Interview with Vladimir Penkov for B2B Magazine, April and July 2011
A LAW FIRM WITH A HISTORY
VLADIMIR PENKOV: „A GOOD INVESTOR DESERVES GOOD INVESTMENT CONDITIONS PROVIDED BY THE STATE, AS WELL AS GOOD LEGAL SERVICES“
We are proud to have been able to cultivate our own corporate ethics, culture and tradition
The business community needs a sound investment environment and the opportunity to exercise its rights quickly and fairly.
The creation of a specialized commercial tribunal as a major tool for producing expedite legal decisions of good quality, while reducing the workload on civil law courts.
THE ANNUAL REPORT OF THE BULGARIAN CHAMBER OF COMMERCE AND INDUSTRY WAS ADOPTED AMID PRAISE FOR YOUR LAW FIRM FOR THE RECENT AMENDMENTS TO THE COMMERCE ACT. WHY IS IT THAT SUCH A RELATIVELY CONSERVATIVE AREA OF LAW IS IN NEED OF SUCH ‘REVOLUTIONARY’ PROPOSALS?
I would not agree that this is a conservative area for Bulgaria, since the Commerce Act itself was adopted as recently as 1991, whereas a free market economy has been in force, to varying levels of maturity, for only 20 years. It has been for just 3 years, however, that we have had at our disposal a modern electronic register, providing conditions for clear criteria, swift justice, instant checks and an electronic signature. Notwithstanding any of the above, though, practice has shown a number of disturbing deficiencies in the operation of that register, and we have indeed been very actively involved in drafting the Bill to amend the Commercial Register Act as initiated by AmCham and with the support of the Bulgarian Chamber of Commerce and Industry and other major NGOs, with the aim of overcoming hitherto existing weaknesses.
Of the entire Bill for amending that Act, the draft proposed by the Ministry of Justice perceives, in terms of the protection of personal data, the user registration regime with respect to the corporate documentation databank, while guaranteeing general access to merchant-related data and circumstances, further provides an albeit brief 3-day period for rectifying technical flaws in the submitted application; and stipulates a new set of rules in respect of companies that have failed to register in due course.
Regrettably, the legislator did not take on board the widely supported proposals for dealing with unlawful misappropriation of company names and for imposing a ban on misleading company names that mimic those of legitimate businesses. This was the only proposal that could have been described as a revolutionary one. Also discarded were proposed procedures regarding the suspension of the public nature of circumstances that are not subject to recordation, as an instance of protection of personal data. The elimination of ‘old’ errors, as well as the nomination of the procurator as a legal representative were disregarded as well. It is absurd for the procurator to be able to appoint procedural representatives under law, while being inadmissible as legal representative of the merchant before the commercial register.
IS THIS GOOD FOR 90 PERCENT OF SMALL AND MEDIUM-SIZED BUSINESSES, I.E. THE PREVAILING PART OF ENTREPRENEURS?
Not all of the proposed amendments are, perhaps, instantly appreciated as positive by SMEs, but in a medium-term context, the harmonization of rules with European standards and the provision of clear and transparent conditions for all investors are to the benefit of everyone in Bulgaria.
The introduction of the electronic document and electronic signature in registration proceedings, as well as free 24/7 access to the database for purposes of checks and enquiries are, without a doubt, highly beneficial, especially for small and medium businesses, as they help save a lot of time and labour.
WHAT IS THE SIGNIFICANCE FOR THE REGISTERED COMPANY NAME AND TRADEMARK?
While collating the 28 previously separate and mutually unrelated company registers around Bulgaria into a single electronic one, we came across many instances where famous internationally registered and other recognizable trademarks were used as company names in this country in an obvious attempt to mislead consumers.
A single-letter variation or the addition of a two-digit number, or a different marker for the form of association were considered sufficient as a distinctive feature. For example, there were Sony OOD, Sony 03 OOD, Sony 09, Sony M OOD, none of which had anything to do with the expected primary entity. These were each a clear case of abuse of another company’s reputation. Therefore the law must provide procedures of remedy for the aggrieved party. This has a direct bearing on the good investment environment and is equally important for all investors, whether Bulgarian or foreign.
DOES WORKING ON MAJOR DRAFT LAWS ADD PRESTIGE TO THE NAME OF A LAW FIRM? MANY ENTREPRENEURS ARE CURRENTLY INTERESTED IN THE NEW PROVISIONS IN THE RENEWABLE ENERGY SOURCES BILL.
No doubt about it, especially when our involvement in drafting the bill has been efficient and useful for the business community, this is highly prestigious for a law firm. That is not, however, what motivates our committed effort in preparing legislation essential for the business community. For any successful professional, law firms included, the main thing is to be committed to the public good, to contribute, through legislation, towards speeding up economic development, which is to everyone’s benefit.
In addition to our engagements regarding the Commercial Register Act and the Commerce Act, our law firm, as the official advisers to the Bulgarian Chamber of Commerce and Industry, has been involved in the discussions of the Renewable Energy Sources Bill, as we are also members of the Bulgarian Wind Energy Association. The point here is not to lobby for one group of potentially interested investors or another, but to seek effective solutions ensuring long-term benefit to the state, while being in harmony with European requirements.
It is essential, therefore, to have preferential prices fixed for the relevant period, to prepare plans for building the infrastructure and to produce the statutory framework in respect of bio-fuels.
It is no less important, however, to make sure that the law provides a clear formula for calculating such a preferential price while not limiting such preferences, for some obscure reason, till 2015 only, and that the EU-set minimum goal of achieving 16% [renewables] by 2020 would not be seen as a maximum.
A time frame must be guaranteed for accession, while removing red tape and unnecessary delays, which solely breed corruption. Of course, the law must guarantee that the entire surplus energy produced by own-needs installations is to be purchased from its producers.
If all of this is achieved, everybody will benefit, most of all Bulgaria as a whole, so this is not so much a matter of prestige for an individual law firm.
WHAT IS IMPORTANT FOR A GOOD LAWYER: TO BE A LONE WOLF OR TO WORK, LIKE IN THE MOVIES, IN A BIG FIRM WITH A TEAM OF LIKE-MINDED INDIVIDUALS?
To me, lone wolves are a thing of the past. It is in the best interest of the users of legal services to have the benefit of the collective knowledge and ability of experts in various fields - something that only teamwork in a larger law firm can provide.
MR. PENKOV, HOW DID YOU COME UP WITH THE IDEA TO SET UP A BIG LAW FIRM WITH REGIONAL OFFICES ALL OVER THE COUNTRY?
I do not believe this was a matter of an original idea. It's just that our philosophy and approach of preparing ourselves thoroughly and individually for every legal case, of supporting in a committed manner our clients with legal advice, of never lying to them or keeping them in the dark about problems and difficulties, but of fighting all the way with the administration in pursuit of a sound and logical solution in cases not explicitly dealt with by the applicable legislation, has resulted in an increase in our workload and the need to hire many new colleagues. At present, we have 23 attorneys and 18 associated staff at our central office, and a little over 50 colleagues around the country.
To be able to provide quality service at the highest standards nation-wide, we needed to set up offices in other cities. Currently we have legal offices in Bourgas, Pleven, Stara Zagora and Rousse, and associated members in Varna and a few other cities.
HAVE YOU CONSIDERED SETTING UP REGIONAL OFFICES IN GREECE, ROMANIA, SERBIA AND TURKEY?
Such offices are not be necessary, since through our membership of Lex Mundi we have access to first-class law offices in over 150 countries around the world, including the Balkan region. This is a big advantage not only for us but for our clients who consider investing overseas.
A BIG LAW FIRM UNDERSTANDS THE BENEFIT OF GOOD LEGAL SERVICES. HOW CAN YOU PERSUADE SMALL BUSINESSES AND THE MIDDLE CLASS THAT INSTEAD OF CUTTING CORNERS THEY WOULD BE BETTER OFF CONSULTING AN EXPERIENCED FIRM?
The existence of a good legislative framework, of swift and fair jurisprudence, would make legal consultations an expected and necessary part of any commercial undertaking. Good legal advice, when it leads to greater efficiency, would position the relevant law firm in greater demand. Conversely, the existence of bad practices, not geared towards the proper application of legal norms, combined with bad practices in jurisprudence itself, would entice not just SMEs but major corporations as well to seek benefits for themselves by saving on the seemingly ‘unnecessary’ cost of good legal advice.
CAN YOU CITE AN EXAMPLE THAT WOULD CONVINCE YOUR CLIENTS THAT SEEKING LEGAL ADVICE IN ADVANCE IS MORE EFFICIENT THAN SEEKING LEGAL REDRESS AFTER THE HARM HAS BEEN DONE?
I would rather say that it's impossible to cite an example where follow-up legal assistance has been more efficient than early consultation, including in terms of the legal requirements for economic undertakings and the advance contractual provision of maximum legal protection.
Therefore those companies that invest some funds in legal assistance are the biggest market winners.
DO YOU HAVE A PREFERENCE FOR BIG INTERNATIONAL COMPANIES AS YOUR CLIENTS?
Indeed, some major projects are related to the so-called big companies. However, as in any other European nation, the backbone of the economy is made up of small and medium-sized enterprises, and they account for over two-thirds of our business. We have enormous respect for them, and since their representatives usually have a profound knowledge of the law and the marketplace, the provision of legal services to such people is not just a real challenge but also has an educational effect on ourselves.
DO YOU NEED TO TRAIN YOUR TEAM FOR GOOD EXPERTISE?
We are one of the few law firms certified under ISO 9001:2008 for quality service management. The highest quality standards are a sine qua non for our work, and to be able to attain them, we participate on a regular basis in all sorts of workshops, both theoretical and practical, including within the framework of Lex Mundi, the leading international organization of independent law firms, in various other specialized seminars and in annual team building events.
IF YOU NEED TO GIVE ADVICE TO FLEDGLING ENTREPRENEURS, WHAT WOULD YOU URGE THEM TO CONSIDER IN THE LEGAL DOMAIN IN ORDER FOR THEIR BUSINESS TO PROCEED SMOOTHLY?
Of course, every manager must possess a certain amount of economic and legal knowledge, especially where things like setting up and managing a company, business activity and taxation, and perhaps, at a later stage, employment law are concerned. But managers must, first and foremost, become aware that for every decision they make they must seek specialized legal advice, which will greatly increase their operational efficiency in the long run.
A FEW WORDS ABOUT LAWYERS AND GOVERNMENT AUTHORITY: FOR EXAMPLE, WHY DON’T YOU SEEK PUBLIC OFFICE?
People like myself should not become involved with a certain political party or government authority, as that would be detrimental to their professionalism and civic commitment. For that reason, I gladly performed my duties as a long-standing deputy-chair of the Bulgarian Chamber of Commerce and Industry, striving for the establishment of a good investment climate for entrepreneurs on Bulgaria; to this day, we gladly participate in various working groups on matters of legislation. On every occasion, however, we strive to uphold an objective position that would be beneficial for all, rather than act as lobbyists for somebody’s narrow interests. Also, a professional private practice is more lucrative than a position in the public sector.
WHO SHOULD SEEK PUBLIC OFFICE THEN, WHO SHOULD WORK FOR THE PUBLIC GOOD IF EVERYONE WANTS TO BE IN THE PRIVATE SECTOR?
I am not competent to answer this question, but since candidates for public office are often more numerous than job applicants for the private sector, there probably are things that elude us people in the private sector...
WHAT IS YOUR COMMENT ON THE IDEA OF DESIGNATING MAGISTRATES, I.E. JUDGES AND PROSECUTORS, FOR THE SO-CALLED ‘SPECIALIZED TRIBUNAL’?
'Specialized' is what it is called. I, however, do not believe that this will help resolve any issues because essentially it is not a specialized but an extraordinary tribunal. Now, that is something forbidden by the Constitution and alien to any law-governed state. We are talking about the same judges, the same laws, the same opportunities for procrastination, with the same evidence being required. This doesn’t change anything, therefore it simply sets a bad example, though it may exist in certain states under extraordinary circumstances. The idea, in my view, has no justification at this point in time. What was it that so far prevented the magistrates designated for that specialized court from doing their job effectively? A specialized court would be a separate commercial court of law that would have a focused jurisdiction over all cases of a commercial nature: legal disputes over contracts, over corporate law, registration proceedings and insolvency. In this context, the commercial court would be part of the judicial system and not a special jurisdiction. This would benefit private entrepreneurship as it would guarantee to a larger extent the equal application of the law and would perform administrative and bookkeeping functions. The judges’ qualifications would also increase, and thence the efficiency of their work and the swiftness and quality of their judgment. Also, this would free capacity for the common law courts. Now that is what I call a specialized tribunal, and not one specifically designated to hear cases of a more serious nature.
DOES MR. PENKOV’S LAW FIRM HAVE A FAVOURITE CASE?
I don’t have one personally, but I can cite dozens of examples where the entire firm has been satisfied with its success. We are proud to have been part of the establishment of the first joint venture with a major Western company, even before the adoption of the Commerce Act, between the Central Cooperative Union and the Coca Cola Company; to have been involved in a large number of successful privatization deals where our clients became big Bulgarian taxpayers; to have had the opportunity to serve the biggest transaction in Bulgarian history, the initial acquisition of the Bulgarian Telecommunications Company and its subsequent purchase by AIG Capital Partners for €1.8 billion. We can be nothing but satisfied with our consortium with PricewaterhouseCoopers, leading to the successful sale of the Bulgarian Maritime Fleet. But our biggest satisfaction is that we managed to establish our own corporate ethics, culture and tradition, as well as a set of rules and incentives for work that ensure that our clients receive the best service possible.
DOES THE PRIVATE SECTOR APPRECIATE THOSE RULES AND REQUIREMENTS?
I believe our clients appreciate that, because those that are averse to this kind of philosophy simply go elsewhere. Those who insist on having us serve them, and these are most businesses, are companies of a similar philosophy and it is owing to them that I am optimistic about the establishment of a civil society and a law-governed state in Bulgaria. Everybody working in the economic sphere who encounters the unbelievable difficulties created, regrettably, by the public administration, must feel proud that they are giving rise to something new. Regrettably, governments so far seem to have failed in creating the kind of economic and legal frameworks and the sense of promising prospects that would make young people confident about their future in Bulgaria. In order for this country to have a better future, it is necessary for the government and civil society to create favourable prospects for the younger generation, and for the younger generation to like those prospects, otherwise we all stand to lose.
AND YET, ARE YOU AN OPTIMIST?
Considering the manner of our work on behalf of our clients, and considering the fact that our clients have enormous respect for the rule of law, and ultimately, considering the merits of my colleagues, I can be nothing but an optimist. But let us not rely on extraordinary jurisdictions familiar from the times of socialism; let us stick to the fair and just provisions of the law that apply to all and are respected by all. Only the civil society and the democratic principles of the law-governed state can ensure the proper functioning of a socially-committed free-market economy. In evidence of our optimism, at our new offices in just a few months’ time we will provide even better working conditions for our colleagues and even better service to our clients.
Interviewer: Vassil Chobanov