Solicitor calls for physical division of staff and IT with use of Chinese walls

CONFLICT RISK: with increasing global consolidation, firms must focus on confidentiality issues

Chinese walls dividing potential conflicts between clients should be bolstered by separation of buildings and IT systems - although this is not current practice at law firms - a conference heard last week.

At a seminar on accountants' liability, organised by City firm Reynolds Porter Chamberlain, indemnity partner Stephen Reilly told delegates: 'Ideally Chinese walls should allow for the separation of staff into separate buildings and the use of separate IT systems to maintain confidentiality of the information at risk.'

The recommendations applied to law firms as much as auditors, Mr Reilly later said.

Most firms - such as City giant Clifford Chance - use Chinese walls within the same building, and using the same IT systems.

Chris Perrin, Clifford Chance's deputy chief operating officer, said: 'In my own experience, clients are perfectly happy with us using the same IT systems so long as they are password protected.'

He said he would always seek client consent to any Chinese walls, and obtain consent for the form of Chinese wall to be put in place.

Mr Perrin said Clifford Chance tries to avoid having Chinese walls where possible because the 'responsibilities are severe'.

Mr Reilly said full consents were an important safeguard, but added: 'The golden rule is that buildings and IT systems should be kept separate.

Conflicts and confidentiality are slightly off the radar at the moment, but with so many firms consolidating into more global entities, issues of confidentiality and conflict have more potential to become problems, unless rigorous systems are in place.'

The Law Society's regulation review working party is set to put draft regulations reforming the rules on confidentiality and conflicts - including Chinese walls - before the Society's council for approval this week.

If agreed, a three-month consultation period will follow.

Ed Nally, partner with Bolton firm Fielding & Porter and chairman of the working party, said: 'The draft rules permit information barriers with tight restrictions.

It will not be a charter for irresponsibility.

Law firms should use such barriers with caution, because if there are subsequently questions asked about their judgement, it will be for a court to decide in hindsight whether they made the right call.'

Jeremy Fleming