One flick of a judge’s wig and suddenly the whole City is up in arms. Freshfields Bruckhaus Deringer’s somewhat ignominious exit last week as Philip Green’s counsel on the bid for Marks & Spencer (M&S) has brought out the hysterical side of lawyers’ natures.
But before law firms start overhauling their conflict systems, take a deep breath and pause. The M&S injunction has not uncovered a new hornet’s nest of issues. It has simply reinforced what City lawyers should already know: if a law firm is acting for a client against the interests of a former or existing client, either get consent or get those Chinese walls up – and sharpish.
Freshfields did not think that when it accepted the instruction to act for Green’s consortium Revival Acquis-itions on 5 May it was acting against M&S interests. And the firm did undertake a thorough conflicts check before accepting the deal. How was it to know that the retailer’s contract with George Davies (the man behind M&S’s highly successful Per Una women’s wear line), a contract that Freshfields arranged in 2001 and subsequently restructured, would become one of the four main criteria on which Green would make a bid? Would this have been such a factor had Green’s offer been recommended? Maybe not – but why wait to find out? Through past experience alone (Green’s last unsuccessful bid for M&S when he was advised by A&O) Freshfields must have had an inkling that it was going to be in for a fight.
Of course, the firm would never do anything to compromise client confidentiality and over the past week has given many undertakings, undoubtedly made in good faith, to this effect. But surely it should have recognised immediately that the Davies contract, whose line accounts for millions of pounds in revenues each year, was inextricably linked to M&S’s future strategy and would become a factor in any bid? Certainly, the prevailing view among its City rivals is that Freshfields has misjudged the situation spectacularly, and should never have accepted the mandate in the first place.
In its defence, a law firm cannot start building walls the minute any new instruction comes through the door. But a £9bn mandate from Mr Retail himself? That has to start the alarm bells ringing. While it is easy for lawyers to sit back and comment on Freshfields, one can’t help thinking that, rightly or wrongly, it has been made an example of. There are other firms that have come up against the conflict issue many times but have not been so publicly castigated. Perhaps their time is now coming. You know who you are.