Dead men walking

By bne IntelliNews August 25, 2009

Ben Aris in Berlin -

The EU is a single market where companies can sell their goods across the region without restriction. At least that's the idea. In practice, it doesn't always work so well and governments do their best to give the locals a leg-up in competing against those nasty "foreign" companies.

One of the most basic things that a company entering a new EU market wants to do is to keep its name. But when Wolf Theiss, one of Austria's biggest law firms that is active in Central and Eastern Europe, opened an office in Sofia in 2008 all the local firms immediately sued. "The legal services act [in Bulgaria] limits law firms to being owned by Bulgarians and only living partners of the firm are allowed to use their name as the name of the firm," says Richard Clegg, managing partner of Wolf Theiss in Sofia.

The government says the rule is so that Bulgarians "know they can trust the firm," says Clegg, but really it's a thinly disguised attempt to protect smaller local firms from competition by bigger and richer foreign firms. Indeed, many large international firms moving into a new market buy out their smaller rivals precisely because they need a local name on the front door to operate legally, as the "local name rule" is still in force in several newly minted EU member states.

For its part, Wolf Theiss did what any self-respecting law firm would do - it sued the Bulgarian government, taking the case first to the local Supreme Court and then to Brussels at the end of 2008. "We challenged the names rule, as it clearly contravenes the freedom of movement of companies in the EU, which is a fundamental principle of EU membership," says Clegg.

And the case failed. The EU wrote to the Bulgarian government informally and a bodge was agreed. The government didn't change the law, but it did change the instructions that come with each law explaining how they should be interpreted. Now lawyers qualified in EU countries can be admitted to the Bulgarian bar. The non-living partner rule remains in place.

And Wolf Theiss managed to come up with a dodge that allowed them to keep their name. The original Mr Theiss is still alive and is registered with the Sofia office, but Mr Wolf proved to be more tricky: he left the firm years ago to set up a new business. Luckily, there happened to be another Mr Wolf in the Sofia office, but he is not related to the founding Mr Wolf. However, the law doesn't say which Mr Wolf you have to have, only that you need one Mr Wolf as a partner.

Still, it is only a half solution as if - god forbid - anything happens to either Mr Wolf or Mr Theiss, then the firm will either have to find another namesake to employ or change its name.

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