Conflict of interest

Conflict of interest

A conflict of interest is a situation in which someone in a position of trust, such as a lawyer, insurance adjuster, a politician, executive or director of a corporation or a medical research scientist or physician, has competing professional or personal interests. Such competing interests can make it difficult to fulfill his or her duties impartially. A conflict of interest exists even if no unethical or improper act results from it. A conflict of interest can create an appearance of impropriety that can undermine confidence in the person, profession, or court system. A conflict can be mitigated by third party verification or third party evaluation noted below—but it still exists.


Conflict of Interest related to the practice of law

In the legal profession, the duty of loyalty owed to a client prohibits an attorney (or a law firm) from representing any other party with interests adverse to those of a current client. The few exceptions to this rule require informed written consent from all affected clients. In some circumstances, a conflict of interest can never be waived by a client. As perhaps the most common example encountered by the general public, the same firm will not represent both parties in a divorce case.

A prohibited or undisclosed representation involving a Conflict Of Interest can subject an attorney to disciplinary hearings, the denial or disgorge of legal fees, or in some cases (such as the failure to make mandatory disclosure) criminal proceedings. In the U.S.A., possible conflicting clients of a single attorney are deemed as possible conflicts for all lawyers associated with a law firm. Law Firms often employ software in conjunction with their case management and accounting systems in order to meet their duties to monitor their Conflict Of Interest exposure, and obtain waivers when necessary or appropriate.


Conflict of Interest generally (unrelated to the practice of law)

More generally, conflict of interest can be defined as any situation in which an individual or corporation (either private or governmental) is in a position to exploit a professional or official capacity in some way for their personal or corporate benefit.

Depending upon the law or rules related to a particular organization, the existence of a conflict of interest may not, in and of itself, be evidence of wrongdoing. In fact, for many professionals, it is virtually impossible to avoid having conflicts of interest from time to time. A conflict of interest can, however, become a legal matter for example when an individual tries (and/or succeeds in) influencing the outcome of a decision, for personal benefit. A director or executive of a corporation will be subject to legal liability if a conflict of interest breaches their Duty of Loyalty.

There often is confusion over these two situations. Someone accused of a conflict of interest may deny that a conflict exists because he/she did not act improperly. In fact, a conflict of interest does exist even if there are no improper acts as a result of it. (One way to understand this is to use the term "conflict of roles". A person with two roles - an individual who owns stock and is also a government official, for example - may experience situations where those two roles conflict. The conflict can be mitigated - see below - but it still exists. In and of itself, having two roles is not illegal, but the differing roles will certainly provide an incentive for improper acts in some circumstances.)


Types of conflicts of interests