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Axe retainer if illegality is suspected, IBA warns lawyers

22 May 2019 / international Print

Axe retainer if illegality is suspected, IBA warns

A task force on the role of lawyers in international commercial structures has found that offshore vehicles may facilitate potentially illegal conduct.

The The task force report scrutinises the role of lawyers in detecting, identifying and preventing illegal conduct in commercial transactions, in particular those with an international character, where the risks of such conduct may be higher.

A joint initiative of the International Bar Association (IBA) and the Organisation for Economic Co-Operation and Development (OECD), the report says that the law is not static but rather dynamic and evolving such that what is considered unethical by society and a reputation risk today may be unlawful tomorrow.


It offers principles framed as a broad statement of how lawyers and law firms should conduct themselves regarding international commercial structures.

It says ignoring these principles should result in the application of “proportionate disciplinary measures.

“These should include, where appropriate, disbarment, recognised also in foreign jurisdictions,” the report says.

Law versus morals

The document parses regulation of lawyers and whether this has the force of law rather than morals.

It says in its report that the term ethics does not mean something that has the binding force of law but is rather outside the binding law.

The context of the task force report is the Panama Papers which were released into the public domain in April 2016.

11 million electronic files

Approximately 11 million electronic files sourced from the Panama law firm Mossack Fonseca, whose services included the incorporation and administration of offshore documents, were made public.

In November of the following year, in excess of 13 million documents from the Bermuda law firm Appleby and associated service firms, were also released.

The IBA/OECD report points out that lawyers, by the nature of their work, may be unwittingly associated with illegal conduct, including financial crimes.

“A lawyer should not facilitate illegal conduct, and should undertake the necessary due diligence to avoid doing so inadvertently,” the report says.


Recognising that the concept of legal professional privilege is of fundamental importance to lawyers, but says this should not be used to shield wrong-doers.

“A lawyer should give due and proper consideration to refraining from acting for a client if the lawyer …has grounds to believe that the main purpose of the retainer is to allow the client to be able to rely on the confidential nature of the lawyer-client relationship (or privileged communication) so as to permit or encourage the client to engage in illegal conduct”.


The report urges lawyers to conduct due diligence on their clients with reasonable and proportionate  inquiries as to ultimate beneficiaries of the conduct or transaction, it continues.

These measures should be heightened if the risk profile falls under benchmarks for jurisdictions with increased risk of bribery or corruption.


If conduct becomes illegal though was originally legal, a lawyer should advise on the consequences and recommend alternative solutions.

If the client persists in the conduct the retainer should be terminated, it says.

The task force is led by OECD general counsel Nicola Bonucci and the IBA president Horacio Bernardes Neto.

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