Law: Partners who sleep with the enemy

It's unthinkable: lawyers and accountants chatting? Next thing they'll be in business together...

IT MIGHT not have struck the casual observer as the most dynamic of gatherings, but when a group of leading City lawyers and accountants sat round a table last week to discuss the way they provide professional services, it was a landmark event.

To put it mildly, the two professions are suspicious of each other. Lawyers view the big five accountancy firms as number-crunching automatons, hell-bent on world domination. For their part, accountants see lawyers as mired in antiquated working practices more relevant to the 19th century than to the 21st.

So what on earth were these high-flyers from the two professions doing, squeezed round a table at the London offices of the US law firm Jones Day Reavis & Pogue? They were discussing the prospects of what, until recently, would have been unthinkable: multi-disciplinary partnerships (MDPs).

For some, MDP are the way of the future: professional services - accountancy, auditing, consultancy and law - all wrapped up in a one-stop shop. But there is just one problem. Professional regulatory bodies in England and overseas generally take a dim view of lawyers forming partnerships with anyone apart from other lawyers. So a debate rages in legal circles around the world, over whether dropping bans on MDPs will allow the Barbarians through the gates, pillaging independence and leaving a trail of conflicts of interest in their wake.

Indeed, international opinions differ. A commission of the American Bar Association should report any day on its view of MDPs. It is expected to be heavily influenced by the US Securities and Exchange Commission, which has said the roles of auditors and lawyers would be incompatible under one roof.

A contrary view has come from Europe, where the European Commission said at the end of April in response to a Law Society of England and Wales consultation paper that MDPs "will promote innovation". In Australia recently, the Law Council of Australia came out relatively in favour of relaxing bans on MDPs, while, in Canada, the Quebec Bar has given qualified support, as long as individual MDPs are controlled by the legal profession.

And back at home, the Law Society of England and Wales has just completed a consultation on whether the ban should be amended or dropped. It is likely that the Society's ruling council will give the go-ahead for MDPs by the end of the year.

Over the last six years, lawyers and accountants have been co-operating and indeed coming close to forming MDPs without in fact crossing the regulatory line.

And at the end of April, KPMG jumped on to the bandwagon, bringing a marketing-department-designed name to the concept in its launch of Klegal. To get into the game, KPMG also created waves by luring six partners from Arnheim Tite & Lewis, the affiliated firm to its rivals PricewaterhouseCoopers.

Ian Barlow, KPMG's head of tax and legal services, is adamant that blended service provision is the way forward for both professions. "There is a significant market wish for disciplines to be combined to provide integrated solutions," he says. "Not all clients will want that to happen; many will still want to manage their professional services separately. But there is a substantial number of clients - both large and small - who will want an integrated solution developed, because doing so will take the heat off them internally."

The big players in the traditional world of independent City law firms tend to be less enthusiastic about the prospects of success for MDPs. At Clifford Chance, the second-biggest law firm in the world, the view is clear. "I don't think there is a place for MDPs," says the firm's Tom Rose. "Our clients want a high- quality service and an MDP could endanger that level of service." However, Terence Kyle, the chief executive at Linklaters & Alliance, says it would not be sensible for law firms to discount the fact that the big five accountants are establishing themselves in the legal market. And they have the resources to to do it.

But for them to be successful presupposes that they will be able to attract successful lawyers. And one of the problems they face in doing that is that accountants' earnings are generally lower than lawyers'. "I don't see them as being able to persuade enough quality lawyers to gel together to form a force that would threaten the top end of the City legal market", he says.

But Christopher Tite, managing partner of Arnheim Tite & Lewis, disagrees. "The sort of work we are doing currently is for companies in the top 200. And our revenue-per-lawyer figure puts us at about 16th in the UK. All of our lawyers come from top-10 City firms and their ability to handle top-end work has been proved."

As is often the case, it appears that market demand for choice will force the hand of regulators around the world.