Technology has raised the bar for client expectations and is creating strong demand for the best, most accurate and fastest services at a lower cost. The challenge is to see how law firms can utilise technology tools to deliver for clients. Innovative firms that embrace this digital change will do well and thrive.
In what areas do you see potential for growth within your business?
Growth is always difficult to predict at the best of times. Nowadays, with so much economic and political disruption, it’s an increasingly complicated task to create a credible business plan. However, one can safely say that an area in which there is great potential growth for lawyers is in assisting banks in cleaning up their balance sheets by tackling non-performing loans (NPLs). Another promising growth area is the financial services sector where Cyprus is becoming a significant regional hub for funds and for other financial services companies for the Middle East and North Africa.
Shipping is obviously a key sector, as are energy and support services. One area that has a lot of potential, but is still in its infancy, is the R&D sector. The 2019 EIB Investment Survey found that only 11% of firms in Cyprus are classified as active innovators or developers, a figure which is well below the EU average of 28%. I think this is a sector we should invest heavily in by establishing more development centres to create IPs that may be exploited or licensed around the world. That is something we haven’t really done yet in Cyprus.
I also anticipate that domestic and cross-border infrastructure projects will generate more business. Large projects like these cannot succeed without solid professional support. I include under this umbrella the potential rise of the East Med either as an energy hub or, as an alternative energy corridor to the EU.
I continue to see growth potential in Cyprus as a second home both for individuals and for business. It is particularly attractive for people who come from our ‘neighbourhood’, either from the Middle East and Balkan countries or even from Africa. Cyprus is a good location to create a base from which to conduct business in other parts of the world and especially in the EU. Indeed, Cyprus is already gaining traction as a headquartering location for international business. Operating and management costs are lower here than in bigger and more mature business centres in mainland Europe, our regulatory and tax framework offers many advantages, we have a vast pool of seasoned professionals and a highly educated workforce, and last but not least Cyprus offers a great lifestyle – especially for families.
How do you see technology changing your business or disrupting your sector?
Things in the legal sector are changing big time, there’s no doubt about that. There are areas of ‘mundane’ law that may soon be completely overtaken by technology. More specialised areas may be slower to change but none will be immune from it. Technology has raised the bar for client expectations and is creating strong demand for the best, most accurate and fastest services at a lower cost. The challenge is to see how law firms can utilise technology tools to deliver for clients. Innovative firms that embrace this digital change will do well and thrive.
As a firm we are introducing a legal tech innovation hub this year. We are working with engineers and developers from across the globe and the project is progressing well. Both our challenge and our ambition is to start creating legal tech tools that will make life easier for us, our clients and for other law firms. I envisage a situation where the routine work could be executed by a machine that can process data and thousands of pages of information even in the context of litigation. This would allow the human legal mind to focus on the more important parts of the client relationship and offer advice based on a given set of facts.
We are also creating a data centre providing advice to clients as to how they can best guard their data against cyber-attacks. Data is becoming, if it is not already, the most important commodity in the world. The protection of data is a huge issue not only from a legal standpoint, but also from a technical and IT aspect. If they get hacked, companies may suffer irreparable damage not only to their reputation, but also to their very existence. We will guide our clients in all aspects of data protection to give them peace of mind.
Some argue that soon it will not be sufficient merely to have ‘traditional’ lawyers, but in the near future we will need lawyers capable of working alongside engineers and IT specialists. These ‘legal engineers’ will be providing advice on, for example, blockchain solutions and other forms of artificial intelligence. This may indeed be the direction that we are heading towards but the rising importance of technology is not something that a good lawyer should fear. I still believe in the importance of the human relationship and in the human advice that lawyers provide to guide clients. Technology is our aid to providing better client service, it is not our replacement.
How do you think Brexit is going to affect Cyprus?
I do not think we will lose business because of Brexit. On the contrary, we have much to gain if we capitalise on opportunities arising from it and market Cyprus to the right people in the correct manner. Many European capitals are already seeing huge benefits because of Brexit. Professionals from Dublin, Amsterdam, Luxembourg, Brussels, Frankfurt, Paris and even Madrid are talking to colleagues of ours and saying they have been extremely busy in the last couple of years. Many companies that were based in the City of London have created a second base in one of these European capitals just to have a succession plan when Brexit happens.
Cyprus on the other hand has lagged in attracting any substantial business so far (although the re-flagging of some vessels from the P&O fleet could be seen as a promising start for our Shipping sector). The blame for this probably lies with a lack of coordinated and aggressive marketing. However, we have recently seen some companies creating a third base here to have geographical proximity to the Middle East, the Gulf or to North Africa. This is a niche we can build on. We should also emphasise the fact that we have English common law as this makes it simple for UK lawyers to work with us for the benefit of a client.
At a higher level, however, I strongly believe that Brexit is bad for everybody concerned. It is bad for the UK, bad for the EU and it’s bad for a small country like Cyprus. The UK with its strong pro-business stance has played an important role within the EU and has helped to maintain the balance of political power. We are worried about Brexit bringing more regulation and legislation in its wake. We really hope that a good exit deal can be agreed as without it the ensuing ‘red tape’ is likely to stifle many business opportunities.
In your view, does Cyprus continue to suffer from image problems of the pre-bail-out years, and if so are these perceptions founded?
Unfortunately, we are still haunted by certain bad practices that took place in the past and we pay a disproportionately heavy price because of them. Recent anti-money laundering (AML) scandals in some European countries have revealed that hundreds of billions may have been utilised in ways that were not proper. That is AML on a massive scale relative to anything that may have previously taken place in Cyprus and yet we tend to be stigmatised more. Unfortunately there is an amount of politics involved in everything and Cyprus is a small country with limited resources and limited political power to defend itself. In many parts of the world we are still perceived as a ‘dark jurisdiction’ and this is completely unfounded. There has to be a more concentrated and coordinated effort on the part of the government and all regulatory bodies, including the Central Bank and the Cyprus Securities and Exchange Commission, along with the private sector to promote an accurate image of the country.
However, the best way of countering the stigma is to focus on making sure that we do and are seen to do things correctly here at all levels. The reality today is that our AML and other compliance systems are extremely strict- to the extent that we have more stringent measures in place than many other European jurisdictions. This is of course a positive move and one that we should publicise. Unfortunately, however, as is often the case with these types of developments, I think we may have gone to the other extreme. We must be careful not to disincentivise and stop perfectly legitimate business from operating here. This requires AML officials to focus on and to understand the objectives of the law rather than to simply adopt a box ticking approach. Opening bank accounts for legitimate customers should take days and not months.
For decades, Cyprus was lucky in a way that it generated a lot of business whilst facing little competition, but times have changed. The days when hundreds or tens of thousands of companies were registered here are long gone. We can expect to see the number going down dramatically. Handled properly this is not necessarily a negative. Cyprus needs to focus on attracting quality rather than quantity. We must attract more corporate or individual clients with solid businesses and activities that they can develop and expand through our services, this is the real win-win situation for both our clients and the country.
A key part of achieving this success is that we should do everything possible to restore the good name of Cyprus in the international financial sector. We must offer quality services on a competitive basis, promote the jurisdiction and establish Cyprus as a business centre of choice.
As a firm, we take AML compliance extremely seriously both for our protection and for the protection of our clients. We have dedicated significant resources towards this and have permanent compliance officers. Doing things properly like this obviously increases our operational cost but it is a cost that you unfortunately cannot carry over to the clients – hence profit margins are inevitably affected. We are probably one of the biggest firms in Cyprus in terms of size and number of lawyers but we are focused on quality and not quantity of clients. We handle only 30-40 companies which is a low number because our admission criteria is so high and strict. This was a policy decision, so that we can ensure that we adhere to the highest standards of quality, risk control, compliance and AML procedures.
How do you see Cyprus and your sector developing in the next few years?
To talk about the shaping the future you must begin with an objective and a strategy to achieve it. The key to success boils down to creating a sustainable model. This model cannot be completely rigid since there is no fixed degree of certainty in life. We must keep evolving and reassessing our methods and goals and the model must be able to adapt to them. Firms that will thrive in Cyprus and elsewhere are the ones that are creating a sustainable model through better and faster delivery of services at a lower cost, that add value to their clients, and, that assist them in becoming more competitive in a fierce and changeable global business environment.
There are big changes happening with the services sector both in Cyprus and internationally. I believe that a successful future for Cyprus relies on it moving more into niche and quality businesses. We should focus on attracting high-net-worth individuals and companies for the right business reasons. To flourish Cyprus needs them to set up here, have a degree of sophistication, and to understand and comply with all the new set of laws and regulations that exist to conduct successful cross-border business. We would be happy if these types of companies set up here, created offices, created employment and contributed to our efforts in developing the country’s business landscape in a sustainable manner.