Policy Statement
To maintain the ULC’s reputation for drafting legislation that is thoughtful, disinterested, and based on sound public policy, Members are expected to leave personal and client interests at the door. In communications made and actions undertaken within the framework of ULC proceedings, Members should exercise their judgment as Commissioners without regard to self-interest or the interest of a client.
Policy on Conflicts of Interest Relating to Study and Drafting Committees
Definition.
A Member or Reporter of a study or drafting committee has a “conflict of interest” if it is reasonably foreseeable that the Member or Reporter will derive a direct financial benefit or suffer a direct financial loss as a result of a particular outcome that might reasonably be reached by the committee. The term “Member” includes a Chair.
General Statement of Policy.
The ULC’s reputation for objectivity is among its most valuable assets. Preserving that reputation requires that study and drafting committee Members and Reporters avoid conflicts of interest. The fact that a Member or Reporter undertakes compensated activities in the subject area of the committee’s work is not disqualifying and is usually indicative of a level of expertise that will be helpful to the committee. Members and Reporters may receive compensation from practicing, consulting, serving as an expert witness, or otherwise from their expertise. By contrast a conflict of interest, which relates to a particular outcome that might reasonably be reached by a committee rather than the subject area generally, raises serious concerns that must be dealt with in the manner set forth below.
Applicability of Policy to Members.
Prior to being appointed to a study or drafting committee, a Member must disclose to the President in a record any circumstance that might constitute a conflict of interest. The Member is disqualified from appointment if the President determines that a conflict of interest exists.
At the time of appointment, a Member must sign a commitment in a record to refrain from participating in the committee’s deliberations with regard to an issue related to a conflict of interest that arises after appointment and to recuse herself/himself from voting on the issue.
If a conflict of interest arises after appointment, a Member who is not the Chair, in addition to fulfilling the commitments described in the preceding paragraph, must disclose to the other members of the committee the fact that a conflict of interest exists. Also, at or a reasonable time after the conflict of interest arises, the Member must sign a record describing the facts surrounding the conflict of interest and provide it to the Chair and the President. The President and Chair shall discuss, and the President shall decide, whether additional information about the conflict of interest should be disclosed to the other members of the committee and whether any other action should be taken.
If a Member is in doubt about whether a conflict of interest exists, the Member must describe the circumstances to the Chair and, if time permits, to the President. In case of doubt, the President, or the Chair if the President is unavailable, shall determine whether a conflict of interest exists, and if so the Member shall follow the procedures set forth in the preceding paragraphs.
A Chair must sign a record disclosing to the President, and to the Chair of the Executive Committee if the President is unavailable, any circumstance that arises after appointment and that might constitute a conflict of interest. In case of doubt the President, or the Chair of the Executive Committee if the President is unavailable, shall determine whether a conflict of interest exists. The Chair must disclose the fact that a conflict of interest exists to the other members of the committee. Also, at or a reasonable time after the conflict of interest arises, the Chair must sign a record describing the facts surrounding the conflict of interest and provide it to the President. The President shall decide whether additional information about the conflict of interest should be disclosed to the other members of the committee and whether any other action should be taken.
Applicability of Policy to Reporters.
Prior to being appointed to a study or drafting committee, the Executive Director must discuss the Policy on Conflicts of Interest with a prospective Reporter and the prospective Reporter must disclose to the Executive Director any circumstance that might constitute a conflict of interest. The Reporter is disqualified from appointment if the President determines that a conflict of interest exists. At the time of appointment, a Reporter must sign a commitment in a record to refrain from participating in the committee’s deliberations with regard to an issue related to a conflict of interest that arises after appointment.
After appointment a Reporter must disclose to the Chair, and if time permits to the President, any circumstance that arises and that constitutes or might constitute a conflict of interest. In case of doubt the President, or the Chair if the President is unavailable, shall determine whether a conflict of interest exists, in which case the Reporter must fulfill the commitment not to participate in the committee’s deliberations with regard to an issue related to the conflict of interest. Also, at or a reasonable time after the conflict of interest arises, the Reporter must sign a record describing the facts surrounding the conflict of interest and provide it to the Chair and the President. The President shall discuss with the Chair, and the President shall decide, whether additional information about the conflict of interest should be disclosed to the other members of the committee and whether any other action should be taken.
Comment
1. The Policy on Conflicts of Interest differentiates between a Member or Reporter undertaking compensated activities in the general subject area under consideration by a study or drafting committee and a Member or Reporter foreseeably deriving a direct financial benefit, or suffering a direct financial loss, resulting from a particular outcome that might reasonably be reached by the committee. It is common for a Member to be compensated for activities in the subject area, as for example when the Member practices or serves as a consulting or testifying expert in the area. This does not constitute a conflict of interest and the integrity of the process is protected by the Member’s obligation to exercise judgment as a Commissioner without regard to self-interest or the interest of a client. A Reporter may for example be compensated for providing consulting services or serving as a testifying expert in the area. The terms of appointment require the Reporter to exercise independent judgment without regard to self-interest or the interest of a client. Expertise on the part of a Member or Reporter is an important resource for a committee and the fact that compensation is derived from involvement in the subject area is not disqualifying and need not be disclosed prior to appointment.
2. There may be situations in which a Member or Reporter has a financial interest that rises to the level of a conflict of interest. This occurs if it is reasonably foreseeable that a particular outcome that might reasonably be reached by a study or drafting committee will result in a direct financial benefit or loss to the Member or Reporter. For example, a prospective Member or Reporter might have a controlling ownership interest in an entity that would be subject to regulation by an act promulgated by the ULC. For another example, a prospective Member or Reporter might be, or might foreseeably be, involved in a dispute and a particular committee decision could have the effect of advantaging or disadvantaging the Member’s or Reporter’s legal position.
A Member or Reporter must be directly advantaged or disadvantaged financially for there to be a conflict of interest. The fact that a Member’s or Reporter’s client might be financially advantaged by a particular outcome does not of itself constitute a conflict of interest because the direct financial benefit flows to the client and not to the Member or Reporter. As noted above, the Member is required to exercise judgment as a Commissioner without regard to self-interest or the interest of a client, and a Reporter is required to abide by the Policy on Conflicts of Interest. The result would be otherwise if the Member or Reporter accepted compensation for bringing about a particular result with respect to the committee’s work. There is not a direct financial benefit to a Member or Reporter merely because an act might advantage a client by providing for the payment of attorney’s fees or by creating a new cause of action.
3. Prior to appointment, a prospective Member must disclose to the President in a record any circumstance that might constitute a conflict of interest. If the President determines that a conflict exists, the Member is disqualified from serving on the committee. The process is similar for Reporters, who must make the disclosure to the Executive Director. The Executive Director will provide the information to the President, who will determine whether a conflict of interest exists, and the appointment will not be made if that is the case. At the time of appointment, a Member must sign a record committing that if a conflict of interest arises after appointment the Member will refrain from participating in the committee’s deliberations with respect to an issue related to the conflict and will recuse herself/himself from voting on the issue. At the time of appointment, a Reporter must sign a record committing to refrain from participating in the discussion of an issue related to a conflict of interest. “Sign” and “record” as used in the policy have the meanings ascribed to them by the standard ULC definitions of those terms and thus include both tangible and electronic signatures and documents.
4. If a conflict of interest arises after appointment, a Member who is not the Chair must disclose to the other members of the committee the fact that the conflict exists but need not disclose any additional facts. In addition, the Member must sign a record disclosing the facts surrounding the conflict and provide it to the Chair and the President.
If a Member is in doubt about whether a conflict exists, she/he must describe the circumstances to the Chair and, if time permits, the President must be consulted as well. The President, or the Chair if the President is unavailable, will determine whether there is a conflict. If so, the procedures described above must be followed.
The procedures are similar if a conflict of interest arises with respect to a Chair, except that the Chair must report to the President or to the Chair of the Executive Committee if the President is not available. The procedures for a Reporter are essentially the same as the procedures for a Member who is not the Chair.
There may be additional consequences in the event of a conflict of interest. In the case of a Member who is not the Chair or a Reporter, the President and the Chair must discuss, and the President must decide, whether additional facts about the conflict should be disclosed to the other members of the committee. In the case of a Chair, the President need not discuss the situation with the Chair before making the decision. The President might also determine that additional measures are in order, including potentially terminating a Member’s or Reporter’s appointment to the committee.
Recommendations of the Ethics Working Group
Adopted by Executive Committee
December 6, 2018