Conflict check
Definition and classification
A conflict check is a procedure within a law firm to verify whether accepting or handling a mandate would create conflicts of interest. The focus is on whether existing or previous mandates, relationships with clients, or other circumstances could influence the independent and proper representation of a new client. The conflict check is an essential component of mandate acceptance and a key element for integrity and trust in the work of a law firm. It serves both to protect the clients’ interests and to ensure compliance with legal and professional requirements.
Importance and typical use cases in daily law firm practice
In law firms’ everyday practice, the conflict check is an integral step prior to taking on a new mandate. It ensures that there are no conflicting interests that could impair the duties within the mandate. The most common use cases include checking new mandates for new clients, as well as checking new matters for existing clients. A conflict check is also necessary when team composition changes or third parties become involved in the mandate.
Processes, procedures, and methods
Procedure for conflict checks
The conflict check is carried out in several steps:
- Collection of necessary information: At the outset, all relevant data concerning the mandate request, involved individuals and companies, as well as previous and ongoing mandates, are gathered.
- Comparison with existing mandate data: These details are then compared with the law firm’s database of mandates. This includes previous and ongoing mandates, involved individuals, companies, and other relationships.
- Assessment of the results: If matches or indications of a potential conflict of interest are found, a thorough examination is conducted to determine whether a conflict of interest exists and to what extent this could affect the handling of the mandate.
- Documentation and decision: The result of the conflict check is documented. In the event of an actual conflict, a decision must be made as to whether the mandate must be declined or, under certain conditions (e.g. consent or information barriers), can still be handled.
Methods of conducting a conflict check
Various methods are used for conflict checks:
- Manual research in mandate files and databases,
- Use of dedicated software solutions for automated checks,
- Enquiries within the team or firm to uncover previously unknown connections,
- Regular training to raise staff awareness of relevant scenarios.
Framework conditions and standards
Law firms conducting conflict checks are guided by legal requirements, professional codes, and internal policies. In Germany, rules regarding confidentiality and the avoidance of conflicts of interest are particularly significant. The design of a conflict check procedure may vary depending on the size of the firm and areas of practice.
Modern law firms increasingly use electronic client files and digital conflict-checking tools, enabling fast and reliable matching. Processes are clearly defined and typically embedded as binding elements in internal quality management. Especially in larger firms, support from centralized departments or designated coordinators is common.
Practical application: Managing the conflict check in daily practice
For employees as well as those new to the profession, the conflict check is a recurring step. Upon first contact with potential clients, the people or companies involved are identified. This is then cross-checked according to the firm’s guidelines. Where there are uncertainties, many firms designate a central contact person to assist in assessing potential conflicts. Sensitivity to potential conflicts of interest is promoted through in-house training and workshops.
In daily practice, the conflict check means dealing conscientiously with mandate data and, before taking on or changing a mandate, carefully conducting and documenting the check. Faulty or omitted conflict checks can result in reputational damage or even liability risks.
Opportunities and challenges in daily law firm operations
Opportunities
- Safeguarding independence: The conflict check helps safeguard the independence of the law firm and build trust among clients and business partners.
- Liability avoidance: A thorough conflict check prevents liability cases and protects against conflicts with clients.
- Trustworthiness: By using transparent processes, law firms strengthen trust both internally and externally.
Challenges
- Complexity in large firms: With many mandates, staff, and international connections, the effort required for conflict checks increases.
- Reliable data maintenance: The conflict check depends on comprehensive and up-to-date mandate data. Data maintenance errors can result in gaps.
- Time pressure: Time pressure in everyday operations may affect thoroughness. Nevertheless, compliance with standards must always be ensured.
- Technical implementation: Introducing and operating appropriate software requires training and regular maintenance.
Frequently Asked Questions
What is the purpose of a conflict check?
The purpose of the conflict check is to identify and prevent potential conflicts of interest at an early stage, thereby ensuring independence as well as compliance with legal and professional requirements.
When does a conflict check have to be conducted?
A conflict check is carried out before accepting each new mandate, as well as upon changes to existing mandates or when there are changes in personnel handling the matter.
Who is responsible for the conflict check?
Depending on the firm’s size and internal organization, attorney teams, staff, or centralized departments carry out the conflict check. Decision-making authority often lies with the persons responsible for the mandate.
What happens if a conflict of interest is identified?
If a conflict of interest exists, the mandate is generally not accepted. In certain cases, processing may be possible with the consent of all parties involved or under specific safeguards.
What role do digital tools play in conflict checks?
Digital tools facilitate the identification of potential conflicts through automated search and structured data management. They are especially valuable when reviewing large data sets and increase efficiency.
This article provides a concise and practical overview of the topic of conflict checks and illustrates why this process is indispensable for smooth, transparent, and responsible law firm operations.
Frequently Asked Questions
Which parties must be involved in a conflict check?
A conflict check must fundamentally include all natural and legal persons who could appear in a given mandate as parties, opponents, participants, or even as indirectly affected parties. In addition to the actual clients, this includes subsidiaries, parent companies, sister companies, or, where applicable, beneficial owners as defined by anti-money laundering law. Agreements involving consortia, shareholders, or certain groups of participants may also be relevant. A thorough conflict check also considers trustee or representative structures, especially when the true identity behind the commercial interest is not apparent.
How is the scope of the conflict check within a law firm determined?
The scope of the conflict check depends on the organization of the law firm, the association of independent professionals, and any international connections (e.g. as part of a network). The key question is whether there is a conflict of interest between different clients for whom the same law firm or entity—including their independent and dependent branches, potentially worldwide—acts. This applies in particular under § 43a Sec. 4 BRAO and § 3 BORA. For international entities, the conflict check may be more complex, since national and foreign legal regulations concerning professional rules and confidentiality obligations must be considered.
What are the legal consequences of an improper conflict check?
A faulty conflict check can lead to significant legal consequences. If a conflict of interest is identified and a mandate is nevertheless accepted or continued, professional disciplinary proceedings, civil liability claims, or even disciplinary actions can ensue. The professional liability insurer may refuse coverage in the event of damage if a deliberate breach of professional duties is proven. In addition, the relationship of trust with the client and the public can be severely impaired.
When must the conflict check be repeated or updated?
A conflict check is mandatory at the start of the client relationship; however, since circumstances may change during the course of a mandate—such as the involvement of new parties, restructurings, or procedural developments—the conflict check must be regularly reviewed and adapted to the situation. When taking on new mandates that could overlap with existing ones, a new conflict check should be conducted to ensure continued compliance with professional duties.
For how long and to what extent must conflict check data be retained?
The retention of data collected for conflict checks is governed by professional and data protection regulations, in particular pursuant to GDPR and § 50 BRAO. As a rule, data must be kept for at least as long as necessary to fulfill professional duties or to assert or defend claims. If no client relationship is established, data that is no longer needed must be deleted without delay, unless retention is required to ensure future conflict checks. If a mandate is entered into, the retention periods prescribed for mandate files apply.
What special considerations apply to international mandates?
International mandates are often subject to differing regulations on professional conduct and ethical rules, particularly with respect to conflicts of interest. It must be checked whether the respective national regulations require a broader or different assessment. In multidisciplinary law firms or partnerships, the rules of other involved professions (e.g. tax advisors, auditors) must also be considered. In practice, it is advisable to conduct especially detailed conflict checks for cross-border matters and, where necessary, to obtain external reports or opinions.
To what extent is information from the conflict check subject to confidentiality?
Information obtained during the conflict check is subject to legal professional confidentiality under § 43a Sec. 2 BRAO and, if applicable, § 203 StGB. This covers not only data on prospective clients, but also information about actual or potential opponents, participants, and other affected individuals. Disclosure of the collected data to third parties is only permitted with the explicit consent of those concerned or where legally required. Data protection requirements must also be observed, particularly with regard to storage, processing, and deletion of sensitive information.