September 30, 1999
The Nallet Report and Multidisciplinary Practice
A summary by Sydney M. Cone, III and François Berbinau
Background of the Nallet Report
The Nallet Report (the "Report"), addressed to the Prime Minister of France in response to a request dated September 14, 1998, was published in Paris in 1999. The Report is entitled Les réseaux plurisdisciplinaires et les professions du droit (multidisciplinary networks and the legal professions). The person responsible for preparing the Report, Henri Nallet, is a member of the French National Assembly and a former French Minister of Justice.
The Report deals with multidisciplinary practice ("MDP") in a French setting, and much of the Report relates to the profession of avocat, which generally corresponds to the American profession of lawyer. The context of the Report is existing French legislation and professional rules, and policies of the European Union.
The Report describes in some detail the presence in France of substantial law practices under the control of the Big Five. The Report observes that prohibiting MDP in France is out of the question, focuses in particular on the Big Five, and concentrates on recommendations for the regulation of MDP.
With respect to the Report’s recommendations, three observations are in order. (1) To a considerable extent, the Report sets out principles, not detailed guidance for applying those principles. (2) At this time, it is unclear whether and how the Report’s recommendations will be reflected in French legislation and professional rules. (3) Views will necessarily differ as to whether and how the recommendations might be applied in an American context.
The Report and the United States
Notwithstanding these observations, the Report’s recommendations on the regulation of MDP may be analytically useful to an American concerned with MDP, and the Report’s focus on the Big Five may be particularly useful in analyzing their efforts to promote MDP in the United States. Indeed, because the Big Five have been actively practicing law in France for some years through practice groups created or acquired by them, the Report’s recommendations necessarily reflect substantial actual experience with MDP as carried out by the Big Five and, for this reason alone, may merit attention in the United States.
The Report’s Survey of the Big Five in France
The Report contains extensive information about the Big Five (and their predecessors) in France. It describes their presence in France as "gigantic" and sets out data as to their substantial revenues, large number of employees, and major share of the market for accounting, auditing, legal, and other services. It explains that, as a regulatory matter, the Big Five have been permitted to render legal services in France, subject, in recent years, to the statutory rule that a law firm in a Big Five "network" is not supposed to use the name of the "network." It says that a law firm in a Big Five "network" is required to disclose to the relevant French bar the contractual and constitutive documents underlying the firm’s relationship with the Big Five firm, but questions whether these documents have in fact been fully disclosed. On the basis of a survey of users of legal services in France, the Report indicates that the Big Five have been particularly successful in attracting clients in need of international legal services, in part because there are few French law firms that can offer such services, and further indicates that the larger corporations in France tend to want the opportunity to use independent law firms as well as law firms affiliated with the Big Five.
The Report’s Eight Principal Recommendations.
The Report’s eight principal recommendations concerning MDP are summarized below. (The following enumeration and summary are not found as such in the Report.)
First, the Report calls for legislation that would define MDPs and authorize the free creation of MDPs thus defined. The Report would open MDPs to all professions, and not just to those that are statutorily regulated. Even so, the Report focuses almost exclusively on MDPs of the type created in France by the Big Five.
Second, the Report calls for the creation of a national commission having jurisdiction over matters of professional ethics involving MPDs (a new Comité national de déontologie des réseaux). This commission would be authorized both to prescribe ethical rules where there were conflicts or gaps in the rules applicable to the professions in an MDP, and to resolve particular ethical cases where existing disciplinary bodies lacked jurisdiction. In principle, this new commission would when feasible apply pre-existing ethical rules and act through pre-existing disciplinary bodies. The Report proposes that the new commission have eight members—three from bar organizations, two from audit/accounting organizations, and three from governmental agencies. (There would thus be one more bar than audit/accounting representative.) The Report further proposes that standing to bring matters before the new commission would be limited to those organizations and agencies, other governmental bodies, and firms and entities within MDPs.
Third, the Report would require that every MDP submit to the new commission, as well as to existing professional disciplinary bodies relevant to the MDP, all agreements and constitutive documents relating to the structure and operation of the MDP. According to the Report, any such agreements and documents not so submitted would be void. The Report would also give clients of the MDP access to such agreements and documents.
Fourth, with respect to the professions of avocat and auditor, the Report calls for the "absolute independence" of each profession from the other. With respect to auditors and accountants, the Report would leave it up to the two professions to work out their relationship and, failing that, to have them consult the new commission referred to above.
Fifth, the Report endorses the principle of forbidding the sharing of fees between avocats and other professionals in an MDP. The Report is unclear as to how, and how far, it would apply this principle, and recognizes that stating the principle does not answer questions relating to the sharing of expenses and the sharing of profits. Again, the Report would turn these questions over to the new commission mentioned above.
Sixth, the Report calls for the independence of each profession in an MDP with respect to its own professional strategy and management, and the admission of partners.
Seventh, the Report touches on three specific questions of professional ethics.
(1) As to conflicts of interest, the Report, without providing any factual data in support of its statement, says that existing MDPs claim to have adopted detailed and strict rules on the basis of recognized principles and norms, that no significant problems have arisen thereunder, and that it will suffice for these MDPs to make their rules public.
(2) As to advertising, the Report calls for common rules for all professions in an MDP, including those professions which do not now have any rules, based on the relatively restrictive rules applicable to avocats.
(3) As to professional secrecy, the Report states that the avocats in an MDP must remain absolutely bound by existing rules of the legal profession.
Eighth, the Report discusses at some length ways in which professional organizations and law firms in particular might be given improved access to capital resources. Here, a proper understanding of the Report’s recommendations requires some knowledge of French law governing professional entities, and French tax law. Generally speaking, the Report calls for changes in applicable law that would facilitate the raising of capital by law firms, both through the firms’ own resources and through passive investments from the outside.