Features

The offshore banking nightmare

Cover story

Written by Bruce Livesey Issue Date: February 2012

Cover: Mick Coulas

It was a strategy born of sheer frustration, a chess move that failed. On Nov. 28, 2006, Michael Morris, a Canadian who runs a small offshore bank in the Bahamas, arrived at a bustling Starbucks in downtown Toronto expecting to meet a woman called Ginette Brown. The previous month, a woman by this name had called Morris at his offices in Nassau, where he runs Barrington Bank International Ltd., and told him she had a client seeking financing and would Morris agree to meet with her when he was next in Toronto? Weeks later, they arranged to rendezvous at the Starbucks while he was in town visiting family.

Judging the judges

Written by Michael McKiernan Issue Date: February 2012

Illustration: Tara Hardy

In almost two decades of practice, criminal lawyer Paul Slansky had never complained about a judge. But one day in July 2004, he resolved to change that. Ontario Superior Court Justice Robert Thompson had just ordered him confined to the courthouse in Owen Sound, Ont., while jurors deliberated on the fate of his client, Vytautas Baltrusaitis, who was charged with murder. Toronto-based Slansky, who was staying at a hotel just a couple of minutes’ walk from the courthouse, viewed the move as malicious and petty. “However this conduct was merely the straw that broke the camel’s back,” Slansky wrote in an affidavit following the trial he called “the most difficult of my career.”

The death of collective bargaining?

Cover Story

Written by Jeff Mackinnon Issue Date: January 2012

Air Canada has had two strikes. The one in 1998 involved pilots; it lasted 13 days and was settled through bargaining during what were profitable times. The other, last June, involved front-counter staff; it was settled after three days — mere hours after the federal government tabled back-to-work legislation. The first strike occurred while the Liberals were enjoying a majority in the House of Commons with Jean Chrétien as prime minister. Today, Stephen Harper’s Conservatives run the country, also with a majority. But while Chrétien stayed out of Air Canada’s contract squabble in 1998, Harper has not.

In light of labour disputes in recent months by both Canada Post and Air Canada, academics and labour lawyers across the country are now discussing Harper’s apparent war with the labour movement in Canada. Some unions are preparing to enter the trenches to fight that battle while others already have done so.

Harper has carte blanche because of his majority, but the hockey enthusiast has the equivalent of a breakaway on an empty net. There’s the loss of resistance with the collapse of the Liberal party, and the uncertainty left at the top of the new opposition New Democrats due to the death of leader Jack Layton. “Harper’s government has more respect for the right to bear arms,” says Toronto labour lawyer Paul Cavalluzzo, who represents the Canadian Union of Postal Workers, referring to the Conservatives’ recent move to do away with the long-gun registry. “Obviously they are not very friendly to the labour movement and they don’t pretend to be.”

In 2011, Minister of Labour Lisa Raitt interceded to stop a strike by Canada Post and prevent one by Air Canada’s flight attendants. Meanwhile, the Canadian Union of Public Employees is preparing proposals for new deals for the carrier’s pilots as of November; the two sides there are already fastening their seatbelts in anticipation of severe turbulence. A contract with Air Canada mechanics is also up for renegotiation.

This new policy of stepping into disputes is setting the stage for a new style of labour negotiations, experts say, where companies hold back and wait for government help. If the government’s propensity to involve itself in labour disputes continues, says Cavalluzzo, employers will feel safe under the umbrella of back-to-work legislation and will no longer be serious about negotiating. That’s exactly what happened in Air Canada’s dispute with the flight attendants, says another Toronto employment and labour lawyer, Howard Levitt of Levitt LLP. “I blame it on Air Canada,” he says. “They didn’t fight. You’ve got to be prepared to fight.”

The airline’s communications department did not respond to interview requests for its representatives.

The government’s increased involvement in labour matters is dangerous, says McGill University’s Bob Hebdon, an expert on government intervention in disputes. “[Parties] hold back knowing if the government intervenes they’ll have padding,” he told The Canadian Employer. “So, the union doesn’t really get the last best offer. The behaviour has changed.”

Twice CUPE took an offer from Air Canada back to the flight attendants. On the first attempt in August, 87 per cent of them rejected the proposal; on the second in October, that number was down to 65. Union leaders said they managed to get 80 per cent of what membership was seeking. “The fact that the members twice rejected offers that they were presented by the union is a pretty clear signal that there is conflict within the union,” offers Ken Thornicroft, a law and labour studies professor at the University of Victoria.

The Canada Industrial Relations Board hadn’t been used in more than a year when it was asked by the union representing Canwest employees to establish successor rights when a number of the broadcaster’s television stations were sold. By going to the CIRB, the government took away the union’s only strength — the membership’s willingness to withdraw their labour, says Julie Guard, an associate professor of labour studies at the University of Manitoba. “For the Harper government to take away the only power that the union really had undermines the entire premise of the labour relations system that has governed relations between workers and their employers since the 1940s,” says Guard.

She says that by intervening twice now — with the postal workers and the flight attendants — one might surmise that the goal is to prevent all strikes by intimidating workers into accepting bad agreements, on the grounds prolonged agreements will not improve the employees’ position. Also, the employer can offer as little as it wants, knowing it will not have to face a strike.

She says the Air Canada and Canada Post negotiations suggest the Harper government has a secret policy of undermining collective bargaining and weakening the labour movement. “The Conservatives did not mention collective bargaining or an intention to undermine unions when it campaigned in the last election and has not acknowledged that goal now,” she says. “But it appears that is nonetheless its agenda.”

Levitt believes Air Canada would have been better served training new flight attendants in what he says is an unskilled job — forcing a strike that wouldn’t matter to the public, given that the airline would still be in the air and would still have people on the plane pouring coffee. The unionized flight attendants would then watch as the company proceeded without them and be frightened back to work.

That seems to be the plan of the City of Toronto, which by all accounts is bracing for an extended work stoppage with its two largest unions in January. Toronto is moving ahead with plans to train managers to perform unionized employees’ tasks as it tries to negotiate rollbacks on benefits and the end to the “job-for-life” clause in its previous contract.

Levitt says the danger in having the Ministry of Labour continue to get involved in forcing arbitration is that it “will kill the collective bargaining process.” In an opinion piece for Postmedia News in July, Levitt cited the example of the City of Windsor asking Dalton McGuinty’s Liberal government in Ontario to stay out of its dispute with its union and not order them back to work. “[Asking for intervention] is an admission of failure, because ordering the workers back means an arbitrator will decide their remuneration and the history of arbitrators’ decisions has created the very wage boondoggle the public is decrying,” Levitt wrote.

When dealing with labour disputes that reach a stalemate, Levitt recommends firing the lawyers and advisers who brought negotiations to a standstill. Then, if the union strikes, tell the union the cost of the strike will be taken out of their future salaries and benefits when a settlement is reached. “With one not-for-profit client I negotiated for, we told the Teamsters every time our offer was rejected, the next would be less. On the third offer, they believed us and accepted the reduced offer. The next time they didn’t strike,” wrote Levitt.

The postal workers began rotating strikes on June 14, and on June 15 Raitt informed them she would be tabling back-to-work legislation. She did so on June 20. The postal union filed a constitutional challenge in Ontario Superior Court on Oct. 11, arguing that the Conservatives violated the Charter of Rights and Freedoms by imposing back-to-work legislation.

Raitt sent Air Canada’s flight attendants to the CIRB to arbitrate their dispute. The 6,800 flight attendants cancelled a strike scheduled for Oct. 13 after the CIRB told them to stay on the job while the contract offer was reviewed. On Nov. 7, the CIRB ruled in favour of Air Canada on a new four-year deal that expires March 31, 2015. “The government robbed [the flight attendants] of what was a democratic opportunity,” says Anne Gregory, acting director of CUPE’s legal branch. “This is a company that declared bankruptcy twice and after agreeing to wage rollbacks and concessions to help the company, they didn’t get to bargain.”

The pilots were met by a notice of dispute filed with the government in October, prior to a second round of talks, which appears to be following the same path as that of the flight attendants.

That Harper has begun a war with the labour movement in Canada is clear to the Professional Institute of the Public Service of Canada, which has 60,000 white-collar professionals, including federal government lawyers. Traditionally keeping an arms-length distance from labour matters, PIPSC voted in November to join the Canadian Labour Congress in anticipation of layoffs, rumoured to be extensive in the coming months. In the late 1990s, PIPSC had voted against joining the CLC. But, back in the late 1990s, money wasn’t as tight. Air Canada’s pilots won nine-per-cent salary increases over two years in 1998. The airline made a profit of $427 million in 1997. A few short years later in 2003, the company filed for bankruptcy protection and most recently reported a loss of $46 million for the second quarter of 2011, considerably less than the $318 shortfall for the same quarter a year earlier.

Formed in 1920, PIPSC’s almost 100 years of political neutrality ended when 400 delegates rallied at Parliament Hill on Nov. 4. That same day, a private member’s bill tabled by Conservative MP Russ Hiebert calling for greater financial disclosures from Canadian unions crashed in the House of Commons in large part because of procedural strategies developed by PIPSC, and slipped into the hands of the New Democrats. “In today’s difficult economic times, our members are facing an increasingly complex labour environment, as well as a sustained attack on the part of government and its supporters in the business community,” PIPSC president Gary Corbett said after the Nov. 7 vote.

Finance Minister Jim Flaherty is attempting to balance the budget by 2015, but among the roadblocks he faces is a reported increase in pay for public servants of $1.2 billion for 2012 as established through collective bargaining. Job cuts have already been publicized. Close to 800 positions were eliminated in August at Environment Canada, whose employees belong to PIPSC, along with 52 from the National Research Council. In October, Veterans Affairs Canada confirmed that 500 jobs would disappear in the next few years.

On the flipside, what hasn’t been reported, according to the Canadian Taxpayers Federation, is an increase in public sector jobs of 35,000 since Harper took office in 2006 — to 420,000 from 386,000. “It is simply not correct to say that the Harper government is cutting the size of the federal public sector, or cutting spending. The opposite is true,” says Gregory Thomas, the CTF’s federal and Ontario director. “We welcome the cost-cutting the government has carried out so far. We urge them to cut more aggressively.”

The federal government is using the Air Canada dispute to publicize its desire to make changes to the Canada Labour Code, which is more than 100 years old.

“There’s something wrong in this case and does that mean there’s something wrong in the code?” Raitt said in an interview with the CBC in October. “If we do have a problem and maybe it is a flaw in the system, we should discover it now, and if we need to make changes we can make changes.”

Harper has made some major moves in the first months of his majority, including scrapping the long-gun registry, eliminating the Canadian Wheat Board, and beginning the process of cutting $4 billion from the country’s budget, which is what prompted PIPSC to hold its vote.

The labour movement in Canada faces a challenge not only from the government, but also from the new global economy. As the generation of baby boomers leaves the workforce, it is replaced by a younger workforce that views unions as being less important — having grown up in a country where most labour rights have long been established.

According to a paper written by compensation and industrial relations director Karla Thorpe for the Conference Board of Canada, organized labour has seen a 1.7-per-cent decline in the past few years, to 29.2 in 2011 from 30.9 per cent of the workforce in 1997. Seventy per cent of the public sector is unionized, while 15.9 per cent of the private sector is — an all-time low, down from about 35 per cent just a decade ago. “Labour’s ability to exert pressure on behalf of workers will undoubtedly be impacted by a declining base of members and the resulting loss of union dues,” writes Thorpe. “Even though union density is on the wane, organized labour can continue to have a positive impact on government policy — particularly if they focus on issues that have broader public appeal.”

Thornicroft suggests that unions are here to stay, and will remain especially relevant in the public sector. “In terms of public, unions remain strong and powerful and well funded and I don’t see any change there. They will continue to have considerable bargaining leverage. In the private sector, that’s a different story. In the private sector unions have no significant bargaining leverage these days.”

Most of the concerns, according to Thornicroft — safety, health care, and wages, for example — are no longer issues in Canada, so workers in the private sector are now opting to skip unionizing. “For private sector unions the glory days are gone,” he says. “They may be back but I don’t see it happening any time soon.”

It would appear Air Canada’s flight attendants are dealing with that reality right now.

Cover photo: Liam Sharp

Air Canada has had two strikes. The one in 1998 involved pilots; it lasted 13 days and was settled through bargaining during what were profitable times. The other, last June, involved front-counter staff; it was settled after three days — mere hours after the federal government tabled back-to-work legislation. The first strike occurred while the Liberals were enjoying a majority in the House of Commons with Jean Chrétien as prime minister. Today, Stephen Harper’s Conservatives run the country, also with a majority. But while Chrétien stayed out of Air Canada’s contract squabble in 1998, Harper has not.

IP boutiques holding their own

Top Boutiques: January 2012 — Part One

Written by Michael McKiernan Issue Date: January 2012

When Philip Mendes da Costa started out at Bereskin & Parr LLP in the mid-1980s, intellectual property boutiques were small affairs. Twenty-five years later, “we’re now larger than some of the mid- to large-size firms,” says the firm’s managing partner. He says the 59-lawyer shop has grown in tandem with the increasing emphasis corporations are putting on their IP portfolios. “Back then, patents and trademarks were considered important, but not really central to the business of the company,” he says. “More recently, you’ve got companies who can receive more revenue from patent royalties than manufacturing products, and companies where the value of the IP portfolio or goodwill represented by the trademark portfolio is very significant, and stands out on the balance sheet. It’s of critical importance to make sure the IP strategy aligned with the business strategy.” For that reason, he says it’s natural that larger corporate firms are looking to get in on the action. “It’s not just a peripheral issue at the moment.æ

“[Boutiques] don’t dominate the field anymore like they might have done 10 years ago. Big firms have formed their own departments and the market has certainly become more competitive,” says one Bay Street practitioner, who says full-service firms are strong on the litigation and transactional side of IP law.

Another western Canada-based lawyer at a full-service firm says IP lawyers outside boutiques are still often overlooked because the field is so strongly associated with specialist firms. “Most IP practices, even in large firms, are run as mini boutiques. The IP department is run very differently from departments in other areas of law, because it really is quite distinct,” he says.

Mark Evans, managing partner of Smart & Biggar/Fetherstonhaugh’s Toronto office, says that the unique nature of IP law makes it difficult for large firms to match the depth of expertise boutiques can provide. Because the volume of IP litigation is not as high as in other jurisdictions such as the United States, firms need to branch out. Evans says some larger firms struggle to accommodate patent agents in their structure, or the specific file-handling systems IP demands. “We have our own proprietary systems and administrative features that are geared to that,” Evans says. “There are certain elements of IP that can be suited to general practice firms, but a lot of it is an uneasy fit.”

Despite the new competition, Mendes da Costa says IP boutiques have a long future ahead of them. “I don’t think it’s ever going to be subsumed into the full-service firm and disappear. We’re going to be here forever,” he says.

In employment and labour law, conventional wisdom says that large firms sop up the management-side work, while boutiques live off referrals when conflicts arise. But Erin Kuzz, co-founder of Toronto firm Sherrard Kuzz LLP, says there’s a lot more to it than that. “To be candid, our experience is a lot of the large firms have issues with billing rates. Some of the files that we do just can’t bear the billing rates that a large corporate commercial department might charge. I certainly understand that creates some conflict sometimes in the larger firms,” she says.

Paul Young, managing partner at Filion Wakely Thorup Angeletti LLP, agrees that price has been a key factor in the rise of the employment and labour boutique. He says new ones seem to spring up every year. “We just have a greater ability to be flexible in terms of fee schedules, which really makes us quite competitive,” he says.

And boutiques are cementing their positions by forming their own alliances across international borders to expand referral networks in an increasingly global business landscape. Young says the firm’s recent tie up with L&E Global, the Belgium-based group of 10 management-side employment boutiques, will bring in new work, as well as offering domestic clients with international business a ready-made panel of counsel in foreign jurisdictions. “You also get lots of ideas from the other firms in the alliance about how to attract new business, which leads to more entrepreneurial thinking,” he says.

Sherrard Kuzz also branched out last year, joining the larger Employment Law Alliance, which consists of 3,000 lawyers from 135 countries around the world. “Clients feel very well looked after,” says Kuzz. “I’d say it gives us bigger reach than some of the large firms, because they may not be willing to refer to firms around the world who may be competitors in other fields. We have no competition with the other members of the alliance, so it takes away that conflict issue.”

Our editorial team began the process of selecting Canada’s top IP and labour and employment boutiques by creating a short list of the most notable firms in their respective fields. From there, we drew on the experience of in-house counsel and large-firm lawyers who refer work to these boutiques, conducting a series of confidential interviews to identify the cream of the crop. The following results are an alphabetical list of the 10 boutique firms in each of the intellectual property and labour and employment categories that are most often called upon by other lawyers when stakes are high.

Illustration: Jason Schneider

When Philip Mendes da Costa started out at Bereskin & Parr LLP in the mid-1980s, intellectual property boutiques were small affairs. Twenty-five years later, “we’re now larger than some of the mid- to large-size firms,” says the firm’s managing partner. He says the 59-lawyer shop has grown in tandem with the increasing emphasis corporations are putting on their IP portfolios. “Back then, patents and trademarks were considered important, but not really central to the business of the company,” he says. “More recently, you’ve got companies who can receive more revenue from patent royalties than manufacturing products, and companies where the value of the IP portfolio or goodwill represented by the trademark portfolio is very significant, and stands out on the balance sheet. It’s of critical importance to make sure the IP strategy aligned with the business strategy.” For that reason, he says it’s natural that larger corporate firms are looking to get in on the action. “It’s not just a peripheral issue at the moment."

Labour & employment boutiques holding their own

Top Boutiques: January 2012 — Part Two

Written by Michael McKiernan Issue Date: January 2012

Illustration: Jason Schneider

This article is a continuation of "IP boutiques holding their own" from the January 2012 issue of Canadian Lawyer magazine. Click here to read Part One.

Preparing for uncertainty

Canadian Lawyer Annual Corporate Counsel Survey 2011

Written by Jennifer Brown Issue Date: November 2011

As Canada fights to stay out of a looming global recession, it seems corporate counsel are preparing for the worst with plans to bring more work in-house even as they expect to see an increase in the amount they will be challenged to do in the coming year, according to the annual Canadian Lawyer corporate counsel survey.

The loan arrangers

Cover Story

Written by Ava Chisling Issue Date: November 2011

Cover: Dominic Bugatto

Third-party litigation loans have a rather nasty reputation. The funding of legal cases by complete strangers causes many intelligent people, some of them lawyers, to declare these kinds of loans abusive, predatory, and a black mark on the justice system. And yet there are others, some of them also lawyers, MBAs, and financial advisers, who believe when administered to the right people, by the right people, these “lawsuit loans” help those in need when no one else will. Stephen Pauwels is one such person. Yes, Pauwels is in the loan business. Yes, he profits from plaintiff-victims. But his point of view will surprise you. Pauwels believes his own industry is dangerous, similar to both the Wild West and the American subprime catastrophe.

Doing business in Africa

Cover Story

Written by Paul Brent Issue Date: October 2011

Cover: Jacqui Oakley

As the world’s second-most populous continent and blessed with abundant mineral riches, Africa holds great promise and economic opportunity. But those opportunities must also be mentioned and measured along with Africa’s many challenges: its division into 50 often fractious nations, frequent wars and civil strife, a stubborn history of corruption and inefficiency, and the deepest poverty anywhere on the planet. It’s fair to say Africa is the toughest place in the world to do business.

A decade on

Cover Story

Written by Janice Tibbets Issue Date: September 2011

Kent Roach thinks of it as the age of innocence, those emotional early months following the Sept. 11, 2001 attacks in New York and Washington, D.C., when Canadians were vigorously debating new anti-terrorism laws. Parliament, the legal community, and other stakeholders were consumed with how to craft legislation that would properly balance national security, privacy, and human rights. That was long before most Canadians had ever heard of Maher Arar or Omar Khadr. No-fly lists, security certificates, and electronic surveillance were barely on the national radar. The federal public safety department, now one of the most high-profile federal ministries, didn’t exist. Canada had not yet deployed the 37,000 soldiers who would serve in Afghanistan over the following decade, 157 of whom lost their lives.

Hacked!

Written by Daryl-Lynn Carlson Issue Date: September 2011

Illustration: Mick Coulas

Computer systems at law firms, governments, companies, courts, and high-profile organizations have been targets of increasing numbers of cyber attacks as perpetrators become more sophisticated in their ability to steal information. As recently as July, the North Atlantic Treaty Organization and the United States’ Central Intelligence Agency were targeted. The CIA’s web site was shut down for several days as a result, while the hackers who attacked NATO claimed they had infiltrated the organizations’ computers and obtained classified documents; the United Nations, law firms in Canada and the United States, and Ontario’s courts have been hacked over the last several months.