Judgment boost for lawyers' integrity

EUROPEAN COURT: In a landmark decision last week the European Court of Justice held that a ban on multidisciplinary partnerships between lawyers and accountants was legal, even though it was anti-competitive. The Dutch Bar's ban was justified because of the different requirements of professional conduct between the two professions.

The judgment is a major setback for the accountancy firms involved in the case - Arthur Andersen (auditors of failed US energy trading giant Enron) and rivals PricewaterhouseCoopers.

Other "Big Five" accountancy firms have also sought to create tie-ups with law firms around the world. They may have to look again at how their arrangements operate in various EU states.

The court endorsed the Dutch Bar's rules setting out the essential duties for the proper practice of the legal profession - "the duty to act for clients in complete independence and in their sole interest, the duty to avoid all risk of conflict of interest and the duty to observe strict professional secrecy".

It also found that "by contrast, the profession of accountant is not subject, in general, and more particularly in the Netherlands, to comparable requirements of professional conduct".

Another issue identified by the court - not a new issue for the accountancy profession but one that has been brought into sharp focus by the Enron debacle - is the potential for conflict of interest.

"The concurrent pursuit of the activities of statutory auditor and of adviser, in particular legal adviser, also raises questions within the accountancy profession itself," the court said.

The potential for conflict of interest outweighed any ostensible economic advantage in the availability of a "one-stop shop".

This judgment has been welcomed by members of the legal profession in the EU and beyond. The Law Society of Ireland views it as a vindication of its view that multidisciplinary partnerships involving solicitors and accountants are contrary to the public interest.

But how can the court approve something it acknowledges as anti-competitive? It is because the court saw the overall objective of the Dutch ban as being "to ensure that the ultimate consumers of legal services and the sound administration of justice are provided with the necessary guarantees in relation to integrity and experience".

In particular, the court approved of the requirement that lawyers "should be in a situation of independence vis-à-vis the public authorities, other operators and third parties, by whom they must never be influenced".

This concept of the independence of the legal profession is the key. If there was no independent legal profession, there could be no independent judiciary. If there was no independent judiciary, there could be no rule of law. If there was no rule of law, there could be no justice, democracy or freedom. The fundamental rights of every citizen depend on the existence of an independent legal profession.

Accordingly, the decision of the Court of Justice should not be seen as a victory for lawyers over accountants. It is a victory for the fundamental freedoms of citizens.

A breach of the competition law principles of the Treaty of Rome, on which principles Irish competition law is based, is not illegal if it can be justified. In this case, the ultimate authority on such matters, the European Court of Justice, has found the necessary justification.

The objective of the statutory prohibition on fee-sharing by solicitors in the Republic - which effectively prohibits multidisciplinary partnerships here - is compatible with the underlying principles of EU and Irish competition law.

Even beyond the EU, in countries such as the US where lawyer involvement in multidisciplinary partnerships is also prohibited in the public interest, encouragement will be taken from this hugely significant judgment.

Irish solicitors recognise the benefits of competition. Intense internal and external competition is a reality for practising solicitors. What this case illustrated, however, is that there can be more fundamental principles at stake that can justify a rule which infringes competition. This judgment has confirmed the special value to all citizens of the legal profession's independence, confidentiality and avoidance of conflicts of interest.

• Ken Murphy is director-general of the Law Society of Ireland