How to set up in Ireland

Ever since Britain voted to leave the EU, lawyers and other professional services have been casting an expectant eye across the Irish Sea. Their motivations are clear – a hop to Dublin could ensure that firms retain vital access to the EU market, institutions and workforces, as well as maintain their legal privileges in European competition investigations.

Others may want to follow banking clients, or take advantage of the potential opportunities Ireland offers in itself as a place of significant growth for the future – regardless of a hard or soft Brexit.

At the time of writing, no fewer than 22 financial services businesses are actively considering a move to Dublin, and their law firms are set to follow suit.

The consensus is that Ireland will be one of the key EU-based destinations for international firms looking to ‘Brexit-proof’ their business.

However, while Ireland has much to offer, firms need to understand this distinctive market before making the move. This came to the fore at a recent Professional Practices Alliance seminar*.

Commercial landscape

Andrew Quinn at Maples and Calder, Dublin, told the seminar that the Irish market is a hard market to break, so the key to success is taking the time to establish credibility (which could take a number of years), investing in a sustainable strategy and, where necessary, making indigenous lateral hires.

Selecting the right locality is key. Dublin’s legal sector has three core locations: Dublin II, the legal sector’s heartland; and the Docklands and the Grand Channel, both of which are relatively new areas.

One opportunity highlighted is the potential to sublet space from larger financial services and social media companies, which have recently been leasing more room than they currently need.

Aside from those solicitors already qualified in England/Wales/Northern Ireland applying for a certificate of admission to practise in Ireland, hiring local partners and associates can be difficult and may increase entry costs, said Portia White of Fox Rodney Search, London and Dublin.

‘Most partners in Irish firms feel that they are in a top firm already and may need bigger incentives to be persuaded to move to an international firm,’ she said. Laterals may also fear that the new entrant may not be committed to the Dublin market in the long term.

Not all insurance is equal

Another hurdle is the Law Society of Ireland’s professional indemnity insurance (PII) requirements. It should not be assumed that any worldwide insurance previously arranged by a parent firm could be relied upon. In Ireland, firms are required to obtain specific PII coverage from one of a panel of pre-authorised insurers.

Neil Pointon of Howden suggests SRA-regulated firms look to circumvent the costs of such additional insurance and help prevent gaps in coverage by seeking an insurer authorised as a participating insurer in Ireland as well as England and Wales – for example, CV Starr, Axis and Allianz.

Anglo-Irish mergers or takeovers?

If a firm does not want to test its luck by setting up an office in Ireland, merger or takeover of an Irish firm may be an option.

For regulatory purposes, solicitors operating in Ireland can only do so as an 1890 Act partnership, which means unlimited liability for partners. However, Barry Magee of McDowell Purcell noted that under proposed legislation there may in future be a potential limited liability ‘wrapper’ available to Irish 1890 partnerships – it is proposed that in all other respects, including the exemption from statutory disclosure of financial accounts, these 1890 partnerships would remain the same.

Second, law firms currently in Ireland can only practise with other solicitors and cannot practise with non-legal persons. Iain Miller of Kingsley Napley noted that in the legislative pipeline there may potentially be a future option for solicitors and barristers, and solicitors and other professions, for example accountants, to set up in partnerships. This is, however, still some way off and not uncontroversial.

Although there have been some enquiries about Anglo-Irish mergers, nothing has yet emerged. One reason may be that most Irish firms prefer to control their own destinies, and may be reluctant to enter into mergers at this stage, where they perceive that the international firm will wish to control its Irish operations. They may be waiting to see the lie of the land post-Brexit.

Tax and profit-sharing

As noted by Corinne Staves, of Maurice Turnor Gardner LLP, the way an international practice is structured usually depends on tax and regulatory issues in the relevant jurisdictions. One common constraint is that the partners in one jurisdiction cannot share the profits generated there with people who do not have the necessary local qualifications or regulatory permissions (or entities controlled by non-qualified persons).  

This presents challenges for international professional services firms which promote a collegiate, team-focused culture across their networks, where the concept of global profit-sharing is at the heart of their ethos. In these circumstances, profit share arrangements must be carefully constructed.

Irish rules make it difficult to provide control or influence over an Irish law firm by the firm’s headquarters in another jurisdiction, but it may be possible to achieve alignment with the international strategy through a combination of an overarching alliance agreement and cross-membership, with all individual members agreeing to comply with international policy. It can be difficult to require partners to vote according to the directions of an international board without infringing the rights of partners under Irish partnership law, so the arrangements sometimes have to rely on trust.

In Ireland, as discussed, law firm partners must operate through an unlimited liability partnership, when the rest of the partners in the international network may benefit from working through limited liability entities. Firms sometimes put indemnities in place for exposed partners, though these offer little comfort if the firm has faced an ‘Armageddon’ claim and is insolvent. In some cases, the other partners are prepared to offer personal indemnities.

While honourable, this fundamentally undermines the limited liability structure that was put in place and provides desperate creditors with an incentive to advance claims against individuals.

It may be possible to implement lifeboat arrangements, whereby the international partners promise to compensate the family of an Irish partner personally bankrupted by the firm’s failure up to a pre-agreed cap, so non-bankrupted partners have a maximum capped liability. As the sum is quantifiable, this can now be insured.

Protecting your firm once established

After becoming established in Ireland, what can a firm do if partners seek to move on (or are poached)? Key business protections for firms operating in Ireland are broadly similar to those in the UK.

Bernadette Quigley, a barrister of the Irish bar, finds that, usually, key restrictive covenant protections are provided for in partnership deeds, including non-competition, client non-dealing and non-solicitation, and non-poaching of staff restrictions.

However, there are some areas of significant difference in terms of enforcement. Irish courts may be less keen than their UK counterparts (although this has yet to be tested) to enforce partner non-competition restrictions without clear evidence of that partner’s personal relationships with clients of the firm, which could damage the firm if they were not restrained.

Protections such as the grant of springboard injunctions have also been embraced by the Irish courts where necessary, to deal in a fair and just manner with the consequences which may flow from a partner acting in breach of their obligations to the partnership while still a partner.

Colleen Cleary of CC Solicitors pointed out that litigating partnership disputes remains a challenging prospect in light of extraneous market considerations. Reputational issues, which are of great significance in a relatively small market, often strongly influence tactical decisions as to how best to tackle disputes. Much of the partnership litigation which may relate to partners leaving and joining competing firms is generally kept out of the glare of the courts, with firms tending to have arbitration clauses to keep their matters confidential. Disputes are kept under the radar – which could be a positive thing for many incoming firms.

Clare Murray is founder and managing partner of CM Murray LLP, which specialises in partnership and employment law for international partnerships.

* A copy of the full seminar report on Setting up in Ireland: Issues for International Professional Services Firms is available here.