EXCLUSIVE: Improving the ‘investor community – legislative decision makers’ dialogue is still needed in Romania

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Interview with Bryan W. JARDINE, Managing Partner at Wolf Theiss Bucharest.

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10 years ago, Wolf Theiss entered Romania with the aim to establish itself as a leading law firm. Concretely, which are the achievements of the law company since its establishment here?

Wolf Theiss is a leading Austrian-based law firm, founded back in 1957 and currently numbering approximately 340 lawyers with offices in 13 countries throughout the CEE-SEE region. In Romania, we just celebrated our ten year anniversary with a high-profile event that brought together Wolf Theiss lawyers (both past and present) from Bucharest and Vienna, business partners, clients and colleagues from other leading local law firms (and whom we consider our respected “friendly competitors”).

When we opened the Bucharest office in 2005, the Wolf Theiss name was already well-known in Romania, given its excellent reputation as a leading law firm in the region. Indeed, the Firm had already been involved in certain local transactions, including advising Bank Austria (now part of the Unicredit group) on the acquisition of a majority shareholding in Banca Tiriac. It is notable that Wolf Theiss also represented Unicredit in the acquisition of the remaining shareholding from Mr.Tiriac earlier this year – thereby completing the full “circle” on this transaction over a 10 year period.

I was part of the team of lawyers who joined Wolf Theiss at the inception of the Bucharest office. We all had the advantage of having previously worked with other international law firms that already had activity here for many years. Thus, we understood those opportunities offered by the Romanian market and also what could be the potential future market trends. We knew even in 2005 that the Romanian market was poised to develop, just one year after the admission to NATO and two years prior to eventual EU Accession.

In the years following its opening, the Romanian office grew significantly in terms of our team and turnover. In 2008, when the crisis first hit the local market, we reacted by reducing the team and otherwise focusing on improving cost efficiencies. We were therefore able to remain profitable even in this most difficult period and to further grow the office though strategic hires, in order to keep up with the developing market and client demands.

With its focus on international business law, our Bucharest office is currently one of the largest in the Wolf Theiss network, with a team of over 30 local and international lawyers.

 

Wolf Theiss made its debut on the Romanian market having already a great experience in Austria, respectively in Central, Eastern and Southeastern Europe. But what are Wolf Theiss’ assets on a so competitive market?

As noted, with more than 340 lawyers across our 13 fully-integrated offices, Wolf Theiss has one of the largest and most experienced teams in Central and South-Eastern Europe. As for Romania, the Wolf Theiss regional network of offices was and is uniquely positioned to service the local market and its future anticipated growth and change.

A key asset for us is that Wolf Theiss can leverage attorney knowledge gained through more than 50 years of legal assistance to international market players. Our expertise is spread across our local offices, including Romania. Also, through our activities, the Wolf Theiss offices have developed a very solid regional and local network of contacts and know-how and we are thus able to facilitate new commercial opportunities for our clients and business partners.

We communicate regularly with our clients, preparing a number of key industry and sector guides that give an overview of the regulatory and legal systems in each of the countries where we provide services. Wolf Theiss is also actively involved in the renewable energy sector in Romania and is annually publishing a legislative guide for electricity from renewable energy sources in Central Eastern and South Eastern Europe, which guide that can be accessed freely from our website.

 

How did the Vienna–based company saw the domestic market at the beginning, how it is now and what prospects you see for the future, in terms of experience, professional training, but also in terms of human resources? Have you noticed any changes in all these years?

The market has indeed been subject to major changes since Wolf Theiss entered Romania. In 2005 Romania was an extremely interesting market for foreign investors as it was a market in full growth mode. In addition, there were not as many international professionals and competitors present in the local market at that time. Since then, the market has matured and is more complex. Moreover, there are many more capable and experienced transactional lawyers working in Romania, which increases competitive pressures.

In response to these market changes in Romania and the region, Wolf Theiss has developed the Wolf Theiss School of Excellence, which focuses on training our lawyers to remain abreast of the key developments and changes in our markets. This can include training on purely legal developments and best practices, but also highlights business related aspects, client management and negotiation approaches.

Wolf Theiss covers many general practice areas from Banking & Finance, Competition & Antitrust, Corporate/Mergers & Acquisitions, Regulatory, Dispute Resolution, Labor and Employment, Real Estate and Projects, IP/IT and Procurement, among others.

 

What are the areas most demanding here, in Romania? How would you characterize the Romanian legislative domain?

Currently there is significant demand for corporate M&A, banking and finance (including the buying and selling of non-performing loan -NPL- portfolios), restructuring, compliance and dispute resolution. Real estate is also becoming more active, following the post-crisis downturn. Our Bucharest office has competitive teams in all of these legal practice areas and we search to continue developing our expertise.

As for the local legislative domain, I remember that in my early days in Romania, I was often struck by the view of most lawyers: they considered whatever law not allowing something, must be prohibited. In contrast, the U.S. approach is always that unless the law specifically forbids something, it can be construed as generally allowed. This U.S. approach is more “solution-oriented” vs. “problem-oriented”.

A second difference that I see is that the common law is much more organic and flexible. The law develops and adapts as the courts interpret and construe their application to real life cases and these interpretations themselves become legally binding on future courts. In contrast, in a civil law jurisdiction like Romania, the court decisions while perhaps useful, are not necessarily legally binding and do not create mandatory judicial precedent for future cases. Laws can only be adapted through parliamentary decision or government ordinance. I see this system as therefore being generally more rigid and slower to adapt to swift market changes and legal developments in certain areas.

Finally, investors frequently voice concern over the unstable and frequently changing legislation in Romania. This trend, coupled with the tendency of Romania to introduce key legislation through government ordinance rather than through proper Parliamentary process, with informed public debate, dissuades investors from entering the market.

 

Which of the areas have brought you most satisfying results, professionally speaking?

One of the advantages of working as a lawyer in an emerging market like Romania is that you tend to be more of a generalist. In the U.S., lawyers typically have very specialized and focused areas of practice – for example, you are not just a lawyer, or even a real estate lawyer, but a real estate lawyer who handles only tenant eviction (unlawful detainer) cases for commercial landlords. I find this to be constraining.

In contrast, when I came to Romania I found myself working on different transactions in many different areas – including energy, telecomm, FMCG and media. You learn about these businesses and meet different types of people from different industry backgrounds. This keeps the practice interesting for me.  My practice has developed over the years given my experience, contacts and knowledge in relation to the CEE/SEE markets and Romania in particular. Currently, I have a fairly diverse practice – primarily focused on corporate M&A in regulated industry sectors.  Interestingly, I am also still involved in advising clients on a number of litigation matters we have pending in Romania, although I don’t advocate in court here.

 

How would you shape the profile of your client in Romania?

Given the fact that we mainly work with foreign clients who have established or intend to establish business in Romania, it is quite difficult to shape a profile. Wolf Theiss has had clients from almost every continent, clients with different cultural backgrounds and even different business backgrounds shaped by the country from which they have come.

Where we do offer input is in managing client expectations – making them understand that how a particular matter or legal issue may be handled in the US, UK or other jurisdiction is not how this same issue may be handled in Romania. Sometimes it is difficult for clients to understand why certain matters tend to take longer or be more complex in a general more bureaucratic Romanian legal and business environment.

 

After a decade, Wolf Theiss has also an ascending path financially speaking. How the results show after the first half of 2015?

Our revenues in 2015 consider to be strong and stable, essentially aligned with the revenues achieved in 2013 and 2014.

What is notable is that we are achieving these turnover numbers with fewer lawyers – focusing on quality rather than quantity of headcount and this has resulted in a leaner, more efficient and profitable Romanian practice, with improved margins and attorney utilization.

 

In your opinion as foreign investor, what local authorities should make to open more its doors to domestic business environment? 

As noted above, the lack of legislative stability is often cited by investors as a key concern when investing in Romania. We saw this in practice with the dramatic changes to the subsidy scheme for promoting renewable energy projects in Romania at the end of 2013.

These changes resulted in a significant negative impact on the renewables sector in Romania and reinforced the negative perception of Romania as a country with an unstable and random legislative environment. There must be improved the dialogue between the investor community and the legislative decision makers in Romania.

 

What are Wolf Theiss plans for the next 10 years on the domestic market?

Over the next 10 years we aim to increase our visibility in Romania and to be consistently acknowledged as among the Top 5 law firms in the local legal market. We intend to act on the most significant deals on the market and thereby add value to our clients.

Finally, we aim to be perceived as a great employer with a strong culture where people enjoy a pleasant and rewarding working environment.

 

What is your message to potential foreign law companies seeking to enter Romania?

I think it would be more challenging to start the office from scratch now in 2015 than in 2005. The legal market has changed significantly in the last 10 years.  It is more competitive with many more experienced lawyers and law firms active in this market.

At the same time, client expectations in terms of work deliverables and fees have also changed. There is more expectation that law firms will provide quality work but at prices that the client can dictate more directly. There is increasing expectation from clients that lawyers work within their designated budgets for a particular project and without regard to the traditional fee metric of the billable hour.

This has resulted in many law firms getting caught in a “race to the bottom” on the fees in order to get the work. The problem with this approach is of course the old adage – “you get what you pay for”.  Essentially, you cannot buy a Mercedes for the price of a Dacia, and yet this seems to be the expectation of certain clients in today’s market in relation to the expectation of legal services contrasted with the price they are prepared to pay for these services.

The best way to address this disconnect is for a law firm to differentiate itself. Wolf Theiss is able to do this in several ways. First, we have a very strong regional network of fully integrated offices, which allows us to offer seamless, cross-border service to large regional investors.

Second, we focus our work across dedicated practice groups, so our lawyers within each practice group have shared experience and capabilities, whether they sit in Vienna, Bucharest or Belgrade.

Finally, we also have organized industry groups so rather than just understanding the legal issues, our lawyers strive to understand our client’s specific business and industry concerns.

This approach is critical for Wolf Theiss to differentiate itself from many competitors and to try and avoid the “lowest bidder” fee trap.

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