Acting to stop harm: the FCA and Appointed Representatives
The Solicitors Disciplinary Tribunal (SDT) recently imposed a fine of £250,000 on White & Case – the largest against any law firm in England and Wales. The previous record (£50,000) was shared by Clyde & Co and Fuglers.
White & Case’s was an agreed outcome ie the fine and its reasons were negotiated between the firm and the SRA. The SDT was then provided with a joint proposal by the parties as to how the case should be determined. Whilst far from a rubber stamping exercise, this approach does change the dynamics of the way such cases are determined.
Conflict of Interest Injunction
The regulatory proceedings arose because White & Case Partners from UK and USA offices ended up acting on opposing sides in litigation: Client A was represented by a Partner (David Goldberg) in the UK and Moscow office, and Client B was represented by a Partner in the USA. When Client B’s General Counsel was notified of the issue they applied for an injunction to restrain the firm from acting for Client A. Mr Justice Field upheld the injunction and gave a useful judgment on the underlying common law issues around conflict, Georgian American Alloys Inc v White & Case  EWHC 94.
At the heart of the case is the huge difficulty in managing conflicts cross border. There is not only the practical problem of identifying who is acting for whom worldwide but conflict rules vary from jurisdiction to jurisdiction. From an England and Wales perspective, there is no scope for a client agreeing to waive a conflict.
Given the relatively high profile of the decision of Field J it was inevitable that the SRA would follow with its own proceedings. This highlights the additional risk in law firms pushing a conflict injunction application to a full hearing, rather than ceasing to act at an earlier stage.
SDT proceedings were brought against both the London based Partner who acted for Client A and the UK LLP. Given Field J’s findings there was no real scope for a factual dispute and the defendants admitted their failures. The SRA did not bring allegations of failing to act with integrity or of acting dishonestly.
While there has been no limit on the level of fine the SDT may impose since 2009, the SDT’s Guidance Note on Sanctions 5th Edition (December 2016) outlines the starting point figures for fines. Level 4 fines range from £15,001-£50,000 and Level 5 fines begin at £50,000 and are unlimited for conduct that is significantly serious but not so serious as to result in an order for suspension or strike off. The guidelines suggest that fines ought to be in the tens of thousands. At first blush, it is difficult to reconcile the guidelines with the fine agreed by White & Case.
The Agreed Outcome procedure
Traditionally, the facts in regulatory cases would be put to the SDT on an agreed basis at a hearing but without a penalty being suggested. The SRA would open its case, the Respondents would mitigate and the SDT alone would decide what penalty to impose. This involved a public hearing and often media attention. Both parties would be uncertain as to outcome, the reasons and what might be said in open court. The statutory power to impose fines over £2,000 and to suspend and strike off lies with the SDT and not the SRA.
More recently, the SRA has in some cases presented the SDT with agreed outcomes at a hearing. Sometimes these have been accepted by the SDT but, on occasion, the Tribunal has felt unable to agree. Some SDT members have been sceptical about agreed outcomes partly because of under prosecution concerns, and partly because statutory powers rest with the SDT. However this informal agreed outcomes practice was put on a more formal footing by amendments to the SDT’s Case Management Practice Direction with effect from 1st September 2016, this also allowed for the case to be determined on the papers.
It is clearly advantageous for both law firms and the SRA to reach agreement on both outcome and reasons on the papers. Uncertainty is removed. However, the dynamic of agreed outcomes is that the harder the law firm negotiates the less likely the SDT is to accept the agreement. This perhaps explains the huge fine that White & Case was willing to pay. It is probable that the firm would have received a smaller fine if the matter had been left to a hearing before the SDT, given previous decisions and the Indicative Sanctions Guidance.
By agreeing a £200,000 fine, White & Case has raised the bar for everyone. The SRA will see this decision as a new benchmark against which future similar cases should be measured and will rely on it in negotiations and before the SDT. That is the sting in the tail of the agreed outcome procedure, where firms agree a tariff rather than it being set by the SDT.
This article first appeared on Law Society Gazette online on Monday 25th September
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