Conflict of Interest (GS Paper 4)

Conflict of Interest

• A conflict of interest (COI) is a situation in which a person or organization is involved in multiple interests, financial interest, or otherwise, one of which could possibly corrupt the motivation of the individual or organization.
• A conflict of interest is a situation that has the potential to undermine the impartiality of a person because of the possibility of a clash between the person’s self-interest and professional interest or public interest.
• A conflict of interest is a set of circumstances that creates a risk that professional judgement or actions regarding a primary interest will be unduly influenced by a secondary interest. Primary interest refers to the principal goals of the profession or activity, such as the protection of clients, the health of patients, the integrity of research, and the duties of public office. Secondary interest includes not only financial gain but also such motives as the desire for professional advancement and the wish to do favours for family and friends.
• The secondary interests are not treated as wrong in themselves, but become objectionable when they are believed to have greater weight than the primary interests. The conflict in a conflict of interest exists whether or not a particular individual is actually influenced by the secondary interest. It exists if the circumstances are reasonably believed (on the basis of past experience and objective evidence) to create a risk that decisions may be unduly influenced by secondary interests.
• The presence of a conflict of interest is independent of the occurrence of impropriety. Therefore, a conflict of interest can be discovered and voluntarily defused before any corruption occurs.For Example: When a government official has a personal monetary interest in a matter up for vote, it is best for the official to abstain from voting to avoid the appearance of a conflict of interest.
• In an organizational setup there can arise a situation when the organization goals and objectives do not remain in sync with the personal goals of its employee in question. This is also called conflict of interest. For Example:
  1. Person’s conscience does not allow him to act in a manner his organization wants him to act eg shooting a person in encounter might be against personal ethics of the officer.
  2. Person’s beliefs eg religious notions and customs might come against his professional course of action eg approving application of a homosexual person.
  3. Person’s greed/selfish motives might supersede the organizational goals – eg son of public servant working in an organization where govt has majority stakes.

Q. What is the view of the Supreme Court of India on the cases of “conflict of interest‟ at high public offices? Do  you think there  should be a law to punish individuals involved in such cases?

• SC in Tansi Land Deal case (2003) has recommended for ‘self-imposed discipline’, where persons in public life are expected to maintain high standards of probity. SC in A.K Kraipak case acknowledges the fact that it is difficult to show whether a person was biased in mind when he shows favors to others.
• Conflict of Interest comes under the principle of Natural Justice and is not codified. According to the Supreme Court, the rules of Natural Justice are not embodies, yet must be applied based on the facts and evidence of individual cases.

Arguments supporting need for conflict of interest law to punish individuals:

• Cases of ‘conflict of interest’ increasing in public domain in India.
• Such punitive law will act as deterrent for officials while showing favors to individuals or industries in their official capacity

Arguments against:

• There is still debate on definition of ‘conflict of interest’. In cases of financial favour, it can be quantified but not in case of behavioral favor
• There are enough provision in current laws like in Anti-Corruption Law or cooling off period for officials

What should be done?

• What should be done instead is to codify the principles which need to be followed by  officials  in  cases  of  Conflict  of  Interest.  For  eg.  Canada  has  laid  down  a  Conflict  of Interest and Post Employment Code while in the UK, MPs need to declare Pecuniary interests in a ‘register of financial interest.’
• In  India,  a  start  was  made  in  the  Rajya  Sabha  which  has  a  register   of  interest. However,  it  is  not  public  information.  As  a  first  step  the  register  should  be  made public and a similar provision be made for the Lok Sabha and state assemblies. The principle should also be extended to include top officials in administration .
• Codified principles for dealing with Conflict of Interest, along with publicly declared interests  by  MPs,  MLAs  and  top  officials  could  have  a  salubrious  impact  on  any misuse of official powers for personal interest.

Other Mitigations in case of Conflict of Interest:

• Recusal: Those with a conflict of interest are expected to recuse themselves from (i.e., abstain from) decisions where such a conflict exists. Judges are supposed to recuse themselves from cases when personal conflicts of interest may arise.
• Disclosure: Politicians and high-ranking government officials should disclose financial information—assets such as stock, debts such as loans, and/or corporate positions held, typically annually.
• Removal: Sometimes, people who may be perceived to have a conflict of interest resign from a position or sell a shareholding in a venture, to eliminate the conflict of interest going forward. For example, Lord Evans resigned as a non-executive director of the UK National Crime Agency after a tax-avoidance-related controversy about HSBC, where Lord Evans was also a non-executive director.