E&Y's Swedish legal network under threat

The other four offices are scrambling to create a combined separate legal entity by the end-of-year deadline.

The Reviserslagen law on accountancy firms, which was introduced in autumn last year, states that an auditing firm cannot perform any legal work that is directly linked to an auditing firm. "So there's no point in Ernst & Young existing as a law firm," said Stockholm managing partner Anders Fernlund, whose office is now being dissolved.

Fernlund is taking a team of five lawyers to Delphi & Co; teams are also joining Södermark and Lindh Stabell Horten, one lawyer is joining Lindahl and competition specialist Rolf Larsson is joining the Competition Authority. Some associates have still to find work.

This leaves around 37 lawyers at the firm's offices in Malmo, Uppsala, Karlstad and Gothenburg. Swedish managing partner Claes Sjölin said he still hopes to keep these offices together, but Fernlund thought the battle was lost and said that only the seven lawyers of Uppsala and Karlstad had managed to unite.

The accountancy firm entered long negotiations with the Accountancy Board, but the firms were denied any cross-ownership or profit-sharing agreements.

KPMG gave up the fight this summer when it launched KLegal in June, but E&Y has failed in its efforts to keep its lawyers together.