Oral Testimony of William M. Hannay - Center for Professional Responsibility

Oral Testimony of William M. Hannay, III,

Chair of the ABA International Law and Practice Section,

and a partner at Schiff Hardin & Waite


The Commission next heard from William M. Hannay, III, Chair of the ABA International Law and Practice Section. A partner at Schiff Hardin & Waite he explained his international practice background and participation in international bar negotiations. He clarified that the ABA International Law and Practice Section had not yet adopted a formal position on the subject of multidisciplinary practice and that his comments, though reflecting advice and suggestions from certain Section leaders, were his own. He presented his written statement to the Commission.

Mr. Hannay responded to Professor Daly that use of lawyers by accounting firms in the Far East is in its infancy; there are lawyers in accounting firms in Hong Kong and China and in the last four years the Big 6, now Big 5, have acquired law firms. Mr. Mundheim questioned the statement that a change in MR 5.4 would be seized as a reason to lock out U.S. lawyers from Japan, that is, wouldn’t any argument be used? Mr. Hannay said that MDPs would be used as a good faith basis for denying U.S. lawyers the right to practice in Japan as MDPs are based on business justifications and would lower the perception of the American legal profession as a profession. Japan views its legal profession as honored (tight controls) and keeps lawyers in law firms away from participation with U.S. and English lawyers. He then referenced the IBA Vancouver meeting newspaper account where Chris Arnheim of PricewaterhouseCoopers indicated he had been instructed by the Chief Financial Officer without Chief Counsel input to illustrate a MDP’s chilling effect on professionalism. Judge Friedman, mentioning that witnesses from Europe and Canada have recounted MDP experiences, raised the question that foreign jurisdictions know and understand this phenomenon. The response was that the International Law Section does not want to add an arrow to the quiver of foreign Bars and governments in restricting entry for U.S. lawyers. He also said it is far from a foregone conclusion that the MDP phenomenon is here to stay and mentioned the May 1999 gathering of the UIA, Paris Bar and the ABA International Section led by President Anderson (with Steve Nelson) that will discuss this issue in its day long session. Asked by Mr. Traynor if the Prince Jefri case was fact specific or had larger implications Mr. Hannay said it concluded that clients of professional service firms that obtain litigation support services can subject the providers to lawyer rules and that Chinese walls are not sufficient (there was no evidence of leaks). Ms. Lamm said the Commission has heard from the heads of bars in France, Germany and Great Britain where MDPs do exist and lawyers from these countries are not treated differently than U.S. lawyers in Japan. She said the approximately 8,500 bengoshi in Japan want to limit competition. Multidisciplinary practice in other countries has developed because of the absence of rules, France is an example; in the U.S. the existence of MDPs would be seen as a weakening of the rules. Mr. Hannay was unable to tell Ms. Lamm where the legal access issues before the World Trade Organization’s Working Party on Professional Services might end up but did say that legal services would require a set of disciplines like those written for the accounting profession, subject to the commitments made in the country-specific schedules. Twenty-eight of the thirty or so pages of the U.S. schedule are legal services. Ms. Lamm thought that WPPS negotiations on legal services issues might start up as soon as July. Mr. Hannay said the International Section is a strong advocate of market access and liberalization. Asked by Ms. Katz whether there was any MDP practice in Japan Mr. Hannay explained that the ability of an American, British or French lawyer to practice law in Japan has been very limited - a lawyer couldn’t practice under the name of his or her firm but rather The Office of Bill Hannay, and what the lawyer could practice was very restricted. Until 1998 a foreign lawyer could not form any kind of association with a Japanese lawyer and under a special arrangement passed last year only three firms - Freshfields, Baker & McKenzie and White & Case -, to his knowledge, have tried it. None have been accounting firms. In response to Ms. Garvey he explained that the International Section had recently formed a Task Force on MDPs but the Task Force would be unable to come up with specific recommendations in time for the Commission’s deliberations. Paraphrasing his suggestion that the Commission not change Model Rule 5.4 to allow lawyer/nonlawyer partnerships in order not to interfere with American lawyers’ negotiations to open up markets abroad Ms. Garvey asked if there was a time limit on the suggested restraint. He said that if the WTO process of multilateral negotiations with respect to legal services proceeds the issue of MDPs is certainly a fair one to put on the table. He sees as a different point whether MR 5.4 should be changed or whether lawyers ethics (probably the most restrictive) should apply to the entire integrated firm or just the little pocket of lawyers or law firm involved. His and the Section’s principal concern centers around pulling the MDP issue out of context, isolating it, and doing nothing about the transnational issues which he consider to be far more important to American lawyers as a whole than what happens with respect to MDPs. Mr. Rosner asked Mr. Hannay’s opinion of whether every U.S. law firm of a sufficient size and standing to attract clients like Prince Jefri and the government of Brunei would have rejected the government’s engagement following their representation of the prince. Mr. Hannay said he wasn’t sure about everyone but the case certainly wouldn’t have gotten through the screening process at his firm. He didn’t know any of the people involved at KPMG but said it is an approach to conflicts characteristic of accounting firms as they truly believe Chinese walls are the answer. Accounting firms routinely have engagements for companies that are adverse to each other in all sorts of matters and from an accountant’s point of view this is fine; however, when the line is crossed into litigation support, where leaks become extremely dangerous, a different set of rules are called for. Mr. Hannay told Mr. Rosner that the litigation support unit of KPMG was involved in both engagements and did not get client permission. On the general question of obligation under international treaty Dean Powell was told that there are many reservations built into the U.S. and virtually every other country’s accession to GATS (General Agreement on Trade and Services) regarding the legal profession, and the reservations flow from cultural as well as competition reasons. Japan, in some ways, is more solicitous of the concept of professionalism than the U.S. as, for example, they still believe the appropriate model for practicing law is the sole practitioner (and that’s one of the reasons they’ve been reluctant to permit relationships between Japanese lawyers and American or British or French lawyers). Mr. Hannay responded to the Chair that there are 14,000 members of the Section of International Law and Practice and, based on the ABA annual census, about an equal number of nonSection member lawyers who practice international law to some degree or another. He thought about 40,000 American lawyers have some international aspect to their practice. The Chair added to the picture the 400,000 lawyer members of the ABA as well as the equal number of U.S. lawyers who are not ABA members. Based on the fact that of this total number over 60 percent are in solo or small firm practice and the Commission’s been told they would like the opportunity to develop a multidisciplinary practice, the Chair asked how the international consideration alone could justify asking the Commission not to relax Model Rule 5.4. Mr. Hannay said looking at the numbers is balancing things that really are not comparable and he is presenting angles on issues that need to be considered. He’s asking the Commission not to forget his 50,000 when it’s thinking about its 400,000.