A Little More Liberté

The 308 articles of the Macron Law did more than open the door to SPEs (the subject of this post).

As regards lawyers (avocats), it also relaxed certain restrictions on how lawyers may practice. Three of those changes are especially significant:

This is the third in a series of eight posts relating to France.

The first change relates to the types of companies in which lawyers may hold shares and via which they may practice law. To begin, in the past, lawyers could not be shareholders of a commercial company, but only of those forms of company especially intended for regulated professions (those special forms are called sociétés d’exercice libéral, or SEL). Today, under Article 93 of Decree 91-1197 of November 27, 1991 (modified by Article 4 of Decree 2016-882 of June 29, 2016, implementing Article 63 of the Macron Law), lawyers can now also create and be shareholders of most forms of commercial companies (sociétés commerciales), such as société anonyme (SA), société par actions simplifiée (SAS), and société à responsabilité limitée (SARL). The only limitation is that they cannot be forms of commercial companies which would result in the qualification of its partners as merchants (commerçants).

The second change relates to the number of structures in which lawyers may practice. In the past, lawyers were restricted by the principle of “unity of practice” (unité d’exercice or unicité d’exercice). Under this principle, a lawyer could practice either as a sole practitioner or as a partner or as an associate of a law firm, and in no other manner. Further under this principle, a lawyer could practice only in one of these manners. If the choice was with a law firm, then the lawyer could practice with only one law firm. Today, Article 63 of the Macron Law has eliminated the principle of unity of practice. As a result, a lawyer may practice as a sole practitioner as well as a partner or as an associate with multiple law firms or SPEs, and can be a shareholder of more than one law firm or SPE.

The third change relates to the types of goods and services that a lawyer or a law firm may provide. Under Article 111 of the Decree 91-1197 of November 27, 1991, lawyers and law firms were not permitted to engage in any commercial activity deemed to be “incompatible” with the practice of law. This was generally considered to exclude the sale of pretty much any kind of good or service other than the provision of legal services, notable exceptions being in the areas of publishing and teaching/training, and also subletting office space to other lawyers. Article 4 of Decree 2016-882 of June 29, 2016, implementing Article 63 of the Macron Law has added a clause to Article 111 of the Decree 91-1197 of November 27, 1991 stating that lawyers as well as law firms may offer “on an ancillary basis, goods or services connected to the practice of law if these goods or services are intended for clients or other members of the profession.”

Lawyers and law firms who seek to offer such goods and services may not, however, do so entirely freely. Article 111, as modified, requires such a lawyer or law firm to notify the competent bar authority within 30 days of first offering such goods or services. The bar authorities then have the right to “request all useful information or documents” in order to determine if such activity is compatible with the profession’s ethical rules.

These changes to Article 4 of Decree 2016-882 raise a great many questions. They include:

1)         What does it mean for goods and services to be offered “on an ancillary basis?” Does it mean that revenue from those sources cannot exceed a certain threshold? Also, what types of clients are permitted? Do they have to be clients who have previously purchased traditional legal services from the lawyer or law firm, or can they be new clients?

2)         The introductory notes to the Decree explain that this change “authorizes legal publishing, professional training, and the provision of office space and other means of practice to other lawyers or law firms.” On the other hand, Article 4 of the Decree itself contains no such list. Does this mean that only those three types of goods and services are allowed, and no others? Or was the list only meant to be exemplary? Given that before the adoption of Decree 2016-882 many lawyers and law firms already offered those three types of goods and services without being considered to be in breach of ethical rules, you could ask: what is the point of Article 4 if it does not effectively expand the permitted types of goods and services?

To the extent the experience of England & Wales may provide an example, the responses to these questions may evolve over time. Let me explain:

To make a long story short, when the Solicitors’ Regulatory Authority (SRA) of England & Wales first began to license alternative business structures (ABS), the authority was severely criticized for how it handled license applications. Not only did it take a very long time to respond to applications (as long as two years in some cases) but it showed great reluctance to grant licenses to “new, unfamiliar approaches.” For that reason, it was accused of demonstrating an “inherent cognitive bias” against anything unfamiliar. Over time, however, the SRA gained more confidence in its role and became more willing to take risks. Not only did it considerably simplify the application process as well as considerably shorten the application period, but it also began to grant licenses to a greater number of “novel” approaches.

If this example is anything to go by, it is likely that the first lawyers and law firms that notify the competent French bar authority that it would like to offer goods or services that are not one of the three types mentioned in the introductory notes to Decree 2016-882 will take the risk of meeting considerable resistance by that authority. This resistance will likely continue for as long as it takes for the authority to gain confidence in its role and to overcome its likely own “inherent cognitive bias” against anything unfamiliar. Additionally, the authority will need to gain the confidence needed to withstand the criticism it will undoubtedly encounter, especially if any such “ancillary” good or service that it allows is later considered to have “failed” in some manner.

Considered on an individual basis, the changes described above may appear to be insignificant. Some may even appear to be nothing more than technical tweaks that are barely worth mentioning. However, as we will see in a following post, considered as a whole, these changes, together with those described in this post and this post, are France’s first, firm steps towards the adoption of alternative structures.

Related posts on this site:

John Kain, Managing Director, Kain Lawyers

Rod Cunich, National Practice Group Leader, Slater and Gordon Lawyers

Robert Cross, Project Manager – Research, Legal Services Board

Links to the other seven posts in this series:

  1. There’s Something About France
  2. A Big Happy (French) Family
  3. A Little More Liberté
  4. France’s Haeri Report on the Future of the Legal Profession: Intro
  5. France’s Haeri Report and Alternative Structures (1 of 2): Je t’taime un peu
  6. France’s Haeri Report and Alternative Structures (2 of 2): Je t’aime, moi non plus
  7. France and Alternative Structures: Putting the Pieces Together
  8. Alternative Structures: Why is France Succeeding While the US Continues to Fail?

All eight posts, regrouped, can be viewed at this link: Regroup of posts on France

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