Differences in interests and conflicts of interest

There has always been under English law, and notwithstanding MiFID will continue to be, a law of fiduciaries governing conflicts of interest as well as a regulatory regime dealing with the same issue, albeit in a different manner. Under any such law or regime there are, as with any rule, three questions: When does it apply, i.e. what type of relationship between the parties is considered sufficient for the rule to apply? What does it require, i.e., for this purpose, what is a ‘conflict’? And: How can it be complied with, in other words is the conflict prohibited such that the transaction cannot proceed, or can it simply be disclosed to the other party or must it be managed in some other way? Each of these is a very difficult question to answer in practice, often involving relative degrees of uncertainty. But answering the first two questions can result in fundamental misconceptions unless you understand that a Conflict of Interest is not a Difference in Interests. Any commercial situation involves a Difference in Interests: as the seller I want the highest price and as the buyer you want to pay the lowest price, a Difference in Interests which is in practice resolved through commercial negotiations in which each party brings to bear the full force of its own interests. It does not involve a Conflict of Interests unless there is some special reason, recognised by the rule, under which one party's interest has to be subordinated, in his own conduct, to the interest of the other party.