Conflict of Interest
Presentation 2 February 2016
Indian Merchant Chamber,
Mumbai Members of Law Society of Mumbai in attendance
Defining Conflict of Interest
Conflict of Interest is defined as conflict between the personal interest of the individual and the position he has in an institution where he must make the decision in the interest of the institution or society at large. Personal interest includes interest of others that the person might want to benefit as family member or another person in a non-economic relationship.
Most identifiable example is when a lawyer acting for one party in litigation colludes to compromise the interest of his client by dealing with the opposing lawyer to make personal gain to the detriment of the client’s interest. Such conduct is sanctioned by the Law Society in Canada and by the Advocates societies in India. There are many examples of such conflict in institutions of society where rules of conduct or law or regulations are put in place to avoid conflict situations.
Examples of conflict of interest exist in many situations in law, politics, business and professions. Different countries adopt different rules as well as ethics of behaviour to deal with the conflict issues. Rules of ethics and laws are created around the need to identify situations of conflict and these rules are observed and sometimes broken based on the culture that the society develops and continues to develop and change over time.
Evolution of the concept of conflict in Law - Historical perspective
Common law jurisdictions follow the English model which is followed in many countries around the world, including, US, Canada and India. Common law jurisdictions require different lawyers to protect their client’s interests before the courts. Each lawyer advances the position of his or her client in interpreting the law and seeing the facts from the perspective of his client. This is one illustration of the development of adversarial system to ensure protection of the litigant and provide fairness in justice. This process applies in different areas of activities in society, including politics and business.
In England it was the Barristers who started the development of the concept of opposing counsel approach to provide representation before the court. Common law was As each lawyer agreed to represent the client in court, it was soon found necessary that even the black and white text of the law can be seen from two different perspectives, and therefore it was necessary to have separate and independent lawyers to protect the interest of each party and interpret the law from client’s different perspectives.
Thus the system of having separate representation evolved and was eventually the procedure was codified into Rules of Professional Conduct where in the Common Law jurisdictions, including, England, Canada and India and US have these principles codified into procedural rules of negligence and ethics which are required to be observed by the lawyers in protecting the client’s interests when lawyers represent them in court room.
This rule is extended to many different areas of law including family law, conveyancing, as well as civil and criminal litigation. In civil law jurisdictions, which follows the Napoleonic Code the trial process is inquisitorial which means that the judge inquires into the issues to find a resolution. In these jurisdiction more often the areas of conflict such as family law and conveyancing are considered non-conflictual and are adjudicated by a notary without dual representation. One notary for example would carry out a closing of a transaction to transfer the property ownership than have two lawyers, one to sell and one to check title for the purchaser. Thus it is the society through the parliament that decides which areas of activities are conflictual and how to deal with that situation. These rules evolve over time and in common law jurisdictions there is an increasing use of Alternate Dispute Resolution that is adopted to minimize the effort and resources required to find a resolution of the legal problem.
The institutions of society, including law and ethics and culture evolve around of the rules of conflict over time. In common law jurisdictions, each country such as India, Canada and U.S. evolve different rules to identify and address situations of conflict. To be able to identify the situation of conflict of interest and dealing with it to protect individual interests requires the maturity and ethics of the individuals making decisions and for the society or country to create the norms that are in conformity with the culture of the society.
Judge and Lawyer Roles
In Canada it is possible for a lawyer to be a Deputy Judge in which the lawyer carries out his lawyerly duty when representing a client in court, but if he acts as a Judge and sees a person as a client in front of him where he could use his position for his advantage of the litigant and he would recuse himself from decision making in that situation and decline to use his judicial position and remove himself as the judge to ensure that the decisions are made objectively and fairly. This ability to do so requires personal integrity, and ability to forgo self interest to ensure that the institutions of justice are not compromised.
In my career as a Deputy Judge I have removed myself as a judge whenever there is a conflict, which is when I have identified the client and refused to act as a judge in that case. In my 24 years of working as a Judge I never had a situation where a lawyer asked me to use my position for a decision for their benefit. Canada has established high standards of ethics and it makes it possible for backlog of cases to be dealt with by lawyers acting in their capacity as Judges on a part time basis. It is a credit to a society where the cultural ability to achieve this has been made possible.
In India and many commonwealth and developing countries a lawyer is never permitted to act as Judge preventively because of the risk that he might act in conflict. This is done to avoid a problem before it happens. This is also the reason why in many towns in India the Judge who knows the lawyers in that town is sent to another town to be a judge where he does not know the lawyers. In a lawyer acting as a judge is not in conflict of personality, but he avoids the conflict of interest in decision making for others when acting as a judge.
Conflict in Business
An example of conflict in business activity happens when in a public company the director who has advance knowledge of the company and where the value of shares of the company are likely to go up or down, trades in those shares for his personal gain. It is called insider trading and is prohibited in most countries, because if does sell out shares when they are going to go down in value the director is using his position to the detriment of other share holders to whom he owes a duty of care to protect their interests. In other words you can’t use your personal position for personal gain when you have a duty to others outside your family.
Conflict in Politics
In a political position such as a minister, when you have a duty to protect the public you are making decisions for the public you are serving and it is important that this position is not misused for personal gain. For example, if there are licences to be issued for radio signal or mobile phones, they can’t given to those you know at a price which is not market value or designated value. Getting kickbacks for such sale is equally wrong because the right to make the decision as a minister requires the decision to be made in the interest of the public and the public position cannot be used for personal gain.
How does one deal with conflict
Rules and laws are created to deal with conflict issues and ethics of personal behaviour develops around it as culture. When there are professional bodies or parliaments dealing with conflict issues, there is usually not a problem creating the rules which protect the public or group interest. The problem usually arises when rules of conflict are broken and enforcement of the rules created is not done as a cultural norm.
Western democracies have made much progress in their societies using these rules and using the enforcement mechanisms to ensure that the rules are not broken and if they are the culprits are punished. Many developing countries including India are grappling with this problem and it takes time to develop not just the institutions but the culture that is ready to deal with breaches of the rule. In China where the elite communist party enforces the rules many who breach the conflict rules are severely punished.
Understanding and the ability to enforce the conflict rules is fundamental for the maturity of the society in its development and it makes considerable difference in economic growth rates as it is happening in India. India has reached very high numbers of GDP growth rates of up to 7% under the Prime Minister Narendra Modi and the strict enforcement of the rules can improve these rates even higher because when a position of a public servant is abused for personal gain the extent of the loss to the public is far out of proportion to the gain made individually by the person in position.
India is poised to be once again on the world stage in its current history which it was before the arrival of outsiders who used the Indian economy for benefit of their own society, impoverishing India. India contributed about 24% of world GDP when British Raj before about 1857 when East India Company took over Delhi, and the power to make decision for India was given to the British Parliament which acted to protect British public but not the India. The GDP declined to about 4% of world GDP by 1947 when India became independent. During the intervening period England was industrialized at the expense of Indian economy and this is an illustration of the conflict of interest where no mechanism has been put in place to address the situation. This is an example of conflict of interest of one society against another. India has the potential to be the third biggest economy in the world after US and China if the conflict issue is dealt with properly. India is dealing with it under Prime Minster Narendra Modi but how fast the country does it is the challenge for the Indian Society at large.
Questions from the floor
One question from the floor was how would one deal with a landlord and tenant situation where the landlord has collected rent over time which exceeds the value of the property. My answer was that the parliament enacts the laws for landlords and tenants and the judge in such situation can only decide based on the obligations of the tenant under the law and the judge cannot sit in judgment of moral ethics of what I fair in the rental law.Another question from the floor dealt with fairness of the Railway Commissioner to make decisions on the termination of employment of a railway employee. I commented that that Indian Railways Act was enacted during the British period as an administrative statute giving rights to commissioners to adjudicate on employment. It is for the Indian Parliament to change it so that the employment rights are determined by courts giving the employee better opportunity to have lawyers protect his interest.