Canada's law firms have long taken a back seat in terms of attention to their brash southern neighbours but, as Emma Sadowski finds, the country's seven biggest firms have been quietly following their own global agendas

Falling in the shadow of the vast North American market, it would be fair to say that the Canadian legal market does not typically generate much foreign press coverage. Major US firms take little heed of their conservative Canadian neighbours, while scant attention is paid by the UK and European legal industries.

However, it would be wrong to assume that Canada's legal market is focused solely on domestic activity. Firms in the Great White North have been targeting international clients for decades and advising Canadian clients globally for even longer.

Fundamentally dominated by the 'seven sisters' – Blake Cassels & Graydon, Davies Ward Phillips & Vineberg, Goodmans, McCarthy Tetrault, Osler Hoskin & Harcourt, Stikeman Elliott and Torys – the country's legal market is upping its game internationally.

Although relationships between Canada's largest banks – Royal Bank of Canada, Bank of Nova Scotia, Canadian Imperial Bank of Commerce, Toronto Dominion Bank and Bank of Montreal – have fed Canadian law firms work for centuries, the motivation to establish a stake in global transactions is increasingly more important to each firm's strategy moving forward and out of the global recession.

Domestically, it is without a doubt the country's abundance of oil, particularly in the province of Alberta, that has been the driving force behind the success of many of Canada's largest firms. But it has also enabled players such as Calgary-based Macleod Dixon to establish a presence in oil-rich regions such as Russia, China and the Middle East.

Nevertheless, most Canadian firms have little more than a handful of offices established outside Canada and staffed by a small collection of partners and associates.

Merger moves

The Canadian legal system has been shocked by just two international mergers in the last decade.

The first being Torys' entrance into the Wall Street market in 1999 when it tied the knot with New York practice Haythe & Curley to create the first Canadian firm to practise US law. Prior to that point, Canadian presence in the States was restricted to one- or two-partner satellite offices, solely advising Canadian clients doing work overseas. Torys' venture into New York has still to convince some of its more sceptical Canadian counterparts, with critics claiming it has failed to make significant headway in the market.

The second significant merger happened in 2007 when mining giant Fasken Martineau DuMoulin approached London commercial firm Stringer Saul to combine English and Canadian law capabilities.

"The firm's goal is for its international offices to be quality standalone operations – not just representative offices handling Canadian clients and sending files back to Canada," says Faskens newly-elected London managing partner Gary Howes.

"We have around 40 lawyers in the London office, and only two of them are Canadian lawyers. Of course, a lot of files do pass between the firm's various offices, but it is in all directions. And the end game is to attract international clients, and advise them locally."

However, rumours of another potential tie-in hit the market late last year, after DLA Piper was in talks with Fasken Martineau to enter into a joint venture. And while little progress seems to have been made on this front, Fasken is still working on strengthening its links with the US market.

London calling

But Fasken Martineau and Torys are cut from different cloth to their rivals, who, if they have opened outside Canada, have done so independently and with a restricted headcount.

Stikeman Elliott – considered one of the leading firms for corporate work – is the oldest Canadian firm in London after opening in the City 40 years ago. With six partners and 10 associates, it also ranks as the largest Canadian outpost in the City.

Although Stikeman has a handful of UK-qualified lawyers, the firm focuses predominantly on Canadian law, as it does with its New York and Sydney branches.

The office was set up with the aim of servicing Canadian clients and international clients looking to invest into Canada, and to this extent London managing partner Derek Linfield's plans for expansion are limited.

"Canadian law is our base. We don't have the advantage of the UK firms which can export legal services. You can't take your law with your clients – making it difficult for Canadian firms to grow outside Canada," concedes Linfield (pictured left).

He adds: "We have been here for 40 years while many other firms have come and gone. The reason we are so successful is that we have focused on a niche."

Stikeman, like its peers, targeted the Alternative Investment Market (AIM) from its London office when the economy was in its boom period. The focus mirrors its strong capital markets practice back in Canada.

Fasken also cites AIM work as an enticement to enter the already saturated UK market. But with the AIM market in a prolonged slump, the firm's London office is shifting its focus to life sciences work, while also pushing to corner mining work coming out Anglophone Africa – a traditional Fasken strength.

Rivals McCarthy Tetrault launched in London in 1987 with intentions to corner M&A and capital markets activity in the energy sector in order to link work back into Canada. The firm's London offering – its only international office – has since grown to 11 fee earners who practise a mixture of Canadian and UK law.

Chair and chief executive at McCarthys Iain Scott (pictured right) explains: "We are focusing on growing our London connection and its ties back to Canada. London is an easy office to work out of. Through it, we have done work with clients in Africa in the energy sector." The office also has business in Brazil and India.

The only other Canadian firm to have a London presence, Blake Cassels & Graydon, has only three lawyers in its London office.

However, the firm could arguably be said to have the largest network outside Canada, with offices in New York, Chicago and Beijing.

Firm chair Brock Gibson says: "Canadian clients are increasingly looking to go abroad. We have the skills capable of doing the work outside Canada even though our non-Canadian offices do not practise local law – they are there to facilitate the inward and outward bound work."

Going south

New York is a mainstay for the majority of the Canadian elite. With the exception of Goodmans and McCarthy, the remaining seven sisters all have a toehold in the city. But as with London, the primary purpose for most firms is to support the home base.

Torys, which has the largest presence, primarily focuses its office around capital markets, private equity and M&A work – the main strengths of its Toronto hub.

Co-head of the firm's corporate practice, Phil Brown, comments: "Our concept is that our Canadian practice is focused in Toronto and we service the rest of Canada from there. Our New York office allows us to do US law and the combination of the two offices allows us to carry on an international practice with other clients around the world."

But the firm is nonetheless keen to add weight outside Canada: Brown is soon set to re-locate from Toronto to New York to lead the US component of the firm's practice.

"We are going to continue to focus on the north/south element of our practice and the international growth areas. It is silly to worry about the recession, but you still have to be cautious," he adds.

Osler Hoskin & Harcourt is also attempting to up its game in New York, having launched in the market in the early 1990s. Until recently Osler's New York office acted on a representative basis only, but through recent expansion it has started to provide US legal advice.

"It came in response to what we were hearing from our clients," explains chair of the firm's business law department and former firm wide co-managing partner Steve Sigurdson. "Clients told us they wanted us to have capabilities in both Canada and New York."

The firm now has 31 fee earners in New York, making up 8% of its 367-lawyer headcount. Although New York operates solely to represent its Canadian clients doing business in the US, Sigurdson says the firm also picks up on a large share of in-bound M&A work from the BRIC (Brazil, Russia, India and China) region, as well as Europe.

Davies Ward Phillips & Vineberg, arguably has the most successful of the New York practices. As its only office away from home, the firm's 16-lawyer outpost practises both US and Canadian law and has cornered a portion of the US deal market. Its longstanding affiliation with Paris firm Reinhart Marville Torre, through which it has attempted to target Europe, has worked to a lesser extent.

Home is where the money is

Clearly home turf is the most important battleground for Canadian firms. The natural resources sector continues to hand out its fair share of deals to local firms despite the general downturn.

In March, Petro-Canada agreed a merger with oil giant Suncor totalling over $18.9bn (£12.4bn) – a deal which sat with Canada's competition bureau for over a month due to its size.

Calgary leader Macleod Dixon landed a major role acting as lead counsel to Petro-Canada under corporate heavyweight Robert Engbloom.

Petro-Canada also turned to McCarthy Tetrault and Torys for further advice, with the latter providing Canadian and US counsel to handle all of the US components under Toronto corporate partner Peter Jewett.

Suncor turned to Blakes' Gibson (pictured left) to lead on the deal, with competition chief Calvin Goldman advising on all competition-related matters.

The deal was not the only lucrative piece of work handed to Canadian firms in 2009.

February's $2bn (£1.31bn) takeover of Canadian-based Nova Chemicals by Abu Dhabi state-owned International Petroleum Investment Company (IPIC) saw rivals Oslers and Torys sit across the table from one another.

IPIC called in Torys to provide legal counsel under Phil Brown, while Nova turned to Oslers' co-chair Brian Levitt, corporate finance partner John Macfarlane and corporate head of Western Canada Stan Magidson.

And while mining and natural resources clients still prove the most lucrative for the majority of Canadian firms, they are slowly waking up to the need to enter the global sphere, building relationships with large multinationals.

Oslers counts Shell as one of its largest clients, but also has strong ties with JP Morgan, Goldman Sachs and Microsoft.

Canada's largest tech company, BlackBerry manufacturer Research In Motion (RIM), has turned to McCarthys for its global work, as has Australian mining giant Rio Tinto.

Stikeman Elliott benefits from relationships with Indian giant Tata Steel, in addition to African Rainbow Minerals and Eni SpA, Italy's largest industrial company.

Meanwhile, many local lawyers are hopeful that Canadian banks will become international heavy-hitters once the dust settles on the current financial downturn.

"There is significant investment in the US from the Canadian banks from a capital standpoint," says McCarthys' Scott, who feels innate Canadian conservatism means the banks currently have a lower risk profile and will move in to fill the financial gap globally.

Despite this, future widescale global expansion for Canadian firms is not on the cards.

"Canada produces talented lawyers, but Canadian law is not an exportable product like UK and US law," says Oslers' Sigurdson.

"You can go so far with only providing Canadian legal advice. That's why Canadian law firms are always sheepish about opening up elsewhere," adds a City partner.

A cross-border merger also looks unlikely due to the sheer size of some of Canada's firms. Blakes has a global headcount of 755 full-time lawyers, making it one of the largest law firms in the country, while McCarthy and Stikeman come in close after that, with both firms totalling 660 lawyers across all offices.

The road into the future

Undeniably Canadian firms are feeling the pinch of the recession. The last-minute call-off of Total's acquisition of Calgary-based UTS Energy provides an example of the lack of appetite for big-ticket deals reflected globally.

Given the obvious links into the world of oil and mining, the Middle East, Africa and BRIC region are likely to prove the most interesting to Canadian firms internationally in the future. A number of firms are flirting with the region, which offers a less saturated market than the North American and UK battlegrounds.

But it is clear that none of the seven sisters are about to come over all brash and expand in the same magnitude as their US and UK peers. While the sisters are united in their optimism that the recession will provide opportunities to build new client relationships and strengthen existing links outside of Canada, for now they are content to fall back on that conservative legal axiom – consolidation.

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