LawyerlinQ founder Marijn Rooijmans wrote in October last year, following a case before the European Court, about external investors as shareholders in the legal profession in his column for Advocatie.

A ruling that reignites the debate

It is a recurring debate: should we not, like the UK, allow external investors to participate in law firms in the Netherlands?

This question arises not only here but also in Germany. There, a law firm was involved in a conflict with the local bar association over precisely this issue. This dispute led to preliminary questions being referred to the European Court. The case, initiated by German lawyer Daniel Halmer, has now received a clear answer: on December 19, the European Court ruled that member states may prohibit external investors in law firms.

With this ruling, the Court confirmed that the ban on non-lawyers becoming owners of law firms does not conflict with the European principle of free movement of capital. The European judge does not state that it will necessarily lead to problems but also does not rule out the possibility that an investor might prioritize financial interests over the interests of clients. In such a case, this could compromise the independence of lawyers. Moreover, the Court states that member states are, in principle, free to regulate how lawyers in their country should practice their profession.

A ruling that reignites the debate

What does this ruling mean for the Netherlands? In principle, equity participation by non-lawyers in law firms is also not allowed here. In 2023, Erasmus University conducted a study on alternative business structures for law firms, commissioned by the Ministry of Justice and Security. This study concluded that external shareholders do not pose a direct threat to the core values of the legal profession and could even benefit consumers. This, along with the NOvA's ongoing research and experiments with Brand MR, previously suggested that the door in the Netherlands was slightly open.

The Dutch Bar Association (NOvA) has responded to the ruling, stating that it highlights the special position of lawyers within the rule of law. The primary motive of external investors – profit maximization – may conflict with the fundamental duties of lawyers, such as independence and client advocacy. According to the Bar, despite the experiment with Brand MR, the Dutch legal profession should remain closed to large-scale participation by private equity or other external parties for the time being.

Is this the end of external investors in the Dutch legal profession?

Is this the end of the debate? We doubt it. Although this development cannot apparently be enforced through Europe, the need for modernization and scaling up remains. The pressure to work more efficiently, embrace technology, and reduce costs for clients will continue to grow. Developments in this area are unstoppable.

The innovative strength of Dutch law firms remains an important point of attention. If the legal profession in the Netherlands remains the exclusive domain of lawyers, without powerful external parties bringing expertise and capital, can our firms achieve the investments and efficiency improvements necessary to be future-proof?

We think not and see a significant risk that this ruling by the Court, if followed in the Netherlands, will ultimately negatively impact our national legal profession.

What do you think? Is the Court's ruling a victory for the independence of the legal profession, or a missed opportunity for innovation and growth?

Marijn Rooijmans