Chinese Walls in the Law Firm: Locked Door or Open Sesame?

DOIhttps://doi.org/10.1108/eb025618
Pages171-174
Publication Date01 Feb 1993
AuthorJonathan Middleburgh
SubjectAccounting & finance
Chinese Walls in the Law Firm: Locked Door
or Open Sesame?
Jonathan Middleburgh
Jonathan Middleburgh
Formerly a lecturer at the University of
Chicago and part-time Tutor in Law at
Worcester College,
Oxford,
the author is
a barrister, specialising in commercial
law, financial services and commercial
fraud.
He has a particular interest in
judicial review and related public law
issues.
ABSTRACT
Recent case law suggests a reluctance on
the part of the courts to allow the Chinese
wall within law firms as a device to prevent
conflicts of interest. This paper examines
the recent case law and considers whether
the courts' reasoning is justified. The author
suggests that the validity of the Chinese
wall should be considered on a case-by-
case basis rather than by a near irrefutable
presumption against it He then sets out a
series of safeguards which might create an
effective Chinese
wall.
DEFINITIONS
Scepticism about the success of erecting
Chinese walls is not uncommon: in
1987,
the Chairman of the Senate Bank-
ing Committee commented that 'the
Chinese Wall is a phoney, it's a fake, it
doesn't work . . .'. In stronger terms, the
Chairman of James Capel & Co com-
mented that 'Anyone who believes in
Chinese walls believes in fairies'.1 Recent
case law suggests a reticence on the part
of the courts to allow Chinese walls
within law firms.
The time is ripe for an analysis of the
courts' reluctance to allow Chinese walls
within the context of the law firm. The
past 20 years has seen an unprecedented
expansion in the size of law firms in
England and worldwide. As firms con-
tinue to expand and to swallow smaller
firms (the partnership of Clifford Chance
expanded from two separate practices
with a combined partnership of 74 in
1979 to a giant partnership of 209 in
1990),
it is inevitable that law firms will
increasingly share a common client pool.
It is first necessary briefly to define
what is meant by a Chinese wall for
those who are uncertain about the
meaning of the concept. Dr Finn pro-
vides a useful definition, stating that the
wall is an 'organisational contrivance
within an enterprise designed to present
the flow of confidential information to
or from a part or parts of that enter-
prise'.2
Within the context of a law firm, a
Chinese wall is a device to prevent con-
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