Trade disputes, lawsuits driving up Ottawa's legal bills

The Trudeau government's spending on outside law firms has risen sharply in the last year, topping $26 million for the first time since numbers have been proactively posted. The federal Justice Department refuses to release details, but legal costs are clearly being driven by trade disputes and veterans' lawsuits.

Trade battles with U.S., veterans' lawsuits, Indigenous challenges mean big business for law firms

Softwood lumber being processed at Groupe Crete, a sawmill in Chertsey, Que., on Jan. 17. The legal battle with the U.S. over softwood lumber is still ongoing. (Christinne Muschi/Reuters)

The federal government's legal bills are rising sharply, driven in part by fresh trade disputes with the United States.

The Department of Justice paid $26.4 million to outside law firms and other legal agents in 2017-2018, the largest amount since the government began publicly reporting figures five years ago.

The biggest bill last year came from a Washington, D.C.-based law firm that helps Ottawa fight trade battles with the United States over softwood lumber and other exports.

Hughes Hubbard & Reed LLP received an $8 million payout, largely for work led by their international trade partner Joanne Osendarp, previously senior counsel in Canada's Foreign Affairs department (now called Global Affairs Canada).

Osendarp's team won a key decision for Canada in July at the World Trade Organization in a dispute with Washington over glossy paper exports.

The work of that firm and 54 others helped drive up the outside legal bill by about 23 per cent over the year before.

Dip in spending due to election

Since 2013, when Justice started to proactively issue spending reports, the cost of hiring external legal agents has largely remained steady at about $22 million annually. (There was a dip to $14.5 million in 2015-2016, in part because the federal election campaign from August to October restricted government operations.)

Overall legal costs for the Liberal government were about $461 million in 2016-2017, the last year for which figures are available — up by about $30 million over the previous year. The total includes the cost of hiring outside counsel and all other costs for a broad variety of legal services provided to dozens of departments.

A briefing note for Justice Minister Jody Wilson-Raybould, obtained under the Access to Information Act, notes the recent rise in legal costs for the federal government, but details are blacked out to protect solicitor-client privilege. (Darryl Dyck/Canadian Press)

A June 2018 briefing note to Justice Minister Jody Wilson-Raybould, obtained by CBC News under the Access to Information Act, flags the rise in outside legal costs for 2017-2018 as the "result of new and continued activity of major cases."

But the department blacked out the specific reasons, claiming solicitor-client privilege. An annex to the note that lists the cases being handled by the 55 law firms and agents is also redacted.

Asked to explain the sharp increase in costs last year, department spokesman Ian McLeod said only that it is "likely linked to a number of new/renewed or active litigation and advisory matters."

Ottawa facing over 40,000 claims

The federal government is juggling more than 40,000 legal claims, about three-quarters of which name Ottawa as defendant or respondent. Collectively, they pose a theoretical financial liability running in the hundreds of billions of dollars.

To better co-ordinate the massive litigation agenda, the Trudeau government struck a special committee on Aug. 22, 2016, known as the Cabinet Committee on Litigation Management, chaired by Dominic LeBlanc, then fisheries minister.

At the time, LeBlanc said "the more coherence and effective management we can bring to this, it might have a positive impact on the government's financial position."

The committee was quietly disbanded on Aug. 28, 2018, when the cabinet was last shuffled; its work was farmed out to other cabinet committees, said Stephane Shank, a spokesperson for Privy Council Office.

"Litigation-related Indigenous issues may, for example, be considered by the Cabinet Committee on Reconciliation," he said.

Although Justice has refused to provide details of its legal bills, recent reports indicate some expensive lawsuits are underway.

CBC News reported that two class-action lawsuits over sexual harassment of women and men in the military, each launched in 2016, together had cost the department $963,572 in legal fees as of February this year. The two lawsuits are pressing claims for up to $1 billion in compensation.

Another $1.3 million in legal fees has been spent defending 73 other cases involving veterans. This month, another settlement was proposed in a 2016 class-action lawsuit with disabled veterans, worth $100 million.

Some high-profile lawsuits have been launched by First Nations communities. Others raise issues linked to the environment and natural resources.

McLeod said legal fees paid to outside agents hit about $40 million in 2011-2012, under the previous government of Stephen Harper, though Justice has not posted the numbers.

Joanne Osendarp, a partner at the Washington, D.C., law firm Hughes Hubbard & Reed, is currently Canada's main hired gun in trade disputes with the United States. (Hughes Hubbard & Reed LLP)

The total dropped sharply the following year, to about $21.5 million, "due in large part to the conclusion of many large and active files," he said.

Despite the blacked-out files from Justice, it's clear that new trade disputes are contributing to the recent rise in legal costs for outside counsel.

In 2014-2015, the Washington-based legal firm Hughes Hubbard & Reed, specializing in trade disputes, invoiced Ottawa $335,145 for work that year, putting them at No. 12 on the Department of Justice's billing list.

But in the following three years, the firm occupied No. 1 on the list, billing the federal government $2.1 million (2015-2016), $8.5 million (2016-2017) and $8.3 million in the last fiscal year.

Most of that legal work was shepherded by Osendarp, a Canadian citizen who has been a partner at the firm for the last seven years.

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About the Author

Dean Beeby

Senior reporter, Parliamentary Bureau

Dean Beeby is a CBC journalist, author and specialist in freedom-of-information laws. Follow him on Twitter: @DeanBeeby