The financial crisis is supposed to be prompting some ethical reflection among those in financial circles. Business schools have beefed up their courses in this area, but law schools seem to be feeling more sanguine since law firms haven't been fingered to the same extent as banks. This came to my attention when I heard about an interesting situation regarding lawyer and client relationships: something on which I have just written a paper.
Many think that the regulation of lawyers in the UK is looser than that elsewhere especially the United States. The Solicitors' Code of Conduct (and the Code of Conduct of the Bar of England & Wales) are quite brief documents compared to the American Bar Association Model Rules of Conduct.
One aspect that has arisen recently is when lawyers have sexual relations with their clients. This particular case is yet to be determined, but it indicates there may be more going on than we thought. The ABA (and the states that have adopted this) have taken a strict line on this.
Rule 1.8 (j) A lawyer shall not have sexual relations with a client unless a consensual sexual relationship existed between them when the client-lawyer relationship commenced.The days of Arnie cozying up to his divorce clients in L.A. Law are long over. But then anyone who has seen This Life or North Square on British TV will know that it isn't yet over--here. One aspect of Arnie's behaviour should be noted. His clients were not the typical repeat players that are the norm of corporate lawyers.
Suppose a corporate partner in a major law firm starts an affair with a client. There is nothing in the rules that expressly prohibits this. And moreover if they were both single, others might smile benevolently on the match. Presumably both would disclose the situation to their respective firms to ensure clarity.
What if, however, they were both already married? Then the repercussions potentially go wider. And let us assume the conditions of 1.8 (j) didn't exist. First, there would be the damage to the extant relationships especially if children were involved, causing heartbreak and disappointment.
Second, what happens to the lawyer-client relationship? (I realize compared to number one, this is a subsidiary matter.) Let's say the client is in banking--which was the subject of my paper--then this already places the participants in a small club. Both lawyers and clients. Since the lawyers tend to work for both banks and borrowers, the potential for conflicts of interest rears up. If the lawyer happened to be working for a client who was borrowing from the bank, would the client be content with the knowledge of his lawyer's relationship? What pillow talk might occur? (Doesn't exactly sound great if work is the post-coital topic.) Should the lawyer disclose the relationship? Or should the lawyer withdraw from the matter?
The Solicitors' Code of Conduct rule 3.01(2)(b) says there is a conflict of interest if:
your duty to act in the best interests of any client in relation to a matter conflicts, or there is a significant risk that it may conflict, with your own interests in relation to that or a related matter.This would appear to cover the situation where sex is involved. (Interestingly, rule 3.04 discusses gifts from clients to lawyers and says the lawyer should urge the client to obtain independent advice.) Of course disclosure of an illegitimate affair is unlikely because the consequences of such disclosure would go much further.
There is a third aspect to the situation. The lawyer has a fiduciary relationship with the law firm in which the lawyer is a partner. A partner is as much a business-getter as an hourly biller. Affairs of this sort are potentially damaging to the firm's interests if, for example, there were to be fallout from the affair. The bank could cease instructing the firm; it could insist that the partner be excluded from future work for the bank. And, if as I said, in my example above, a borrower-client might have an arguable case agains the firm for malpractice.
In all it could be quite a mess.