Reading new research commissioned by the SRA into professional independence I was reminded of the unfortunate time that I tried to discuss professional ethics with my estate agent. It’s not a pastime that I would recommend you try. For a start, there’s very little in the way of shared vocabulary. ‘Independent advice?’ my agent repeated, utterly perplexed by my complaint that his advice appeared to have been influenced more by what was best for him than what was best for me. After some explanation (and diagrams and role-play) my agent eventually grasped the concept and responded ‘Well it’s not in my interests to help our competitors secure your business is it?’.

For lawyers, allowing personal interests (or indeed any form of interest) to influence the advice provided to clients is perhaps one of the most serious and fundamental breaches of a lawyer’s ethical duties that can occur. My estate agent, however, thought it obvious that a business cannot be relied upon to advise its customers independent of its own financial interests. Fascinating new research by Dr Steven Vaughn and Claire Coe published recently by the SRA suggests that many lawyers may be of a similar view.

While some may question whether it is realistic to expect a legal practice to operate differently to any other business, nobody should doubt the commitment of the regulators and the Courts to enforce these core ethical obligations. Earlier this year the Solicitors Disciplinary Tribunal handed out a £305,000 fine – the largest on record – to a solicitor who was found to have allowed his own financial interests in a client matter to come into conflict with those of the client.

The researchers, however, encountered “complete ignorance” from some senior lawyers about what the term ‘professional independence’ actually means: “Crikey, I’ve never even heard the expression.”

To be fair, while the SRA Principles strictly prohibit a firm or lawyer from compromising their independence, the precise meaning of the term ‘independence’ in this context is not entirely clear.

SRA guidance stresses that the concept of professional independence applies to both individuals and law firms. The guidance also states that this means more than simply giving independent advice to the client. As the new research points out though, this only really scratches the surface.

The guidance does at least provide clarity on the starting point for what must be done to maintain independence: advise the client independent of any other interests e.g. financial interests, firm politics, political interests etc. This sounds simple enough but as the research highlights the practical realities of fulfilling this duty when running a law firm can be much more challenging.

Third party fee-payers, or ‘shadow clients’ as they are referred to in the report, is one interesting example of the pressures placed upon a lawyer’s independence. This is a scenario in which one party (such as a borrower) refers work to a firm and remunerates that firm but the firm’s actual client is on the other side of a transaction to that party (i.e. the bank). So in effect, the other party to your client on a transaction is the same person who referred the client to you and so may in turn refer more clients to you in the future. As one interviewee pointed out, this gives rise to a risk of advice being influenced by a desire to please the other side and some seemed convinced that this was happening in practice. If so, that is a very serious breach of the professional duties.

The risk of a third party influencing the conduct of legal work is by no means unique to financial transactions. There are numerous examples of the SRA taking disciplinary action against law firms who have allowed the interests of a third party who referred the work to the firm to influence how that work is actually undertaken (though such arrangements are more common in the context of personal injury or conveyancing work). The issue arose so commonly that guidance was added to the Solicitors’ Code of Conduct 2007 (prior to its repeal) which warned that firms should not agree with an introducer of work to conduct client matters referred to them in a particular way, such as by referring clients to particular experts or search providers. Wherever the work comes from and whoever pays the bill, firms must always ensure that these arrangements do not impact upon their ability to freely and independently advise their client.

Similar issues arise in the context of what is understood to be a growing ‘market for bad legal advice’. There’s reference in the report to clients putting pressure on lawyers to provide a legal opinion which simply says what the client wants it to say. Again, lawyers must resist this pressure and not allow the desire to please the client to compromise their duty of integrity or the duty to the Court. This is partly why current SRA guidance makes reference to maintaining independence as being more than just giving independent advice to the client (though as above, that is also essential).

Another reason is that the SRA seems to view independence as relating to more than actual acts or omissions by lawyers and law firms. There is also a question it seems of whether the lawyer is truly able to operate freely. Previous SRA prosecutions and guidance have made clear that lawyers can fall foul of the rules by entering into arrangements which restrict their ability to advise independently, even if a problem has not in fact arisen in practice with the advice to the client.

Overall, while there is some uncertainty, I would suggest that in order to maintain independence lawyers and law firms need to ensure two things:

• that in practice the professional duties are not compromised by any personal, financial or other interests. In particular, the duty to act in the best interests of the client, the duty to act with integrity and the duty to the Court must be maintained; and
• that the ability to fulfill those duties is not restricted (whether by contract or otherwise i.e. because practically the firm or individual is simply not free to choose how they pursue their professional activities).

Interestingly the authors of the research were quite surprised by the lack of sophistication in how risks to independence are managed, even within what are understood to have been quite well resourced firms. The report encourages systematic training on independence as a starting point and that certainly seems very sensible (though as a vendor of such training, I feel compelled to declare a risk to my own independence in making that assessment!).

I would also suggest that where a material risk to independence is present but the firm is nonetheless able to act, firms should put checks and balances in place to monitor matters more closely to ensure that the duty to maintain independence is being met in practice. For example, many firms maintain a log of high-risk matters and once a matter is designated as such it is subject to closer scrutiny by supervisors (or even independent reviewers). Matters which carry a risk to the lawyer’s ability to advise independently might well be appropriate for that type of enhanced monitoring.

More broadly, firms also need to think carefully and frankly about whether their business or a section of their business is dependent upon a third party and if so how the firm strategically can move forward to ensure that it retains its ability to act independently.

In conclusion, the report indicates that the core duties of lawyers are under pressure and that the risks are being compounded by a lack of sophistication in how firms approach these risks. It is not clear what steps if any the SRA will take next following receipt of this research but with the warning signs now set out so clearly it would seem unwise to hold off a review of your own approach.

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