Swiss verein arrangements on the rise

October 5, 2013 Law firms are pursuing mergers at an astonishing rate, seeking out greater stability and market reach by partnering up at the domestic and international level.

The Swiss verein model has become an increasingly popular way to structure associations between firms. The verein allows independent legal entities to be associated for specially defined purposes - marketing and branding, for instance - while maintaining financial independence and control over local operations.

The majority of law firm vereins have been formed since 2008, and there are more than 20,000 lawyers working in verein structures worldwide. Firms that operate under this legal structure include Hogan Lovells, Baker & McKenzie, DLA Piper, Squire Sanders and Norton Rose Fulbright.

This article from ABA Journal takes a look at the ethical and legal questions raised by the operation of vereins. It examines the rules governing financial arrangements between law firms sharing work, as well as what kind of obligations exist for firms to disclose to a client when they are referring work to another firm within the structure.

The article points out that since revenue sharing is not permissible among firms in a verein structure, firms will often share ‘costs’, with each firm contributing to a common pool that is used for branding, marketing, business development. But another use to which the common pool of funds is put is distribution among the member firms to influence the operating results of independent members, thus allowing for individual partner reward.

As the ABA Journal points out, this approach may not stand up to close scrutiny, and may not comply with the U.S. ethics rules on fee-splitting and referral fees.

comments powered by Disqus