Canada (Commonwealth)_ Canadian law firms have traditionally lagged behind their American counterparts in adopting legal technology. However, the rapid advancements in artificial intelligence (AI) are bridging this gap. This slower adoption rate in Canada is not indicative of a lack of innovation. In fact, Canada’s legal tech sector is thriving. Instead, the delay stems from factors such as a smaller legal market and stringent privacy regulations, which have historically slowed technology uptake. These challenges often resulted in a significant delay between the introduction of legal tech products in the United States and their availability in Canada.
Recent developments indicate a shift in this trend, with Canadian markets receiving increased priority from global legal tech companies. For instance, Westlaw Edge was introduced in the United States in July 2018, but its Canadian launch was not announced until September 2021, a gap exceeding three years. Similarly, Lexis+ debuted in the United States in September 2020, with its Canadian version announced in August 2022. However, the timeline for recent AI-powered tools shows a remarkable reduction in this delay. Thomson Reuters launched CoCounsel Core in the United States in November 2023 and made it available in Canada by February 2024. Similarly, Thomson Reuters announced the launch of Lexis+ AI for the Canadian market in July 2024, following its introduction in the United States in October 2023. This expedited timeline underscores the increasing importance of the Canadian legal tech landscape.
Canada’s federal government has demonstrated strong support for AI innovation through substantial investments and strategic initiatives. The government has allocated CAD$568 million to its national AI strategy, aiming to promote AI research and development, nurture a skilled workforce, and establish robust industry standards. This initiative is expected to benefit Canadian legal tech companies, including Clio, Kira Systems, Spellbook, and Blue J Legal—all headquartered in Canada. By positioning Canada as a hub for AI innovation, the government’s focus is likely to attract funding and talent, enabling these companies to thrive in a competitive global market.
While fostering innovation, the Canadian government is also taking steps to ensure the responsible development of AI technologies. In June 2022, it introduced the Artificial Intelligence and Data Act (AIDA), which seeks to regulate high-impact AI systems. Even though AI tools used for legal research and document review were probably not included in AIDA’s original scope, the Act’s changing rules may still have an effect on the sector. For example, AIDA emphasizes mitigating bias and discrimination in AI systems, which could lead to increased scrutiny of algorithms used in legal research. Developers may be required to demonstrate fairness and transparency in their AI solutions.
AIDA could create challenges for U.S.-based companies looking to enter the Canadian legal tech market with AI products. However, it may also offer a competitive advantage to Canadian companies aiming to expand into Europe. AIDA’s regulatory framework shares similarities with the European Union’s Artificial Intelligence Act (EU AI Act), despite some material differences. This alignment could provide Canadian companies with an edge in navigating European regulatory requirements.
The EU AI Act’s approach to AI regulation is broader and more comprehensive than AIDA, encompassing a wider range of AI systems. In its multi-tiered, risk-based framework, even low-risk AI systems are required to be transparent, and high-risk AI applications are subject to strict rules. The EU AI Act could classify tools used for legal interpretation as high-risk. This would necessitate compliance with rigorous standards, presenting challenges for companies entering the European market.
Canadian legal tech companies can leverage their engagement with AIDA to gain insights and prepare for compliance with the EU AI Act. Despite the differences between the two regulatory frameworks, Canadian firms may find their familiarity with AIDA advantageous when addressing global AI regulations.
The rise of generative AI is transforming the Canadian legal tech industry, narrowing the gap with the United States and positioning Canada as a global leader in the sector. While AIDA’s long-term impact remains uncertain, its emphasis on responsible AI development is likely to influence the creation and deployment of AI-powered legal tools in Canada. This evolution marks a pivotal moment for Canadian legal tech, as it embraces innovation and prepares for a prominent role in the international market.
