When ‘conflicts of interests’ are good

In our Western corporate culture, we’re conditioned to recoil at the idea of conflicts of interests. Conflicts of interest are bad, avoiding them is good, and there is no gray area in between. But is that always true?

In Asia, where I practiced law for two decades, parties coming together to form joint ventures would often use only one lawyer to negotiate and draft the documents. The lawyer (me) would technically be retained by only one of the parties, and bills for legal fees would go only to that party, who would pay them. But it was understood that the other party would also be relying on me, as the only lawyer at the table, to create the legal basis for the joint venture.

One reason the one-lawyer approach made sense was that it solved the mother tongue problem. If one party was from China, say, and the other from Japan, they could bridge the language gap by agreeing to use a third language — English — for the JV documents. Then they’d agree to use just one native English speaking lawyer to create the documents. That would avoid the problem of having separate teams of lawyers who might have unequal English language skills. Or worse (in the parties’ view), having two teams of native English speaking lawyers who would be negotiating in a language neither company felt completely comfortable with.

I don’t believe the one-lawyer approach put me in actual violation of the ABA rules about conflicts of interest. Only one party had formally retained me, all legal fees were billed to and paid by that party (if there were arrangements for the other party to reimburse some of the legal fees, I didn’t know about them), and my role as the sole lawyer at the table was of course fully disclosed. Further, even if there was a technical conflict, it was waivable because the two parties weren’t in a dispute, in which case a waiver would have been ineffective and impermissible under the ABA’s rules.

Was I comfortable being the only lawyer at the table? The first couple of times, it felt strange not to have the benefit of an opposing lawyer and his or her brain power. But I eventually settled into the one-lawyer role and felt privileged to play it. It meant my actual client and its proposed joint venture partner both had faith that I would act fairly. Both believed I would help them achieve their mutual goals and so they put me in a position of special trust.

Why trust me? In every case, I’d worked with at least one of the parties over several years. One or both sides had already “tested” me in smaller deals where less was at stake, and decided to trust me on the bigger stuff. And besides, everyone involved always knew that if I violated anyone’s trust, if I did something to hurt either party, the word would spread that I couldn’t be trusted, and I’d be shunned in Asia for the rest of my days there.

The actual drafting and negotiating process would vary. Usually I was there whenever the two parties met. I’d listen to the technical and commercial discussions to equip myself to write those terms into the documents. For the legal stuff and boilerplate, I’d write a draft, then take as much time as necessary to explain it to the parties. If they agreed something didn’t quite reflect the deal they had in mind, I’d change the words and explain it again. At some point each party would nod their consent and we’d move on.

It was great work for a lawyer. Although not all of the joint ventures I worked on were commercial successes, none of them ever exploded into open disputes that needed to be litigated. The spirit of collegiality the JVs were formed in lasted to the end, even when the business mission didn’t work out.

To be clear, there’s no virtue in actual conflicts of interest. Acting in secret against the interests of one’s employer to achieve personal gain is always wrong. But what I learned is that sometimes what we might at first assume to be a conflict of interest could actually be something else. It could be a position of special trust.

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Richard L. Cassin, pictured above, is editor at large of the FCPA Blog.