2011-11-10 Business learned to contend - business learns to tolerate: Interview
November 10, 2011, 08:00 a.m.
Interview with David Sargsyan, Head of the Legal Service, Ameria Group
Could you please specify the main directions of the legal and advisory activities of the company?
I'd better specify the spheres our services do not cover. It's family and criminal law. In the rest of the spheres we have a team of professionals each specializing in a particular sector. One of our units is engaged in judicial system and provides court representation services. The other unit works with corporate clients and offers full-scale services covering legal aspects of business management. Currently we are working on a new interesting product - audit of labor contracts. It is aimed at both updating of agreements in terms of labor and legal issues and their adjustment with the current legislation.
We have a considerable number of clients, and permanent clients, too, who have been cooperating with us from the very date we launched our business. In some cases clients seek correct interpretation of the legislation in terms of its application in a particular industry. We provide both legal consultation and legal opinion. We are legally liable for the services we provide. Our professional liability insurance is unique as compared with most Armenian advisory companies where the liability issue is yet to be handled, although liability insurance is widely practiced in Western jurisdiction.
Besides, we have a group of experts who review bills and cooperate with the Ministry of Justice to give their best possible opinion on such bills. Such activities do not imply any profit; they are aimed at contribution to the legislative development of the country. Based on it we plan to include draft laws and bills analysis into our services and customize it to interests of concerned business directions.
Were the entrepreneurs ready to face the changes in the Labor code adopted back in 2010 summer?
Considerable difficulties arose because the changes were enforced in August which is considered a 'Passive' for businessmen. For some provisions the transition period would have been a better option. Overall, some of the provisions could be additionally clarified in future.
Efficient settlement of labor disputes is also worth mentioning. Previously the maximum term for labor dispute settlement at courts was two months. Then a more reasonable term was set since the courts do not manage to handle the volume of instituted suits. In this context establishment of trustworthy arbitration could be great. We have a relevant Law 'On Commercial Arbitration' which is not widely practiced yet.
Recommendations of IMF for Armenia include also a mechanism for tax arbitration under the Ministry of Finance. How efficient might it appear to be?
As a lawyer I am for arbitration institutions in any industry, as long as it is more efficient, cost-effective and time-saving as compared with judicial system. Our society still demonstrates more confidence in judicial system while arbitration is perceived as a less formal remedy where one is expected to pull someone's strings in order to get what he wants. Therefore it should be made clear that with independent and competent arbitrators the issue may be settled easily, timely and which is most important, fairly.
Earlier this year the procedure of business registration was simplified. How well does the new scheme fit the business?
Although the procedure was simplified advising on most of the issues is still required. Founders often prefer elaborating an own charter rather than adopting the model charter approved by the State Register, since the own charter reflects the corporate objectives better and is more compliant with that of the foreign parent company. In such cases we can verify the compliance of the charter vs. the current legislation and provide relevant recommendations and solutions.
The registration procedure for business liquidation has also been modified. Did it lead to simplification of the liquidation procedure?
We have executed both liquidation and M&A transactions for some of our clients. We have considerable experience in both spheres and did not face serious problems during that process. In addition, the recent Government reforms have facilitated the process even more. For instance, the tax clearance certificate is now provided in electronic form like most of the references. If the businessmen have no tax liabilities, they may apply for a liquidation based on their own assurance.
The National Assembly of the Republic of Armenia has long been discussing the package of bills on restriction of cash transactions. Can this package create difficulties for those businesses which are used to work with cash?
Of course, the fewer niches for the shadow business are left the higher is their potential need in our services. Business starts getting interested in legal facilities which will help to organize the activities in a proper and lawful manner. In this regard the measures aimed at restriction of cash transactions are definitely useful. Most businessmen still prefer to close transactions in cash. Foreign countries abandoned such practice both in business and in consumer sales long ago. It will be quite to the point to bring an example from the times when I was working and studying in the USA. There you could hardly find anyone with a banknote worth more than 20 dollars in the pocket. But it is a matter of monetary culture rather than a legal issue.
In your opinion which branches of business law require reforms more urgently?
The business may benefit from the new version of the Tax Code which will comprise all legal acts relating to different types of taxes. If we manage to elaborate an all-embracing code covering the legal relationship in the tax field, it will help to make the laws clearer for the business. This mechanism is also better from the point of view of codification of legislation.
The other issue which becomes more urgent is the private-public partnership. Long-term development projects are being initiated and implemented in Armenia. Investments in these projects will not be paid off soon or may have no payoff perspectives at all. Such investors should receive special advantages and the investment mechanisms should be simplified for them. It is more reasonable to grant such advantages to projects due to which infrastructures, direct and indirect jobs are created. The ropeway 'Wings of Tatev' may be a good illustration of such projects. But currently such projects are mainly initiated by private investors. To support them the Government should create a system platform.
Recently Ameria Group launched its official representation in California. What parallels one can draw between the Armenian and American legislation, environment and business?
This step is essential for us since it's a kind of a chance to enter the American market where investment advisory services on Armenia are in great demand. A considerable number of Armenian-American enterprises are ready to invest in Armenia but are held back by weak understanding of our legislation and procedures. In addition, fourth or fifth generation Armenians living in America become bearers of not only the American culture but also the legislation. And the US legislation considerably differs from our legislation. Take case law, for instance. That's why our advisory services in the US may serve as guidance on the RA legislation and the business practice in Armenia. Unfortunately, investments from the US are not always duly coordinated in Armenia. Investments often may be driven by advice of a relative or friend, groundless confidence in business partner (not always a familiar one). As a result people turn to us too late when the consequences of abuses cannot easily be recovered. I will not say that we are able to remedy the situation immediately and completely, but still conflicts are resolved more easily if there are professional advisory services engaged. If both parties are represented by professional lawyers during the negotiations on key commercial or legal issues, doing business would be much more efficient. If after hearing our legal advice the counterparty attempts to interpret our communication on business level they may lose the thread to the solution. Two lawyers would catch each other better in this case.
Armenian and American legislation and business practices must be quite unlike each other. Could you please outline the main differences?
First and foremost it is the efficient and really independent judicial system. The US legislation is rather bureaucratic in terms of document circulation and the elder generation who has got negative reminiscences of the Soviet bureaucracy can easily draw parallels between the American and Soviet models with a single exception. The bureaucracy is efficient in the US. The number of references required may be greater but one can easily get all of them within one day. You can draw parallels with our reality. Moreover our so-called 'bureaucracy' may for some obscure reason be present also in the private sector, whereas in the US the business is definitely and unconditionally client-oriented.
Do you have any practice in providing advisory services to Armenians from the Russian Federation, or does their extensive experience help them to get along without advisory services?
Clients from Russia surely have more similarities with our businessmen. It's interesting that in most cases they get surprised with our reforms in paperwork and business. Our laws on bank transfers are more liberal. No transaction certificate is required for FX transactions between residents and non-residents neither are there any limits on dividends management in Armenia. The procedures pertaining to business registration and other industries underwent considerable simplification, too. So in many cases the RA legislation turns to be a nice surprise for the Russian investors who turn to us.
Conducted by Aram Gareginyan
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