The German legal regulator has told UK firms that take advantage of the Legal Services Bill that they will be barred from practising in Germany.
The news may alarm firms such as Taylor Wessing, which is taking advice over the possibility of a private equity sale once regulations allow. In voting on a conversion to limited-liability partnership (LLP) status last week, the firm took the next step towards making this possible.
A Bundesrechtsanwaltskammer (Brak) spokesperson told The Lawyer: "Germany is a big market for English law firms, and under German law its lawyers may not be allowed to practise in law firms with these structures."
The regulator's attack on the legality of the bill comes ahead of crisis talks with Law Society representatives in Berlin, scheduled for February 2007.
At the February meeting Brak will outline amendments concerning confidentiality and impartiality that will need to be added to the bill, which is expected to be introduced in the next session of Parliament.
"While we are careful not to interfere with another country's national issues, we're against the introduction of alternative business structures [ABSs]," said the spokesperson. "Anything which compromises the core values of the legal profession, namely independence and confidentiality, should not be legal."
In June Brak sent a letter to the joint parliamentary committee scrutinising the draft Legal Services Bill, voicing its concerns about the bill's provisions for ABSs, which will allow law firms to accept investment, ownership and management from other professional bodies, including banks, insurance companies and estate agents.
Taylor Wessing was the first firm to confirm publicly that it is considering a private equity sale once regulations allow and the firm's managing partner Michael Frawley has confirmed that he is continuing to receive advice on a sale.
Frawley said: "The current thinking on [the bill] is that the changes are more aimed at high street and commoditised firms than large City practices. However, it's still early days."
The Law Society said it was aware of the Germans' concerns and that they will be addressed, but the Department for Constitutional Affairs has stated that it does not agree and that the "proposals are entirely facilitative".