War of the words
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10 July 2013
French plans to regulate MDPs have a sparked a debate between lawyers and accountancy firms which could lead to all-out war, reports Richard Tyler.
Wherever you encounter the debate, the subject of lawyers and accountants working together has always been prickly. But in France, famed for its red-blooded defence of traditional working relationships, the exchange of views is less of a debate and more akin to open warfare.
The reason for this inconvenient distraction from World Cup success is a report on multidisciplinary practices (MDPs) by the Conseil National des Barreaux (national Bar council), the body of 80 lawyers whose role it is to harmonise the varying professional rules used by France's 163 local bars and to represent their interests to the national government.
For first time, the Conseil National has issued a consultation paper on the regulation of MDPs which is being discussed at local bar level.
More than 4,000 French lawyers (over 10 per cent of the entire profession) are associated in some way with an MDP.
All the Big Five accountancy firms have law firms attached to them in Paris and, by size, they dominate the legal scene. Price Waterhouse and Coopers & Lybrand will have 520 lawyers in Paris when the firms merge their practices later this year. This will make them Paris' largest law firm. Arthur Andersen's law firm Archibald Andersen comes in second with 370 lawyers.
And across France there are hundreds of smaller firms where accountants, notaries and lawyers work in tandem.
But to all intents and purposes, the Conseil National's report represents the interests of lawyers in private practice. It identifies 24 areas where harmonisation across the different bars must be achieved as a priority. The definition and regulation of an MDP is one of these.
By the council's definition, an MDP will exist where:
lawyers practise with other professions using the same firm name or distinctive logo;
where there is documentation presenting a group that offers MDP competence;
where there is a mechanism in place that triggers direct or indirect sharing of costs or income; and/or
where a common clientele exists or where there is technical, financial and marketing co-operation.
If any of these conditions are met, the report recommends that the lawyers and "networks" involved should ensure that the operation of the practice does not affect the essential principles of the legal profession and that it does not contradict the articles of law on soliciting clients and on advertising. The report then advocates regulation of the different professions that make up the MDP.
To help regulation, the Conseil National recommends that MDPs reveal to their local bar the legal and financial structure governing the working relationship between the lawyers and the other professions involved.
When the Paris Bar Council issued a similar report soon after the Conseil National's it set in motion a debate that has become a hot topic among lawyers in Paris and the regions.
That the Paris Bar followed many of the Conseil National's arguments is significant in itself. The Conseil National was set up in 1993 and a power struggle ensued between it and the Paris Bar, which represents more than 13,000 of the 28,000 lawyers in France, and which historically has set the agenda for the profession. So with the "meeting of minds" over the regulation of MDPs there appears every possibility that rapid progress will be made.
But one sticking point is the fact that only Coopers & Lybrand CLC and Deloitte & Touche's associated law firm Thomas & Associes are based in central Paris. Firms like Arthur Andersen, PricewaterhouseCoopers and Ernst & Young have their law firms based in La Defense, a suburb of Paris, and their lawyers dominate the local bar of Nanterre, in the department of Haute de Seine.
For the Paris Bar the test case for the new requirements will be the merger of Coopers & Lybrand and Price Waterhouse. The two firms aim to bring their two legal and tax practices under one roof by October. Both have expressed their intention to the Paris Bar that they would like to move to a central Paris location and that it would be "nice" if they got a good reception.
The merged firm's underlying concern is that the Paris Bar will come down heavily on it by insisting that it reveals the entire financial and legal structure of the MDP and demand that each profession in the MDP is regulated by an independent body.
According to lawyers close to the negotiations, there has been some progress. They say the accountants have accepted the Bar's desire to see evidence that there is no pressure put on the lawyers to break ethical professional rules of conflicts of interest or client confidentiality.
Dominique Garanderie, the president of the Paris Bar, is also said to be taking a diplomatic rather than bulldozer approach to the talks, so as not to frighten the accountants out of Paris.
But Jean Gaignon, president of the executive committee of tax and legal services at PricewaterhouseCoopers, says his firm is still considering the Paris Bar's requests.
"We are ready to speak frankly and be transparent," he says. "We feel we are part of the legal profession and we can help the legal profession to evolve because there are some serious problems."
Gaignon argues that most of the problems have their roots in the differing views of lawyers in private practice and those who work in an MDP over such matters as the role of professional and ethical rules. "What we aim to do is serve clients," he says. "The question is, are these ethical rules serving clients? They are not there to protect professional interests in some kind of economic dispute."
Pierre Berger, partner at KPMG's law firm Fidal and president of Juri Avenir, an association of about 1,000 lawyers working in MDPs, argues that the Conseil National's recommendations go too far and pose a serious threat to the future growth of MDPs in France.
According to Berger, the position of the Conseil National goes beyond both the spirit and the letter of the law governing the interaction of lawyers and auditors.
He says: "Juri Avenir thinks that the legal profession used arguments based on professional codes of ethics in order to stop the networks' [Big Five] development."
He adds that the legal profession may have questions about how law firms in MDPs work, but the Conseil National cannot accuse them of wrong-doing without first proving it.
This challenge has been taken up by the Union of Young Lawyers, which is studying the information that the Big Five accountancy firms have submitted to regulators across Europe on the lawyer/auditor relationship in their European legal networks.
But Gaignon says that the union's time would be better spent coming to talk to the young lawyers working in the MDPs.
And he argues that it is all very well putting forward solutions, such as greater regulation, but the MDPs cannot be held responsible for the financial difficulties that approximately 40 per cent of lawyers in private practice in Paris are currently facing.
As the year progresses the debate is set to heat up further. PricewaterhouseCoopers is the test case for the Paris Bar. If the firm decides the bar is attaching too many conditions to its move then it will retreat to the MDPs' heartland of La Defense. And if that happens the Conseil National will have a battle on its hands to get the Nanterre bar to agree to any of its proposals. The war of words is intriguingly poised.