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Outlook: A judge sees through Chinese walls

NOBODY OUTSIDE the City ever believed the existence of Chinese walls within organisations much of a safeguard against information on client A leaking across to client B, yet amazingly the system has not only survived but flourished in the modern world. The concept of Chinese walls - the idea that teams are ring-fenced within firms and consequently don't know what each other is doing - is routinely used by investment banks and accountancy firms to justify acting for clients where there is a clear conflict of interest.

The big accountancy practices are among the most active in construction of these walls, as indeed they have to be, having shrunk first from the big eight to the big six, then the big five. Now finally someone has had the gumption to challenge them.

High court judges are not generally noted for their common sense, but in Mr Justice Pumpfrey we have been treated to a rare example of clear thinking from the judiciary. The judge is sceptical in the extreme about the effectiveness of Chinese walls and is rightly of the opinion that KPMG should not have acted for the Brunei Investment Agency in investigating the affairs of Prince Jefri when it had already spent two years acting on his behalf.

Most of us would find this a statement of the blindingly obvious, as indeed Allan & Overy, the City lawyers, did in the same circumstances. Not KPMG, which seems to believe that accountants are different from others. It is to be hoped that the ruling sets a precedent that will help reverse the consolidating trend towards ever fewer accountancy practices and encourage the development of new and smaller partnerships.