Law firms will be able to advise rival clients on the same deal after the Solicitors Regulation Authority laid down plans to relax conflict of interest and confidentiality rules in a shortened consultation which will close next month.

The proposed rule changes being pushed through by the regulator will permit firms to act for ‘sophisticated clients’ in ‘any situation in which there is a conflict of interest’, except for litigation.

The rule change follows lobbying by the City of London Law Society (CLLS), which expressed concerns that the current regime is ‘overly restrictive’ for corporate clients.

Firms will need the written consent of clients to proceed in conflict situations, and the SRA suggests that firms should let clients know the identities of other clients involved.

Firms looking to take advantage of the relaxation in the rules must be ‘properly resourced’, with teams that can operate independently of each other, and an individual or team that can make ‘dispassionate and independent decisions’ about whether the firm can act.

The SRA said the move was necessary because current rules ‘are not sufficiently flexible to provide for the needs of sophisticated users of legal services.’

Sandie Okoro, global general counsel at Barings Asset Management, said: ‘When you have developed a strong relationship with a law firm, it’s very difficult when, all of a sudden, they can’t act for you for conflict reasons. There may be some circumstances where it’s not desirable to give consent, but otherwise, I want the law firm that knows my business. The only concern then is how the information barriers go up in that law firm.’

However, Andrew Cheung, director of compliance at City firm Denton Wilde Sapte, said that the changes are ‘likely to put solicitors’ core duties to clients at risk’.

He said: ‘The proposed changes suggest creating "firms within a firm" to deal with the conflict of interest inherent in acting on both sides of a matter. This arrangement increases the potential for the interests of solicitors and their firms to conflict with those of the clients, which could compromise solicitors’ independence and inhibit them from acting in their client’s best interests.

‘It will result in reduced accountability, to the detriment of both clients and the reputation of the profession.’

The consultation period has been shortened to eight weeks with the agreement of the Law Society on the basis that the main thrust of the reforms was subject to consultation in 2008. An SRA spokesman said the authority did not expect any resistance to the reforms, which would be implemented ‘without undue delay’, and without waiting for the SRA’s move towards principles-based regulation, which will involve rewriting much of the conduct rulebook. The consultation ­closes on 12 February.