Second consultation finds lack of support for relaxed conflicts rules

The Solicitors Regulation Authority (SRA) has abandoned plans to relax its conflict of interests rules following a lack of support from the in-house legal community.

Following a consultation on rules three and four of the Solicitors' Code of Conduct, which closed in February, the SRA last week decided not to make changes that would have allowed firms to act for multiple 'sophisticated clients' in related matters with client consent after a number of responses raised concerns.

The body has, however, decided to continue with reforms to rule four in relation to confidentiality and disclosure, giving firms further scope to accept instructions "in the knowledge that it would not be possible to get consent from the client whose information required protection".

The SRA had initially consulted on the changes in 2008, but launched a second consultation last year after a lack of response from the in-house community. Network Rail was the only in-house legal team to respond to the first round out of 38 respondents.

Five in-house legal teams took part in the second round, along with 11 City firms and a large national firm. There were also responses from the City of London Law Society (CLLS), the Law Society and one barrister.

The question of whether to relax the rules governing conflicts has been debated for a number of years now, with the CLLS in particular pushing for reform via a committee headed up by Clifford Chance executive partner Chris Perrin.

Thomson Reuters EMEA general counsel Daragh Fagan commented: "I am a little wary of what this relaxation might [have meant] for corporate clients, and how much transparency there would be around its application in practice. In tough times firms are clearly keen to avoid turning instructions away, but this should not be allowed to undermine good ethical practice."

Charles Hollander QC (pictured) of Brick Court Chambers said: "The distinction drawn between sophisticated users of legal services and those who are not in that category is sensible. The real concern is for vulnerable clients and those who are not familiar with the legal process, and they remain extensively protected."

One senior City partner commented "What is driving the SRA on their big, real changes is that they are totally against 'one rule for the City and another for the high street' and I am troubled by that fact."

A top 10 City partner added: "We were pleasantly surprised when the SRA appeared to be doing something, but it now seems the backwoodsman have come out from under their shells. This is a very political beast and will not just go away."