Lawyers, in turn, play a huge role in the growing international market of corporate and commercial services and as a result law firms are rapidly expanding in size and jurisdictional scope. The global expansion of legal practice has prompted the question of how legal services should be regulated on an international level – just one of the questions that might need to be answered is how to deal with conflicts of interest? Conflicts of interest arise when, by some set of actions, a person or organisation is involved in multiple interests. These may be financial or otherwise, but they compromise the decision-making of that person or organisation. An example for a law firm may be a firm acting for two clients trying to collect a debt from the same debtor. Conflicts of interest is a generally accepted principle by lawyers all over the world, yet different jurisdictions take different approaches and with the growth of the global law firm this has become a difficult issue for firms to resolve. The UK and US are both heavily invested in providing legal advice in relation to cross-border transactions and therefore they make for a good comparison with some interesting differences.
Regulatory Regime
In England & Wales, all lawyers are subject to the Solicitors’ Regulation Authority’s (SRA) Code of Conduct. In the US, whilst the American Bar Association (ABA) has a set of model rules, these have not been adopted nationwide and there are significant variations between states but for the purpose of this article we will look only at the ABA rules. The SRA relatively recently moved away from a rules-based approach to a more outcomes focussed approach, only providing brief rules in order to allow law firms and individuals the flexibility to innovate (whether these intentions have borne out may be a point of contention). The ABA, on the other hand, adopts a far more prescriptive approach to its regulation; their Model Rules contain very little flexibility, disciplining lawyers who fail to comply. This approach has been heavily criticised for restricting lawyers, in their trained capacity, to exercise their ethical judgement appropriately. These broad differences in approach raise the question of whether harmonisation of conflict rules would even be possible.
Defining Conflicts
The SRA and ABA both define conflicts as 1. A lawyer acting where their own interests are involved 2. A lawyer acting where a conflict arises between two or more current clients In addition, the ABA also defines the following as conflicts 3. A lawyer acting against a former client 4. A lawyer practicing in a firm acting when another member would be prevented in the previous definitions It is perhaps the tight definition of conflicts in the US that has resulted in resistance against their adoption.
Exceptions
Interestingly, when it comes to exceptions, it might be argued that the US has a more liberal approach. The ABA allows clients to consent to the lawyer acting in a conflict situation, as long as the lawyer believes they will be able to provide competent representation. Whereas in the UK, clients must have a substantially common interest or be competing for the same objective before they can consent to the same lawyer acting for them.
Policing Global Conflicts
The enforcement of conflict of interest rules globally is relatively rare. This is because large corporate clients tend not to file complaints with disciplinary authorities. In the UK, clients occasionally seek injunctions. In the US, however, companies more frequently seek disqualification in lawsuits. That being said, global conflicts are by no means unheard of and will become increasingly common in the not so distant future as the globalisation of legal advice continues. So should we look to harmonise rules globally going forwards. From a UK perspective if we were to try to suggest the SRA rules be applied internationally this may weaken our relationship with the US and other jurisdictions and result in future reluctance on their behalf to deal with us. On the other hand if we were to adopt the stricter US rules, their tighter definition of conflicts of interest would put the UK at a significant disadvantage. As an international set of conflicts of interest rules is unlikely to form any time soon, countries will have to take voluntary efforts to harmonise their conflict rules when a global conflict inevitably arises. Whilst we have focussed purely on US and UK conflict rules, as you might have guessed there are as many different sets of practices around conflicts of interest as there are jurisdictions and so law firm risk and compliance teams have to be forward thinking, agile and adaptive to keep all parties happy.
