Accountants' pacts with lawyers ruled out by EU decision

A ruling by the European Court of Justice has effectively ruled out partnerships between lawyers and accountants here. The Court has backed a decision by Dutch regulators to bar two lawyers from partnerships with accounting firms Arthur Andersen, auditors of failed US energy trading giant Enron, and rivals PricewaterhouseCoopers (PwC).

Mr Ken Murphy, director general of the Law Society of Ireland, welcomed the ruling yesterday and said the principle is now not open to a legal challenge in Ireland. "We are delighted with the outcome of this case. The judgment has confirmed the core values of the legal profession of independence, confidentiality and the avoidance of conflicts of interest," he said.

Commenting on the ruling, the Institute of Chartered Accountants in Ireland (ICAI) suggested that link-ups between lawyers and accountants might be examined by the Competition Authority, which is looking at the professions at the moment.

A spokesman said the debate about offering multidisciplinary services had grown out of client demands.

The ruling by Europe's highest court means lawyers have no right to team up with accountants to offer consulting and accounting services.

"The court is saying there may be a degree of incompatibility between the advisory activities carried out by a lawyer and the supervisory activities carried out by an accountant," a court spokeswoman said.

The lawyers had argued that European Union competition rules gave them the right to collaborate with accountants. The EU court held that those rights were outweighed by other considerations

"The court recognises that this is anti-competitive and may affect trade between the member-states," said a court spokeswoman.

Nevertheless, the court decided the prohibition was reasonable "because those measures are necessary for the proper practice of the legal profession", she said.

Lawyers JCJ Wouters and JW Savelbergh had sought permission from their local Dutch bar associations to collaborate with Andersen and PwC, two of the big five accounting firms. The associations refused, citing a 1993 rule that does not explicitly authorise lawyers to set up integrated offices with accountants.

The court accepted the view of its advocate general, who said long before Enron's failure in December, that the Dutch ban was proper.

It said that lawyers must act in the sole interest of their client, in complete independence and with complete professional secrecy. - (Additional reporting by Reuters)