France says “Non” to ABS

The law societies of France object to the arrival of alternatives business structures (ABS). That was the resolution that the Conseil National des Barreaux (which represents the 179 French law societies) voted on 16 June 2012.

The terms of the resolution are particularly strong as the CNB states that:

• ABS cannot be viewed as law firms;
• ABS conflict with “the essential principles of the legal profession in France that guarantee the independence and the competence of its members within a democratic society”;
• no ABS can benefit the freedom of establishment and consequently register in one of the 179 French law societies

The French legal culture explains that opposition.

The French legal market is far less concentrated than in the UK. There is not one French Law Society but 179, comprising 52,000 avocats (since 1991, the professions of solicitors and barristers have been merged in France). Half of these avocats practise at the Law Society of Paris. Most avocats practise alone or within very small firms.

French avocats cannot practise in a company under their title. Where an avocat wants to practise in-house, he/she should ask for voluntary suspension from the law society to which he/she belongs. That is justified by a principle of independence vis-à-vis the employer.

The possibility of multidiscipline practice is limited. Until recently, avocats used to be denied the right to be member of a structure grouping several different independent professions (like the UK multi-disciplinary practice – MDP). This situation has slightly changed as the Act of 28 March 2011 allows a form of multi-discipline equity structure. Certain professions can create a capital structure (SPFPL) which can take equities in two or more firms belonging to certain professions: avocat, chartered accountant, notary, bailiff, auctioneer.

The French code of conduct also allows avocats to be member of a multi-discipline network or to take part in occasional multi-discipline partnerships.

External investments in law firms are very restricted. Where a law firm is created under the particular form of the SEL (société d’exercice libéral), that SEL is allowed to accept external investment, i.e. membership of legal persons (companies) or membership of natural persons who do not practise within the SEL.

But the statutes provide stringent limits. These external persons should be:

• either a natural or legal person practising the same discipline as that of the SEL; or
• people who have ceased to practise the discipline of the SEL, but for a period no longer than 10 years; or
• legatees or heirs of the persons mentioned above; or
• of SPFPL structure.

It should be noted that 50% of the shares of an SEL must be held by natural persons practising the discipline of the SEL.

The status of avocats refuses all confusion. A statutory instrument dated 27 November 1991 provides for the incompatibility of the profession of avocat with commercial activities or partnership in commercial companies.

As chairman of the Franco-British commission of the Paris Law Society, I accompanied the Bâtonnier of Paris (i.e. President of the Law Society of Paris), Christiane Féral-Schuhl when she met with John Wotton, President of the Law Society of England & Wales, on 9 May 2012. Despite the enthusiasm of John Wotton relating to ABS, she recapitulated some of the above-mentioned reasons opposing the arrival of ABS in France. A long time will pass before the French and the UK law societies reach a common view.