Editors' Blog

A non-permissive Society

Posted 16/11/2006 by legalweekblogs.com SU

It is evident from talking to City partners that a good deal of confusion still surrounds the new conflicts regime. As Legal Week reported on 2 November, there is certainly a perception that some people are still flouting the rules (see story). You can deliver your verdict on how the leading firms are behaving by taking part in legalweek.com’s current web poll, which can be found on the home page.

It is also well worth taking a look at Clifford Chance (CC) general counsel Chris Perrin’s comment in today’s issue of the magazine (see article), in which he sets out to explain a question that has baffled conflicts experts. Namely, why the new rules - which came into force earlier this year - are more restrictive than common law (see Charles Hollander QC: Were the conflicts rule really necessary?) .

Perrin, who played a major role in drafting the new rules, puts this down to an ambush by a Law Society committee that saw an eleventh-hour amendment inserted without consultation. He does not hide his disappointment over what he describes as an “ill-judged and inappropriate” move.

The main bone of contention is a clause in the confidentiality rules requiring a firm to seek permission from an existing client to take an instruction from a new client in cases where the firm holds information from the first client that might be “material” to the case and where the two clients’ interests are “adverse”.

This has presented firms with a major headache, given that it is often impossible to obtain consent from clients about deals that are being plotted in secret. The larger the firm, the more often it rubs up against such problems, especially during an M&A boom. So it is no surprise that CC, Linklaters, Slaughter and May, Freshfields Bruckhaus Deringer, Allen & Overy and Herbert Smith are among the firms making representations to soften the impact of this rule by changing the guidance.

While all this is, no doubt, a highly frustrating situation for these firms, it is refreshing to see them attempting to change the rules by the front door. This is absolutely the right way to go about things. After all, the old conflicts rules had been allowed to fall into disrepair precisely because nobody took them seriously, which was hardly a satisfactory state of affairs.