POSSIBLE WAYS FORWARD

The Law Society’s reluctance to reflect the changed commercial environment in its rules has resulted in a significant proportion of solicitors acting outside the current regulatory regime.

1. the degree of protection afforded to clients where firms act in conflict situa­tions is brought into question;

2. some firms may be commercially disadvantaged because they adhere to Law Society rules;

3. the reputation of the profession as a whole may be tarnished where firms do not comply with the rules.

Is it feasible, then, to accommodate the needs and interests of a disparate clien­tele and a heterogeneous legal profession? What are the possible ways forward?

1. Enforce the Rules

One possible answer to these problems would be for the Law Society actively to enforce the existing rules. This would mean, at least in theory, that clients’ inter­ests were safeguarded, all firms would be placed on an equal footing, and the reputation of the profession would be maintained. However, as the empirical evidence has shown, conflicts of interest feature most prominently in the envi­ronment inhabited by large firms. If they had to comply with the rules as presently drafted it would be virtually impossible for the ‘mega’ firms to serve their current clientele. Some niche practices would also find themselves in diffi­culties. Although some commentators might welcome such a move,⁴⁵ some clients would probably face increased legal bills. They might also experience difficulties in finding a firm with the necessary resources and expertise.⁴⁶ In addition, this ‘solution’ is premised on the notion that the Law Society would be able to police conflicts effectively and would impose sanctions which would deter solicitors from committing further breaches of the rules. This could well prove to be an impossible task, if only because, should clients wish firms to act

⁴⁵ See, for example, the views of H McVea, ‘Heard it through the grapevine: Chinese walls and former client confidentiality in law firms’, (2000) 59 Cambridge Law Journal 370.

⁴⁶ This is what has happened in the US. See above at n 42. in conflict situations, it would be very difficult for the Law Society to discover a breach in the rules where no complaint was received.^[492]

2. Develop a More Detailed Regulatory Framework

Another option would be for the Law Society to develop a far more complex and sophisticated regulatory framework. The arguments in favour of this at first appear compelling. Account could be taken of the changed commercial envi­ronment, at the same time ensuring that firms adopt adequate safeguards to pro­tect clients’ interests. It might be possible, for instance, to distinguish between different types of firm operating in different commercial environments. Rules could be devised to allow firms to act in conflict situations provided certain cri­teria were met.^[493] The criteria could be determined, for example, by the type and size of firm, the nature of their clientele, and the area of practice. Guidelines could be drafted with respect to the measures which should be employed by solicitors to protect client interests when acting in a conflict. By issuing clearer guidance to solicitors operating in very different commercial environments, the profession might retain its responsibility to self-regulate.^[494] Paradoxically, devel­oping a framework of rules which discriminated between different practice environments might be the best way to preserve a unified profession.

However, detailed codes can become very unwieldy and even then cannot cover all situations. Such detailed guidelines would require constant amend­ment, in which case their content would be unlikely to be familiar to all mem­bers of the profession.^[495] Also, solicitors have a trained capacity to find ways around detailed rules and so might become rather less scrupulous in their con­duct. After all, professional codes can be used as an excuse to justify question­able behaviour. As Cotterrell has observed, ‘lawyers dwell in the details, making little use of abstract interpretative skills....’^[496] In effect Cotterrell argues that firms are not good at seeing the wood for the trees on ethical issues.

[T]his more narrow legalistic conception competes with and frequently precludes real­ising alternative extra-legal notions of loyalty or responsibility. Strategies that allow law firms to manoeuvre through the minefields of their fiduciary obligations often create a formulaic adversariness, a kind of stripping away or cleansing of social net­works and ties of familiarity, a distancing between lawyer and client that collide with lay conceptions of loyalty or a commitment to looking out for what is truly in the best interests of one’s clients... These tensions frustrate many lawyers and confound their relationships with clients.^[497]

A detailed framework of rules has not aided lawyers in other jurisdictions. In the United States, for example, the rules are frequently used for commercial reasons as a litigation tactic to disqualify particular law firms from acting against specific clients.^[498] There is nothing ‘ethical’ about the way these strategies are sometimes employed.

Drafting a regulatory framework which catered for all conflict situations would be a formidable task. The profession is fragmented to such an extent that it is unlikely to be possible to cover all types of practice within a single regula­tory framework without damaging the interests of any one sector of the profes­sion or their clientele.^[499] Also, as in the United States and Canada, problems would arise with regard to interpretation of provisions.^[500] In other words, it is likely that a more detailed framework would lead to even more complaints and even more litigation.

3. Enforce a More Narrowly-defined Set of Rules

A possible alternative to enforcing the existing rules or drafting a more detailed regulatory framework would be to enforce the rules but in respect of a more nar­rowly-defined set of conflicts.

Against this, such a redefinition could simply be viewed as an attempt to treat the symptoms rather than the cause of the existing problem. Changing the scope of the conflict rules does not tackle the underlying issues which led to their cre­ation. Furthermore, the proposals advanced by the City of London Law Society are intended to apply to all solicitors irrespective of the size or the nature of their practice. The use of Chinese walls, for example, is not intended to be restricted to City firms with a sophisticated clientele. This would almost certainly give rise to difficulties in practice. First, smaller firms do not possess the necessary resources to erect Chinese walls. This could lead to even more mergers between legal practices, something which may not always be to the advantage of less powerful clients and could create even more conflict situations. Secondly, some clients may be forced to accept that conflicts of interest are inevitable when instructing a firm of solicitors. Some clients will not understand that there is no prohibition on a firm acting for one of their competitors.

Another problem with narrowing the conflicts rule would be the role of the solicitor in interpreting the provisions. The City of London Law Society, for example, envisages that where a conflict of interest exists, provided that the client’s fully informed consent is obtained, a firm may act for more than one party to the conflict.^[502] In determining whether ‘informed consent’ has been obtained, a solicitor must decide whether a client possesses ‘the experience and ability to understand the issues and exercise their own independent judgement’.

4. The Client Autonomy Model

Another possibility is to abandon detailed regulation and to focus instead on the solicitor-client relationship. If the only ‘rule’ were one of openness, so that solic­itors were under a duty to inform clients of all potential conflicts, the client’s voice would be the determining factor in deciding what conduct was acceptable. If clients were not satisfied with the way in which their solicitor was acting, they could take their custom elsewhere. The advantage of this approach is that it would force solicitors to reflect on their own ethical standards and, it could be argued, to act in a way which was acceptable to their clientele.

However, such a ‘rule’ may be considered somewhat insubstantial and not to offer clients sufficient protection. Everything would depend on firms’ commit­ment to inform clients of the material facts, and thereafter on clients’ having suf­ficient understanding to realise when their interests were being compromised. As previously highlighted,^[503] what clients decide to do when party to a conflict may very well depend on what they know, which will in turn depend on what their lawyers have told them. What is to prevent firms from placing their own interests above those of their clients when deciding what information to convey, and how to convey it?

Moreover, as one commentator has observed, it is doubtful whether solicitors should abdicate to the client their responsibility to maintain the highest ethical standards in their practice:

Central to the concept of professionalism is the notion that only the initiated—those with actual professional knowledge, skills and credentials—are able to determine proper professional procedures and standards of practice.^[504]

It would also be wrong in principle, where a solicitor-client relationship has terminated, to allow that former client an unfettered right to bar his former solicitor from acting for another client whose interests might conflict with his.

Finally, there are some instances where even to seek the approval of one client (or potential client) would be to breach confidence. For example, if a firm is approached by a potential client who wishes to mount a hostile take-over against an existing client for whom the firm acts on a general retainer,^[505] the prospective client’s interests would be prejudiced if the ‘target’ were to be given early notice of the intended take-over.

5. The Professional Autonomy Model

Another option would be to leave the resolution of conflicts to the integrity and judgement of individual solicitors/firms. Some support for this idea can be found amongst writers on legal ethics.^[506] For example, it is argued that the more it is left to solicitors’ own judgement to determine matters of professional con­duct, the more likely they are to give thought to ethical dilemmas and to reach justifiable decisions.^[507] In addition, it is suggested that as written codes become increasingly complex and unwieldy as they attempt to cover the different cir­cumstances of mega firms, high-street practices, sole-practitioners and employed lawyers, solicitors may be inclined to reduce issues of ethical judge­ment to questions simply of risk analysis and commercial calculation.^[508] Also, a framework of rules does not guarantee that the practice of a profession will be imbued with what outsiders would recognise as high ethical standards. As de Groot-van Leeuwen has argued: ‘[Lawyers] escape from ethical reflection by phrasing all problems they may encounter in purely legalistic terms.’^[509] In other words, lawyers have a tendency to interpret rules literally and to ignore the broad picture which the regulation is intended to cover.^[510] Other commentators have likewise suggested that formal guidelines tend to encourage cynicism and a lack of concern for questions of ethics and morality.^[511] There are also practical considerations. No code can cover every foreseeable situation, whilst detailed rules freeze professional ethics at the moment of drafting.^[512]

By placing the onus on firms to determine when it is appropriate to act in a conflict, solicitors would have to accept responsibility for their handling of all ethically complex situations. For most commentators, however, total deregula­tion of professional conduct would be a step too far. Some have expressed scep­ticism as to whether the legal profession operates within the kind of moral framework that deregulation requires if it is to prove anything other than a means of allowing commercial interests to run unfettered:

First, total deregulation of professional legal ethics goes much further than the exist­ing regime of self-regulation in freeing lawyers from public accountability. Instead, it relies heavily on the outdated noblesse oblige tradition and a ‘professional mystique’ which disregards calls for greater accountability and transparency as misguided. Secondly... the idea that the solutions to ethical dilemmas in professional life are self- evident and derivable from first principles involves naive wishful thinking.... Thirdly, deregulation may well lead to a lowering rather than a raising of ethical standards. Deregulation assumes educational and institutional frameworks capable of develop­ing and sustaining the moral character and reflexive moral capabilities of individual professionals.^[513]

The Lord Chancellor’s Advisory Committee on Legal Education and Conduct has also suggested that leaving ethical decisions entirely to solicitors may prove unwise given the commercial environment in which firms now operate:

[T]he high ethical standards of the profession... have been very much grounded in the close-knit professional communities represented by such institutions as the Inns of Court and local law societies. As the organisations in which law is practised become larger and more complex, as competition and instability in the market for legal ser­vices increases, and as many legal practitioners experience a growing sense of insecu­rity, there are real dangers that professional standards will be threatened unless counter-balancing steps are taken to reinforce ethical values.^[514]

Clients likewise may not be satisfied that their interests are protected if there is no framework of rules governing solicitors’ conduct. Not everyone regards lawyers as especially principled:

Lawyers these days are no longer depicted as crusaders of justice or enlightened upholders of the law, but as a parasites feeding on the misery of others, as servants of the Mafia, or as common mortals at best.^[515]

As larger firms already act in conflict situations, deregulation would remove one of the few remaining restrictions on the size of law firms. This raises the related question of whether it is in clients’ or the profession’s interests to allow firms to continue to expand. Rather than competition being stimulated and a better ser­vice provided, very large firms may simply increase their already substantial share of the market. This in turn would further encourage the tendency for pol­icy issues to be determined according to the commercial interests of such firms rather than in the interests of their clients, or of the profession as a whole.

6. Develop an ‘Aspirational’ Regulatory Framework

One way of coping with the diversity which exists within the profession would be to make the conduct rules ‘basic’ or ‘aspirational’. Boon and Levin describe such an approach as follows:

An alternative therefore, is to renew the commitment to professional ethics in terms of the values which the profession espouses, which it attempts to imbue in its entrants and which it seeks to sustain in its practitioners... The rules may then become less detailed but more principled. Lawyers would thereby regain professional autonomy in interpreting their ethical obligations.^[516]

It might be argued that such rules would be too vague to provide adequate guid­ance to practitioners or adequate protection for clients. They might also be undermined by the creation of another set of norms with a lower standard. Nicolson and Webb have responded with a suggestion that such codes of con­duct should contain three normative levels:^[517]

1. a general statement of underlying values which should underpin the lawyer­client relationship;

2. a statement of principles which govern the lawyer-client relationship (for example, loyalty, integrity, candour and informed consent), fleshed out with commentary which would set out their rationale and underlying values;

3. contextual factors which are relevant to the way in which lawyers should apply the general principles.

These authors acknowledge that a change in lawyer attitudes will not occur sim­ply through changes in the content and form of regulations.^[518] Accordingly they suggest that such a regime would have to be coupled with:

—changes in legal education;

—greater participation by consumers on regulatory bodies;

—appointment of in-house compliance officers;

—engagement of firms in more pro bono work;

—recruitment of solicitors from different ethnic and social backgrounds;

—a move away from the present adversarial system of justice.^[519]

Needless to say, these accompanying changes in the legal environment may also be deemed ‘aspirational’.

Would such an ‘aspirational’ set of guidelines be effective as a means of gov­erning solicitors’ conduct in conflict situations? Two possible objections to this approach are acknowledged by Nicolson and Webb, namely that normative rules would be time-consuming for practitioners to apply, and secondly, that they would be construed by some as too ‘hard’ for solicitors to operate.^[520] Perhaps the real difficulty, however, lies in the fact that large City firms have shown themselves to operate as commercial enterprises rather than as tradi­tional professional partnerships.^[521] Such firms may, therefore, be opposed to increased regulation, preferring instead to concentrate on devising guidelines which reflect the commercial environment in which they now operate.

7. Let the Courts Decide

A final option would be to adopt the same approach as certain other Commonwealth countries, namely to allow the issue of conflicts of interest to be determined by the courts under the common law. The potential threat of litiga­tion, in other words, would determine the way everyone behaves. The advan­tages of this approach could be said to be threefold. First, if clients believe their interests have been prejudiced, they can seek redress. In this sense the whole issue is subject to commercial calculation, with the courts having the responsi­bility to ensure that clients are protected. Secondly, firms might be prompted to behave appropriately because the threat of being sued over an alleged conflict would bring adverse publicity^[522] and might well result in business being lost. Thirdly, firms would have a financial incentive to behave well because their pro­fessional liability insurance premiums would increase whenever they were required to pay damages.^[523]

Yet this solution too has obvious limitations. First, it could prove costly to clients and solicitors should either misjudge the situation. It is a litigation-based solution and that is inherently expensive. Secondly, it is questionable whether we want to promote litigation on these lines between members of the legal profession since it necessarily undermines trust and collegiality. Thirdly, some clients may employ the threat of litigation as a tactic to ‘conflict out’ firms they do not wish to see acting against them. This threat of litigation would not oper­ate equally across the board. It would enable more economically powerful clients to impose their will on the financially vulnerable.

There is also the argument that this ‘solution’ assumes that the courts will provide an appropriate and sufficiently clear answer to the problems posed by conflicts of interest. As was seen in chapters 2 and 4, this may not be the case. Different courts may come to different decisions on similar cases. In the United Kingdom the legal position cannot be stated with absolute clarity or confidence. Courts in New Zealand have adopted a more lenient approach to firms acting against former clients than have courts in Australia or the United States. The result may be that neither clients nor solicitors would be entirely sure when a firm was entitled to act when faced with a potential conflict of interest.