Canada Special report: Canadian shield

As the global economy crashed last year Canada weathered the storm reasonably well. The demise of the US subprime market sparked the collapse of other global markets, with the US itself and UK bearing the brunt of the slump.

Canada’s robust national banking and risk-averse attitude meant the country was not as exposed to the troubled subprime market as its neighbours.
The country’s conservatism towards lucrative boom time financial products has definitely paid off.

While still exposed to dramatically reduced global dealflow, Canada has ­nevertheless maintained a reasonably high level of activity in its traditional routes - mining, projects and energy.

Activity is relatively stable and national Canadian firms are snapping up the work. In March domestic firm Blake Cassels & Graydon scored a lead role advising energy giant Suncor Energy on its merger with Petro-Canada, for example.

“We’ve been able to minimise the impact of the downturn because of the lack of ­exposure to the subprime market,” relates Blakes chairman Brock Gibson. “There’s clearly been a ­slowdown due to the ripple effect of the downturn, but we’ve held up pretty well in the context of the economic crisis.”

The health of the Canadian financial ­markets and its lack of exposure to troubled assets has propelled the top five national banks to take up spots in the top 50 largest banks in the world.

“Conservatism has helped,” says ­Stikeman Elliott UK managing principal Derek Linfield. “It’s not that the Canadian banks have experienced such significant growth, but other banks have reduced in size so dramatically in recent months.”

RBC Royal Bank, TD Bank Financial Group, Scotiabank, Bank of Montreal and Canadian Imperial Bank of Commerce are now key players in the international market. While they may not abandon their ­conservative attitude and launch in far-flung destinations, their success has still filtered through to Canadian law firms.

Local firms now have the opportunity to make their marks on the international legal landscape.

Typically wedded to the domestic market, some Canadian firms are now looking ­further afield towards international ­markets for opportunities to launch.
“I don’t think we’ll change our practices in the US or UK in any material respect,” says Gibson. “Our strategy has worked so far, and we don’t intend to start directly competing with our friends in those jurisdictions.”

Firm’s such as Blake Cassels have several locations worldwide but stick to practising Canadian law only. With representative offices in the UK, the US and Asia, Blake Cassels focuses on serving its Canadian clients only in these locations and not ­competing with local firms on the ground.

But not all firms want to stick to the traditional ­Canadian routes.

Three years ago The Lawyer reported on Canadian firm Fasken Martineau DuMoulin’s merger with UK firm Stringer Saul (The Lawyer, 4 December 2006).

he firm traded in its representative office in London to launch a full-service UK law practice in London.

“We’ve taken a very different approach to the majority of Canadian firms’,” says Fasken Martineau London head Gary Howes. “Our international mining client base encouraged us to develop a domestic UK office. It’s been ­beneficial for us, but perhaps not as relevant for other Canadian firms.”

Fasken has only two Canadian partners in its UK office. The firm is fully wedded to the idea of a UK domestic practice.

Outward investment from Canada has been the catalyst for this growth.

With Canadian mining and energy ­companies advancing their international strategies in recent years, there is a clear ­motivation for Canadian firms to follow them.

Sophisticated Canadian pension ­investment vehicles have also encouraged firms to expand outside their home territory.

Funds such as Canada Pension Plan Investment Board are renowned for their global investment appetites.

“These funds look to local opportunities for investment, but also have a well-­rounded international investment strategy,” says Howes. “This has encouraged a more ­international focus. We want to take these opportunities.”

Fasken aside, Canadian firms are still very cautious about competing on an international level. Their natural conservatism is hard to shake and has caused the majority to stick with a purely domestic focus.

“I don’t  think we’ll change our practices in the  US or UK in any material  respect” says Gibson. “Our strategy has worked so far and we don’t intend to start directly competing with our friends in those jurisdictions.”

Canadian firms have so far avoided the widespread layoffs suffered by UK and US firms. Restricting growth of offices even during the boom time has meant the associate ranks at such firms have been protected.

Canadian conservatism clearly has its benefits during the downturn.