THE Big Four accounting firms have failed in their challenge to French government proposals restricting their rights to offer advisory and assurance services.

The Conseil d’Etat has rejected arguments by the Big Four that a new code of ethics issued by the Government was more restrictive than the 2003 law that it stemmed from.

The Big Four, as well as Grant Thornton, were seeking to overturn a decree from the Ministry of Justice that enacted a code written by the French accounting regulator, the Haut Conseil du Commissariat aux Comptes.

The code bars an accounting firm from auditing a company’s accounts if it has provided advisory services to the client in the past two years. The code will include the advisory work provided outside France.

A senior partner at a Big Four firm yesterday attacked the decree as protectionist. He said: “The Big Four are perceived as Anglo-Saxon, though most of their partners are French.

“There are a number of smaller French firms that don’t have the international networks and feel they are losing out to the relentless march of the Big Four. They are hoping that the restrictions on the big firms will create opportunities for the French.”

The Big Four have also said that the restrictions will limit choice for companies. Neil Lerner, head of regulatory issues at KPMG, said: “This will be bad for the competitiveness of the French profession.” Olivier Breillot, head of regulatory affairs at Ernst & Young, said that the firms hope to talk to the Government over the problems that they are encountering as they try to introduce the new regime.

The setback for the accountancy firms comes after a series of measures introduced by the French Government that have been criticised as protectionist. Dominique de Villepin, the Prime Minister, has described the policy as economic protectionism, but critics say that his Government has sought to move back to the dirigisme of the 1960s.

Ministers, for instance, have published a list of 11 sectors in which foreign investors must seek government approval before launching a takeover bid, including casinos, cryptology, private security and civil and military technology.

Legislation has been introduced enabling French companies to use a so-called poison pill if they are the subject of a bid.

President Chirac has described the criticism as nonsense, however, arguing that France is one of the most open members of the European Union, with one in seven French people working for a non-French company and a bigger proportion of foreign investment than any other leading European country.

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