While the resolution adopted by the American Bar Association (ABA) this month against multi-disciplinary practices (MDPs) has recently hit the headlines, the French wrangle has been rumbling on for years. The current situation in France is very much a product of the legal profession’s history.
Until 1990 there were two main legal professions. One was the strictly regulated avocat who had to be a French national and take full cultural and legal exams to join the profession. The other was the conseil juridique, a profession open to any nationality and more relaxed. So when foreign and accountancy firm-linked legal practices arrived in France, they did so as conseils juridiques.
In 1992 the two professions merged. By this time, the big six accountancy firms had put together legal organisations and the accountancy-firm linked practices were doing well. Under the merger law the French nationality requirement was relaxed and those practising as conseils juridiques at 31 December 1990 were allowed to join the new merged profession without restriction. But subsequently, to become an avocat any new candidate had to pass a French law examination irrespective of the law they intended to practise.
The law firms associated with the big accountancy firms joined the new profession and MDPs thus now exist in this profession.
Article 67 of the merger law stated that accountancy firms that owned law firms had five years in which to change their legal practice names so they could not be confused with those of the accountancy firms. But none of the names changed. Most of the MDPs were based just outside the reach of the Paris bar in La Défense and so had control over the second largest bar association in France with about 1,250 members (compared with 15,000 in Paris). PricewaterhouseCooper’s legal arm was based in Paris and last year was forced by the local bar to change its name to Landwell et Associés.
The MDPs argued that Article 67 should be interpreted as applying only to new entrants into the MDP market. In response, there were rumblings about litigation from various bar associations but nothing came of it.
Then, about three years ago, the MDP issue became a hot potato, partly in response to the ABA’s study of the issues involved. At the same time there was a desire to harmonise the ethical rules of the 180 bar associations representing the nearly 39,000 lawyers in France. The Conseil National des Barreaux (CNB), created by the 1990 merger law, introduced its standard ethical rules in 1999 and submitted them to the individual bars. These included Article 16 which would, if upheld, essentially sound the death knell for MDPs.
Under Article 16 of the new code of conduct a law firm can ally itself to a MDP but only on the condition that everyone in the MDP is covered by bar rules. Also, the MDP must make it clear to the public that the law firm is part of an MDP. In addition a law firm cannot represent a client which is audited by a member of the MDP, as an auditor is legally bound to disclose any financial dodgy dealings, while lawyers are bound by client confidentiality to keep quiet.
KPMG decided to bring a court case against the Dijon bar, which was the first to adopt the rules, arguing that the CNB did not have the authority to introduce Article 16, as the prerogative of adding any further restrictions to Article 67 belonged solely to the legislature. This was dismissed by the Court of Appeal in Dijon and is now going to the Cour de Cassation. There are about 20 other similar cases against local bars and now that the Paris bar has adopted the new code including Article 16 legal proceedings are expected there.
All of which ought to sound a warning to the ABA. The French market is trying to work its way around a historical situation which allowed MDPs to creep in by the back door. But the ABA has just rejected MDPs and therefore implicitly any further discussions on the subject. If it does not stay in the debate control may get taken out of its hands by the government. Then the ABA could end up having to look on while a solution unacceptable to the legal profession is imposed on the market. And attempting like the French bars to re-establish control over a market that it has allowed to get out of its hands.
John Riggs is managing partner of White & Case in Paris.