We invite you to read the publication of Diario Financiero in which our partner, Rodrigo Albagli, commented on the ethical crisis that law firms are going through.
A recent survey published by Diario Financiero showed that 74% of lawyers believe that the profession is in an ethical crisis.
The survey conducted by Cadem in June – commissioned by the Bar Association and the García Nadal law firm – is known right in the middle of the gale caused by the Audios Case and where one of its protagonists is none other than one of the best known jurists in the market, Luis Hermosilla.
This perception of crisis regarding the profession added to the splinters of the aforementioned case have not been at all indifferent to the legal industry, and particularly to law firms, which in recent weeks and months have had to take charge of these issues, not only promoting internal discussion, but also revisiting their protocols and ethical manuals.
Most firms have a policy regulating conflicts of interest, which they say is in line with international best practice, as well as the Bar Association’s code of ethics. But how ‘alive’ are they, and how are they promoted internally, are some of the questions DF asked four reputable law firms.
The criteria
In all these offices, they say, the standard is that every time a new client or new matter arrives from an existing client, the partners or a specialized committee review whether or not there is a conflict of interest.
“We are mainly concerned about the independence of judgment that we must maintain, and whether this could be affected by accepting the assignment of a new client,” says FerradaNehme’s managing partner, Rodrigo Ferrada, who adds that in this evaluation it is also important to analyze whether accepting a new assignment would lead them to defend conflicting interests with one or more of the firm’s current clients.
Another point to distinguish, notes Ferrada, is direct and indirect, real and apparent, and actual and potential conflicts. “We are also concerned about kinship and friendship issues with clients and authorities, when they may impede our freedom of decision or may tip the balance in a way that is detrimental to our clients,” he adds.
At PPU this type of protocol for opening new matters is put in place for “the purpose of detecting, evaluating and resolving any event related to this issue, which is mandatory for our offices in Chile, Colombia, Peru and Uría Menéndez in Spain,” details the firm’s partner and member of PPU’s Deontology Committee, Alberto Pulido.
Cariola Díez Pérez Cotapos managing partner Carlos Pérez-Cotapos adds that once the review is done, if there are doubts, it is taken to an executive committee to resolve. “And, if there is a conflict, obviously we do not take it”.
Higher risks
In the opinion of AZ managing partner Rodrigo Albagli,full-service firms and those with litigation areas are the ones that require a “particularly rigorous” approach, as exposure to potential conflicts of interest is more frequent and complex.
The firm applies what it calls “ethical barriers”, “which consist of assigning certain matters and clients to independent teams, ensuring confidentiality and effective separation of information between areas. This allows us to guarantee independence, transparency and the protection of our clients’ interests,” says Albagli.
Carlos Pérez-Cotapos adds that risks and complexity decrease as long as the task of checking for conflicts of interest is done well, particularly in bidding issues, “since several clients may want to participate in the same purchase, and also in the area of litigation, when one client decides to sue another client”.
For those situations where there are “gray areas, in PPU, for example, issues are addressed in an Ethics Committee made up of the senior partners of the three countries where they have offices in the region, plus their Spanish partner. Pulido notes that the greater the number of clients and jurisdictions, the more common it is for cases to be evaluated by this body.
In that sense, conflict management for full-service firms becomes a challenge when “balancing the firm’s financial goals with ethical criteria on conflicts of interest,” Albagli acknowledges. For this reason, he says that the real challenge lies in “achieving a balance between growth, the fulfillment of strategic objectives and respect for the highest ethical standards”.
However, the Audios case and the new Law on Economic and Environmental Crimes have brought these practices back into focus. “Beyond some changes or additions to our protocols, we have provoked conversations in the teams to reinforce the permanent alert that we must have in the exercise of the profession,” says Ferrada.
Alberto Pulido agrees with the above and adds that these types of tools should always be subject to review and improvement and that “emblematic cases” (such as this one) make the firm’s lawyers more aware of the protocols “to respect them and take them very seriously”.
Although to date the firms interviewed say that they have not had any problems related to conflicts of interest of any of their professionals, they point out that the sanctions are not minor and may involve a serious infraction or the exclusion of partners, among other disciplinary measures.