SRA relaxes conflicts rules after review of use of Chinese walls

City law firms will now be able to make wider use of Chinese walls after the Solicitors Regulation Authority (SRA) finalised a review of the rules governing conflicts.

The rule changes, approved by the Legal Services Board earlier this month (13 July), lift the restrictions which formerly only allowed law firms to act for multiple clients with information barriers in place if the firm had already been instructed at the time the conflict arose.

Rule four of the SRA Code of Conduct previously only permitted work involving Chinese walls to be completed after a conflict became apparent.

However, firms will now be able to accept new instructions, even when it is apparent that there are risks concerning confidentiality, provided the firm in question has the infrastructure in place to set up legally compliant information barriers.

The SRA has warned that most law firms will not have such capabilities and that Chinese walls should therefore continue to be used with "extreme caution".

Commenting on the amendments, an SRA spokesperson said: "It really only will be of significance to the largest City firms, mainly because you need to have the size and infrastructure in place to comply with common law on information barriers."

The latest changes come as a result of a review conducted by the SRA in February which also looked into amendments to Rule three of the Code of Conduct, which would have allowed firms to act for multiple 'sophisticated clients' in related matters with client consent - a proposal that was scrapped after concerns were raised.

The SRA initially consulted on change to the conflicts rules in 2008, but launched a second consultation last year after a lack of response from the in-house community. Network Rail was the only in-house legal team to participate in the consultation's first round out of a total of 38 respondents.

Five in-house legal teams took part in the second round, along with 11 City firms and one large national firm, while there were also responses from the City of London Law Society, the Law Society and one barrister.

• For more, see SRA reaches conflicts impasse as firms remain cool on reform