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3 Regulatory Trends for 2023 – Part 2: Acting Ethically

In this series of news alerts, our regulatory and professional discipline partner, Andrew Pavlovic, identifies 3 key regulatory trends which firms and solicitors need to be aware of in 2023. In this second alert, Andrew considers the increased scrutiny on lawyers following the Russian invasion of Ukraine, both in respect of the conduct of litigation and on the issue of client selection more generally.

Whilst criticism of lawyers is nothing new, the conduct of lawyers is now arguably in the spotlight more than ever before. Rightly or wrongly, an impression has arisen that lawyers are acting as “hired guns”, enabling clients to act unethically/improperly, and pursuing client’s instructions without any regard to either their regulatory obligations or overriding duties to the Court.

Strategic Lawsuits Against Public Participation (SLAPPS)

The SRA’s issued guidance on the conduct of disputes in March 2022, in light of concerns raised about SLAPPS, a form of litigation in which wealthy litigants seek to suppress negative stories about them through the threatening of vexatious or frivolous defamation claims against journalists/newspapers seeking to report on matters of public interest. 

The guidance reminded solicitors/firms of the relevant SRA Principles/Rules that would potentially be infringed by engaging in SLAPPS, as well as other forms of abusive and oppressive litigation more generally, including, among other things:

  1. the need to act in a way which upholds public trust and confidence in the solicitors profession;
  2. the requirement to ensure that the Court is not misled;
  3. the requirement to ensure that third parties are not taken advantage of, and;
  4. that representations/submissions are only made where they are properly arguable.

This was followed by a specific warning notice on SLAPPS in November 2022 (previously considered in further detail in this news alert). The press release accompanying that guidance stated that the SRA was currently investigating 29 cases where it was alleged that solicitors/firms had been engaging in litigation which constituted a SLAPP (the SRA recently confirmed that this has now increased to 40 cases). It is expected that at least some of those investigations will be completed at some point in 2023. Where the SRA decides to take no further action, then the outcome of any investigation will usually be confidential. However, if a regulatory settlement agreement is entered into or a referral is made to the Solicitors Disciplinary Tribunal, this will be informative in demonstrating where the SRA considers that the conduct of litigation crosses the line between representing client’s interests vigorously and breaching the SRA Principles/Rules.

The SRA has also indicated that it will publish a thematic review once it has completed its investigations, setting out any common themes arising from those cases and indicating when it is likely to take action.

This is a challenging area for the SRA, with legislation on SLAPPS working through parliament and, as a result, no guidance/interpretation of that legislation by the Courts. Whilst the SRA is under increasing pressure from parliament to take action on SLAPPS, it must ensure that any decisions that it does take are capable of standing up to scrutiny and are fair to the firms and individuals involved.

Other Ethical/Regulatory Issues

In addition to investigating SLAPPS, there are other on-going SRA investigations/reviews which raise similar ethical and regulatory issues:

  1. Non-Disclosure Agreements (NDAs) – The SRA is conducting a thematic review on NDAs, reviewing the extent to which firms/solicitors have taken heed of the warning notice, first published in March 2018, which made clear that NDAs should not include clauses that attempt to prevent or restrict the ability of individuals to report matters to criminal or regulatory authorities. Concerns had previously been raised that solicitors were assisting their clients in covering up sexual and other forms of misconduct through the insertion of such clauses into agreements.
  2. Post Office Inquiry – The on-going inquiry into the Post Office scandal, where sub-post masters were convicted of fraud on the basis of faulty software, is set to consider the role that the Post Office’s internal and external lawyers played in the prosecutions. It has been suggested that the Post Office persisted with the prosecutions despite having concerns about the reliability of the software and/or failed to disclose documents which would have revealed concerns about the software’s reliability. The SRA is a core participant to the inquiry, although it is unlikely to take any steps in relation to any relevant individuals or firms until the inquiry has concluded.
  3. General Counsel/In-House Lawyers – There is a wider concern that General Counsel and in-house lawyers are regularly put in positions of potential conflict between their obligation to act in the best interests of their employer and their regulatory obligations to act with independence and in a way which is consistent with the SRA Principles/Rules. This presents particular issues where General Counsel/in-house lawyers become aware of misconduct within their organisation, but consider that they are prevented from blowing the whistle on such misconduct due to their regulatory obligations to maintain privilege and confidentiality.

Economic uncertainty could also present ethical challenges for solicitors and firms. At the recent COLP/COFA conference, Paul Philip, SRA Chief Executive, referred to the “natural tendency” of solicitors to use client account money to keep struggling firms afloat. Whilst this is unlikely to be a risk for larger firms, it is possible that firms may be more likely to “take a view” on ethical issues such as SLAPPS, own interest or client conflicts if work begins to dry up.

Client Selection

Whilst the above issues are a potential regulatory concern, there is a broader question regarding client selection, and increasing pressure on firms to reject instructions from clients where either (1) the profile of the client or (2) the nature of the matter do not reflect the firm’s purpose or resonate with their values. This issue was primarily brought into focus by the war in Ukraine, with firms taking differing approaches as to whether they continued to act for Russian clients and/or continued to operate Russian offices. However, it has also led to firms considering client selection issues more widely, such as whether they should act for tobacco companies or companies which are not environmentally friendly. As firms seek to attract and retain new talent, they are increasingly being required to demonstrate their culture and purpose not just through what they say and do, but who they act for.

If you have any questions in relation to SLAPPS, client selection and related ethical/regulatory issues, please contact Andrew Pavlovic, who specialises in professional discipline and regulatory law.