The economics of recovery

I’ve had a chance to speak to many Canadian in-house lawyers over the past few months, and have come to understand the economic recovery everyone has been waiting for, as 2010 comes to an end, has yet to deliver the desired financial results to legal departments. According to the latest corporate counsel survey published in Canadian Lawyer, nearly 80 per cent of the 165 respondents say an improving economic climate had no effect on their legal spending. In addition, nearly 30 per cent have seen their legal budgets cut further last year.

Technically, the Great Recession is over, the economists tell us. The economy is growing again, and soon the effects are supposed to ripple through the economy. The problem is there is a discrepancy — a time lag — between economic reports and what companies and their legal departments experience in terms of projections and budgeting. It is the same force that is causing persistent high unemployment and sluggish growth in the U.S.

Born out of the U.S. housing and financial markets, the recession did not have the depth or the harshness here in Canada that it did south of the border. However many sectors of the Canadian economy, like manufacturing and energy, suffered. And although things have improved, the current situation in the U.S. does not bode well for Canada, which relies heavily on its trade relationship with its neighbour.

From discussions with Canadian corporate counsel, I also get the sense they closely watch what is going on south of the border. And these are not necessarily just in-house lawyers that work for companies with ties to the U.S. or that are involved in cross-border trade. In today’s global world, everyone is connected.

The general wisdom is that because of the similarities between the two countries’ economies and legal systems, many of the issues faced by the American in-house bar are the same as those Canadian in-house counsel might have to deal with. The idea is that economic, business, and legal problems flow through the border just as easily as the latest fashion or musical trends. This year’s cross-border issue of InHouse looks at some of these business trends.
As our cover story points out on page 14, similarities between the two countries might make it easier to bring “Made in the U.S.A.” class actions up to Canada, but that doesn’t mean Canadian judges will be happy to deal with ready-made American class actions that have simply been copied and pasted to Canada.
Differences in regulations can also cause legal problems for cross-border trade, having the potential to create a sort of “Barren soil” for U.S. franchises wanting to do business in Canada, as our feature indicates on page 22.
In the end, the U.S.-Canada relationship goes beyond lawsuits and differing regulations. But one thing is certain: Canada’s economic prosperity is closely tied to that of the U.S. So although projections indicate sluggish economic growth on both sides of the border for 2011 too, maybe some of the economic progress planted in 2010 will finally catch up with legal departments next year.

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