There may be a degree of incompatibility between the 'advisory' activities carried out by a lawyer and the 'supervisory' activities carried out by an accountant

ECJ judgment

Seven years ago, Andersen and PwC took the Dutch Bar Association to court, arguing that the association's restrictions on lawyers' partnerships represented an unfair restraint of trade.

But after much deliberation, the court has decided that some restrictions are necessary if lawyers are "to avoid all risk of a conflict of interests and... to observe strict professional secrecy".

If applied Europe-wide, the ruling could call into question dozens of high-profile mergers and alliances between lawyers and consultants, which see consolidation as central to their development.

Duties under threat

The ruling came as a shock to Europe-watchers, since it contradicted an opinion from the court last year.

The court has changed its mind in the past nine months

Then, the court said that Dutch rules against lawyers' alliances outside the profession were anti-competitive, if the law was considered a profession like any other.

Now, however, the court has decided that the legal profession is not like any other, since it has particular duties of confidentiality and independence.

These duties, the ECJ fears, could be compromised if a lawyer were included in a broader business services company.

"There may be a degree of incompatibility between the 'advisory' activities carried out by a lawyer and the 'supervisory' activities carried out by an accountant," the court said.

"Accountants, who perform a task of certification of accounts, are not, in the Netherlands, subject to a duty of secrecy comparable to that of members of the Bar."

Wider ripples

It is not yet certain how applicable this ruling will be around Europe.

Lawyers at Big Five firms

Andersen: 3,600 PwC: 2,700 KPMG: 2,500 Ernst & Young: 1,850 Deloitte & Touche: 430

Although the Dutch Bar Association has specific rules against such alliances, its sister organisations elsewhere have dropped their objections in recent years.

In Britain, for example, the Law Society and the Office of Fair Trading have begun moves towards deregulating the legal market, allowing law firms to behave more like companies.

In a few places, lawyers are resisting change.

Two years ago, the American Bar Association voted against repealing its rule prohibiting lawyers from sharing fees with non-lawyers, and similar objections have come from France and Germany.

These, however, have yet to be tested in European courts.

Press on regardless

Shrugging off resistance from the authorities and parts of the legal profession, big consulting companies have pushed aggressively into the legal market in recent years.

Their goal is to create "one-stop shops" for business services, offering everything from human resources to accountancy under one roof.

In order to avoid restrictions on legal mergers, most have formed their own legal departments in-house, poaching staff from existing firms.

All the "big five" accounting firms now offer legal services in some form, and in some cases are major players: KPMG's French legal arm, Fidal, is the biggest in the country.

Auditors under fire

The spread of what were once simple accounting firms into allied business services has caused disquiet in many areas.

Most recently, there have been concerns that conflicts of interest caused auditors to overlook the shady accounting practices that contributed to the collapse of US energy trader Enron.

Andersen has come in for particular criticism, as the firm that audited Enron, as well as a string of scandal-hit companies.