14. January 2020

The world’s biggest law firm – an association under Swiss law!

More than 10,000 lawyers, with offices in 175 locations spread across 78 countries. Dentons is the world’s biggest law firm. And although it is not represented in Switzerland, it still has an essential connection with this country: Dentons is constituted as an association under Swiss law. How can this be made compatible with the statutory “non-profitability” of associations, and what advantages and disadvantages does it entail?

The ability to manage complex and border-crossing mandates is paramount for international law firms. In order to circumvent the legal and functional challenges of a complete merger (one single firm), big international law firms have most recently appeared to opt for the association as an umbrella organisation. Six of the world’s ten biggest law firms are constituted as an association according to Swiss law.

A globally operating law firm, which may consist of dozens of national companies, requires flexible organisation in terms of its organs, their configuration and the distribution of competencies among them. At the same time, the firm wants to prevent a situation whereby its partners are liable for mistakes made by colleagues of theirs in other countries. International law firms aim to avoid the emergence of a cross-border liability community. The lack of legal ties between the members enables the national law firms to manage their mandates independently since they are exclusively subject to their individual national rules and regulations. Owing to its legally liberal organisation, the association satisfies all these requirements.

The crucial point is that the association qua umbrella organisation merely serves as an organisational structure and instrument for organising management in the association and the cultivation of the “law firm brand” in a standardised way. To sidestep the danger of a legally inadmissible “economic object” in accordance with Swiss association law, entrepreneurial activities may strictly only be pursued by the member companies, not by the association. If the statutes of the association satisfy these requirements, the association satisfies the requirements of its legitimacy. Since the umbrella organisation constituted as an association does not make any economic profit in money or in kind, it does not pursue any economic object within the meaning of the law.

Although an association consists of several legally and financially independent partnerships, it may still operate under one name in the market. A joint brand and a homogeneous market presence are an indication for potential clients that the law firm is capable of solving cross-border problems.

To minimise the hazard of an inadmissible object, an association qua umbrella organisation must not pursue any operative business, nor must it cultivate relations with clients. In practice, the difficulty consists in configuring governance in the association in such a way that the national organisations are managed according to standardised criteria while the association limits itself to the provision of management stimuli and does not intervene in the national organisations’ operative management. Services provided centrally for the national organisations are possible. Such services, such as umbrella marketing, but also controlling and IT, process design or advanced training for law firm staff, are indeed a necessary condition for the law firm’s success in achieving a standardised market presence on the international stage.

An insight into the configuration of the statutes of a big law firm organised as an association can be gleaned online on the homepage of the Commercial register of the canton of Zurich where the statutes of the law firm Dentons are publicly accessible. Simply click on the following link to select the little blue folder at the reference number 22 and receive the latest statutes conveniently by e-mail. Have a look – it’s worthwhile!

 

This article is a brief summary of my text “Die grössten Kanzleien der Welt – Schweizer Vereine”, which was published in the recent anthology Beiträge zu aktuellen Themen an der Schnittstelle zwischen Recht und Betriebswirtschaft V.

About the author
Patrick Zumsteg Patrick Zumsteg is a prospective graduate of the master's program in law at the University of St. Gallen. He also works as a student assistant at the Executive School of Management Technology and Law at the University of St. Gallen.