We interviewed the managing partners from four local law firms that have recently won awards for their outstanding performance. They told us their secrets for success, and assessed current market trends.
Law firms can win many different kinds of prizes, but the Chambers Europe awards are considered particularly prestigious. Chambers’ 150-person independent research team evaluates the cream of the crop of the European legal services market, applying stringent criteria. DLA Piper triumphed in that competitive environment, winning the International Law Firm of the Year for Hungary. “Our firm was short-listed for four years in a row for the award, our efforts bore fruit at last,” says Dr. András Posztl, country managing partner. He admits that success goes hand-in-hand with being on stand-by mode around the clock. “We have been full of great projects in the past five or six years, but 2015 turned out to be the busiest year since 2007.”
Dynamism has been apparent on all fronts, but transactions and cross-border arbitration cases received special emphasis. In the energy segment, the government’s pro-active economic policy has been responsible for a lot of transactions where DLA Piper was involved. But the financial sector did not remain immune to state intervention, either. The sale of MKB gave an opportunity for DLA to deliver its expertise, together with JP Morgan.
Positive trends affected all areas of business. “Investor activity has been exceptionally high even in the food sector. One of the biggest stories was the purchase by the second largest player in the global frozen food sector of Fornetti, a Hungarian brand, and DLA made the deal happen from the legal perspective,” Posztl says. After such a busy period it is far from surprising that revenues jumped by 30% from the previous year’s figures. “Around 20% of our turnover stems from the public sector, however, growth was hardly an issue there. This shows that it is the private sector fueling growth,” DLAʼs country managing partner adds.
The firm has long since got used to hastily changed laws in the country. What keeps the legal community excited now is rather the upcoming comprehensive amendment of the Civil Code. “Although market expectations were higher, with more comprehensive changes to the regulation of collaterals and more clarity on what corporate rules are cogent, the very recent draft is less ambitious. It amends certain rules on security interest (pledges). By re-introducing the independent mortgage, clarifying the provisions on the appointment of the security agent, the sub-mortgage and cash and securities deposit, it aims to reflect market feedback and it further facilitates the operation of the financial sector. However, compared to earlier expectations, it does not bring changes with respect to the collateral registry. A comprehensive amendment requires thorough discussions, but when that amendment does happen, it is bound to help investors,” Posztl says.
CMS is doing more than fine nowadays, not least thanks to two key awards the firm pocketed recently. Chambers Europe named CMS “Law Firm of the Year 2016 in CEE”, which clearly reflects its pre-eminence in the region. CMS also came out on top in the Central Eastern Europe category of the Legal500 ranking, as it was ranked as a top-tier firm in 30 practice areas.
“We are very delighted about these recognitions,” says managing partner Dr. Gabriella Ormai. “It is even more pleasant that one of our colleagues from the Budapest office, Dóra Petrányi, has been charged with managing the operations of CMS in the whole region.” This latter move is another sign that expertise is abundant at the Budapest headquarters, which has been sought after in several key areas by a growing number of clients.
“The volume of work has been spectacular, especially in the banking sector where portfolio transfers took place in high numbers,” Ormai explains. That phenomenon was greatly facilitated by a legal change that now allows the transfer of several types of products in one go without requiring client approval, only a National Bank of Hungary permit.
Certain departments such as those dealing with competition law, employment, and public procurement have continued to operate at the highest possible capacity. But others are picking up as well. “Since the property market is recovering, our property lawyers are kept busy at last. It helps that less money has been flowing to Poland, from which the country can profit,” Ormai says. Positive macroeconomic developments are finally trickling down to affect daily business.
On the legal change front, companies should prepare for more stringent regulation in the field of data protection. “This, in fact, has an effect on the EU level and it concerns personal data processing,” Ormai highlights. Related rules have always been complex, but now it has reached a whole new level. “What entities need to watch out for is that they can expect heavier fines in the case of violating the rules. Fines will not reach the heights normally applied by the Competition Authority, but they will increase substantially. It will be well worth observing the new regulations.”
Kinstellarʼs recent “Law Firm of the Year Central Europe Award” from the magazine The Lawyer is another indication that the regional player is on the right track. Managing partner Dr. Csilla Andrékó is more than pleased that the firm’s efforts have been recognized. “We take great pride in finishing first in the entire region. We are thus also assured that we are a major player,” she says.
Accordingly, everyday business is great: High-profile cases are being handled one after another. The previous year featured the refinancing of Budapest Airport, among many other matters, where Kinstellar acted as the legal representative of the senior creditors. “The energy sector was equally strong. Our role in relation to the transfer of E.ONʼs gas customer portfolio must definitely be highlighted here,” Andrékó says. A lot has been going on lately in terms of competition law. Since many banks were concerned by anti-trust proceedings, Kinstellarʼs legal competence came in handy.
Economic growth clearly also has an impact on revenues. “Our focus has always been on bigger transactions, and now their number has grown substantially. This dynamism applies to segments that were dead until two years ago, such as real estate, for instance, where there has been a spectacular surge,” Andrékó explains. “In that area, in particular, finance is on the rise too. More importantly, it’s no longer about refinancing old loans, but rather fresh money is seeking its place vehemently.” The only bottleneck is that really good projects are few and far between out there, and many transactions are generated by the state.
As far as upcoming key legal amendments are concerned, businesses should mark July 1 in their calendar. That is when a set of rules of the Hungarian Civil Code will hopefully change, more specifically in relation to securities. “Several provisions which were crucial in larger financing transactions were difficult to interpret correctly because they were ambiguously drafted or could not serve their purpose. Collaterals are of huge importance to creditors, so we are scheduling some of our finance deals to close after the new amendments take effect on July 1,” Andrékó says.
“This is crucial validation for us, since it completely justifies our decision to transition our team to Dentons last year,” István Réczicza, Managing Partner at Réczicza Dentons Europe LLP, commented on the significance of the freshly received National Law Firm of the Year Award from the International Financial Law Review (IFLR). Réczicza joined Dentons, together with a group of approximately 40 lawyers, in 2015 and evidently their efforts at their new firm have paid off. “We applied for the IFLR awards with matters where both teams worked together. So the newly built team functions seamlessly,” Réczicza adds.
The IFLR award exists to recognize the most innovative law firms and deals in Europe, and the recognition of Dentons in 2016 can largely be attributed to the Budapest office’s scope of activity covering major cross-border transactions in Hungary and elsewhere in the CEE/SEE region.
Key areas of specialization feature regulated industries such as energy and telecommunications. “These areas have always belonged to our core business, and we maintain a leading role here,” Réczicza notes.
As to Hungarian market developments, the revival of real estate is surely a factor to keep in mind. “There is immense interest on the part of both domestic and foreign players out there. The volume of financing and the number of transactions in the property market is far greater compared to what was going on three years ago.” Réczicza confirms that the state has been economically active in certain industries, but he believes it shouldn’t necessarily be perceived negatively. On the contrary, in many cases government intervention has changed things for the better.
Business law is about change in some important areas, he says. The revision of the attorneys’ act and the act on civil procedures are the two developments most closely watched by practicing lawyers. The latter will be completely restructured. “Data protection will be a big issue also, but not only on a national level. The relevant legal changes will substantially affect data transfers between Europe and the United States as well, which will influence the daily business of multinational companies,” Réczicza predicts.