Last week The Lawyer reported that ABN Amro had replaced Allen & Overy (A&O) as its adviser in the ongoing Safeway battle, after the Dutch investment bank’s bidder Wm Morrison discovered that the magic circle firm was also acting for two opposing parties. A&O had set up Chinese walls so that a separate team could advise Wal-Mart’s financial adviser Dresdner Kleinwort Wasserstein. Denton Wilde Sapte has now scooped the work for ABN Amro.
Head of corporate at a leading City firm
“There’s a trade-off in the balance between conflicts of interest and the degree of loyalty clients have towards their external lawyers. There’s also an issue in relation to confidential information and the question as to whether firms can create sufficiently effective Chinese walls. Additionally, in the context of a public bid, conflicts are less manageable. Finally, there’s a limit on how informed the consent can be – informed consent is easier where the conflict is direct or overt.”
Kenneth MacRitchie, London managing partner, Shearman & Sterling
“The desire to minimise risk of deal failure and to maximise fee revenue has resulted in an increasing trend among the largest UK firms for taking multiple appointments. While clients have benefited from lower fees, or no fees if unsuccessful, in the current business climate, where transactions are getting into difficulties, clients are focusing on the fact that if a matter becomes litigious a firm with multiple appointments is obliged under Law Society rules to withdraw from acting for any party. This leaves the client unrepresented at a time when it needs legal advice the most.”
An in-house lawyer at an investment bank
“Law firms using Chinese walls for different clients on the same transaction need to be very careful to make sure that the appropriate senior person within their respective clients – and in turn those clients’ clients if dealing with an investment bank – are fully informed about, and consent to, the use of such a Chinese wall. An investment bank wouldn’t rely on a Chinese wall erected between separate teams in its M&A department without obtaining its client’s consent in writing and reminding the bankers involved of the relevant procedures, and without discussing whether the bank is comfortable with acting in both capacities from a reputational risk perspective at its relevant internal reputational/risk committees.”