  We present a detailed study of the ionised environment of the Seyfert 1
galaxy Mrk 704 using medium and high resolution X-ray spectra obtained with a
long XMM-Newton observation. The 0.3-10 kev continuum, well described by a
power-law (Gamma ~ 1.86) and two blackbodies (kT ~ 0.085 and 0.22 kev), is
found to be affected by a neutral partial covering absorption (N_H ~ 10^{23}
per cm square, covering fraction ~ 0.22) and two warm absorber components. We
identify a low ionisation, xi ~ 20 erg-cm/sec, and high outflow velocity, v ~
1350 km/s, phase producing the OVI and Fe M-shell unresolved-transition array
(UTA). An additional high ionisation warm absorbing phase with xi ~ 500
erg-cm/sec and low outflow velocity, v ~ 540 km/s, gives rise to absorption
features due to OVII, OVIII, NVI, NVII and CVI. We also detected signatures of
weak emission lines of He-like triplets from OVII and NVI ions. The emission
lines are well described by two warm emitting, photoionised media with
different densities but comparable xi, suggesting discrete clouds of warm
emission. The high density phase (n_e ~ 10^{13} per cc) responsible for the
resonance lines appears to outflow at high velocity ~ 5000 km/s. The low
velocity, low density phase is likely similar to the X-ray line emitting
regions found in Seyfert 2 galaxies. The physical conditions of warm emitters
and warm absorbers suggest that these clouds are similar but observed in
absorption along our line of sight and in emission at other lines of sight. The
unique line of sight passing close to the torus opening angle is likely
responsible for the neutral partial covering absorption and our view of
emission lines due to the suppressed continuum in this polar scattered Seyfert
1 galaxy.
