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Having a one-size-fits-all law isn’t such a good idea

Having a one-size-fits-all law isn’t such a good idea

22.11.2011 15:07
Autor: Dagmar Dubecká, KSB

When she entered the room, the temperature suddenly shot up about five degrees. Energy seems literally to radiate from the forty-four year old attorney Dagmar Dubecká. She is the type of person who always appears to be at the top of her game – someone you would automatically expect to sit at the head of the table. She is a woman with a firm grasp of the appropriate means and ends. And one who is used to achieving those ends. All of this comes in naturally handy in merger and acquisition negotiations, her field of expertise and an area in which she is considered among the very best.

Someone once made a remark for the International Financial Law Review to the effect that your sharp edge may sometimes be more of a liability than an asset in negotiations. Is the edge really so sharp?

I did noticed this little jab from the competition! It didn’t appear in the review last year so I’m wondering whether I’ve stepped on any toes recently. Transactions demand, on the one hand, the willingness and ability to seek and achieve compromises but, on the other, I am definitely not the type of attorney willing to bend over backwards just to push through a transaction. When I have the feeling that something is unfavorable to the client, that he should at the very least be aware of it, I will simply tell him. And sometimes I’ll tell him even when the other party is present because I’m firmly convinced of what will or will not fly, and I am known to defend the interests of my clients quite vigorously. So when someone says I’m not the softest person around – well I guess I’m not.

How far are you willing to compromise? Do you occasionally refuse a client?

This is, of course, a possibility, but one that should be used sparingly. A client and attorney must trust each other during transactions, both must be capable of cooperation, and some mutual confidence and chemistry must be present. If they’re not, it shows. When I demand that my colleagues spend whole days and nights in the office, they must know the client has confidence in them as well... and conversely. Of course, you can rarely be sure of this at the first meeting. Sometimes a client comes with a request for assistance and you have to check more than just his solvency. Sometimes you might be dealing with someone with a less then stellar reputation, but it may still be worth it to hear them out and see if they have a legitimate grievance. Attorneys are here to provide aid to people, so refusing someone out of hand wouldn’t be very ethical. It may happen that I respond to a request to take over a certain matter with saying “Look, wouldn’t it be better to just approach someone else with this?” For example, when someone asks for confirmation of a legal interpretation I disagree with, or when I think someone else might be more fit for their purposes, for whatever reason... But refusing someone beforehand is not my style.

And what about refusing a client for reasons of, shall we say, the firm’s reputation?

You’re right: that has to be done in some instances. But the law should apply equally to all and if you, for example, think of a criminal attorney, he is there to defend his client, even if the client is a murderer. We are striving to achieve and maintain the rule of law and this includes a duty to educate people of the fact that even a murderer is entitled to legal counsel and treatment in accordance with the law.

You say that we are striving to achieve the rule of law. How much more strife is still ahead of us?

I won’t say the rule of law doesn’t exist nor that the current state of affairs is ideal. There is certainly room for improvement in some areas. For example, hearing of certain public tenders and the current lavish lifestyles of their participants, one can’t shake the feeling that we shouldn’t have to suffer through this and be ashamed of it after 20 years of freedom.

Speaking of public tenders, how is Kocián Šolc Balaštík doing in this area?

We are somewhat cautious. . I must say we have made bids for several public tenders but we have never been selected, for reasons I do not understand. But when I look back and read about some of these tenders in the newspapers, I’m actually rather proud.

So there is no gradual shift to more civilized manners in the area of public tenders?

There is some effort, of course... But at the same time there is a strong lingering faith that all will be resolved in detail by some statute. I don’t think that the statutes are always at fault. Primarily, I would blame the general level of morality on the one hand and on the other the approach of the various authorities entrusted with overseeing the public tenders. This or that statute may be blamed for inadequacies, but I believe that certain basic principles will always exist above the statues – principles we don’t even have to write down.

You recently had quite a go at Karel Březina for his involvement in the Transportation enterprise of the Capital city of Prague, not to venture too far...

To set the record straight, I wasn’t primarily having a go at Mr. Březina and was pretty much innocent in the whole matter... One Friday my phone rang and a journalist from Hospodářské noviny asked me to help him out with interpreting one provision of the Commercial Code, as he was aware that I specialize in business law. He asked about the conditions and impediments to holding a position within a statutory body – and all I was attempting was to explain the pertinent provisions to him. It was a general interpretation, unrelated to any specific situation or name. The journalist then asked me to review the text. I said alright, I can do that, but if you intend to quote me, I should at least know who it concerns. And he said – Mr. Březina. And I said yes, I stand by my explanation, whether this includes Mr. Březina or anyone else. Nevertheless, if you wish to ask me whether I am a supporter of grand coalitions, and specifically the one currently in existence in Prague, then I am not. But that is purely my personal opinion which has nothing to do with KŠB. This is Dubecká speaking as a citizen.

What do you consider to be the greatest problem of the Czech legal environment?

I think we generally have problems with applying the law. Although a slight hyperbole, the majority of those dealing with the law, the attorneys, judges, care too much about crossing all the Ts and dotting all the Is in a particular statute and too little about the purpose for which it was adopted in the first place. If I somewhat exaggerate, we need to pay more attention to the actual intent of the law and a little less to its letter. Some court decisions have immense impact and the specific context and circumstances leading to the decision are often forgotten. The conclusions reached by the court are often far too generalized, even by the judges themselves, and their context is neglected. For example, a decision concerning a bankrupt company cannot automatically be applied to a corporation at the peak of its prosperity. Too much generalization has enormous impacts on practical business.

Could you be more specific?

One example is the decision that dividends cannot be paid unless the company sanctions do so prior to July 30. Some two-odd years ago, the Supreme Court adjudicated a case in which an extraordinary general meeting decided on profits distribution from the preceding accounting period by the end of the year. The Court came to the conclusion that that was not permissible and that such a decision may only be adopted before July 30, that is prior to the deadline for the ordinary financial statements. And if it’s done later, even if you duly approved the financial statements – and only have yet to decide on the payment of the dividend – you are in violation of the law.

I – and I know I wasn’t the only one – was very surprised by that decision. When I had the opportunity to examine its grounds, I discovered that the specific situation concerned a company that happened to become insolvent in the meantime, meaning the economic fundamentals had changed from the time of the financial statements. But the solvency could have just as easily been lost prior to July 30. So in my opinion, the grounds for deciding that the dividend payment was impossible should have been different, first and foremost based on the insolvency of the company in question at the time of payment. It shouldn’t have been generalized as “this is not allowed because you didn’t make the decision prior to July 30.”

Generalizations are very dangerous. My example concerns a decision by the Supreme Court and it’s hard to imagine a businessman figuring out such a thing on his own. He can’t hire a lawyer for each everyday act, can he?

Where do you see an opportunity to challenge the status quo?

It begins with the lawmaking process. It’s as if the parliament thought that statutes can be altered and changed in perpetuity, ever adding more and more sections. Then, to exaggerate a little, a statute governing the size of holes in Swiss cheese is adopted and in its final provision we discover that, oh, by the way, it amends the Commercial Code as well. This is one immense terror.

There can be two reasons for this – one, that it is truly necessary to make a last minute change, because something material was forgotten during the adoption phase. So in order for the statute to work at all, it is critical to quickly fill in the holes... which is a quite understandable motivation. Other times, however, it seems that the reasons lie somewhere else. But the legal environment suffers from this approach for whatever reason.

And as far as the thinking of judges and attorneys is concerned, this is an issue of a gradual change in their thought process, perhaps coupled with a generational replacement.

I sometimes wonder how it is possible for such absurd things to happen; everybody knows it is absurd and yet it happens all the same?

It really is necessary to return to the principles. Having a special statute for everything does not help. I’m not talking about the Decalogue, but going back to the basic rules of the game, the fundamentals, would be beneficial. Although something may not be explicitly stated in a legal rule, I know that certain, if unwritten, principles of morality exist and these should guide my decisions. Even while reading the law. I hold the same view with regard to the recodifications of the Civil Code and the Commercial Code currently underway. These contain some rules which could help us. I know criticism of the recodification exists as well, opinions concerned with the associated costs and the amount of sudden changes. On the other hand, adopting this damning approach historically towards anything new would have left us with the Inquisition and the rotundas.

What role does European law play in these changes? Is it a boon or a burden?

In terms of Czech law, I think certain common rules within the Union are necessary. And it’s not often that a European law dictates everything from A to Z. It provides a basic framework and it’s up to the Member State to transpose it and incorporate it into its own legal environment. This really helped us in some instances; the corporate segment of the Commercial Code would be a good example.

On the other hand, from time to time adopting a specific statute is domestically justified by the existence of a European directive. First you take a look at the directive, which is perfectly clear. Then you read the local result, for example, Section 196a of the Commercial Code, which purportedly adapts the directive, and you have a hard time believing your own eyes.

Were the Czech lawmakers in the case of this section once again more Catholic than the Pope?

Section 196a of the Commercial Code is famous not only among attorneys and judges, but among businessmen as well. Clients know it, I think, by heart, as they come and say “one ninety-six.” It concerns relationships between a company and its shareholders, other companies within the same business group, board members and their close persons i.e. relatives and so on. The relevant provision is formulated in a way which is very difficult to understand and not just for laymen. The way courts interpret it in practice, to put it simply, nothing can be done within a single business group (or between a company and its statutory bodies) without an expert testimony.

Say you are an ordinary entrepreneur, not interested in lawyers but rather in supporting yourself and your people, and you forget about this section. You consider the price negotiated between your two companies to be fair and market appropriate. So you go ahead with the transaction, but then you find out that there is this “one ninety-six” and that the operation is impossible without an expert testimony. So you say to yourself – alright, I’ll get a subsequent testimony. But because you didn’t think of it in time, you are not allowed to. Because the entire transaction is invalid. I think this is nonsensical, completely removed from reality, and all it does is complicate matters for businesses. And the relevant European directive, purportedly the original source of the rule, contains no such thing.

And this brings us back to the same question: is this just schlep or someone’s intention? Who benefits from this?

Probably attorneys... The intention was likely sound. Aside from transposing the directive, it was probably the aim to prevent asset stripping, our famous forte from the 90s. But the level of dilettantism involved in this attempt to set things right is astounding. As I have said, I consider the provision and especially the conclusion that any transaction, any act not conforming to it, is absolutely invalid, to be nonsensical. It certainly doesn’t promote legal certainty.

Do you mean to say that a judge should have the power to make judgments based more on the intent and less on the letter of the law?

I think the courts have sufficient powers. I have been pleased recently by some decisions of the Constitutional Court, as they manifest the endeavor to elevate decision making above mere grammatical interpretation and lead other courts in the same direction….the effort to uncover the aim of the law at hand and to protect this aim. And when something contradicts this aim, to be able to rise above it. And it would be great if lower courts began interpreting the law in this manner as well.

On the other hand, it is not always that simple for the judges either. In business disputes – for example in proceedings determining a fair squeeze-out compensation – the judge is forced to decide economic issues. Judges are not trained in these matters and they don’t understand economics very well (or at all); they look to various expert opinions for help, but these often diverge as well... and often not by insignificant amounts. Making the right decision must be really difficult for a judge who doesn’t have a background in economics. They would at the very least require some professional courses in this area. Keep in mind that clients employ highly specialized teams for these purposes.

Just as law firms do. You, as say an M&A expert, must be even within this rather narrow specialization versed in a broad spectrum of fields. How is it possible to maintain one’s perspective?

Some people think that mergers and acquisitions are a schematic type of work, just buying or selling something, merging or splitting...That certainly isn’t true. What you’re buying matters. Sometimes it’s gravel, other times beer or mineral water and so on. You need to have what I call light bulbs. Even specialized physicians need a working knowledge of the rest of the human body. The law works the same way. I do the M&A and need to know – oh, look, this could be a potential bankruptcy law problem, here’s a labor law issue and this could be problematic from the perspective of competition... Those are the light bulbs that must light up at the crucial moments. Once it happens, the solution is simple. I pass the problem on to my colleagues who specialize in energy or labor law and they know exactly how to deal with it.

But you can’t do without the light bulbs. I don’t need to understand everything, but the final responsibility always rests with me.

You have many foreign clients. Are there any specific – for example cultural – differences in dealing with these clients?

It’s highly individual. With a client from India, who is used to a completely different environment, you have to provide broader explanations, but I don’t see any fundamental differences.

Speaking of India, one of our clients, a company doing business in, among other things, car components, came from there. The Czech market and the local environment was something completely novel to them. In such case, it doesn’t suffice to draft a contract and limit oneself to a narrow description of the transaction and its relevant aspects. You also have to explain to the client matters not directly connected to the purchase agreement, for example, the need to appoint officials to the company’s bodies, explain who may be appointed, what powers they will have, that natural persons must fulfill certain criteria and submit certain documents etc.

A normal Czech or European entrepreneur is generally aware of these things, because the fundamentals don’t differ too much, thanks to the European law. But Asia is worlds apart.

What do you consider to be your greatest achievement?

In the professional arena, my major accomplishments naturally include completing my legal studies, obtaining a doctorate and passing the bar – anyone who says they aren’t afraid of the bar exams is lying – and then of course the offer to become a partner at KŠB. There have been too many successful client cases to name one; every transaction is an accomplishment. When you finish one, succeed in bringing it to completion without too many hiccups... every transaction has two parties and there are no winners or losers. It’s always a compromise.

You are a top lawyer working in a top law firm and yet you rarely appear in the general media. Is that a strategic decision or is there something else behind it?

It’s not exactly a deliberate strategy; we are just not one of the most aggressive firms out there in this way, with their insatiable desire to express an opinion on everything. We do not wish to publicize ourselves at all cost. We do not need to continuously appear in the papers. But you will find us continuously in professional periodicals.

The current trend in marketing dictates that not being on Twitter or Facebook equals barely existing at all. Yet I haven’t found your profile there.

I’m not exactly a fan of social networks. One does have to take the internet more seriously, though. Personal recommendation is the best kind of advertising; however, I am aware of the fact that many of our clients have found us through our web pages. I personally do not use Facebook. I still conservatively prefer printed Christmas cards to e-mails and text messages and I’d rather have a chat in a café than in front of a computer screen. I don’t condemn it, but it’s just not for me.
But this is probably what the future has in store for us and we will all have to give social networks and the merit of appearing on them a long hard thought. That’s where it’s most likely headed...

Our readers are always very interested in cars. What do you drive?

I’m not sure I should tell. I think my car is the subject of a well-known joke... I drive a Jaguar XKR Coupé, quite a beast of the road. I have had the opportunity to try it out on a race track in Most, as a part of a sports driving course. I like driving fast. It relaxes me.

JUDr. Dagmar Dubecká, PhD. (née Synková)

Partner at Kocián Šolc Balaštík, attorney since 1997. Specializes in counsel in the areas of acquisitions and mergers, restructuring, law of business corporations, competition law and law of obligations. International rating publications list her among the top Czech experts in mergers and acquisitions and competition law (IFLR1000, Legal 500, PLC Which Lawyer). Dagmar Dubecká (44) graduated from the Charles University’s Faculty of Law in 1994 and completed her postgraduate doctorate in private law at the same faculty in 2001. She is a member of the Czech Bar Association, sitting on its disciplinary committee since 2002. She is also a member of the International Bar Association.

Throughout the years, Dagmar Dubecká has led teams at Kocián Šolc Balaštík during many transactions carried out for its clients. Examples from recent years include counsel to New World Resources and OKD during a divestment of OKD’s energy assets into NWR Energy with a subsequent sale of NWR Energy’s shares to Dalkia ČR, acquisition of the Czech Mint or the joint venture of Spolchemie/DIC. Among other transactions, we could name various acquisitions and restructurings for Heineken, Skanska, Karlovarské minerální vody, HeidelbergCement, NextireOne and others.

This interview was originally published in the Law & Business Magazine in March 2011.

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