Norton Rose-Ogilvy merger could be a Canadian snowball

When you talk about countries whose legal professions have raised barriers to foreign entry and discouraged ­competition, most people think of India. But as The Economist pointed out recently, an equally plausible target for a charge of protectionism is Canada.

Foreign lawyers seeking to practise in this country face multiple barriers and interjurisdictional mobility is relatively low. Our legal profession has not shared the national hospitality towards foreign­­ interest seen in other industries and resources, with the notable recent exception of potash.

Canadian lawyers have thrived in this relatively cloistered market for decades. So you can imagine the shock to the ­profession’s system last month when 2,000-lawyer Norton Rose announced
it had merged with 450-lawyer Ogilvy Renault - a 120-year-old firm with deep roots in vieux Montréal, a blue-chip reputation in corporate Toronto and a fledgling office in energy capital Calgary. It was a message that the global legal ­marketplace had finally crashed our party.

Opinion is split in the Canadian ­profession about what this development means. Some people, especially those in the 10 Canadian firms larger than Ogilvy, classify it as a one-off, a decision unique to Ogilvy’s situation that would not be appropriate for many (if any) other firms. They do not perceive Norton Rose and its global reach as a threat to client relationships.

Most of Canada’s largest firms already have overseas offices, from London and New York to Sydney and Johannesburg. National firms here purport to see no ­benefits to joining a global giant (there are reports that Norton Rose was rebuffed by at least one other Canadian firm before forging ahead with the Ogilvy merger).

But others believe this event is a game-changer for Canada’s legal profession. With this deal and a simultaneous merger with South Africa’s Denys Reitz, Norton Rose has nearly 40 offices worldwide. Canadian firms’ overseas presences are ­nominal - small offices that represent ­toeholds rather than footprints. Lawyers at rival Canadian firms who crave true global opportunities will be drawn to ­Norton Rose’s local outpost and their clients might be inclined to follow. The firm brings ­internal management processes and ­external market aggressiveness unknown to most Canadian firms.

In ­particular, its public disclosure of its financial situation will highlight the absence of equivalent practices by ­Canadian firms.

What this deal really does is open the door between Canada and the world. The global merger precedent has been set, and it might take just one more such deal to trigger a long overdue consolidation of a market that is not overlawyered, but ­overfirmed.

And the traffic need not be one-way. There are a few firms here that could launch a global merger process of their own. Either way, expect to hear the term ’hollowing out’ bandied about with greater frequency in the months to come.

And events here are likely being ­followed closely in other Commonwealth countries with global ambitions but local professions, including South Africa, ­Australia and yes, India.

What will global firms find if they come to Canada? Partner profitability at even the richest Canadian law firms pales in comparison with what many AmLaw 100 lawyers would consider an off-year, and barriers to mobility still exist. But in most respects the rewards outweigh the risks. Fiscal management is strong, competence is high and the judicial system is respected worldwide.

As expansion candidates go, Canada looks like an investment with upside.