, tree farms and land for the production of wood and biomass products) as purchaser in connection with the acquisition of farms and forests in Romania
Tuca Zbarcea & Asociatii Tuca Zbarcea & Asociatii obtains favourable ruling in high-profile public procurement dispute with a Local Municipality Tuca Zbarcea & Asociatii acted for a Romanian bid consortium member in its challenge to award of a EUR 20 million public construction works contract for the Sala Polivalenta Cluj, a 7,070-seat multi-purpose indoor arena in Cluj-Napoca city (located in central-part of Transylvania, Romania). The team was headed up by litigation Partner Ionut Serban, and Dan Cristea (Senior Associate).
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Tuca Zbarcea & Asociatii
Tuca Zbarcea & Asociatii secures discontinuance order for ING This project started as a land development Continental Europe in complex project. It has a very good location. We have done a lot to provide the land plots with utili- competition case
ties, parceled it out from the smaller plots, and amended the town development documenta- Tuca Zbarcea & Asociatii advised ING Continental Europe Holding BV on the Romanian tion. Competition Council’s investigation into the L: Can you tell the GCG readers a bit about private pension fund market which began in how UFG Real Estate’s legal department 2007 and ended by Order of the President operates in the region? And how would you of the competition authority as of June 11th, describe what it’s like to work in the legal 2012. Competition partner Raluca Vasilache led department of UFG? What is the size of the the team, alongside Anca Jurcovan (Managing Associate) and Andreea Oprisan (Senior Associteam regionally? ate). L: In a nutshell, how did you become the DM: We have 20 people in our team. I have 2 Head of Legal at UFG’s Real Estate Team, assistants who are also lawyers. We also have and how long have you been with UFG? a few lawyers in the regions. I handpick the lawyers we take on board. DM: I have been with UFG for 5 years now. I graduated in 2003 and from then until 2006 I worked as a civil servant in the Department of Foreign Federal Property of Russia’s Ministry of Foreign Affairs, providing legal support on the acquisition of real estate and investment L: What are the things that make your projects. I travelled a great deal and went to legal department function well? Any great many interesting locations. My work was tips or processes you have implemented fulfilling but ultimately the lure of earning a that have really made a difference? proper salary moved me into the private sector. Before I joined UFG I worked on a Rus- DM: I have implemented certain “managesian/Dutch joint venture where they were ment schedules” which save time. We have primarily in need of a Russian lawyer with my weekly meetings where we discuss any issues skill set and with fluent English. The combina- in the office and ensure that we all keep on tion of my skills from the Ministry of Foreign top of whatever designated tasks have been Affairs and the experience I gained working on assigned. I try not to be too bureaucratic but the joint venture gave me an advantage when I we certainly function efficiently as a result of moved to UFG. these schedules. Even if we outsource work, I try to go through all documents, even labor L: Do you happen to remember what the contracts and make sure that I am on top of all first project you took on board was when work that we have from both a legal perspecyou joined as General Counsel for UFG tive and my managerial tasks. Real Estate? L: How do you go about selecting your exDM: Yes, the first project I worked on was ternal counsel(s)? What is ‘a must’ in your the raising of a fund for the acquisition of a book in terms of what a law firm needs to company that owned a plot of land. We then have to work with you? subsequently developed the land in St Petersburg near Pulkovo Airport. This project was DM: You generally learn which firms specialpursued by UFG for almost 5 years and finally ize in certain sectors and use them to get the we entered into a joint venture with Hines. work done.You build good relationships with
“I handpick the lawyers we take on board.”
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SLOVAKIA Cechova&Partners Cechova&Partners successfully advises on one of the largest lease transactions in Slovakia in recent months Cechova&Partners represented Lenovo in a major real estate matter related to lease and operation of the premises of its shared service centre for EMEA region in the Digital Park office centre. It is one of the largest lease transactions in Slovakia in recent months.
Kinstellar Kinstellar advises on farm development in Slovakia Kinstellar advised Dan Slovakia Agrar (one of the leading farming companies in Slovakia) as borrower in connection with its EUR 10 million financing by Ceská exportní banka (Czech Export Bank, a Czech state-owned bank) for the purposes of financing a farm development and construction project in Slovakia.
The Private Practice Strip
Denis Martynov, Head of Legal Russia, UFG Real Estate
certain firms too over the years. We discuss and vestments agree on fixed fees with our external counsel. I would like also mention that from a legal L: How have the current economic condi- point of view we have probably the clearest title in our agro-project I have ever met. Most of tions impacted UFG Real Estate? our competitors declare that they have the land DM: We have been forced to change our strat- “under control” which means nothing under egy. In 2010 the market was growing and we Russian legislation. We have a full title, which expanded into other regions in Russia, but has been established through all the legal procenow, with the price of land falling, we are sell- dures required for agricultural land. ing certain of our property investments. It is not a good time regionally. We feel more com- L: What are the main legal challenges you fortable as a Fund to invest in existing real es- face; both now and foreseeably in the comtate projects. We have focused on the class “A” ing year or two? buildings in the center of Moscow, fully leased with long term lease agreements. In general, DM: Currently some legislation in place in finding “A” class properties in Moscow is very Russia is very complex and the lack of proper difficult. Most developers in Moscow do not databases in respect of property ownerships, meet the requirements for this class of build- etc., has allowed for fraud, hostile takeovers ings. and the like. That being said, there are changes taking place and amendments to laws and dataWhen we find these properties we acquire bases are being put in place which afford people them and proceed with improvements to make and legal entities more protection. Notarizing property management more effective and rent of documents is also a welcome change which rates reasonably higher. This is stable in our affords more protection and clarity in property related issues. mind and not too risky. We also have an agro-project in our first Fund. From an economic perspective, agro-projects are more risky as they are influenced by the weather, etc. Our strategy is to create a good product which will be attractive for further in-
place which allows tax discounts and returns. We have invested a lot in agro equipment (tractors, harvesters etc.) We also have a credit line opened in the biggest banks for this project. Under the programs which have been incorporated in Russia (Governmental decree #201 dated 10/03/2009) we will be fully refunded with interest under the existing credit lines if the harvest is damaged in case of the dry season, etc. L: Any words of wisdom/advice you would like to give to any lawyer thinking of moving in-house, specifically into the Real Estate sector?
DM: Be ready to be a manager and not simply a lawyer. You need to be involved in the business of the firm. Even if you have impeccable drafting skills, you need to be able to think broadly and understand the aims of the business at any time.You need to be able to advise and propose ways of dealing with business and need to be able to balance the needs of the business while pointing out and finding solutions to legal risks that crop up. You need to have good communication skills. This is where my experience in L: What if any governmental incentives/ the Ministry of Foreign Affairs comes in handy, programs to increase new development pro- I have learned not to say “no - something is too risky” by finding solutions and finding a way to jects in the region are noteworthy? work something out thus saying “yes”. DM: Russia has a new Agrobiz Program in
GCG’s Budaors General Counsel Coffee Club On the GC Grapevine’s editor, Orsolya Endrefi will be hosting the third edition of this exclusive gathering of top GCs in Hungary. In tune with our promise to create a GC community, these periodical meetings are meant to exchange ideas and best practices, discuss trends in the legal industry, and dissect recent regulatory developments. If you would like to learn more, please contact Beatrix Zentai: +36 20 458 7544 beatrix.zentai@legalisglobal.com
Ogeday Cuhadar, Division Manager Responsible For The Legal and Real Estate AffairsTurkey, Real Hypermarkets I would first need to point out what I see as the three criteria I would use to asses the efficiency of an in-house legal department: being right/ safe, being fast, and being cost-efficient. In light of that, with regards to the team, the key thing is to have it focus on these three criteria and not on other elements. I believe in being flexible with my team and developing a nice atmosphere. I aim to create an environment where people focus less on working hours and more on the value added to the company. Legal departments are strongly target-oriented, meaning the process is not as important as the final result. L:You have been with your company for over 12 years. Why don’t we start with a brief rundown of your career prior to working for Real Hypermarkets? OC: I started my legal apprenticeship inside the legal department of a Turkish Holding Company, mainly active on steel production and export. After finishing the internship, they invited me to stay as an in-house lawyer. Three years later I was appointed as in-house lawyer with Real Turkey. At that time, Real was a quite new Metro Group company with only 2 active stores in Ankara and Gantp. However, the management was planning to invigorate the business and they offered me the Head of Legal position in order to establish the legal department. That’s how my career within the company started.
“I aim to create an environment where people focus less on working hours and more on the value added to the company.”
L: What do you find to be the most challenging aspect of your current role? OC: Definitely, the most challenging aspect is being responsible for multi-disciplinary issues from law, project development, construction, feasibilities, design etc.
Indeed, a lawyer does not receive formal training in many of these directions but I truly believe that if you are able to manage something well, you can apply the same principles to any other functions. In any case, “we learned swimL:Why did you decide to work as an in-house ming by being thrown in the deep end of the lawyer as opposed to an external counsel? pool,” right? I guess I always just loved the challenge of simply finding myself in the water. OC: I have always been interested in both strategic decision-making and the management of Apart from this “intuitive” knowledge, one aslegal affairs. I like being responsible for the per- pect that has proven to be very important was formance of the company rather than focusing the corporate attitude, not only by allowing me/us to experiment, but also by offering us on specific cases. support through ongoing seminars and trainL: In light of that, would you share any of ing. In that sense, my supervisor was not only a manager for me but a mentor as well. your tips for managing a team?
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L: What do you look for when you choose what law firm(s) to work with? What do you dislike seeing from firms when you launch a call for proposals? OC: I like to work with real specialists on the topic at hand and try to find such personalities, for example one counsel for anti-trust issues, another one for real estate matters, etc. I do not feel confortable relying on giant law firms that argue they can do everything. L: How do you identify different competencies of each? In order to find the most suitable law firms I always trust my network rather than rankings from legal publications. The GC community is quite tight in Turkey and both connections and information flow easily. After 20 years in the legal industry I built a strong knowledge of the market in terms of who is best and how to find him. For example, if we know that a professional worked as a GC (hence has a business sense) in our industry (so has the specific knowledge) and now he is a partner, he would definitely be worth reaching out to. Finally, following the academic world is also very useful for this kind of input.
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“..we learned swimming by being thrown in the deep end of the pool, right? I guess I always just loved the challenge of simply finding myself The big urban transformation that Turkey is suffering from is also behind another innovain the water..” tive regulation. This new law considers the fol-
Kinstellar Kinstellar advises Czech Property Investments on Lozorno Logistic Park acquisition in Slovakia
Kinstellar advised Czech Property Investments (a leading Czech real estate group engaged in real property development, investment and management) as purchaser in connection with lowing possibility: someone owns a land; but the EUR 72.8 million acquisition of Lozorno L: What gets your blood flowing when you unfortunately the owner cannot invest on it, Logistic Park from AIRE in Slovakia. think of real estate? Why did you choose however, an investment company can do it, this focus? paying the owner back with one or two flats. Obviously, it will create a lot of opportunities Ružicka Csekes OC: I think the real estate sector brings real for development in the large cities. added value to the economy of countries and it Ružicka Csekes advises construchas a big leverage effect.
“[real estate] is a Furthermore, it is a platform where every platform where every stakeholder can earn serious money if the stakeholder can earn project is a right one and everybody wins: serious money if the the owner, the developer, the constructor, the buyer. What we are doing here changes project is a right one the world and brings a higher quality of life to and everybody wins: people, which I like most. the owner, the develL: On top of compliance, corporate matters, oper, the constructor, areas that GCs face within any company, real estate law is a crucial component to the buyer.”
being the Head of Legal for a hypermarket chain. What came first, did you develop a L: What do you foresee will be the largest passion for RE by working for such a com- regulatory challenges in the RE industry in the pany or did you chose the company knowing upcoming years in Turkey? it would also involve RE work? OC: The government is planning to increase OC: Honestly, at the beginning of working for the VAT rates in RE transactions; I think that Real Turkey, my passion was leading the legal may endanger the investments mainly in the affairs & compliance and managing the legal residence development part of the RE sector. risks in a right, quick and effective way. How- Of course, we make sure we provide that feedever, afterwards I realized that a multi-discipli- back to regulatory bodies. nary role focusing on RE was very attractive for me and the aggressive expansion plans of We do lobby and there are organizations that the company matched with my mindset. represent almost all of the stakeholders/major players (such as one representing the large L: There has been a lot of buzz in the mar- retail chains, the construction material develket over the new regulations and urban opers, residential developers, etc.). That is transformation policy of the government. the main reason we are taken seriously by the How will that impact your work? Turkish government.
tion consortium in tender process Ružicka Csekes in association with members of CMS has advised a consortium of three leading international and local construction companies in the tendering process for selecting the main contractor in an approximately EUR 900 million road tunnel in Northern Slovakia and an approximately EUR 450 million railway corridor in Bratislava.
The Private Practice Strip
example is the new regulation 2B.This regulation will be aimed to re-designate green areas which used to be, but are no longer, forest or fields as urban land. This will provide more land available for usage (highways, residential areas, etc) so there is definitely a lot of new potential for development.
Ružicka Csekes advises Honeywell on turbochargers plant development Ružicka Csekes in association with members of CMS advised Honeywell on its approximately EUR 40 million greenfield investment in Prešov. We supported Honeywell on several aspects of development of its new turbochargers plant in Eastern Slovakia, including those related to the investment incentives, state aid, public procurement and site acquisition.
OC: Definitely in a positive way, since they are facilitating the investments in RE. One
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moved to the real estate development industry and joined GLD Invest Group where I have been working for the last 6 years. I still find this business area very attractive for a lawyer to work in. L: Why did you choose to practice in-house? TM: As my career started in large multinational corporations, I have been always working in very different law areas: corporate, contractual, labor, competition law, etc. This makes my job interesting and unpredictable. I never know what I will be dealing with next week, which tasks and challenges I will face. Also, it stimulates me to develop professionally in many law and business areas, which makes my heart tick and gives me a feeling of satisfacL: Please tell us a bit about the path that tion. I love being aware of how a marketing campaign reaches its target, how to increase lead you to your current role. sales volumes and how to support the whole TM: I started my career in a very favorable process from a law perspective. This is why I place and atmosphere at Unilever, in their Kyiv find my job creative. office. I worked at the legal department of the company for four years, and, as a lawyer at the beginning of my career, it was a great place to learn. Additionally, I was exposed to the “western style” in terms of building relationships with coworkers, clients, suppliers, etc. I was lucky to work in a company with highly qualified professionals that were delivering fantastic results in business. I was also very happy to have contributed to its success as well. L: What are the main challenges of your role and how do you overcome them? After Unilever I moved from the capital to the east of Ukraine to work for Olvia Beta, a Turk- TM: The main challenge is having so much of ish production company. We produced deter- your work depend on other employees’ pergents and personal care products and I was in formance. When a law firm does work for charge of legal service for several companies its client, it is not liable for the client’s slips. with about 1000 employees. The company Working in-house makes you care and be rewas a success, with one of its brands - GALA sponsible for every detail, regardless how - developing such a large market share that small, starting from controlling on-time post Procter & Gamble was driven to purchase the sending, and ending up with top management company. approval. There is nobody to blame for the task not being done properly. In other words As a result of the acquisition I joined P&G, you cannot delegate the responsibility. At the where, after working for about two years, I same time, it requires a strong cross-functional found myself eager to move to a smaller com- understanding of the company you work in. pany to be closer to the core of business. I Sometimes you have to cover accounting,
“The main challenge is having so much of your work depend on other employees’ performance.”
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TURKEY Pekin&Bayar Pekin&Bayar Law Firm successfully represents a Turkish real estate investment company Pekin&Bayar Law Firm successfully represented a leading Turkish real estate investment company in its tax dispute over the stamp duty accrual in relation to a promise to sell agreement. The tax court decided in favour of the client and unjust tax accrual amount equals to TRY 1.3m was returned back to the client by the tax authority.
UKRAINE Avellum Avellum advises on establishment of a joint venture with a TOP-5 Ukrainian beer producer Avellum advised Oasis Group in connection to the establishment of a joint venture with Persha Pryvatna Brovarnya (First Private Brewery) (“PPB”), one of the leading beer producers in Ukraine. PPB is the fifth largest beer producer by sales volume in Ukraine. The Avellum Partners team was led by Mykola Stetsenko, Managing Partner.
Avellum advises on the USD887 million credit portfolio restructuring of Interpipe Avellum advised Interpipe in connection with the restructuring of its USD887 million credit portfolio. As part of the restructuring, the lenders provided the company with the additional funding in the amount of USD136 million. Interpipe is the leading producer of steel pipes in Eastern and Central Europe. Avellum Partners team was led by Partner Glib Bondar.
The Private Practice Strip
Tatiana Marussich, Head of Legal Ukraine, GLD Invest Group
marketing or even some engineering elements from the moment of the first contract on land in case you need it for a lawsuit or contract. leases to obtaining the occupancy permit for the newly constructed buildings. At the end of L: What would you recommend as a best prac- the day, when we can see the huge building that tice when taking up the role of a GC in a new we invested so much time and effort in, it is company? very rewarding. You feel that you have accomplished something truly meaningful. TM: I always try get acquainted with as many people as possible within shortest possible L: In 2009, investments in the real estate time across all business areas and levels. Peo- sector in Ukraine came to a halt. How is the ple are the main asset of the company as they market picking up now as far as you and make up the business in terms of culture and GLD Invest can see? performance. I need to understand this main force within an organization and how it func- TM: Ukraine is still in an unfavorable positions. At the same time, meeting the board of tion from the foreign (Western) investment directors and the shareholders is a crucial step perspective, which still keeps business develin my view, since they represent the core of the opment on halt to this day. Nevertheless, the company which determines the main strategies country has internal private financial sources. and internal climate. I have habit of looking Besides, the main players of Eastern Europe, through all available files, to study the business Asia and Middle East are able to invest even in as thoroughly as possible and also to get a feel- these hard times and a number of big real estate ing of the people who were working before me projects are being developed all over Ukraine. in this position. I try to focus on the latter to understand the building blocks that they used The Euro 2012 Football Championship was to be able to adapt my early strategies to be as a strong boost for the market with a number consistent as possible. of hotels and other facilities having been constructed over the last three years. On the other hand, the drop in prices of residential buildings stimulates their construction. Even office centers are being constructed and successfully rented out in Kyiv despite the crisis. Quality products will be always in demand, I believe.
“The Euro 2012 Football Championship was a strong boost for the market.”
L:Why did you choose the real estate industry? What gets your blood flowing when you think of this sector? TM: I was in FMCG companies for quite a long period, and I felt the need to make a drastic change. When I came across real estate I felt this was a business where the demanding minds would be able to search, study and win. I was completely right in my opinion in my decision to move to real estate. I am a person who follows the line of the biggest resistance, and this is what construction business is. A construction project, from planning to execution, can take years, with each project involving a huge number of files within each department of the company. As lawyers, we draft and execute hundreds of documents and visit lots of private and governmental organizations
“In construction permit planning was, and still is, a path that is not easy to navigate through.” L: What are, from your perspective, the main regulatory challenges in Ukraine that impact the industry? TM: Well, the regulatory topic is a painful issue in Ukraine. Nearly every businessman in Ukraine has faced such issues as tax payments and losses, and VAT refunds. In construction permit planning was and still is a path that is not easy to navigate through. The judicial system requires sufficient improvement. The process of land allotment is not perfect and legisla-
tion in regard to the land market has a number of gaps that need filling as soon as possible to attract investors and get the real estate sector out of crisis. The first instance that came to my mind in regard to land legislation is the issue of land categories and land purpose – these definitions bring lots of confusion in practice. According to the Land Code of Ukraine all lands in Ukraine are divided based into the following categories: (a) agricultural; (b) residential and public construction; (c) nature-conservation; (d) healthimproving; (e) recreation; (f) historical and cultural; (g) forestry; (h) water resources; (i) industry, transportation, communications, energy, defense, etc. In practice the land technical documentation stipulates a more specific and precise land purpose – i.e. “for the placement of a shopping center with offices and recreation facilities” – and often it is hard to determine in which formal category the land should be placed. This causes subsequent issues – determination of tax rates, correct use of the land, restrictions in use, etc. That is why I would suggest using more general land purpose definitions, but this is impossible due to other current legal requirements. Another example of the imperfection of the land legislation is the question of change of the land category and the land purpose. It is obvious that these should be two different procedures, and the change within one category should be simple. But instead, current laws provide only one general procedure which is used for both cases, which is very complicated, and time and money consuming. In practice it means that, for instance, if I have the land for the placement of a shop, I cannot place an Internet café there. Changing the land purpose is too difficult, and placing an Internet Café without obtaining a formal change of the land purpose will be considered a grave law violation, which can even lead to termination of the rental contract. That is why many entrepreneurs who own or rent land cannot use it now – due to the global economic crisis the previous plans cannot be realized, and other activities, which may be more realistic, now cannot be fulfilled.
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Effective Use Of Outside Counsel by David Dixon, Norton Rose The recipe for disaster was well mixed
joined via telephone by the Relationship Partner calling from London (who admittedly had a couple, well a few, drinks at a business function Ingredients: with clients--imagine that--lawyers actually • 1 off-duty General Counsel have other clients!). It was now 02:47 in the • 1 out-of-office Relationship Partner morning and the legal team on the ground was • 1 ad-hoc external team in full swing although the Relationship Partner • a pinch of chaos in London was already in bed as he had early • 1 overnight contract assignment meetings. He would not have a chance to look at the redraft but gave detailed instructions to The call from the client came in to the law firm the team before signing off for the night. It was at 18:31 on a Monday and was routed by the re- routine, alright? The redraft got to the client at ceptionist to a young associate who sometimes 11:04 the next morning. worked with the partner the client was trying to contact (that client’s relationship partner at The business development manager was dethe law firm had left that afternoon on a busi- lighted. The lawyers walked through walls to ness trip and was already over the Channel). “I get the contract done and he could close the need help now”, said the client’s business de- substantial order. While he was quite happy velopment director, “our General Counsel left with the revisions for which he asked, he unon holiday Friday and I need to close a big con- fortunately failed to notice that two material tract tomorrow. He said you guys’ are our law- commercial issues were not properly addressed yers and would help me finalize the contract.” in the contract in the line with the client’s in“No problem”, said the young associate, “who ternal policies (he also had a few drinks with here has been helping you on it?” “No one, its a customer the night before while the legal been sitting in the GC’s inbox for the last three team worked and was a bit bleary when he weeks and he left me an email over the week- quickly reviewed the contract in the morning). end to call you to get it done because he didn’t The Relationship Partner would certainly have have time to get to it. I was with customers all been on top of it normally but in the chaos of day and couldn’t call until now. The customer the overnight document production both iswhich wants to contract with us is really mad at sues were missed and the legal team on the the delay and said they will go elsewhere if we ground did not have the high tech experience don’t sign tomorrow.” and knowledge of the client’s needs to catch them. The customer did not fail to notice and The young associate thought “#~@”%&*!~#, decided it was happy to sign. The contract was like I don’t already have enough to do” but of- duly executed at 16:09. Drinks all around (and fered the client a more ladylike--and proper the lawyers sent their invoice)! service provider--verbal response, “please send it to me right away and we will get it done.” Two weeks later the Relationship Partner got She was dismayed when a rather routine (to the an irate call from the GC. “I need an immediRelationship Partner), but nevertheless eco- ate explanation for the disaster with the routine nomically significant, software development contract we signed two weeks ago while I was agreement showed up in her email inbox. She on holiday WITH YOUR ADVICE”. ”What do thought “I could write everything I know about you mean?” asked the partner. The GC fumed, this topic on the head of a pin and still have nearly shouting, “the delivery schedule is way room for the Bible.” She ran to a partner’s office too short--how could you miss that?--and we for help. She got it (the partner was a real estate never agree the broad scope of warranties that lawyer, however, but duty was calling). She and are in this contract AND, TO TOP IT OFF, you that partner, along with another more senior charged us three times what it normally cost us real estate associate, got to work and were later for similar contracts in the past. This is unac-
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ceptable. We are not paying and you can forget about future work!” (The business development manager got sacked and the GC got badly chewed out by the CEO, by the way.)
People don’t plan to fail they fail to plan Our lessons: 1. As in personal relationships, the key to a successful relationship between a GC and its legal advisors, i.e. effective use of outside counsel, is CLEAR AND TIMELY COMMUNICATION. It is incumbent on both Relationship Partners and GCs to talk with each other frequently even while not in the midst of a current transaction. For me, I generally go to my client, I don’t make my client come to me. If a client is large and busy enough to have in-house counsel you can be sure there are always issues, even important ones, in the GC’s inbox which are dropping through the cracks until they become emergencies. The best way to find out what is happening with a client is over a quick coffee in their office. The best way for a GC to keep the Relationship Partner up to speed on upcoming needs is with a little face time in the GC’s office (after all the GC is too busy to jump to the lawyer’s office for a routine chat--“and maybe he’ll even charge me for the time as well”). Phone calls just do not work as well because they are too easy to put off or they are less focussed when both parties are sitting in their own milieu and subject to distraction. Both the GC and the Relationship Partner have to make the time--for GCs this is called “business management”, for partners this is called “business development.” Our GC and Relationship Partner have obviously ignored this fundamental job requirement of each to the detriment of both. 2. GCs are notorious for having a “do it all” mentality; be aware of when to delegate. Had the GC been thoughtful, he would have
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realized that despite his instinct to do everything himself--that’s why they hired him in the first place, right?--there are many benefits to well-targeted delegation. Had he planned more carefully for his absence he would have told the business development manager to contact their outside counsel about the contract before the relatively mundane matter became an emergency. This is always difficult for GCs as the nature of the role is many faceted. Most GCs have corporate as well as legal responsibilities and they are pulled in many directions simultaneously. Just as GCs must school themselves to be aware and prepared to delegate, again, the timely contact by the Relationship Partner can provide a much needed point of reference to stimulate a GC to take a look at the inbox and prevent an emergency from developing.
ner accepted that a real estate partner would prepare a software development agreement. Even if such agreement is routine to a specialist, it is likely to be arcane to a lawyer without such experience. The Relationship Partner had to make a final review or ensure that a lawyer with the proper skill set did so. There was ample time for such a process and the Relationship Partner dropped the ball.
3. Relationship Partners must ensure that they are always prepared to address Relationships with GCs can be difficult. They client needs appropriately. DO NOT recognize or care that a partner has other clients. The GC only cares that the task The team on the ground was ad hoc and self at hand for him is done correctly.You can make assembled. Not a good thing, merely survival. excuses but do not expect the GC to really When I travel, I make sure that lawyers with “hear” them. Law firms are service providers, specializations that are necessary for my cli- not principals. That is the nature of the beast ents are alerted. Here, the Relationship Part- and that is the reason for the need to plan ahead
by Relationship Partners to make sure they and their team are appropriately positioned with both skills and manpower to serve their clients effectively. It does not happen by chance very often, it is a process. 4. Chaos is expensive. When two partners (one inebriated and at long distance) and two associates do the work of a single lawyer because of a client demand for a hugely accelerated process, it costs more. Get over it or plan better, GCs. Legal dost containment is one of the most important tasks of the modern GC. Planning and clear task engagement requirements are the stock in trade for keeping the process efficient. Whether work is instructed subject to individual engagement letters or a broader relationship letter, each task should be clearly defined in advance of the lawyers starting to work. This process brings discipline to the work and assures that the necessary legal skills are engaged. This is not a luxury but rather is the professional approach. When it is not followed the risk grows exponentially for the client and the lawyers. It seems “commonsense” but it is not common enough.
January 1, 2014 – An Important Date for the Czech Real Estate Sector By Hilary McDowell, CMS Cameron McKenna January 1, 2014 will be a landmark day in the evolution of real estate law in the Czech Republic, with the coming into force of the new Czech Civil Code (the “New Code”), which has been over 10 years in the making. Part of the re-codification of Czech civil law, the New Code aims to unify the current, rather fragmented, civil law into one collection of laws and bring about more freedom of contract. The introduction of the New Code will have a substantial affect on both individuals and businesses.
working in Western Europe and other CEE jurisdictions. Below are a few examples of the changes that will come into effect. Ownership of Land and Buildings
The most striking change is that ownership of land and appurtenant buildings will once again be unified (i.e. the buildings will be an accessory to the land). While there will be no automatic change of ownership on January 1, 2014, a mutual pre-emption right will automatically be given to both owners of land and any buildFor the real estate sector the New Code will ings constructed on it which will apply when introduce a number of new legal institutions the owner wishes to transfer the land or buildwhich will fill gaps often noticed by those ing to a third party. However, if a separate land
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plot has already been created for the land under a building or a land plot can be created without impairing the use of the land plot or the building, the pre-emption right will be granted to the owner of the building only. This merging of ownership has necessitated the introduction of what, in other jurisdictions, is called a building lease, under which an owner of land can grant to a third party the right to construct a structure on it. The building will be an accessory to the land and will not have a separate legal ownership title. Easements Easements will be split into two categories: “servitudes” (služebnosti) and “positive easements / covenants” (reálné bremeno). A servitude will, in addition to allowing an owner of real estate to grant a third party (in personam) or an owner from time to time of another real property (in rem) the right to do something on the land or to refrain from doing something on the land. This should enable the custodian banks of certain institutional investors to place a restriction on the sale of a property without consent registered on the title of real estate.
Under the new institution of positive covenant / easement an owner of real estate can be obliged to take a positive act in favour of a third party or the owner of another real property (e.g. repair a boundary fence). Protection for Good Faith Buyers The principle that a good faith buyer can rely on the information recorded in the Cadastral Register will be enshrined in the New Code so that ownership acquired from a registered owner cannot be challenged. While this is a positive step it should be noted that, as most institutional real estate is transacted by the transfer of shares in a special purpose vehicle, institutional buyers will not be entitled to this protection on a purchase and as good faith is not defined it is unclear whether simply having knowledge of a defect in the title chain will prevent a buyer from claiming it acted in good faith.
that has used real estate for a period of 20 years in good faith may apply to have its ownership registered and, unlike, ordinary prescription (rádné vydržení) the user does not need to have a reason to believe it was the legal owner during such period (i.e., having concluded an invalid purchase contract). Leases Real estate owners and tenants (with owner’s consent) may each apply to register a lease in the Cadastral Register thereby giving notice of its existence to a third party buyer. This is one of the many new rights which may be registered in the Cadastral Register proposed in the draft Cadastral Register Act, which is likely to also come into force on 1 January 2014.
The devil is in the detail and some provisions of the New Code will undoubtedly be interpreted differently by members of the legal profession, but as someone who has worked in the real esPrescription tate sector in the Czech Republic since 1997, The right to acquire ownership by prescrip- the creation of the New Code is a welcome step tion is also being extended to include a sec- in the right direction. ond category – extraordinary prescription (mimorádné vydržení) under which an entity
Does Hungary Really Need The ‘Payment Trustee’ In The Current Economic Environment? By Devald Katalin, Kinstellar Much has been written about the rules of the payment trustee regime introduced in Hungary in the October 2009 “Acceleration II” statute package framework. Therefore, on the assumption that those who are concerned about the role of the payment trustee are already familiar with the main rules of the regime, I do not wish to go into detail on the rules of it, and instead I will attempt to compare the intended objectives of the regime to practical experience.
tion of the chain and circle of debts accumulating in the construction industry (which at the time of enactment were estimated at roughly at HUF 500 billion (approximately EUR 1,700,000,000)). Second, it was proposed that the regime would to prevent the accumulation of further chain debts and consequential bankruptcy of a large number of typically small and medium sized enterprises, all in the aim of assisting in the recovery of the real estate sector.
The major arguments on the introduction of the payment trustee regime (for construction projects above the determined threshold) were twofold: First, that the regime would serve the national economy by facilitating the elimina-
These objectives were addressed in the new regime (in simple terms) by requiring the deposit of the contracted price or the milestone payments (in the case of a contract containing construction milestones) with a payment trus-
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Only some of the major practical concerns:
Legal provisions, instruments and structures for the protection and enforcement of payments (bank guarantees, letter of credits, escrow, independent engineer certificate, etc.) were already available before the introduction of the regime and were used extensively in domestic practice at least at the first level of construction projects having a value corresponding to the current threshold value of the regime, especially in bank-financed developments. This also indicates that the primary objective of the regime is the protection of those participants of the chain who are unable to use the ultimate security provided by the developer, and thus the payment trustee mechanism is a sort of guardianship for the protection of subcontractors on the second and further levels. In other words, the regime, at the cost of the developer, institutionalised and centralised the protection of these participants in a construction project.
- The regime is substantially different from international financing standards, causing delay or frustration of bank financing;
Developer (Employer): - Increased costs (fees of the payment trustee, the lack of interest on the deposited amount while interest is to paid on the same amount to lenders, the price of increased administration, the price of increased risk elements of lenders arising from the regime, the price of increased financing costs, and the administrative burden on the main contractor); - More complex, therefore slower project structuring (e.g., a relatively advanced level of the permitting drawings is necessary to establish whether the payment trustee must apply or not, which, in EPC projects, slows down the deal structuring, as financing must be adjusted.)
Gide Loyrette Nouel Gide Loyrette Nouel Kyiv advises Air Liquide on investment/acquisition project in Ukraine Gide Loyyrette Nouel Kyiv advised Air Liquide, a worldwide leader in production of gases, on a major investment project in Ukraine. The project included acquisition of the industrial gas facilities, construction of industrial gas production units for two major Ukrainian steel producers in south-eastern Ukraine; the deal also included financing by the EBRD.
Lenders:
Gide Loyrette Nouel Kyiv represents French banking group on loan agreement - Some elements of the system increase the risk litigation of lenders (releasing milestone remuneration to the deposit account as of milestone commencement, non- assignability of the forms of securities and money due to the employer) Main Contractor: - Costs of increased administrative burden and pre-financing of subcontractors
It is unreasonable to expect achieving the ultimate objective - the acceleration and boost of the sector – while registering a lack of sufficient number of construction projects. Instead of the mandatorily applicable institutionalised protection of the subcontractors at the cost of As enough time has passed since the introduc- the developers, it might be worth considering tion, we can assess whether the theory stood up less expensive but still efficient alternatives. to the test of practice. Several meaningful initiatives have been already proposed to the government. We are looking The ultimate question is whether potential forward to seeing the response to them. construction projects remain feasible with the additional costs and administrative burden put on the developers.
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UKRAINE
Gide Loyrette Nouel Kyiv successfully represented Natixis, a major French banking group, in litigation with a Ukrainian company, Atem, claiming for invalidation of a USD 28 mln loan agreement taken from Natixis. The case is one of the most important export finance litigations on the Ukrainian market with a positive outcome significant in order to reassure lenders for future export finance transactions involving Ukrainian companies.
Share your firm’s recent wins on the ‘Private Practice Strip’. Contact the editoral team at GCG@legalisglobal.com for more details.
The Private Practice Strip
tee on a deposit account as of the effective date of the contract, or as of the commencement of the respective milestone works (respectively), and by granting the payment trustee the exclusive right to dispose over the deposit account. The payment trustee effects the payment if the employer’s technical controller has issued the performance certificate for the relevant milestone, thereby guaranteeing the respective milestone payment of the main contractor. A further essential element of the regime is that it also protects payments to the subcontractors that are involved in the development at the second and further levels of the chain, by way of an online register of subcontractors. A registered subcontractor (at any level of the chain) may request the retention of a milestone payment to the (main) contractor to the extent of the performed and certified but unpaid works of the subcontractor, thereby ensuring that a system is established to secure payments at all levels of the construction project.
Significant Evolution Of The Real Estate Publicity System In Romania By Ioana Niculeasa and Irina Dimitriu, Nestor Nestor Diculescu Kingston Petersen ties relying in good faith on its provisions.
Under the “opposability” mechanism, the main idea governing real estate transfers was that the key role of the land book was only that of a “barometer” of the sale and purchase of real estate assets. In other words, parties to a real estate transfer would not fear that, absent registration in the land book, the ownership transfer would be invalidated; between the parties, a failure to observe the registration formalities was punished by not allowing the buyer to fully prevail As of the entry into force of the New Civil in any dispute with third parties (who could Code (NCC) on October 1, 2012, references not have been aware of the transaction unless to the land book tend to no longer be in lower they consulted the land book). case.The reason is that, following the legislative changes occurred in the middle of last year (by Under the New Civil Code, what was seen as enactment of the Romanian New Civil Code), the downside of the “opposability system” was the concept and spirit of the entire real estate covered by the enactment of the constitutive publicity system with which we have been fa- effect of the Land Book. As already mentioned, miliar for the past 20 years has changed. pursuant to this concept, a real estate related right is not deemed to have been validly transThe first major step taken in this direction was ferred or created until it is duly registered with to have a detailed legal description of the main the Land Book. One should, nevertheless, be Land Book rules and principles in the New Civ- aware that registration in the Land Book does il Code, which provides the basis for any type not offer protection for the transactions, in the of real estate transaction. sense that the parties are not exempted from executing a valid and legal transfer deed that This new legislation also sets forth one of the underlies the Land Book recording. most revolutionary concepts that Romanian civil law has set forth so far: The constitutive It is true, however, that the new constitutive effect of the Land Book. system could not be accurately implemented at once; thus the New Civil Code sets forth a To provide a better understanding of this con- transition period in which the real estate propcept, we emphasize that there has been a histor- erties in Romania will be duly identified by ical dispute between the so-called “constitutive land surveys, all in accordance with new, upeffects” of the Land Book (a traditional notion dated cadastral rules and techniques. that was enacted in the year 1938 and applicable mostly in Transylvania) – where no transfer Hence, a new cadastral process for property of ownership could be duly performed unless measurements and recordings began at the and until the transaction was recorded in the end of 2010 to identify and prepare real estate Land Book -- and the so-called “opposability properties for accurate implementation of the effects” which entail that Land Book recordings Land Book’s constitutive effects. are meant to ensure “public awareness” and a degree of confidence that Land Book registra- The most visible legal consequences of this revtions accurately reflect “reality”) for third par- olutionary concept are linked to the security
that it aims to bring investors by significantly simplifying the proof of ownership, which may be made by presenting an official and rapidly obtained Land Book certificate and does not require the presentation of all documentation pertaining to the chain of title of the relevant piece of property. This concept will also bring comfort and safety to the parties involved in real estate transactions (especially the buyers), who, by relying on specific legal provisions of the New Civil Code, could more rapidly and safely protect their current titles against flaws deriving from the title history of their properties, especially from claims of historic owners whose properties were seized by the communist political regime. Thus, by simply reviewing a land book certificate, an investor should theoretically find out everything he or she needs to know about the current and actual owner and not fear the irregularities in the chain of titles of the asset it buys. In conclusion, we may consider that the constitutive effect of the Land Book revives the good old principles that were applied in Romania almost eight decades ago and might bring a breath of legal fresh air to the real estate market.
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Draft Amendments To The Civil Code And Their Potential Impacts On The Real Estate Industry In The Russian Federation By Florian Schneider, Salans force being amended accordingly. There are several substantial proposed amendments to the Civil Code that will impact the real estate industry directly. These include the introduction of new rights of a bona fide mortgagee, of a new form of mortgage, of new encumbrances over real estate objects (personal usufruct (individuals’ benefit) and pecuniary benefit (similar to rent)), and new forms of limited property rights: (1) permanent landownership; (2) development right of land plots; (3) personal usufruct; (4) preferential acquisition of immovable property; (4) pecuniary benefit; and (5) limited title by the owner of a building to the land plot under such building. While the Civil Code of the Russian Federation has not undergone major revisions for more than 15 years, the amendments currently on the table are significant and, if approved, will improve the investment climate, including in the real estate industry, and economic life as a whole in Russia.
Other amendments represent the introduction of “neighbors’ rights” to a land plot and the prohibition on separate disposal of land and buildings on it, and vice versa. The Draft also makes notarization of real estate transactions mandatory.
The draft amendments to the Civil Code (“Draft”), effectively represent a reboot of Russia’s second-most important fundamental law after the Constitution, as they will affect a wide range of civil law institutions that are directly involved in the lives of Russian citizens and the business of Russian and foreign companies that is, almost all aspects of property relations in the country.
As we see, the proposed amendments to the Civil Code are what the Russian business community has been waiting for. If introduced, Russian Law will not only fill in legislative gaps, many of which influenced the real estate industry directly, but finally meet western standards and thus improve the investment climate and attract foreign investors. However, some provisions of the Draft are debatable, such as the mandatory notarization of transactions subject to state registration.
The adoption of the Draft will entail immediate amendments to six Federal codes and sixty Federal laws, and will significantly change the “rules of the game” on the Russian real estate market. The majority of the amendments were initially due to enter into force as of September 1, 2012, with certain provisions becoming effective upon official publication. However, it now seems that the Draft is likely to be moved to the autumn session, which generally starts on September 15, with the date of entry into
On the one hand, mandatory notarization of transactions subject to state registration, as provided for in art. 8.2(2) of the Draft, will protect the rights of the parties to a transaction, since notaries will have access to the Unified State Register of Real Estate Rights (EGRP). The notary will be able to check whether there are any restrictions or encumbrances registered in the EGRP and verify whether the seller is the rights holder for the property at the time the agreement is certified. In such a manner the
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rights of citizens and legal entities are additionally protected.
“As we see, the proposed amendments to the Civil Code are what the Russian business community has been waiting for.” On the other hand, mandatory notarization of real estate transactions will result in additional time and monetary expenses for participants in civil transactions. For example, it will create a need to obtain current extracts from EGRUL, without which notaries will not act. Furthermore, it is possible that the foreseen in the Draft requirement for notaries to verify the lawfulness of transactions they certify, may result in some transactions being rejected by notaries due to difficulties in determining precisely whether they conform with the law. Moreover, given its historical roots in the continental model, many of the innovations in the Draft, which are borrowed from English law, are not characteristic of the Russian legal system. Therefore, the subsequent “harmonious” application of the new legal institutions, long known to foreign investors on the international market, within the framework of Russia’s existing legal system, will be vital. The Russian Union of Industrialists and Entrepreneurs (RUIE) believes that only business people, who “test drive” the nation’s laws daily in their work, can say which amendments will truly improve business conditions and ensure fair competition, and which may worsen the investment climate, including in the real estate industry. The RUIE has prepared a package of revisions to the Draft, which will be the main subject of discussion in the second reading, which is likely to take place in autumn session of the Russian Federation State Duma.
Purchasing of Real Estate By Foreigners In Turkey Made Easier Amendments to Articles 35 And 36 Of Law 2644 By Murat Aygun, Pekin & Bayar will issue a decree that will include a list of the countries from which citizens will be entitled to purchase real estate within the borders of Turkey. In the process of determining which countries will be included, the Council will take into account the mutual relationships and the interests of Turkey.
der Article 28 of the same law will be subject to the approval of the Turkish General Staff or any commandership to be appointed by it. Teal estate acquisition in special security zones will be subject to the approval of the Governorship of the province in which such real estate is located.
With the amendments on Article 35, the total area of the real estate that can be purchased by a foreign real person and the real estate over which a restricted real right is established in favor of a foreign real person is also increased from 2.5% to 10% of the district’s total area subject to private ownership, and 30 hectares per person all over Turkey. The right of the Council of Ministers to double the 30 hectares limit is also reserved.
Similar principles shall apply where (a) the companies that are incorporated in Turkey either with a 50% or more foreign capital or in which the power to appoint or dismiss the persons who are empowered to manage the company is vested (“foreign investors”) directly or indirectly hold shares in another company in Turkey in a proportion of 50% or more; (b) the foreign investors directly or indirectly acquire 50% or more of the shares of a company with Turkish capital which owns real estate or (c) as a result of a share transfer, the foreign investors become holders of 50% or more of the shares in a company with foreign capital that owns real estate.
With the Law numbered 6302, Articles 35 and 36 of the Title Deed Law have been amended Amendments were also made to Article 36, which will enter into force in 3 months afsignificantly. ter publication of the Law numbered 6302. It Reciprocity, which was required under Arti- concerns the acquisition of real estate by legal cle 35 (regulating the conditions for a foreign entities incorporated in Turkey with a foreign real person who wishes to purchase real estate shareholding structure. Accordingly, compawithin the borders of the Republic of Turkey nies that are incorporated in Turkey and owned (“Turkey”)) is now abolished for certain coun- by foreign individuals, legal entities and certain tries. That is to say; Previously, if a real person international organizations established under wishes to buy a real estate, his/her country the laws of another jurisdiction shall be entiof citizenship had to allow a reciprocal right tled to acquire real estate or have restricted for citizens of Turkey to buy real estate there. real rights established in favor of them in TurHowever, with these amendments to Article key for their operations. Save for the provisions 35, there is no longer a requirement of reci- of Law on Prohibited Military Zones and the Security Zones Code, real estate acquisition procity for certain countries. by companies in prohibited military zones and In line with Article 35, the Council of Ministers military security zones and zones specified un-
On the other hand, if the foreign real persons and legal entities own less than 50% of a company that is incorporated in Turkey or do not have the power to appoint or dismiss the persons who are empowered to manage the same, then such companies with foreign capital incorporated in Turkey will be entitled to buy real estate or have restricted real rights established in favor of them in Turkey just like a legal entity which is completely Turkish and without the necessity to obtain any approval.
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Practical impact of the failure to effectively begin operation of the new register of real estate property in Ukraine By Sviatoslav Belei, Gide Loyrette Nouel As part of the proposed reform, various registers for real estate operated by different state bodies, including the Register of Encumbrances and Ownership of Buildings and Land were to be combined under one roof at the Ministry of Justice for the creation of a unified register of rights over real estate.
The Ukrainian real estate market is currently considered to be one of the most attractive for investment in the former CIS countries and Eastern Europe. The real estate sector in Ukraine possesses all types of premises for potential investment: residential, administrative (offices) and industrial, resorts, and historical heritage buildings. Moreover, despite political in-fighting, the country continues to develop its business environment, and as a result the real estate market is stable and moving ahead. However, the confident development of the market has not prompted the complete renewal of legislation required by the collapse of the Soviet Union. Therefore, to perform any type of legal operation with real estate (purchase, lease, pledge, etc.), owners of premises are still obliged to obtain a wide array of documents to register their ownership rights. Thus, it is not enough just to obtain the ownership rights for the premises; instead, owners have to undertake many more bureaucratic operations to register their ownership in order to fully enjoy their rights. Ukrainian authorities decided to make efforts to encourage investments into the country’s real estate sector and introduced specific legislation to simplify obtaining title over real estate, and in 2010-2011 Parliament passed certain legislative amendments related to reforming the real estate sector. Under the new legislation the process of obtaining title to real estate should be reduced by almost a half, both in terms of the time and documents required.
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The register of rights over buildings is, at the moment, entrusted to the so-called BTI, whose primarily role is to serve as the architectural controlling body in Ukraine. Unfortunately, this structure creates a situation where the transfer of ownership rights is regularly held hostage to architectural control issues, such as unapproved modifications to a building’s interior layout. The strict technical requirements also make the BTI particularly susceptible to corruption.
the creation of the new register has been postponed, certain legislative amendments that depend of the register being operational have already entered into force. Thus, although the Ministry of Justice database is not yet functional, BTI, the body previously responsible for the registration of lease agreements, is also not able to perform this function, as it is no longer officially responsible for the task, and because the databases it currently operates do not provide the means of such registration. Accordingly, as registration of leases remains a legal obligation, unregistered lease rights may be challenged. As a result, at the moment all leases over premises (except state and municipally owned premises which are regulated separately) could be terminated by court decision for failing to meet legal requirements. There is also a risk that, once the register is finally open for business, third parties may register first – effectively undermining any lease agreement signed by a current tenant. As a result, any tenant planning to make significant investments or improvements to leased property and tenants with long term leases should carefully follow developments on this issue and register their lease rights at the earliest possible opportunity as soon as the required registers begin functioning.
According to the legislation passed by Parliament, owners would be able to register their ownership rights in the Ministry of Justice with a simple document based on which the ownership rights for the premises were obtained (e.g., a purchase agreement, proof of inheritance etc.). As a result, BTI inspections and extracts will no longer be required. Moreover, owners will no longer required to present additional documents in order to sell or lease premises Finally, certain market participants fear a total (extracts, technical passports, etc.). collapse and “technical stoppage” of the real estate markets as authorities struggle to put in The reform legislation passed by Parliament place the practical implementation of the alshould have entered into force on January 1, ready adopted reform. Technical requirements 2012. However, the Ministry of Justice, which are significant (staff, computer programs and was to be entrusted with maintaining the re- clear internal procedures) and the Ministry of formed registers, has so far not implemented Justice has not yet provided these. Therefore the reform. The main reasons for the current there is a risk that the transfer of responsibilidelay are not political or legislative issues but ties for the registration of rights over real estate indeed technical: The Ministry was not able to to the Ministry of Justice on January 1, 2013 meet the terms to create a new unified register could be quite chaotic. of real estate. Due to the fact that the register was not functioning as of January 1, 2012, au- Overall, Ukraine has adopted positive changes thorities postponed the implementation of the to legislation in the real estate field. However reform until January 1, 2013. no serious attempt at implementation has been made so far. As a result, this uncertain situaNot only is the reform not functioning, but tion could be very dangerous for the real estate delays in its implementation have created new market in Ukraine. risks and issues for market players. Although
Next Edition’s Focus
-Banking-
In the next issue “On the GC Grapevine” will focus on the banking industry. Here are some ways you can get involved: The Grapevine pick: Recommend a general counsel to be featured as the “Grapevine pick’ (My) Word on the Grapevine: Reply, provide feedback and comments either to an article or to the “GC Grape vine” overall an we will publish them under the “(My) Word on the Grapevine” section Write to us at GCG@legalisglobal.com to with regards to either one of the two or simply to tell us how we could make this publication better. We are always happy to hear from our readers.
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We would like to thank those who contributed to this newsletter: Jan Lescinsky David Dixon Istvรกn Kocsa Hilary McDowell Andrรกs Sallay Devald Katalin Bogdan Blanaru Ioana Niculeasa Denis Martynov Irina Dimitriu Ogeday Cuhadar Florian Schneider Tatiana Marussich Murat Aygun Sviatoslav Belei If you would like to subscribe to the GC Grapevine please register at www.gcgrapevine.com