Accounting for legal rivals

Lawyers in the Netherlands are facing a new threat to their livelihood as the country's accountants step up their fight for a chunk of the legal services market.

Two accountancy firms, Price Waterhouse and Arthur Andersen, have begun court action against the Dutch Bar

Association over its rules on multi-disciplinary partnerships. Meanwhile, Price Waterhouse has also turned to Brussels, lodging a complaint with the European Commission, arguing that the MDP rules contravene EU competition regulations.

A favourable result for the accountants will open the floodgates to accountancy firms, most of which have devised ambitious strategies to enter the legal services market. According to one partner in a major firm, KPMG has approached his and other firms proposing merger.

However, the accountants are constrained by rules forbidding them forming partnerships with lawyers. The regulations, which came into force in 1993, permit accountancy practices to cooperate with law firms and employ lawyers in-house. But they prohibit their involvement in the running of a law firm, and remove the rights of lawyers employed in accountants to appear in court or claim professional privilege. These are just a few of the barriers accountants want swept away.

Dutch Bar president Tony Huycoper describes the system as "liberal", but accountants argue the options are too limited.

The court starts hearing the case in January, but, perhaps more worrying is the competition directorate of the European Commission, which is believed to take a dim view of restrictive trade practices within the professions.

The threat is being taken seriously by the country's leading firms. "The competition from accountants will force law firms to consider their position," says Ludwig van den Berg, the London-based partner of De Brauw Blackstone Westbroek. "But we should not be afraid of the accountants. Our best defence is in our strengths."

"We have to keep moving into areas where it will take a accountants a long time to build up expertise," adds Diederik van Wassenaer, Nauta Dutilh's resident London partner.

Indeed, catching up with the leading law firms in the market will not be easy. Over the last 10 years, Dutch law firms have transformed themselves into formidable legal powerhouses.

The process began at the end of the 1980s, when firms from the main commercial centres – Amsterdam, the Hague and Rotterdam – merged to create large, powerful national practices.

"The reason why we grew was because the market demanded it," van Wassenaer observes. Clients, he says, wanted greater specialisation as the legal and regulatory structures in the country became increasingly complex.

Tax advice is a classic example of Dutch firms responding to market forces. Historically, this was the domain of independent tax advisers – a separate profession in the Netherlands – and accountancy firms. Stibbe Simont Monahan & Duhot was the first major firm to break with tradition, taking on two high-profile tax lawyers 10 years ago. Today, the firm has 20 lawyers in its tax department. Many other firms have followed suit.

The creation of national giants also fuelled firms' international aspirations. Hague-based De Brauw Blackstone Westbroek was a driving force in the creation of the Alliance of European Lawyers, which, five years ago, was one of the most ambitious strategic moves ever undertaken on the continent.

But this was soon eclipsed by the emergence of multi national partnerships, also driven mainly by Dutch firms. First came Loeff Claeys Verbeke, bringing together a Dutch firm and a Belgian firm. Then Stibbe Simont brought a Dutch, Belgian and French firm under one roof. Some major firms remained aloof from these trends, but, eventually, even they felt compelled to respond.

These changes have meant that the premium international and transactional work is now heavily concentrated in a handful of large, full-service, truly international firms – and it will be difficult for upcoming rivals to wrench that work away.

Most at risk from accountants, according to van Wassenaer, are small and medium firms. But these have also been swept up by the changes in the Dutch legal market and some have merged with specialist practices and forged their own international links. However, they may find it hard to match the resources and, in particular, the pricing policies of the accountancy firms.