UK Client Conflicts: Consent is not a waiver
Clients may instinctively view conflicts of interest as a waivable matter of choice.
From a commercial perspective, that instinct is understandable. If sophisticated clients understand the issue, accept the risk, and want the same firm to continue acting, it may seem sensible to record that position and move forward. That approach is more familiar in US and Canadian contexts, where certain conflicts can be managed through informed client consent.
However, it is not the starting point under the SRA Code in England and Wales. For UK law firms, the question is not simply whether the clients are content to proceed. The firm must independently determine whether a client conflict, or a significant risk of one, exists; whether one of the limited exceptions applies; and whether it is reasonable for the firm to act for all clients.
Consent is relevant, but it is not determinative. For UK law firms, the question is not simply whether the clients are content to proceed.
The firm must independently determine whether a client conflict, or a significant risk of one, exists; whether one of the limited exceptions applies; and whether it is reasonable for the firm to act for all clients.
Paragraph 6.2 of both the SRA Code of Conduct for Solicitors, RELs, RFLs and RSLs, and SRA Code of Conduct for Firms:
You do not act in relation to a matter or particular aspect of it if you have a conflict of interest or a significant risk of such a conflict in relation to that matter or aspect of it, unless:
a) the clients have a substantially common interest in relation to the matter or the aspect of it, as appropriate; or
b) the clients are competing for the same objective,
and the conditions below are met, namely that:
i) all the clients have given informed consent, given or evidenced in writing, to you acting;
ii) where appropriate, you put in place effective safeguards to protect your clients' confidential information; and
iii) you are satisfied it is reasonable for you to act for all the clients.
The clients must either have a substantially common interest in relation to the matter or relevant aspect, or they must be competing for the same objective. Even then, the further conditions must be met: all clients must give informed consent, given or evidenced in writing; appropriate safeguards must be put in place to protect confidential information; and the firm must be satisfied that it is reasonable to act for all clients.
Informed consent is not a free-standing waiver of a conflict.
It is one of the conditions that must be satisfied after the firm has already concluded that one of the exceptions applies.
The same is true of confidentiality safeguards, such as information barriers, restricted access, codenamed files, or separate teams. These measures may help manage confidentiality risks, but they do not themselves create permission to act where the conflict rule is otherwise engaged.
The “substantially common interest” exception should therefore be approached carefully. It does not mean that both clients would broadly like the transaction to complete. The test is narrower. Clients who are commercially aligned at a high level may still have opposing legal interests in the specific matter or aspect on which the firm is instructed. There must be a clear common purpose between the clients and a strong consensus on how that purpose is to be achieved.
A simple example is acting for both buyer and seller in a property or business sale. Both parties may want completion, but that does not mean they have a substantially common interest. The seller will usually want to maximise price, limit warranties, reduce conditionality, and shift risk to the buyer. The buyer will usually want the opposite: a lower price, stronger contractual protection, fuller disclosure, and greater recourse if something goes wrong. Their shared desire to complete the transaction is not enough - they are unlikely to have a strong consensus on how the transaction should be achieved.
This is echoed by the Law Society:
There is a high risk of a conflict of interest if you act for both a buyer and a seller. You’ll need to decide whether there is a conflict in the circumstances. If there is, then you should not act for both clients.
The SRA’s exception for circumstances where the two clients have a “substantially common interest” does not apply to a property purchase. Although both clients will have a common interest in completing the sale, they also have different interests, since one is buying and one is selling.
The position is more nuanced in complex corporate transactions, where the SRA Code refers to the matter or a “particular aspect” of it. A firm may be able to act for clients on a defined aspect where their interests are genuinely aligned, but not on another aspect where they diverge.
For example, two investors forming a consortium to acquire a target may have a substantially common interest in certain buy-side aspects of the transaction, such as due diligence on the target, bid process mechanics, regulatory filings, completion deliverables, and the negotiation of acquisition documents with the seller. At that level, both clients may be pursuing the same acquisition through a shared structure and may have a strong consensus on the external objective.
However, that does not automatically mean the firm can act for both on the internal consortium arrangements. Their interests may diverge on matters such as equity split, governance rights, veto controls, funding obligations, default consequences, management fees, exit rights, liability sharing, and what happens if the bid fails or one party wants to withdraw. On those issues, one client’s preferred position may come at the expense of the other.
The conflict analysis must therefore be applied at the correct level of detail: there may be a substantially common interest in the external acquisition work, but not in the internal arrangements between the consortium parties.
The second exception, competing for the same objective, is different.
It may apply where clients are competing for an asset, contract, or business opportunity, such as in an auction, tender, bid, or insolvency process. In that situation, one client’s success may make the objective unavailable to the other. The exception recognises that, in some structured competitive processes, a firm may be able to act for more than one bidder if the necessary conditions are met. But again, the clients’ consent is not enough alone, the exception must apply. The firm must also protect confidential information and all things considered, be satisfied that it is reasonable to act.
The practical point is straightforward. A conflicts process should not ask, “Can we get a waiver?” It should ask:
Is there a client conflict or significant risk of one?
If so, does the matter fall within the substantially common interest exception or the competing for the same objective exception?
Then … have all clients given informed consent in writing?
Have we put confidentiality safeguards in place?
Is it still reasonable for the firm to act for all clients?
Under the SRA Code(s), clients do not simply waive a client conflict. Consent operates only within the limited exceptions. If the exception is not available, or the conditions are not met, no amount of client consent will make the retainer compliant.
This article is general commentary only and does not constitute legal advice or create any form of reliance. The application of the SRA Code depends on the facts of each matter, and firms should obtain appropriate advice before acting on a potential conflict issue.