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Looking In: Markus Perkams and Alex Hogarth of Addleshaw Goddard

Looking In: Markus Perkams and Alex Hogarth of Addleshaw Goddard

Issue 11.3
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In our Looking In series, we talk to Partners from outside CEE who are keeping an eye on the region (and often pop up in our deal ticker) to learn how they perceive CEE markets and their evolution. For this issue, we sat down with Addleshaw Goddard Partners Markus Perkams from Frankfurt and Alex Hogarth from London.

CEELM: What was your first interaction with the CEE region?

Perkams: My father’s family comes from the Baltics. My mom studied CEE history, and we traveled a lot in the East as tourists, even losing our passports there once! Work-wise, as a young Associate, I worked on a big international arbitration in the gas sector with a state-owned entity as the defendant, which was a departure from the everyday disputes for a German commercial lawyer. To this day, I still focus on disputes – state court and arbitration/investment treaties.

Hogarth: I had the pleasure of traveling across a significant part of the region as a student many years ago and studying the politics of CEE as part of my master’s degree in international relations. My first interaction from a work perspective came as a trainee in 2010 working on high-profile litigation in England over the ownership of CEE-based natural resources. Since that time, I’ve worked regularly on CEE-related disputes, be that for non-CEE clients with cross-border elements into the region or, increasingly, working for CEE clients on cross-border disputes outside the region. We co-counsel regularly with CEE firms, including, for example, on reciprocal enforcement of judgments, and very much enjoy doing so and learning more about the region as we go. As co-head of our Airports & Aviation Group, we’re also doing a lot of work with CEE-based airlines which continue to go from strength to strength despite challenging sector conditions.

CEELM: As for the current pipeline, what has been keeping you busy in the last 12 months?

Perkams: The first is Ukraine-related work, focusing on how Russia can be brought to justice for the harm done to Ukrainian businesses, mainly by way of claims based on the Ukraine-Russia Bilateral Investment Treaty.  This obviously involves questions of third-party funding and enforcement scenarios in the future.

It’s also important to note that it’s not just about Russia but also about rebuilding the country and bringing in FDI to ensure that the money needed is there, as well as advising on protecting those investments – the best disputes advice is on the prevention of disputes.

Second, ordinary commercial disputes in the regions have been developing similarly to Western jurisdictions over the last 4-5 years, particularly disputes in the automotive and energy sectors in terms of the ongoing transitions – e-cars and climate change more generally. The German automotive industry is strong in the region, and many suppliers in CEE face the same set of problems (either as subsidiaries or suppliers).

Hogarth: The region suffers from the same market challenges faced by the rest of the global economy, including high interest rates, inflation, and, of course, the political and economic uncertainty caused by the Russian invasion of Ukraine. That said, CEE businesses have continued to invest and grow. At the same time, CEE states have continued to incentivize FDI, in particular from the Middle East into domestic infrastructure projects and assets (e.g., airports). It may be depressing for some to read, but with business-related uncertainty come disputes. In particular, in the last 12 months, we’ve been kept busy on supply chain, technology and licensing, and M&A and joint venture disputes.

CEELM: How has London’s role in CEE evolved over time, and what is it now?

Hogarth: We’re lucky that a significant number of contracts for CEE businesses are governed by English law and subject to the jurisdiction of English Courts. As a result, London firms remain busy in the region. As much as we might want to, we cannot ignore Brexit. The benefits of resolving disputes in England remain, but how Brexit ultimately impacts the enforcement of English judgments abroad, and the speed at which that can be done, will be an important factor in London maintaining its prized position as one of the go-to global disputes centers.

Perkams: There’s a difference between the economic outlook and the legal perspective. In many jurisdictions, the German economy is still the biggest investor and will continue to be for a long time, despite Asian investors coming in. The more international the region becomes, the more opportunities there will be for the German industry as well. CEE is very important not just as an export market but also as a place of production.

The CEE workforce is still very skilled, making it easy for German companies to set up shop there or pick up plants and benefit from the workforce and take advantage of some of the strategic aspects of the region. It is a region that is politically stable and safe – a firmly established part of the EU – all of which is very good for the German economy, which will continue to play a critical role in the region, in particular now as supply chains are brought back closer to Germany.

Also, German law has played a significant role in the modernization of local law, obviously benefiting the German economy. In the ’90s, we saw a lot of German firms going into the region. Now, the legal market is consolidating, many firms are moving out, the quality of local lawyers has grown considerably, and many regional firms have established themselves in solid positions. It’s essential for us to cooperate with them, and there’s no longer a big market that only belongs to international players.

The advantages of a post-Brexit reality to commercialize German courts are not really materializing; there are always language barriers – English is the language of finance, and people are still used to using English law templates. I don’t think German law will be in a position to challenge English law any time soon, though because German businesses investing in the region tend to prefer German law as the applicable law and German courts to handle disputes, German law will always play a certain role in the market.

CEELM: What is your perspective on internationals in CEE – how will their presence evolve?

Perkams: The market is by now quite consolidated. Those already there will likely continue to be, but I would be surprised by new firms opening up offices. The markets are comparatively small, and you have a high degree of quality. You also have a lot of partner-levels by now who are foreign-trained and educated on the ground. In my opinion, the firms present will stay, but I’d be surprised to see many new investments.

Hogarth: I agree with Markus. I think it would be a bold move for an international firm without an established presence in the CEE to set up in the region. Competing against the strength and quality of the established CEE firms seems risky with little realization of upside in the medium term. Much more likely we’ll see further consolidation and expansion of local CEE firms both within the region and beyond.

Perkams: We see local/regional firms as partners. We give them work concerning Western companies and get work back from them. This is a trend we currently see growing despite troubling times. Also, there’s no real need for locals to tie up anymore and give up their competitive advantage to actively seek merger opportunities.

CEELM: Where do you see the most activity in the next 12 months?

Hogarth: The expectation from CEE-based businesses and law firms is that there will be an uptick in activity as the economic headwinds of recent years begin to subside.  I think Hungary will continue to perform well economically. Its mix of strong-performing domestic-based companies alongside the potential for further and significant FDI should mean it remains a buoyant market. From a sector perspective, across the region, infrastructure and energy will no doubt continue to be a source of investment and growth as will the technology sector in which the region continues to be market-leading in a number of respects.

Perkams: My thinking is very much the same. Beyond focusing on Ukraine for the reasons already mentioned, I expect that the Czech Republic will keep us busy because there are many German investors there, and they see many of the same challenges as in Germany. I would be surprised not to see a surge in disputes there as a result. I’d also keep an eye on Poland – the new government has led to a renewed interest. It’s one of the largest economies in the region and is quite keen on renewables.

This article was originally published in Issue 11.3 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.