MDP bans are legal, European court rules

A ban on multi-disciplinary partnerships (MDPs) between lawyers and accountants is anti-competitive but can be justified as the obligations of professional conduct imposed on lawyers 'may militate against that kind of partnership', the European Court of Justice ruled this week.The landmark decision on the Dutch Bar's MDP ban comes at a time when the Enron affair has focused attention on accountants offering audit and non-audit services together.

It backs an initial decision by the court's Advocate-General, Philippe Lger, given last July.The court identified three 'essential rules' of the Dutch Bar which are designed to ensure 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 a conflict of interest; and the duty to observe strict professional secrecy.The court said: 'By contrast, the profession of accountant is not subject, in general, and more particularly, in the Netherlands, to comparable requirements of professional conduct.'As a result, it said: '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.'In the light of this, the ECJ said it was 'reasonable for the Netherlands rules to impose binding measures, despite the effects entailed which are restrictive of competition, because those measures are necessary for the proper practice of the legal profession'.Even if MDPs are allowed in other EU countries - such as Germany, where accountants have comparable confidentiality rules to lawyers - the Dutch Bar is entitled to maintain its ban, the ECJ added.The case went to the ECJ to decide whether European competition law should be applied to the professions with specific reference to the Dutch Bar's ban, which was challenged by both Arthur Andersen and PricewaterhouseCoopers.The ECJ said competition law should apply in these circumstances as law societies and bar associations are 'associations of undertakings'.Law Society chief executive Janet Paraskeva said: 'This ruling relates specifically to the Netherlands where they have different rules and regulations, and their bar is not required by statute to take its decisions in the public interest.'We welcome the acknowledgement that the prohibition of MDPs restricts competition.

We support the principle of MDPs as part of our commitment to improve access to legal services and choice for consumers.'John Fish, president of the Council of Bars and Law Societies of Europe (CCBE), said the decision protected both the public and good governance under the rule of law.The CCBE has long had a policy of cautioning against the potential problems of MDPs, and Mr Fish said the collapse of Enron and issue of conflicts of interests between professionals working for the same client it caused 'were the very dangers that the CCBE foresaw in its policy'.Tony Williams, Andersen Legal's joint managing partner, said he was pleased to have won the argument that the Dutch Bar was subject to competition law.He added: 'This will not stop us practising law in the Netherlands, in Europe or anywhere else around the world.

Our business is built on the strength of our reputation as a legal practice that works in close co-operation with other professionals.

That is not going to change.

We are active champions of the core values of the legal profession.'Neil Rose