Adamson drags Monti into Brussels consultancy battle

By Peter Chapman

Date: 15/01/04

COMPETITION Commissioner Mario Monti has been urged to issue a precedent-setting ruling in the "battle of the consultancies" case.

Millionaire public affairs guru Paul Adamson is urging Monti to invalidate allegedly unfair clauses in contracts he signed with his previous employers, WeberShandwick|Adamson (WSA), whom he quit last September to set up a new consultancy, The Centre.

WSA has taken Adamson to the Belgian courts in a bid to enforce the contracts and scupper his efforts to run The Centre, which officially opens for business on 28 January. If the contract clauses are enforced, they could stop him working in the same field and soliciting clients until September 2004.

Adamson's lawyer, Charles Price, says that is "clearly excessive" and is a blatant breach of Article 81 of the EU Treaty, which bans anti-competitive agreements in the European Union.

"Put in lay terms," he adds, "WeberShandwick has had five years in which to secure the goodwill and know-how. If it has not managed to do this after five years then it cannot lawfully seek to further extend the restriction in order to make up for its own short-comings in this respect."

Adamson became chairman of WSA in 2001 after WeberShandwick took over Charles Barker BSMG, the company Adamson sold his original company to in 1998. As a condition of his sale to Charles Barker BSMG, he signed "non-compete" and "non-solicitation" clauses. As a condition of the sale, he says he was also asked to sign an employment contract for a minimum term of four-and-a-quarter years.

It is regular practice in the sector for ex-owners to agree to stay on for a period of time to ensure that the know-how and client lists do not disappear the moment the deal is done. Crucially, this employment contract also contained another set of non-compete clauses intended to stop Adamson competing for a further year after the end of the contract.

A ruling would be a shot in the arm for Adamson's bid to escape the grip of his former colleague John Russell, CEO of WeberShandwick|Adamson. But Price says the implications would go far wider than this Brussels battle. He says the EU executive should act to plug an "enormous loophole" on what types of deal are illegal, and preserve the broader "Community interest".

"If this practice is not outlawed then it will be open to any acquirer of a business to extend the period of the non-compete and non-solicitation clauses beyond what would be normally authorized by the simple device of including a separate set of similar or even identical clauses in the employment contract," he added.

But Nicholas Lunt, Brussels-based managing director of Weber Shandwick Worldwide, told European Voice that the company plans to send Monti a firm rebuttal.

"Weber Shandwick has been advised that it has been made clear, on numerous occasions, that the European Commission has no jurisdiction over employment contracts between individuals and their employers. As an employee, Paul Adamson was not an "undertaking" within the meaning of EC competition law.

"In addition, it should be pointed out that Paul Adamson's employment contract, which was originally signed on September 25, 1998 - ie at the time of signature of the Share Purchase Agreement - was concluded for a first period ending on 31 December 2002, and could have been terminated on that date.

"However, for reasons that are totally unrelated to the Share Purchase Agreement, it was renewed by both parties as from1 January, 2003. As of that date, any possible connection or economic interdependence between the Share Purchase Agreement and the employment contract of Paul Adamson was severed."

Lunt added: "The non-compete clauses in question are clearly de minimis [too small to concern competition watchdogs] and lack any significant effect as they only concern an individual."

In the meantime, he says Weber Shandwick "intends to assert its rights in the national courts of Belgium and Paul Adamson will then have an opportunity to present his defence". Watch this space.

Paul Adamson, a former partner in Brussels lobby firm Weber Shandwick is in a legal battle with his former partner, who has accused Mr Adamson of breach of contract. Mr Adamson has urged European Commission President Romano Prodi to invalidate allegedly unfair clauses in contracts he signed with his previous employers.