Andersen set to shake up HK law firms

PUBLISHED : Sunday, 01 September, 1996, 12:00am
UPDATED : Sunday, 01 September, 1996, 12:00am

THE world's largest accounting firm, Arthur Andersen, is about to throw down the gauntlet to Hong Kong's widely complacent legal profession - threatening many traditional law firms.

What has surprised many accountants and lawyers in town is the speed with which Arthur Andersen has seized an opportunity to expand its services in the territory.

The landmark move to allow multi-disciplinary firms - one-stop shops for professional services - was part of the recent Legal Service Legislation (Miscellaneous Amendments) Bill 1996.

But the legislation has not been implemented, and it was generally thought accounting firms looking to establish multi-disciplinary operations would at least wait until this occurred.

Informed professional sources, however, have made it clear that the Andersen organisation may not be forced - and indeed may not be prepared - to wait until the legislation comes into being.

They point out Arthur Andersen's unusual Swiss-based international structure - under which it already has its various legal and accounting operations worldwide - means the one-stop shop legislation may be irrelevant.

The firm has already established several of its legal operations throughout the world, even though multi-disciplinary partnerships were not allowed in individual jurisdictions.

A Hong Kong legal division will help to build on the momentum Arthur Andersen has already established through the establishment of its Australian legal arm, Sharwood Eyers Wilkie, just under two years ago.

Arthur Andersen's accounting operations are not substantial in Hong Kong, and the firm is generally regarded as the smallest in Hong Kong of the so-called Big Six operators.

This is largely because the firm has devoted most of its resources to setting up an accounting arm in China, where it is ahead of its competitors.

Now, the firm is believed to be looking to establish itself as a big player in the legal profession throughout Greater China, and plans to use Hong Kong as its regional base. The firm has set a goal of becoming the world's largest legal firm within 10 years, and says Asia will be a central plank in that strategy.

All this is likely to be bad news for a number of big law firms, particularly London-based firms with operations in Hong Kong, which have unleashed all manner of arguments against the establishment of one-stop shop practices here.

They say a single entity for legal and accounting services would not always serve clients' best interests. Many representatives in the legal profession believe the one-stop shop raises serious issues about possible conflicts of interest and breaches of confidentiality.

But at the time of the establishment of Arthur Andersen's legal operations in Australia, representatives of the firm there were adamant that - while providing more convenience - the legal operations would operate as a separate entity from the accounting firm.

It is also argued that the influx of accounting firms into the law will benefit consumers, because the additional competition will create more efficiency in the marketplace.

No doubt Arthur Andersen will be at pains to run its proposed Hong Kong legal operations on an arm's-length basis from its core accounting function.

But that will not stop some established law firms attempting to exploit any doubts over conflict of interest.

It will be interesting to see just who is first to start throwing stones.



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