The rocky road to MDPs
27 May 1997
22 August 2014
23 June 2014
9 June 2014
10 September 2013
9 September 2013
Although separated only by a relatively narrow stretch of water, a huge gulf exists between the legal services strategies of UK and Irish accounting firms.
Over the past couple of years, the 'Big Six' accountancy firms in the UK have dipped their toes into the legal services market with three of them setting up independent legal practices at arm's length. In Dublin, however, such a move is further down the road.
Recently, speculation has mounted that a number of the Irish Big Six accountancy firms are investigating some sort of move into the legal market. But, when questioned, they are coy about any such strategy.
Coopers & Lybrand senior partner Bill Cunningham admits that multidisciplinary partnerships (MDPs) are on his agenda, but says the firm has no fixed plans. "We have looked at the question of providing legal services, but we haven't made our mind up yet," he explains. "It is on the agenda of our international firm, and so therefore it is on our agenda. We have looked at the Irish market and there is no overriding reason to do it here at present."
Coopers & Lybrand's UK affiliate recently set up its own independent law firm, headed by Mark Lewis and Christopher Tite, who were both partners with City practice Stephenson Harwood. The creation of Tite & Lewis dovetails with the formation earlier this year of Coopers & Lybrand's legal network GIE, an umbrella under which the firm's global legal network is being developed.
A start-up operation by an Irish accounting firm is unlikely, according to Cunningham. "A way in might be with a medium-sized law firm with the same niche. I think it would be too difficult for a large Irish law firm and a large accounting firm to marry their different cultures and structures."
Fee sharing between Irish lawyers and accountants is prohibited under the original 1954 Solicitors Act and its 1994 amendment. According to Ken Murphy, director general of the Law Society of Ireland, there is an enabling provision in the 1994 act which allows the society to permit fee sharing after consultation with the ministers for Justice, and Enterprise and Employment. That, however, is an unlikely scenario.
"There has been no such move by the society to date, nor is one likely," says Murphy. "The view of the society, which was taken back in 1991, is that multidisciplinary partnerships would not be in the public's interest. In essence we believe that it would undermine the independence of the legal advice which the public receive from the legal profession here."
Murphy concedes that a move by the new Labour Government in the UK to legalise MDPs might shift the debate in Ireland. "If they were legalised in the UK then it might not be sufficient policy for the Law Society in Ireland to say we are against them, he says. "We might have to look at what aspects of MDPs could be lived with."
One partner at a medium-sized firm criticised the society's attitude. "It should be something solicitors should be grown up enough to deal with rather than trying to block it for non-thought-out and non-commercial reasons."
All of the Big Six in Ireland provide what Cunningham describes as "quasi" legal services. "There are services we provide that could be classified as legal, mostly in the tax area," he explains. "But we don't draw up contracts, or do conveyancing work which would be seen as traditional legal services, and we don't recruit lawyers with the specific intention of providing legal services."
KPMG, which has one of the largest networks of law firms in Europe, has also ruled out setting up its own legal practice. "We are not forming a law practice and don't have any intention to at this stage," says Robert Barker, a KPMG tax partner in its financial services practice. "What we have done is an internal reorganisation which, in effect, has beefed up our company secretarial practice."
As part of the "beefing up", KPMG has recruited solicitor Chaoime Collins and barrister Michael O'Toole to head the development of its corporate legal advisory services department. Its legal offerings include providing advice on company law and EU directives as well as regulatory tax work, International Financial Services Centre law, and advising on Central Bank and stock exchange regulations.
Barker believes it will be a number of years before Irish accountants follow the lead of their UK counterparts. "It is probably a logical move in the UK environment," he says. "But this is a smaller environment and most firms wouldn't want to jeopardise their existing referral relationships with law firms in favour of an exclusive arrangement.
"I think it will eventually happen, but not until well into the next century. In the end it will be very much client-driven, and will depend on whether they want a one-stop shop."
Opinion is divided on whether clients actually want "one-stop" shopping for professional services. David Dillon, of the medium-sized law firm Dillon Eustace, is sceptical. "It is possible that you might find somebody who you have great faith in to deal with all your transactions. But usually in looking for a top-of-the range service people will tend to go to one adviser for one thing and another for the other. "
Murphy suggests that MDPs might be a "non-issue" in an Irish context. "Where is the demand?" he asks. "There is lots of talk within the professions themselves, but are they staring at a market demanding this, or staring at their own navels?"
Frustration at not being able to undertake certain legal work was one of the reasons behind the departure of Ernst & Young's tax director Brian Bohan in January. "There was a certain frustration at having to get advice on legal matters that I knew I could do infinitely better myself," he says.
Bohan, now a sole practitioner, provided legal services to the Ernst & Young partnership, representing it in disputes with staff, and also advised on wills, trusts, tax work, and Business Expansion Schemes. But there were only ever two lawyers employed by the firm at any one time, he says.
Any move by Arthur Andersen may come through its UK law firm Garretts. That practice was set up by the accountants in London more than three years ago. "We are always interested in areas in which Arthur Andersen has a strong practice, and we are looking at all opportunities and regions," says Garretts' lead partner Julia Chain. "I would rule that [Ireland] out, but nothing is happening at present."
Garretts' fee income for 1997, including its Scottish associate firm Dorman Jeffrey, is projected at £22m by Chain. Arthur Andersen has legal associates in about 24 countries, and recently acquired a dominant position in the Spanish market following its merger with J&A Garrigues.
A rumoured link with the Dublin medium-sized law firm Whitney Moore & Kellar was denied by both parties, but Chain confirms that Garretts has worked with the firm.
Another crucial element in the debate is the size of the Dublin legal services market. The top end of it is currently divided up by five or six large firms and the same number of medium-sized firms.
The consensus is that accountants will find it very difficult to break into what is already an intensely competitive market. "I think it's a non-runner," says Masons' partner Declan Moylan.
"The market is crowded and small, and very well served.
I think that any new firm would have a hard time establishing itself."
Dillon agrees. "The market is entirely based in Dublin, and I think the Big Six would find it too hard to break into it."
For Moylan the motivating factor may be commercial. "If it happens it is because some law firm sees the move as a way to take it up the rankings quicker than the market might grow."