News Focus
Going undercover
Following their successful entry into the Spanish market , the ‘ Big Four ’ are now targeting Portugal – some Lisbon lawyers fear decreasing fees and a drain of talent to their new rivals , but others argue that the prospects of success for Deloitte , EY , PwC and KPMG are limited
Look out Lisbon , the ‘ Big Four ’ have turned their attention to the Portuguese legal market , and they are using their strong foothold in Spain to do it . Deloitte has added the Portuguese firm CTSU Sociedade de Advogados to its legal network , while Lisbon firm RRP Advogados has joined the EY global law network . Meanwhile , it is understood that PwC is expected to make an announcement regarding its own entry into the Portuguese legal market imminently , perhaps even before the end of the year .
The ‘ Big Four ’ are making such moves due to the fact that the Portuguese Bar association forbids multidisciplinary practices ( MDPs ) – that is , practices that have nonlawyers as partners – from practicing law in the country . Consequently , the ‘ Big Four ’ have now spotted an opportunity to enter the Portuguese legal market by acquiring stakes in Portuguese law firms through their affiliated Spanish legal operations .
Deloitte was the first to make the move by using its Spanish office as leverage , with Madridheadquartered Deloitte Abogados taking a stake in the share capital of the existing Portuguese firm CTSU . This development has caused surprise in the legal market with one managing partner at a law firm in Portugal remarking : “ That can ’ t happen because MDPs are not allowed to practice law in Portugal .” However , Miguel Rebeiro Telles , one of the founding partners of CTSU , says the link with Deloitte has been a positive one for his firm . “ As regards to the national legal market , we believe that it is still too early to identify any potential relevant or
MDPs in Portugal : Advocates and opponents João Afonso Fialho , president of Portuguese law firm association ASAP ( Associação das Sociedades de Advogados de Portugal ) and a partner at Vieira de Alemida , says a significant proportion of law firms in Portugal oppose multidisciplinary practices ( MDPs ). “ They believe that it would be extremely prejudicial to the practice of law due to , among other reasons , the potential for generation of conflicts of interest .” However , he adds that the large majority of small and medium-sized firms in the country are “ strong advocates of the MDP ”. Afonso Fialho continues : “ On one topic all firms seems to be in agreement , there are advantages and disadvantages of both options and , in my role as President of ASAP , I have the duty of always maintaining the topic on the top of our agenda for as long as it may be necessary .”
Afonso Fialho acknowledges that some audit firms are trying to implement MDPs in Portugal and expresses concern about audit firms possibly going beyond what is permitted under current regulations . He adds : “ There is no doubt in my mind that the current legal framework prohibits the MDP and in order for that to happen , a new act would have to be passed . I am not aware of any authorisation granted by the Portuguese Bar Association to a law firm allowing the acquisition of share capital by audit firms or an MDP and if that happened , such authorisation would be clearly unlawful .” Afonso Fialho says the acquisition of share capital in a Portuguese law firm by a foreign law firm which may have a MDP in their home country is a different issue . He continues : “ Such an operation would be allowed by law , but the Portuguese law firm would not be entitled to have an MDP by taking into consideration the practice of its foreign shareholder in its home country or any other country in which MDPs are allowed . This is typically the case with Portuguese branches of some Spanish firms , which to not have a MDP , although such a practice is allowed in the country of the mother firm .” significant impact that such event may have caused in the Portuguese legal market ,” he adds . “ Taking into account that most of the Portuguese law firms are investing in the internationalisation of their legal practices , and furthermore , that globalisation is definitively the goal to achieve , we say that by joining the Deloitte Legal Network , CTSU is currently a more ambitious and stronger law firm with regard to facing the needs of the legal market .”
Meanwhile , RRP Abogados – a law firm that was founded earlier this year by Ricardo Reigada Pereira , a former managing associate at Linklaters – joined the EY global law network . “ Our affiliation with EY is likely to follow the same path of the associations that presently exist between domestic and international law firms – for example , CMS , Ontier and Lex Mundi ,” says Reigada Pereira . “ Our ties with the EY universe are at the level of law offices run by EY – we are still at the very beginning of our law firm and several things are still being set up . Our project – where the core of the team came with me from Linklaters – is still at the very beginning .” Reigada Pereira declines to comment on the next step for RRP ’ s relationship with EY . However , it is understood that it will be along the same lines as CTSU ’ s relationship with Deloitte in the sense that EY ’ s Spanish law firm , EY Abogados , will eventually take an equity stake in RRP .
With regard to PwC , a spokesman said “ PwC Spain is not entering the Portuguese legal market .” However , while PwC may not be using its Spanish operation to target Portugal , market sources say it is expected that PwC will make a
16 • IBERIAN LAWYER • November / December 2016 www . iberianlawyer . com