2015 promises to be a year of tighter scrutiny for law firms, whether the oversight is coming from client pressure to keep costs down, or from a growing emphasis on national and international anti-corruption laws. Four players in the world of corporate and commercial law weigh in on what trends to look for in the year ahead.
Elizabeth Maiden, Partner, Solway Wright LLP Ottawa. Practices Condominium Law, Business & Corporate Law; Real Estate & Development
Alternate fee arrangements/structures “will be an economic reality” in 2015 thanks to client pressures for flat-fee billing or blended fees.
“Big corporations who are spending a lot of money on legal services are looking to save. We’re now receiving requests for proposals for fees. Formerly we would have just received the work and started working and we bill what we bill. Now we’re being asked to put together proposals, to compete against other firms with respect to that proposal.”
Maiden says this is “proving to be challenging” for law firms. “Every firm has its own system of partner compensation and these types of alternate fee arrangements put new pressures on that in terms of how do you evolve your partnership compensation to take into account flat fee billing where there could be significant write-offs or gains.”
“It’s today’s reality and lawyers who feel we can hold on to the hourly rate and not address this will find that over time they’re going to lose clients.”
Barbara Hendrickson, founder of BAX Securities Law in Toronto
As part of the post-recession pressure for lower costs, legal work that would once have gone to top-tier firms is moving to smaller boutiques or mid-sized firms – a trend that will continue for a couple of reasons, says Hendrickson. First of all, the lawyers with the expertise are going to those firms because “the larger firms do not have the money to keep them,” and secondly, smaller- and mid-size clients don’t want to pay Big Law prices.
“So they are finding they are getting the same level of expertise at a lower price at the lower venues because they have a lower overhead. There are always going to be deals in Canada that will always stay with these larger firms because of the insurance, because of the number of bodies you might need for a larger transaction within a very short time period … but there’s a lot of securities, corporate finance work that doesn’t necessarily need 15-20 lawyers on it. So I see that as an overall trend.”
Hendrickson agrees that “clients want a cap on fees. They want to know how much their fees are going to cost and in some respects they are no longer prepared to pay for layering or over-lawyering that can happen or training of articling students and junior lawyers on files.”
John Boscariol, Leader, International Trade and Investment law Group at McCarthy Tétrault LLP, Ottawa
Boscariol says 2015 will see Canadian companies are starting to pay more attention to anti-bribery laws and corruption issues abroad.
“Internationally there is a rejection of the attitude ‘when in Rome do as the Romans do’,” he says. “People are recognizing that part of the problem of corruption is not only with the folks in developing countries who are asking for the bribes. It’s the companies that are paying the bribes.”
He points to recent developments such as Canada tabling its Extractive Sector Transparency Measures Act; the introduction in November of a new Corporate Social Responsibility Policy; and a move by the G20 to adopt measures to ensure disclosure of ownership of companies.
Anti-corruption laws on the books since 1999 which make it illegal to engage in corruption abroad haven’t been enforced until recently, he says. The $9.5-million fine assessed against Calgary’s Niko Resources in 2011 for bribing public officials in Bangladesh was a turning point.
“That led to Canadian executives paying more attention to these issues abroad to the point today where I think it has become top of mind for executives and boards when they are looking at expanding abroad, when they’re looking at their operations in other jurisdictions particularly developing countries. They are starting to pay more attention to potential corruption issues and that’s just been growing from year to year, so I see that as a big issue in the coming year.”
Canada is “at the centre of the storm” because of its huge extractive sector, particularly in mining – over 50 per cent of the mining companies operating worldwide are based here. The Canadian government has stepped up to “protect the brand” by ensuring those companies are playing by the rules.
“I think this is something they can no longer pretend they are not seeing. It’s an international trend and they’re trying to jump on that bandwagon,” he says, but the government is also being pressured by the U.S., the OECD, Transparency International and other NGOs because of Canada’s profile in the sector.
Kristine Robidoux, Partner, Gowling, Lafleur, Henderson LLP Calgary. Practices in ethics & compliance, white collar crime.
Robidoux says the most significant trend in 2015 will be toward “pro-active, self-assessment of risk and compliance because good business ethics equals good business.”
In the past, she says she suspects boards of directors might not have really wanted to know exactly how business was being conducted abroad, and were willing to believe personnel in the ground in other countries who said everything was fine or that’s just how things were done. But those days are gone. Now they want reassurances that the compliance program is actually working.
“In my experience I’m finding that boards are being increasingly courageous. They want to know the good, the bad, and the ugly. We’re getting instructions from companies to go out and test, and audit. It often involves us conducting the same procedures that we would conduct in an investigation.”
“There is simply an acknowledgement that companies can’t afford not to know what’s going on. The risks involved with whistleblowers going to enforcement agencies, those risks have never been higher. The enforcement agencies themselves are ever increasing in sophistication and resources and capability.”
Becky Rynor is an Ottawa-based journalist.