Conflicts of Interest: The Murky Legal Landscape

Among the many interesting qualities about the field of COIs is that, perhaps more than any other C&E area,  it is where law and ethics meet.  But what exactly is the law of COIs?  The legal landscape here is, in fact, quite murky.

Before looking at that landscape, consider as a point of comparison the case of anti-corruption law. From the new FCPA Database  offered by my partners on the COI Blog, Ethics 360, one can readily find the anti-corruption laws of over 130 countries, as well as related legislation (in the anti-money laundering and privacy areas) and  information about actual prosecutions under the various anti-corruption laws.  (Keeping abreast of these prosecutions could be quite important for global companies that lack strong local law coverage, of which there are many.) The database has, too, IMF and OECD reports, and also anti-corruption related law firm memos – which can be a very useful source of information on both individual corruption cases and larger trends in the field.  (FTC disclosure: Ethics 360, in addition to being my partner on this blog and an anti-corruption benchmarking survey, has provided me with complimentary access to the FCPA Database, which – given the nature of my work – is definitely a thing of value for me).

Sadly, it would be impossible to create a service like this for COI’s, given the absence of comprehensive COI laws of the sort that exist for corruption.  (I speak here principally about the US, but am reasonably sure that the situation is similar around the world.)

However, one must begin somewhere, and a COI analysis of any situation should generally start with an identification of the relevant duty, which sometimes (but not always) is legal in nature.

Sources of such legal duties include:

a) Express contractual provisions mandating that employees, agents and others conduct themselves in a (more or less) a conflict-free way.  An employment agreement would typically have a provision of this sort, as do agency or retainer agreements.  A code of conduct or other internal policy document could create a contractual obligation – either because it has been formally agreed to by employees or under an “implied contract” theory in the absence of such agreement.  Of course, some codes disclaim any intent to create a contractual obligation, but their COI provisions would still help to create (or prove) an ethical duty.

b) Statutes and regulations addressing COIs in a variety of contexts such as discrete types of employment (e.g., for government employees); in regulated businesses (e.g., healthcare, financial services); or other settings (e.g., as indicated above, even blogging).

c) The fiduciary duty of loyalty, which serves as a “default” under common law, i.e., specifying loyalty-related obligations for employees and other agents even in the absence of a contract or statute.  Note, however, that in some circumstances a party might “contract out” of such an obligation or limit its scope, although doing so would not always be effective as a matter of law.

d)  Standards of conduct for certain professions, which may be enforced by various legal regimes (as in the case of rules of professional responsibility for attorneys) but aren’t always (as in the case of journalists).

This is only a very general framework, and future posts will address in more detail a variety of laws relating to COIs.

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