Pandemic Proves law can Work Digitally

Erika Papp, managing partner of CMS Budapest.

BBJ: How has the COVID-19 crisis impacted the Hungarian legal market?

Erika Papp: It has had a very severe impact. First, because there are smaller law firms who have been hit from an IT point of view. Some did not have the equipment to send home colleagues. It was an IT challenge for us as well because we are a large organization, but our lawyers already work from home regularly and we could easily ensure that our business development, finance and IT teams could also do so. For some of the business support functions it was more difficult, for example the secretaries or reception, but we managed to overcome that in a couple of days’ time. I have heard stories that it has been a major IT challenge for smaller firms, and we even managed to secure new assignments due to this. Even more severe has been the business impact. A lot of transactions were suspended, though they are slowly restarting.

The ordinary courts have been suspended here for a while. Arbitration courts, depending on what technology they have, do continue to work in a distanced, virtual way. There will be a back log as a result. Litigation teams are trying to work out what they can do to help the process now, filing motions etc. But no face-to-face court hearings have been held since the state of emergency was declared, and the summer recesses will be due at some point between the second half of June and August 20.

BBJ: Has it created any particular opportunities or challenges for you?

EP: Well, there has been a tsunami of new legislation: the mortarium on loans, lending programs, national bonds; corporate and competition lawyers have been very busy with the new government support programs.

Of course, everyone is working from home, and there are some challenges there which are the same for everyone. Some colleagues love the office environment and simply prefer to work together in teams of two or three. We now see a certain desperation among some of our male colleagues – with young children at home – who are desperate to get back to the office!

BBJ: When do you think Hungary’s economy might recover? Do you have any insight into how a “return to work” will be planned?

EP: We are monitoring the situation on a daily basis, but we are talking about a long game, at least until a vaccine is found against the virus. Once we find that, I think we will be OK. The question is how long will it take? If it is six-nine months, I think the economy will recover quite quickly. If it is any longer, I think it will be much harder. We are a corporate law firm so what we are doing follows what the economy is doing. Hungarian businesses, as opposed to the multinationals, tend to be small and are therefore prone to running out of money. I think there will be a lot of bankruptcies if we cannot recover soon. I have heard the government is preparing emergency legislation on bankruptcy and insolvency, because it has to have a “Plan B.”

But I have some optimism. Talking to clients, the banks are sitting on a lot of money; there is no systemic financial risk. We have a reasonable pipeline of transactions; as long as clients are able to convince banks, they will continue lending.

BBJ: When do expect your business to return to “normal”, and what might that “normal” look like?

EP: Starting from a profitability and business-to-business point of view, our utilization levels are much better than other offices in the region. That is because our office is larger and has a mix of large-scale transactions and day-to-day bread and butter corporate maintenance: HR issues, IT issues, small day to day work that never stopped and kept us going, though that will inevitably slow in the summer.

From an organizational point of view, I think we have already seen that we will never go back in a lot of ways, because people are scared and do not want get back to office. We have to build up a very safe environment for at least a year to a year-and-a-half until a vaccine is found. That may mean working in smaller teams, for example, for the whole summer, or working in staggered shifts. Like several other companies, we will return to the office in June; however, that will be in rotation and with implementing strict hygiene and other rules to keep ourselves and our colleagues safe. I believe we will have to have this system in place for a longer period of time.

If the virus comes back in the autumn, we may have to send people home again. But the new digital world is working really well. We can work more from home in the future, so we may never be back as it was with everyone in the office all the time. That is harder from a team building perspective. We can work from home, but it is not the same when you do not meet, do not exchange ideas, there no brain storming.

BBJ: How have your clients reacted? Was there a call to stop projects, or a demand for more help? What have been the most common concerns?

EP: Digitalization has been the big thing. If you have a team doing technical law, you are being asked to speed up these projects. There are other examples; for instance, our real estate team has completed a major transaction during the lockdown in a completely digital manner, they have not met the client at all, and meetings, negotiations took place online.

BBJ: Have there been any key issues highlighted by the crisis?

EP: Sorting out documentation issues, signatures, notarized contracts. It is all rather difficult at times like this! Clients want simple documents and forms, less should be notarized or read out aloud in front of witnesses than is the case now. Hungary is rather bureaucratic in this regard; so much has to be done before a notary public, but does it really need to be?

BBJ: What will be the most important legal and business tasks for helping the markets reopen?

EP: I think the government has done a pretty good job. When new legislation is made in a hurry and in very difficult circumstances, you can always find weak spots, issues that need fixing if you want to. The important thing then in to bring in new legislation. Employment support, for example, was not being delivered as widely as the government would have hoped. The government understood this and changed the law.

I think new insolvency legislation will be required or there will be a wave of insolvencies and bankruptcies. We have started a program regionally called Recovery & Rebound that focuses on businesses returning and key issues our clients may face in the next months or so. Besides this, we have been continuously training our people – this is nothing new at CMS – and are currently running training on restructuring and insolvency not only for our banking professionals.

BBJ: What do you think will be the lasting impacts?

EP: How we go about law will change in the short-term, whatever else changes, at least for the next one, one-and-a-half years. We [at CMS] are lucky because all this day to day work has helped keep us afloat. I think we are going to see a lot more digital application of law in the future.