Liberalising legislation to help lawyer-led MDPs grow in Germany

Kilian: Small and mid-sized firms will take most advantage of the change

Multi-disciplinary practices (MDPs) are set to develop further in Germany in the wake a new law that expands the types of professionals with whom lawyers can form partnerships.

German lawyers have long been able to practise in partnership with tax advisers, patent attorneys and auditors.

The Federal Lawyers Act, which came into force last month, increases this to members of other professions, such as management consultants, doctors, architects and engineers.

The Act provides that non-lawyer partners are subject to controls by local bar associations – their lawyer partners have to guarantee that non-members follow their professional rules, that the lawyers’ professional independence must be guaranteed in the partnership agreement (which the Bar can inspect) and that the partnership agreement must allow bar members to “jettison” non-lawyers who have violated the rules.

Professor Dr Matthias Kilian, who specialises in the legal profession at Cologne University, told Legal Futures that MDPs “have never been a big issue” in Germany, with tax advisers, accountants and patent attorneys seen as “junior branches” of the Bar; their regulation almost exactly mirrors that of lawyers.

He explained: “When those professions emerged after WW2, the lawmakers more or less copy-and-pasted the Lawyers’ Act and replaced ‘member of the Bar’ with ‘tax adviser’, ‘patent attorney’. So professional rights and duties, administration, oversight, discipline in their respective laws is regulated in an identical way.”

Professor Kilian stressed that the new law detailed what types of ‘independent’ professions lawyers could share profits with, a lengthy list that also includes physiotherapists, massage therapists, pilots, journalists and interpreters.

An MDP could only share office space and overheads with any profession not named in the Act.

Professor Kilian is director of the Soldan Institute, which researches the legal market, and last year it found that 11% of lawyers surveyed were interested in setting up an office-sharing MDP, with 8% eyeing a profit-sharing MDP.

But he said the reform has also renewed interest in setting up MDPs with tax advisers and accountants.

“While it is difficult to predict, I expect that changes will pretty much be like in Australia and England, i.e. the majority of firms that will make use of the new rules will be smaller and mid-sized with a few larger figurehead firms that will get most of the public focus.”

External ownership remains banned as every member of an MDP must exercise his or her profession “actively” in the MDP.

However, though this prevented investors, Professor Kilian said the fact the Act allowed MDPs with business consultants and “professional experts” – which were not regulated professions – meant there was “a bit of grey area”.

He added that the German ministry of justice reportedly has external ownership on its radar, but there was strong professional resistance.

Writing last year on the Law Society website, Markus Hartung, a former managing partner of Linklaters in Germany and a member of the German Bar Association’s professional regulation committee, said the Act would also provide non-EU law firms with “a reliable and legally secure basis for their activities in Germany”.

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