“Aleinikov & Partners” law firm has been working on the Belarusian market since 2006. The firm focuses on legal assistance to investment projects in the Republic of Belarus as well as on legal support in resolution of business disputes. The lawyers of “Aleinikov & Partners” law firm are involved into activities of the Foreign Investment Advisory Council (FIAC) by the Council of Ministers of the Republic of Belarus. During the interview with senior partner of Aleinikov & Partners Denis Aleinikov and partner Dmitry Matveev we discussed topical issues of concern to potential investors doing business in different countries.
“Aleinikov & Partners” law firm focuses, in particular, on legal support of investment projects. What trends do you observe? Are there any areas with high investment activity?
Denis Aleinikov: Speaking about such legal instruments as investment contracts with the government, I should mention, that investment projects in the sphere of real estate are very popular. Someone might say that this segment has been already overestimated, but there is still strong demand for it, for example, Middle Eastern investors show their intentions. A well-known project “Minsk — Mir” is in progress. The project of BelToll has also been activelly developing. Maintaining activity in the projects within investment contracts can be explained by the specifics of this legal instrument. Commercial risks here may be partly offset by benefits and privileges (sometimes unique) represented by the state under the investment contract.
Dmitry Matveev: Over the last year IT industry of Belarus has concluded a number of interesting M & A transactions (the so-called “Mergers & Acquisitions”). We expect further growth of transactions in this segment.
Let us discuss M & A in IT industry. What the basic features of “Mergers and Acquisitions” in this sector you can identify while comparing with the transactions in real estate sector?
Dmitry Matveev: When concluding transactions in IT sector, investors are mainly interested in two issues: Intellectual Property and a team itself. Revenue generated by sales is not always so particularly important. The potential growth of the project is much more essential in the world market. Therefore, the assessment approaches of the acquired assets are not as clear-cut as in transactions in real estate sector. Thus the price may be formed by intuition.
From a legal viewpoint, you can mark such an important element of the M & A deals in IT as a high personal involvement of the co-founders of the sold project in transaction commitments. This is not about commitments of the seller in regard to realizable assets or financial guarantees. But about the co-called “non-competition agreements for the future” .
These agreements are meant to oblige developers not to compete in the future with a customer by creating similar products, or products of a similar market niche, through the establishment (direct or indirect) of a new company. These agreements can limit future creativity. The future and creativity are the key points for all IT entrepreneurs. Therefore, the study of such issues always occupies a special place, it is necessary to find a balance between the buyer and seller and give the right to creation for the seller.
Could you name the main risks of project implementation in Belarus from a legal viewpoint?
Denis Aleynikov: I do not observe any major concerns for foreign investors. Really. There are plenty of fantastic fears. It all happens owing to the lack of information.
We have the same category risks as in many other European countries, e.g. the risk of expropriation (direct / indirect), the risk of the impossibility of currency export, etc. These are classic risks, which are described in our legislation, as well as in the international agreements to which Belarus involved. So there is no any secret to investors.
Investors should know the following things, such as our legal instruments to minimize these risks and compensation for the consequences, the use of these tools, and the proper formation of investment contracts. And with the last there can be certain problems. Sometimes people bring already-existing contracts for review. So you just take a glance on it and immediately notice mistakes.
Our legislation supports a number of international instruments for investment protection. If investors are worried about political / non-commercial risks such as expropriation, they are welcome to MIGA (Multilateral Investment Guarantee Agency). The international financial structure (a member of the World Bank Group) specializes in investment insurance against political risks.
Today for Belarus they offer insurance coverage up to $ 220 million per the project. Insurance is available for our country due to the participation of Belarus in MIGA’s Convention (several years ago we concluded necessary procedures).
If investors are not satisfied with the adjudication in Belarus, they can apply to the ICSID — International Centre in Washington, specializing in disputes between investors and recipient states. The decision of the International Centre for Settlement of Investment Disputes is mandatory for Belarus by virtue of our participation in the ICSID Convention. Bilateral international agreements offer some tools on investment protection (more than 50). So in fact there are quite enough tools.
Dmitry Matveev: In order to make valid conclusions on the risks you should check statistics, how often the risk materializes in our country in comparison, for example, with neighbouring countries as our competitors for foreign investment.
As Denis has already said, Belarus is a party to the Convention ICSID, according to which over 140 countries have expressed their willingness to consider disputes between them and their investors in The International Centre for Settlement of Investment Disputes (ICSID) in Washington.
Here are some figures. Against Ukraine 4 claims were filed by investors. Against Kazakhstan – 11 claims. Against Poland — 3 claims.
Russia has signed the Convention, but still it has not been ratified, so that, there are no any disputes.
With regard to Belarus any claim has not been filed so far, although we have been fully involved in the Convention for more than 20 years.
“Aleinikov & Partners” law firm has been working for almost 10 years on the Belarusian market. What do you wish young entrepreneurs?
Love what you do, without thinking about money. And you will definitely have something to sell.
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