Clifford Chance GC calls on SRA to relax client conflict regulations

Clifford Chance GC calls on SRA to relax client conflict regulations” />
The Solicitors Regulation Authority (SRA) came under pressure to reform its rules on conflicts at The Lawyer’s fourth annual Strategic Risk Management Conference last week (10 and 11 March).

Issues on the table included bringing to an end all conflicts, potential insurance premium rate corrections, the risks of offering cross-border legal services, Chinese walls and the rise of SRA inspections.

Chris Perrin, Clifford Chance general counsel and chairman of the City of London Law Society’s rules and regulation committee, called for a significant widening of client conflict rules, including proposals to enable clients to consent to effectively eradicating all conflicts of interest, except in litigation matters.

Perrin did his best to woo the SRA’s ethics committee, which was also present and was set to convene on 12 March shortly after the conference to begin preliminary discussions of his proposals.

If it decides to take them further, it could begin detailed consultations of clients and conflict rules in the EU and the US, which could last for around three months.

Currently, the rules permit law firms to act on conflicting instructions only where the clients share a common interest and consent to a situation whereby two clients are competing for the same asset, such as on an auction sale.

“In addition to these two exceptions,” proposed Perrin, “there should be a wider exception to be used by sophisticated clients that would enable them to waive conflict in any circumstances.”

He argued that if two sophisticated clients want to get a deal done and both have historically used the same firm, by preventing them from using that firm it is impeding them from completing the transaction. And if both parties are happy that a firm will look after both their interests, he said, there is no reason why it should not.

The proposed definition of ‘sophisticated clients’ would include clients that have received independent legal advice or which have in-house legal departments.

Perrin also called for a relaxation of confidentiality rules – particularly to extend the circumstances in which a firm can act without a former client’s consent in accepting instructions from a new client – in order to mirror the Prince Jefri common law test.

Finally, he speculated on an ideal world in which lawyers would be subject to the conflict rules of the jurisdiction in which a transaction has predominant effect – but admitted that this would see him out of a job.

A panel discussion with Allen & Overy partnership secretary Heather McCallum, Bevan Brittan director of risk and best practice Sarah Mumford and CMS Cameron McKenna general counsel Craig Perry resulted in a lively debate on strategic risk management issues.

McCallum compared risk management to Marmite. “About 80 per cent get it and about 20 per cent don’t,” she said of the difficulty in getting people to undertake risk compliance paperwork.

The panel also discussed the increasing demands of clients to exceed firms’ risk policies and warned that risk policy information given to clients in pitches should not be expected to be kept confidential.

It said it can be a matter of course for clients to compile spreadsheets setting out the insurance excesses of all law firms that ever pitched for work.

Mumford said she once got her hands on one such spreadsheet, but decided to do the right thing and shred it.

Managing the risk of law firms is clearly a difficult business, but as McCallum summarised: “We’re in the process of risk management, not risk elimination. That’s why we buy insurance.”