The Evolution of Conflicts Reform

We’ve posted before about the work that the Canadian Bar Association has been doing on conflicts of interest and the development of tools for the profession to manage conflicts of interest. Two Slawers were closely involved, here and here, with a fine italic hand evident.

Today’s Lawyers’ Weekly front page reports on the CBA’s response to a report of an Advisory Committee to the Federation of Law Societies of Canada. The Advisory Committee had released a report in June which had departed radically from the analysis of the CBA Task Force on the key issue of current client conflicts. The Advisory Committee’s analysis is here, and the CBA response is published here.

The issues are subtle but vitally important. Canada is diverging from the rest of the Commonwealth in the area of conflicts – see the work of Charles Hollander – and even the Americans are reconsidering their model rules in this area. The Canadian market for legal services is sufficiently tight in certain communities and sectors, that adoption of inflexible rules has implications for access to justice.

At this point, the members of the Federation will discuss the issue at a meeting next month, and then the initiative passes to the law societies in the provinces and territories, who will be mulling over what rule would be best in the interests of the public, clients and the profession.

The CBA response has the following executive summary:

• The CBA supports the harmonization of Codes of Professional Conduct across Canada. The CBA and the Advisory Committee on Conflicts of Interest share much common ground but we disagree on an issue of profound importance.
• The CBA recognizes the importance – and the difficulty – of the issues at stake in conflicts of interest. It is important for the public interest in the administration of justice and the interests of the legal profession across Canada that appropriately high professional standards be maintained.
• The CBA is concerned that a rule not be adopted that undermines the public interest by its over-breadth and negative impact on both choice of and access to counsel. Just as courts must avoid inflexible and immutable standards, so should the law societies.
• The central issue raised by the Final Report of the Advisory Committee is whether a new rule of professional conduct should be adopted which would always require current client consent even if there is no real or no substantial risk of impairment of client representation. Also at issue is whether a new rule of professional conduct should be created which relies on an interpretation of the common law that is not yet settled.
• The CBA is unable to support the Advisory Committee’s recommendation on current client conflicts for the reasons set out in this response. There are real and serious difficulties, for clients and lawyers alike, with the rule proposed by the Advisory Committee.
• We urge the Federation to engage in further consideration and consultation with a view to developing the best rule in the public interest.
• If further consideration and consultation is not possible, it would be preferable to allow the common law to continue to evolve, and not codify one interpretation of the current law into an even more inflexible rule of professional conduct.
• We also encourage the Federation to modify conflict rules that discourage the provision of pro bono legal services.
• The Advisory Committee’s recommendation to permit concurrent representation of two or more clients with competing interests requires greater elaboration to develop appropriate limits and safeguards.
• We recommend modifying Commentary 2.04(2), which appears to require all uninvolved lawyers in a firm to disclose personal interests in every new matter which a firm takes on.
• We propose a number of other drafting changes.

The Federation’s Advisory Committee’s introduction summarizes its thinking:

The Committee focused its work on the significant differences between the FLSC’s draft Model Code conflicts rule and the Report of the CBA Task Force. In doing so, four key differences were identified:

* The definition of client
* The definition of conflict of interest
* The rule related to acting against current clients
* The rule related to acting against former clients

The Committee was very cognizant of the fact that it was mandated to examine ethical rules for a Code of Professional Conduct for lawyers. The Committee was charged with advising and reporting to Council of the Federation, whose vision is ―acting in the public interest by strengthening Canada’s system of governance of an independent legal profession, reinforcing public confidence in it and making it a leading example for justice systems around the world.‖ The Committee recognized the time and effort put into the CBA Task Force work and its efforts to come up with rules and tools that would be of practical assistance to members of the legal profession. As the CBA Task Force recognized in their report, it is, however, the role of law societies to regulate the profession and to set standards for professional conduct. The perspectives of lawyers and firms were important in our deliberations, but the public interest mandate of law societies was foremost in our final considerations.

The Committee was also guided by the fact that while the jurisdiction and responsibility of law societies to set rules governing professional conduct is undisputed, the courts are not bound to accept and apply these rules. Adoption of an approach to regulating conflicts of interest that diverges significantly from the Supreme Court’s bright line test and interpretation of fiduciary duties might lead to lawyers being removed as counsel by a court even though they have complied with the rules set by law societies. In our view, this would place lawyers in an untenable situation.

We believe that the approach we have taken, a clarification of the important duty of loyalty, reflects the reality of the practice of law while at the same time protecting the public interest. Ethical rules will not encompass all of the issues the Courts have considered in the context of conflicts litigation, but the ethical rules are a crucial means by which law societies protect the public interest and provide guidance to lawyers. Consistency between jurisprudence touching on lawyer’s ethical duties and professional rules of conduct set by those who regulate lawyers in the public interest is important.