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Artem Afian: “2019 will be the year of answers to the questions being of great importance to the country”

Артем-Афян-полуростIn 2018 we had rather hard times in the Ukrainian business sector. Despite this, in a large number of industries there has been, albeit small, but some growth. This is largely due to smooth reforming of our legal field, a basis for all business activity in the country. Maanimo learned from Artem Afian, a lawyer, a managing partner of Juscutum law firm about sustainability of this basis and challenges awaiting the Ukrainian legal field in 2019.

— Artem, let’s start right off the bat: please name 3 main legal rules or precedents in 2018, which affected the business sector? (some draft law, judgment, event, whatever)

— One of the most important acts that influenced business field was the implementation of the BEPS plan. This will greatly change the entire structuring of large and medium-sized enterprises in the near future. Also, I’d like to mention deregulation, which in many individual points quite strongly changes business climate in Ukraine. And, of course, my personal “hit parade” is headed by martial law, which was introduced only at the end of the year. But I think that it will also determine the atmosphere of doing business in 2019.

– You specialize on Legal Engineering. Did you have some new and bright launches in your field this year? Bots do not count 

– You have so sharply cut off our bots, that there’s almost nothing left for me to answer, you know. In this case, I can say that a significant part of our bots have already turned into platforms, so we are moving further towards the implementation of the concept of legal services commoditization, that is, turning them into a product. And I’m especially proud of the fact that finally this year we have implemented and continue to develop the internal accounting system. These are not external innovations, but they are very powerful. We have a lot of plans for 2019, but in principle, automation and systematization of the company’s processes is the thing we are mostly engaged in this year.

— What about the development of your PatentBot and SudoBot projects? Was the Ukrainian market ready for such innovations, or people prefer to work in the old-fashioned way?

— If we talk about PatentBot and SudoBot, then, firstly, they are not the only ones, we already have StaffBot and TradeBot, which have also entered the market. And in general this year was quite “fruitful”. The Ukrainian market does not welcome such innovations with open arms. But it is definitely ready for them. Perhaps the most indicative is the PatentBot project. We take monthly statistics: 2-3% of trademarks in our country are registered through it. In my opinion, this can be considered as appreciation.

— What is the budget of such a technological solution as a legal bot? How long does it take from its conception to launching? What are the payback periods taking into account Ukrainian realities?

— As for financial projects, this issue is extremely complicated. It is due to the fact that, firstly, it comprises both legal and technical expertise. We are able to assess technical expertise because we involve outsourcing (although we have employed in-house programmers as well),  but as for legal field, we apply internal expertise, which we have developed over the years, and I think if we try to recreate it, the budgets will be just unbelievable. Therefore, we solve only those issues we have some experience in.

Concerning preparation terms, we have rarely managed to do it in less than six months beginning from product idea’s conception to product launch. Moreover, in addition to the development of the product itself, there is a huge amount of things in need to be developed: it comprises visual identity, website choice, videos, promo, and so on.

As for payback, one of the biggest problems of all LegalTech projects is the choice of a business model.  Because far too often lawyers come up with some great idea, even implement it in a proper way, but they completely forget about how to monetize it. And they choose either the wrong model, or do not choose it at all, and it destroys the project. I think we have tried to find very adequate models, and so SudoBot has already paid off. Within a year we have broken even.

There’s another trick here. These projects usually do not pay off within two years, because everyone continues to develop them. And in this case, if we talk about start-up investments, they can be paid back in a year. But, in general, the project itself during 1.5-2 years requires a very systematic, clear and high-quality work to become a self-sufficient business.

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- You are considered to be one of the first lawyers who has started working with cryptocurrency. 2018 was a year of a very serious downfall in this industry. What will happen to this field in the future, in your opinion? Do you still accept payment for company’s services in bitcoins? 

— I can imagine a world without bitcoins, but probably not the modern economy without cryptocurrency. The price does not really matter. It only prohibits the possibility of speculative operations. Presently we have a decline in the market, that’s true, but we still accept payment in cryptocurrency, moreover, we have launched an infrastructure legal platform AILO.ai, which should close all legal issues concerning cryptosphere.

Therefore, I think that today we live in a very interesting time when the market is being rebuilt and adapted. In 2019, in its second quarter, I think, we will watch the development of infrastructure projects. After all, considering 2017, and the beginning of 2018, it was not a heyday of blockchain projects, but ICO boom, which significant part turned out to be fake. That’s why I believe in future. I don’t believe in a speculative future, in the fact that we will return to previous prices, but, in my opinion, cryptocurrency will become a sector of the economy along with fintech.

– Please name three draft laws the Ukrainian fintech sector needs right now.

– Fintech, in my opinion, needs the following: first, determination of digital assets. This would bring together the whole blockchain field, assets tokenization, and directly fintech. Then I would like to see the liberalization of legislation on payment systems, simplification of licensing requirements and rules. Well, and further currency liberalization, because it is difficult for fintech to develop, being closed only in one country. And we have already adopted laws on trust-based digital services. In this area, I would like to expect law enforcement practice and clarification. We have relevant laws, we just need to actively work on their implementation in business practice.

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— What is your opinion about the idea of SPLIT and a mega-regulator creation in Ukraine? Should non-bank financial institutions be afraid of banking supervision?

— As for the mega-regulator, this idea is not new and purely Ukrainian. Considering this, I believe we should be afraid not of regulation establishment, but of the fact that it will be unexpected. Therefore, I often advise my clients not to stay out of these processes, but to take an active position, because, unlike in Europe, it is much easier in our country to reach out to regulators.

In principle, the world shows no development towards liberalization. On the contrary, there is a very strong regulation strengthening, shifting the need to comply with the rules from the state to private business.

- What is your attitude towards the draft law on withdrawn capital tax? Does it have any chances to be adopted and why does it cause so much controversy?

— I must admit, I am biased in relation to the withdrawn capital. I am a big supporter of this tax because one of the reasons for such a depressed state of the Ukrainian economy is our rather intricate and unjustifiably complicated tax system. I think that tax on the withdrawn capital, though not immediately, will allow businesses to relieve tension in the fiscal field, which will ultimately lead to an increase in budget revenues.

— Should we wait for the lifting of the moratorium on the sale of agricultural land in the coming years? How should a law on the sale of land be set forth to take into account the interests of farmers, businessmen, and the state?

— As for the lifting of the moratorium on the sale of land, I think it should not only be expected and hoped for, but it should be actively promoted because such a legal mechanism is nonsense as it is. In this case, I speak as a lawyer – the very principle of the moratorium and the arguments for its implementation are absolutely unacceptable from the point of view of basic human rights. Transformation of a real estate into a burden, a kind of serfdom, on the contrary, when the land is assigned to a person for good — it sounds as perfect anachronism. Moreover, I agree with the statement that the land market already exists. But it is “black”, it is built on by-pass schemes, and therefore the establishment of an open land market can bring nothing but good, in my opinion. The worst things have already happened to this market.

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- What do you expect from 2019: will it be a year of a leap forward for business sector and our country as a whole?

— I would like to say that 2019 will be the year of a leap forward, but it will rather be a year of answers to very important questions. I do not expect some breakthrough in the economy, any super-positive changes, but the situation with the same martial law, with the tax field, with the elections should finally become clear, it will show which way Ukraine is moving. And this may be even more important in the current perspective than specific percentages of GDP growth. I think these important answers will allow us to count on a proper breakthrough and growth in 2020-2021.

Maanimo