Agriculture, Direct Speech, Funds, Latvia, Legislation, Markets and Companies, Ukraine, USA
International Internet Magazine. Baltic States news & analytics
Thursday, 25.04.2024, 17:39
Even the FBI and the U.S. Attorney General have shown interest in the violation of Latvian entrepreneurs’ rights in Ukraine
Based on your experience — is the number
of entrepreneurs who seek your help due to having run into problems abroad
increasing or decreasing?
If we
compare the situation to ten years ago, then the number of cases where
professional legal advice is required is decreasing. The explanation could be
that our entrepreneurs have become smarter and do not begin operations abroad
based on emotion alone — to just invest free assets. Nowadays, the
majority of entrepreneurs prepare ahead of time, study the potential market,
the competition and possible partners, they plan out their business activities
in greater detail. Likewise, much more focus is placed on various legal
aspects. For example, if the plan is to create a joint venture, then prior to
starting cooperation, the relevant conditions are set out as to how the company
will operate, how decisions will be taken, who will manage the company, what
will be the rights and obligations of each partner, and how disputes will be
settled, if such should arise, various exit mechanisms are installed that can
be activated by either party in case of significant disputes so as not to stall
or impact the operation of the company.
What are the most common issues for which
entrepreneurs seek legal assistance?
Each
situation is unique and everyone has their own problems. If we all knew
everything going in, then we would not encounter any problems. Things that seem
insignificant are often overlooked and can later cause major conflicts. It is
difficult to accept that many countries have a different mentality. For
example, in Latvia when an entrepreneur takes out a loan, they plan to repay
it. However, there are countries were the practice is: if all goes well, we
will repay it, if not, then not. There are also countries where defaulting on
loans is almost a mark of honour. So, you have to understand that your partners
may be very different from you. We also know about the relatively unfortunate
experience of “Valmieras stikla
šķiedra” AS, a very good and successful company, with their factory
in the USA, where their subsidiary “P- Valmiera Glass USA Corp.” had to suspend
their second phase operations. The company had analysed and anticipated
seemingly everything, the management, as well as the shareholders and the banks
providing loans all believed in the company’s success. But in the end, one of
the reasons for failure turned out to be such a trivially simple matter as
labour and its specifics in the particular state which had a major impact on
what “P-D Valmiera Glass USA Corp.” is currently experiencing.
Latvian media are also reporting on the
conflict between Latvian company “LU Invest” and its partners in Ukraine. You
have provided legal advice to our entrepreneurs in this case as well. What was
missed there?
This case
goes to show that problems can arise even if everything is carefully planned
out and prepared. From a legal point of view, all agreements and the statutes
of the joint venture were elaborated carefully. An agreement was reached on the
management of the joint venture etc. It seemed like a perfect union — one
of the shareholders has the needed expertise in agriculture, while the other
has the necessary funding and a desire to invest it in Eastern Europe. But in
this case, the partner — seemingly a respectable US foundation “NCH
Capital” — was misjudged. Going back in the investigation, other similar
cases have also been identified, from which it could be concluded that this is
not the first such unseemly case for “NCH Capital” in Ukraine.
Each country has its own unique court system as
well. For example, the Ukrainian court system is known to be corrupted. Do you
take that into consideration? And what can be done in such cases?
Yes, our
interaction and experience with the Ukrainian court system has been more than
interesting, to say the least, and the progress in the “LU Invest” and “NCH
Capital” case is cause for some concern and suspicions.
Primarily
we deal with issues at a national level according to the specifics of each
country and through our network of offices, but if that is not possible, then
we make use of all tools at the disposal of our clients. Thus, in this case, Latvia has signed an
agreement with the state of Ukraine on protecting investments and based on this
agreement we are drafting a claim against Ukraine for its failure to fulfil its
obligation to protect the rights of the investor.
We are also
using other international instruments to resolve the conflict. For example, we
are collaborating with the U.S. Securities and Exchange Commission, as well as
the U.S. Attorney General and even the Federal Bureau of Investigation.
In any
case, we are expecting international litigation and have involved not only our
colleagues in Ukraine, but also the PwC London office, which will help us
represent the Latvian company in international arbitration.
So the case will go to court in Great Britain?
Most likely it will be the United States of
America, but other venues are possible. We are still actively working on this
and I do not want to disclose all the details at this time. But I do think that
as soon as the case reaches international arbitration, it will become very
public.
Yet Latvia has previously not had the best
experience with international arbitration...
I would
hesitate to comment on cases where we have not been involved in the litigation.
Yes, these are usually serious cases, when only hiring foreign attorneys is
often not enough. The right representation is needed, a large team working in
several countries simultaneously that can find a common solution. I believe
that the team is the key to successfully litigating a case. And I mean “team”
in a broader sense. It is more than just experienced specialists in their area
from each country who are stuck together and work as a team. That, of course,
is also good. Better than nothing, as they say. But by a team, I mean a truly
unified, integrated team working together from project to project, case to
case. That is what gives the team real power. And a unified international team
is what is most powerful in these cases of international arbitration.
What about Latvia and the Court of Justice of
the European Union?
I think
Latvia has a significantly better track record with the Court of Justice of the
European Union (CJEU). The CJEU hears cases pertaining to EU law.
Have you represented any clients at the CJEU?
Yes, I have
indeed had the honour to represent a client at the CJEU on a very interesting
case. The Court was requested to issue a preliminary ruling regarding the
special VAT regime for goods containing precious metals or precious stones.
It was a
very interesting process with Egils Levits, the current President of Latvia, as
the chair of the judicial panel.
What company was this?
I would
rather not say.
Alright. But collaboration with the U.S.
Securities and Exchange Commission seems to be something new for Latvia.
Yes, Latvia
does not have a lot of experience in this regard as we rarely come across
regulated U.S. businesses. But “NCH Capital” is supervised by the Commission.
Our initial experience with working with the Commission is very positive, we
went to the US and together with our American colleagues and people from the
Latvian Embassy we gave a presentation to the Commission about the Latvian
company’s partnership with “NCH Capital” and the violations identified so far.
We were pleasantly surprised about the interest that the Commission
representatives took in the matter in substance, how in-depth they went. It
seemed that they were surprised about what had happened and that something like
that was at all possible. Of course, the Commission does not inform us about
their investigation and what they are doing. But unofficially we know that the
investigation is ongoing and certain action is being taken. From the point of
view of the regulated companies, it is clear that none of them want to end up
in the spotlight of the U.S. Securities and Exchange Commission.
As regards
the power and influence of the U.S. Securities and Exchange Commission, there
is a recent case I can mention as an example: just last year US retail giant
“Walmart” agreed to pay a fine of more than 144 000 000 USD for
violations of the Foreign Corrupt Practices Act in Brazil. They agreed to pay
such a big fine as a settlement to avoid further investigation. This is the
level of fines we are talking about. That is real power.
We are
collaborating with the U.S. Attorney General’s office and the Federal Bureau of
Investigation (FBI) who have also taken in interest in the case. Due to the
restrictions introduced as a result of the Covid-19 pandemic, a meeting in the
USA was not possible, however, we have already set a date for a remote video
interview. This will definitely also be an interesting experience and something
completely new and different. But I believe that in collaboration with our
American colleagues we will be able to provide all the information and facts
that the investigators need.
And then entrepreneurs have no other choice
than to turn to you — the attorneys. How do you choose a partner, why do
they choose you?
The choice
probably fell in our favour because we are a major international law office. We
have offices throughout the world and we can help entrepreneurs there. Our
experience and competence allows us to not only suggest a strategy for
protecting our client’s interests, to protect our client’s interests in court,
but also to identify the best forum for protecting the client’s interests and
to have the client’s arguments heard and examined at the highest level in
almost any country in the world.
Furthermore,
we are not only lawyers, we also have very experienced business consultants,
tax consultants on our team. This helps us gain an insight into the client’s
business, so that we can understand the essence of the case, the specifics of
the business from the very outset and suggest the best solutions.
We can offer
complex solutions, for example, in the areas of taxes, cybersecurity and
finances all under one roof. For example, we had a case once where our client
had tasked us with performing due diligence on a company they wanted to
acquire. In collaboration with our colleagues from the tax and financial
consulting teams we were able to conclude that there is a high probability that
the company was paying their employees under the table. In the end, based on
these findings the client decided to not acquire this company, even though
everything had initially seemed perfect and the due diligence was requested
almost just as a formality.
I think
that another strong point of ours is that we have sufficient experience, but we
are young enough to be venturous, brave enough to take calculated risks and
focus on attaining the results our clients need. Ardour and a spark in the eye
is what modern consultants need. Not only lawyers and attorneys, but
consultants, too. You have to able and most importantly — willing —
to take an in-depth interest in the client’s issue in substance, to the bone,
so to speak, going into the finest detail.
What would you suggest that entrepreneurs keep
in mind when preparing to do business abroad?
The more
preparatory work you put in initially and the more detailed the elaboration of
the conditions of cooperation, the less chance of litigation. But if an
entrepreneur does find themselves in an argument, dispute or litigation —
choose and create a team carefully and make sure that the whole team, not just
part of it, is going in-depth in the problem and issue in substance.
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