Ethics expert calls on SRA to take tougher approach to NDAs

Moorhead: Basic understandings of the Code of Conduct are not well embedded

The Solicitors Regulation Authority (SRA) needs to take a tougher approach to non-disclosure agreements (NDAs), a leading legal ethics expert has told MPs.

Professor Richard Moorhead has called on called for tighter rules on clauses that are or could be void, and taking unfair advantage in negotiation.

The professor, chair of law and professional ethics at University College London, linked the issue to a wider approach to ethics among solicitors that he described as “minimalistic professionalism”, including having “relatively little awareness” of SRA rules.

One way it manifested itself was an approach which unequivocally put the client first: “As well as being wrong under the rules, a model of professional ethics which relies on treating the client interest as paramount risks practitioners making significant mistakes.”

Professor Moorhead said: “Basic understandings of the Code of Conduct are not well embedded within practising ranks. This needs to be addressed by stronger enforcement, better education, and improved training and management in law firms and in-house legal teams.”

“Even elite lawyers” had the capacity “to make significant, and sometimes catastrophic, errors of judgment because they fail to stand back and think about their broader professional obligations”, he added.

His written evidence to the House of Commons’ women and equalities commission, which is investigating sexual harassment in the workplace, was published yesterday. The committee has been focusing on NDAs in the wake of the Harvey Weinstein scandal.

The SRA issued a warning notice on NDAs last month, telling law firms not use them to prevent the reporting of misconduct, particularly sexual harassment involving other employees or clients.

Professor Moorhead said the SRA had “taken up the cudgels with some alacrity, issuing a warning notice quickly, partly in response to fears that solicitors’ firms, and their regulator, were about to be swept up in harassment scandals”.

However, he said there was room for improvement in the area of clauses that are or might be void, which were “not clearly covered” in the notice.

“To my mind, where clauses are included which are known to be void, the situation is straightforward. They should be seen as breaches of professional conduct.

“If they are claiming or implying a right to do something in an agreement that they know to be void, then they risk misleading anyone subject to or interested in that agreement: it breaches a solicitor’s obligation not to take unfair advantage of third parties.”

Professor Moorhead said a more difficult situation would be where a clause was included in a NDA which may or may not be void, and here solicitors would have to rely on their own judgment, “properly balancing professional principles”.

The professor said the warning notice could also be strengthened in the area of taking unfair advantage in negotiation, though “ultimately” it may be best to leave lawyers with “significant discretion” on the issue.

“The SRA might be able to improve matters by making some basic things clear about unfair advantage, e.g. that the rule against taking unfair advantage applies to both represented and unrepresented parties, but it probably cannot legislate for all the potential permutations of unfair advantage, even within the context of NDAs.

“They have to rely on lawyers applying their discretion to the situation, but that discretion will only work if those lawyers do so with full regard to their professional obligations.”

Professor Moorhead went on: “A final point to be made about the warning notice is that there should be some encouragement for the SRA to consider and report on its impact as well as perhaps refine the content of the notice and consider whether any lessons should be carried into the redrafting of the Code of Conduct.

“The committee might ask the Legal Services Board to oversee a request to do that.”

He added: “What I think is important is to have clear statements of what the agreement permits stating explicitly that, for example, NDA parties may report matters covered by the agreement to the authorities (police, regulators, and so on). And that the agreements clearly and concisely state the obligations in the agreement.

“This should be done in English as plain as possible. A positive step would be for practitioners, or practitioner organisations engaged in the field, to engage in user testing of such agreement drafting on ‘ordinary’ employees to see what they understand the clauses to mean.”

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