After City giant Freshfields Bruckhaus Deringer was injuncted from acting on the bid for Marks & Spencer because of a potential conflict of interest, many are speculating on what the long-term effects might be of the ruling.

Jeremy Fleming reports.

There is no doubt that the High Court and Court of Appeal injunction hearings last week were memorable and dramatic corporate courtroom spats - but the significance and long-term effects of Marks & Spencer (M&S) v Freshfields Bruckhaus Deringer are harder to gauge in the immediate aftermath.

Freshfields was blocked from acting for billionaire Philip Green on his bid for its former client M&S because it had previously advised the company on its contract with executive George Davies, which emerged as an important element of the deal.

Mr Justice Collins said there was a real prospect there would be a conflict of interest.

Slaughter and May, which was acting for M&S, reacted to victory over its rival magic circle giant with the modest air of a schoolchild who has accidentally given a member of his own gang a bloody nose.

A source close to the firm - who prefers to remain anonymous - says: 'It's difficult because they have a close relationship with Freshfields and they don't take any personal pleasure from this.' But even if the firm was just carrying out orders, it was evident that the courts had vindicated its impression that 'there was a clear conflict'.

The source adds: 'I'm sure that when the dust settles that will be acknowledged by Freshfields.'

As far as the immediate fall-out for Freshfields goes, the source says: 'It is embarrassing for them.

And it may have some impact on any clients who are being advised by the firm on issues such as Chinese walls.' He adds that the firm has 'taken a huge knock'.

But real damage to all firms could result from any substantive change in the rules on conflicts, and the source is satisfied that this has not happened.

He says: 'I don't think it changes the law and practice.

The point is that Slaughters would not have acted in those circumstances.

I can see why they took the initial instructions but when the materiality of the [George] Davies contract [to the proposed bid] became clear - Freshfields should have ceased acting.'

He adds: 'It may come as a wake-up call to the City.

The lesson to be learnt is that in applying the facts people can get complacent.' The Law Society Council should shortly consider new conflicts rules after discussions with the City.

Over at Freshfields, chief executive Hugh Crisp is less inclined to agree about how clear the conflict situation was.

He says: 'The court concluded that our information barrier and undertakings didn't go far enough.

We appealed because we disagreed.'

He says: 'We'll be reviewing our processes as we always do.

But we think we have a good [conflicts] process, and that we applied it properly.'

He says the firm still maintains that the information relating to Freshfields' previous dealings with M&S could have been kept satisfactorily separated from the bid team.

On the immediate effect on the firm, he is calm, saying that clients have been very supportive.

Certainly there are no angry noises coming from Philip Green.

A source close to the retailing entrepreneur said last week that 'Freshfields acted entirely professionally', and added that Mr Green would continue to use the firm in the future.

Mr Crisp is clear that Slaughters has achieved a tactical victory.

'Tactically we think that Slaughters was entitled to make this move,' he acknowledges - but says Freshfields does not consider that the fear was realistic.

But he is also unsure of the effect of that victory.

He says that City firms have a multiplicity of clients, and 'the matrix starts to get clogged up quite quickly', enabling firms to see conflicts where they do not realistically exist.

He adds: 'I'm not sure that we've changed the rule or the law but the interpretation on the set of facts suggests the courts might be readier to find a conflict.'

Mr Crisp is keenest to underline that 'we didn't and never would disclose confidential information to any client and this was not even alleged.

We're very disappointed by the outcome of the case, but it's important that there is clarity that the court found we were acting in good faith and that no disclosure was made'.

He bats away the suggestion that the firm might have been too greedy to ditch such a high-value bid, saying: 'The number of big, juicy bids we turn down is huge.'

Last week's court case was strange in many ways - it seemed as if the largest domestic take-over bid of the year was being transformed into a test case on the suitability of Chinese walls in professional firms.

But perhaps that was a red herring.

This case was and remains about a huge bid for an extremely high-profile UK company.

Freshfields was already hitting the headlines with the structure of Mr Green's proposed bid, with its unusual combination of cash and stub equity in exchange for shares.

Stub equity - which enables shareholders in a target company to participate in that company's future success - is a relative newcomer to the City.

The bid structured by the firm's corporate supremo, Barry O'Brien, would probably have made a big impact had it succeeded.

Competition issues relating to Mr Green's variety of holdings - in British Home Stores and Arcadia - are, meanwhile, likely to be material to any bid by the clothing tycoon for M&S.

With the arrival at M&S of new chief executive Stuart Rose, a retailing heavyweight to match Mr Green, it looks set to be a protracted battle and one fought on a number of fronts.

By winning last week, Sarah Lee - the Slaughters litigator whose team's success resulted from spending last bank holiday weekend in the office - showed that M&S is certainly up for the fight.