Two recent reports have put large firms in the spotlight over real or perceived conflicts of interest. Will they rebut the claims?

We see accusations from time to time of bad behaviour against sole practitioners or small firms. They are the ones that need regulation, so the saying goes. The City is a centre of excellence, and requires only light touch regulation. But now the large firms, or at any rate the international trade lawyers within them, are in the doghouse.

Two reports have come out in recently effectively accusing them of real or perceived conflicts of interest. I call on the considerable publicity resources of the large firms to rebut these claims.

The first whiff of grapeshot was in a report published at the end of April from an NGO called Corporate Europe Observatory, entitled Towards legalised corporate secrecy in the EU? How industry, law firms and the European Commission worked together on EU “trade secrets” legislation .

This accuses the law firms of assisting to develop and promote the current legislation on trade secrets in order to improve their own profitability. Most corporate law firms are ‘not selling legal expertise on trade secrets to the Commission only’, it states – they are selling legal advisory and defence services on trade secrets to all potentially interested clients.

‘The broad support for the Commission’s initiative among corporate law firms is simple to understand: it adds a tool to the toolbox of services they can propose to their clients,’ it adds.

Now another attack has come, this time from the European Commission itself (which has just been accused above of being in bed with the large firms). The Commission has recently published a concept paper on ‘Investment in TTIP [transatlantic trade and investment partnership] and beyond – the path for reform’. Its title may be dull, but the content deals with one of the most heated controversies on the trade front: the desirability of investor-to-state dispute settlement mechanisms (ISDS).

Depending on which side you are on, ISDS is either the devil incarnate, allowing big multinationals to force states to allow them to do things in breach of state regulation – or else ISDS is a necessary and misunderstood part of the international investment structure.

This article is not about ISDS, but about lawyers’ part in it. The Commission’s report implies - in its carefully worded, neutralised way - that lawyers are again feathering their own nest: ‘Currently, arbitrators on ISDS tribunals are chosen by the disputing parties (i.e. the investor and the defending state) on a case-by-case basis. The current system does not preclude the same individuals from acting as lawyers (e.g. preparing the investor’s claims) in other ISDS cases.

‘This situation can give rise to conflicts of interest - real or perceived - and thus concerns that these individuals are not acting with full impartiality when acting as arbitrators. The ad hoc nature of their appointment is perceived by the public as interfering in their ability to act independently and to properly balance investment protection against the right to regulate. It has also led to perceptions that this provides financial incentives to arbitrators to multiply ISDS cases.’

The Commission is keen to act. Among other things, it proposes that: ‘The arbitrators, whoever selects them, are required to have expertise in international law. Second, they need to comply with a code of conduct (annexed to the agreement or via the incorporation of the functionally equivalent International Bar Association rules on conflicts of interest). The International Centre for the Settlement of Investment Disputes secretary general - not the other arbitrators as is currently the case - decides whether there had been a conflict.’

Big law firms are a recurring target for transparency NGOs, and so maybe the first report should not be a surprise. But the European Commission is a different case, and it is of some concern to see passages like the one quoted above. I am willing to believe that the careful use of ‘perceived’ and ‘perceptions’ in its text is the correct usage.

But how has it come about that such accusations are even being made in a Commission document? Come on, big law firms, hurry to the defence of our profession – since, as always, accusations against one are damaging to all.