Oral Testimony of Dr. Hans-Jürgen Hellwig of Germany,
Vice-President of the German Bar Association,
Before the American Bar Association
Commission on Multidisciplinary Practice
August 8, 1999
Dr. Hans-Jürgen Hellwig of Germany (Vice-President of the German Bar Association, who had spoken to the Commission in February) took the microphone. He commented on a few of the Commission's recommendations based on the practical experience of lawyers in Germany. Unlike the U.S. situation, there are MDPs in Germany. Lawyers in Germany have tried to resolve the issues connected with the MDP context with an approach much like that in the Commission’s report. Referring to recommendation 9 of the paper he submitted to the Commission after his Los Angeles presentation, he stated that the difference in disclosure obligations of lawyers and nonlawyers in MDPs must be sufficiently understood by the client. There must be what the Commission calls informed consent. Based on the German experience he asked whether the Commission has considered the impact its proposal can have on the public confidence in confidentiality of lawyers at large. He said the practical experience in Germany is quite a negative one. That is, law firms, pure law firms, start using Chinese walls because MDP firms work on that basis with the consent of clients. As he said in his presentation in Los Angeles, bad examples start ruining good morals. The law firm does not know the internals, and, therefore, it simply follows the same pattern as an MDP, completely forgetting the fact that for a law firm, the consent of the client in the case of conflict rules is not sufficient. Consent of the client can never justify violation of the conflict rules because lawyers are an organ of justice. When the Commission speaks of informed consent he wonders whether the word ‘informed’ should not also be applied in the first place when discussing the request of clients for one stop shopping. Shouldn’t that equally be an informed request in the sense that the clients making the request know what the eventual consequences could be to the confidentiality of the legal profession, consequences that could endanger the entire justice system? He referred to Recommendation 10 of the Commission Report; a lawyer in an MDP must make reasonable efforts to ensure that the MDP has in effect measures to ensure that the nonlawyers conduct is compatible with the professional obligations of the lawyer. Based on the German experience with the Big Five (an experience of quite some time) he dares to bet that this is simply not going to work. Is it realistic to assume that a junior lawyer who is employed by an MDP or who has just been admitted as a junior partner and who has no chance of finding a comparable position with a law firm will have the audacity and strength and power to bring nonlawyers in the entity alongside the professional obligations of the lawyer? How can a weak lawyer in the Big Five context bring the nonlawyers in line if the Bars, at least in Europe, have failed to do so? In his humble opinion the Commission, in Recommendation 10 simply passes the black jack to the weakest of all, possibly the junior lawyer in the MDP context. Referring to the Commission’s Recommendation 14, the written undertaking by the MDP not controlled by lawyers (he wondered what that term means), he said it would not work in real life. Compliance with the undertaking is simply not auditable unless the lawyers concerned are prepared to talk. Would any Commission member in such an MDP situation be prepared to talk and to risk their job? The experience in Germany clearly says no. Put under this obligation, the majority of lawyers in an MDP situation will prefer the job security to the pureness of the legal profession.
How did MDPs and the giving of legal advice by accountants, at least in Europe, become a reality under the eyes of competing law firms without being questioned by these competitors in court? Hardly anyone attacked the accountants because the firms get too much referral business from them. Recommendation 14 does not require that all members of the MDP comply with the conflict of interest rules applicable to lawyers; letter D requires only that members of the MDP delivering or assisting in the delivery of legal services abide by the Rules of Professional Conduct of lawyers. If he understands the Recommendation correctly, it creates the situation where, in an M & A transaction, an MDP can advise the purchaser by providing legal advice by a lawyer while the seller can be advised on accounting issues by the accountant partner in the same firm (allowable in the Commission’s MDP recommendation because the accountant partner is not rendering legal advice). He asked what would be the consequence if the written undertaking were to be breached? This is an issue they’ve discussed fervently in Germany and to which they have not come up with a solution. Would the consequence be the dissolution of the MDP? That would not be in the power of the authority that is supervising the lawyers, in the case of this country, the courts. Would the consequence be the disbarment of the lawyer members in the MDP? He left it to the Commission whether that would be progress or not. In his opinion, discrepancies in the professional rules of the various professions cannot be resolved, at least in the case of the Big Five, simply by expecting lawyers in the MDP to bring the rest of the MDP up to the higher level of the lawyer’s professional rules. That’s tantamount to requesting that the last few hairs of the tail should wag the dog. Based on the experience in Germany if the Commission does not simply wish to pass on the black jack to the weakest of all, namely the junior lawyer in the MDP, there are only a few possibilities with a realistic chance of success. One, the level of the professional rules of the other professions is brought up to the higher level of the legal profession; that is, the discrepancy is eliminated by moving everything upwards. This is made a precondition for allowing law in an MDP. Or, second, the level of the legal profession’s rules is brought down to the lower level of the other professions - be it for all types of legal work, including court work, or for non-court work only. The latter gives up the unity of the legal profession, an issue that is also being discussed in Europe in the context of the MDP. The Commission’s proposal, he is afraid, will have the result or is running the risk of having the result of tacitly bringing down the level of the rules of the legal profession.
He summed up by saying the Commission’s proposal is too little to protect the professional rules of the legal profession in an MDP context based on the real life German experience; on the other hand it is too much in liberalizing the present prohibition. He asked the Commission to remember that he who gives the devil a small finger will lose his arm. "…coming back to the need for MDPs, do you know that some people are already joking, what does MDP stand for? It stands for money disciplined partnership."