SRA to adopt City firms’ recommendation on dealing with conflicts of interest overseas

Overseas conflicts: higher standard should prevail

City law firms facing conflict issues overseas should apply the rules that apply in the relevant jurisdiction, the Solicitors Regulation Authority (SRA) has suggested.

Meanwhile, the SRA and the Law Society of Scotland have begun discussions on an intra-UK regulatory regime, especially with Scotland set to introduce its own form of alternative business structures (ABSs).

In a report on the SRA’s consultation on the regulation of international practice, the SRA said the City of London Law Society (CLLS) had come up with “a useful practical approach” to the question of how the SRA Handbook should deal with the issue of different conflict rules in different jurisdictions.

The CLLS recommended that a firm/solicitor should comply with the conflict rules that were applicable in the country where the work was being done and that where more than one jurisdiction was involved, the higher standard should apply.

This leaves open the question of what might happen in emerging jurisdictions where no explicit conflict rules have been set out, but the CLLS said this should not be a great problem as such jurisdictions are “extremely rare”.

The SRA said: “The approach suggested by the CLLS would have the support of regulators from many other jurisdictions who have had difficulties in the past with ‘English’ law firms following English conflict rules in their jurisdictions rather than local rules. The safety net of the application of the higher standard in cross-border work where more than one set of rules might be involved, would avoid the danger of ‘regulation shopping’.”

However, during last week’s SRA board meeting, solicitor member Mark Humphries asked whether, in the interests of “international comity”, it would be better to say that firms should comply with both the host and SRA conflict rules where relevant, lest foreign regulators be upset by the suggestion that the SRA rules are of a higher standard than those in that country.

The consultation also uncovered concerns raised by the Law Society of Scotland and Scottish law firms about the absence of a specific intra-UK regulatory regime. The SRA said consumers are likely to have different expectations of their protections and redress when buying legal services from elsewhere in the UK compared to “clearly overseas services”.

It continued: “We also recognise that the absence of an intra-UK regime has some unnecessary and burdensome effects on providers of legal services who are regulated by the Law Society of Scotland and the SRA.

“We are now in active discussions with the Law Society of Scotland on how we can move towards such a regime.”

Scotland’s separate ABS regime requires the ABS firms to be majority owned by solicitors.

The SRA will issue a second consultation later this year on drafting proposals for an international practice chapter of the Handbook to address these and other issues, with a view to it coming into force in 2013.



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