A precarious situation

The Christmas party season is warming up, but at least one City firm may have to redo its invitation list. This year Freshfields' celebrations will be without Citibank and the chair reserved for Wilde Sapte's James Johnson will remain empty.

Freshfields is not the first firm to be blackballed by a US bank for acting against it. In the early 1990s Clifford Chance, potentially the main beneficiary of Freshfields' misery, told Bank of America it would act against it, to which the bank said: "Go ahead." And Clifford Chance promptly found itself out in the cold for two years.

But the news is particularly bad for Freshfields, which is trying to build a finance practice on its corporate powerhouse. The news underlines the perils of conflicts of interests for the top firms as they gain more and more work from both borrowers and lenders of capital.

But it is also a reminder that law firms – however global their businesses – are fragmented and often divided structures. So while Freshfields' zealous litigators may be quietly satisfied that they have ruffled Citibank's feathers, the firm's banking partners are left seething over the loss of their main client and a potentially top-class colleague.