Germany's legal regulator has made an unprecedented intervention in the debate over legal services reform in England and Wales to warn that firms with non-lawyer shareholders would 'be inconsistent with the requirements of German law' and face a major problem if they wanted to operate in the country.


The letter from the Bundesrechtsanwaltskammer (BRAK) - which was sent to the joint parliamentary committee scrutinising the draft Legal Services Bill - will heighten fears about the international fall-out of the reforms.


The Law Society has previously told the committee that suspicions the proposed legal services board will undermine the profession's independence is already being used by foreign authorities as an excuse to make market access by solicitors more difficult.


Germany is liberal over law firm structures and has long allowed multi-disciplinary partnerships. But BRAK president Bernhard Dombeck said the importance German law places on lawyers' independence means that 'only lawyers and members of some other professions which have similar rules of conduct shall be partners and/or shareholders of a law firm. The further requires that its partners/shareholders shall be personally active in the firm.' Lawyers must also be in the management majority.


Under the Bill's provisions for alternative business structures (ABSs), lawyers will be able to accept investment, ownership and management from the likes of banks and insurance companies. Dr Dombeck said: 'Those legal bodies being inconsistent with the requirements of German law, we are therefore of the opinion that German rechtsanwälte lawyers as well as solicitors and barristers established in Germany would infringe German professional rules if they became a member of such type of an ABS. Those firms would therefore encounter a major obstacle in Germany.'


Law Society President Kevin Martin said: 'Our support for external ownership of law firms depends on arrangements being made to ensure that the consumer protections provided by traditional law firms are fully maintained. This can be achieved if the Law Society is given the necessary regulatory powers. We are in touch with the German bar about their concerns. We hope discussions planned for later in the year, once the regulatory situation surrounding ABSs is clearer, will allay their fears.'


City of London Law Society chairman David McIntosh said the BRAK letter reinforced his call for the government to take more care in drafting the rules for ABSs, although he added that there was not 'a stampede of City law firms' in the direction of seeking external investment.


A Department for Constitutional Affairs spokesman pointed out that ABSs will not be compulsory and said firms will have to consider the relevant regulatory environments before creating them.



Neil Rose