In last year’s Osler Legal Outlook, our authors shared their views on important legal developments during 2024 and provided advice and perspectives on how to navigate the years ahead in light of these developments. We predicted that the election of Donald Trump would drive significant change. We also signalled the significance of the rapid expansion of artificial intelligence (AI). Both predictions have been borne out, perhaps even more than anyone could have anticipated. At the time of writing last year, the outcome of the pending Canadian federal election was unknown. We, like others, underestimated the potential effects of a new Canadian federal government.
In assessing the pieces that our colleagues have written this year, three themes have emerged, largely shaped by the trends we identified in 2024. First, while AI has been an important topic of conversation since 2023, it has become an increasingly pervasive theme in legal, policy and business discussions in unprecedented ways. The pace of change is dizzying. This year, AI forms the core theme for a number of our articles. The second theme is the initial and continuing implications for Canada caused by significant and rapid changes in the global order. Notably, the dramatic shift in approach to trade and political relationships stemming from the U.S., and the ongoing uncertainty that persists, has required rapid adaptation in many areas affected by cross-border relations. Finally, despite upheaval in certain areas, many of our articles reflect ongoing “business as usual” legal developments occurring through statutory and regulatory changes and key judicial decisions.
As we prepare for the upcoming year, these themes will continue to resonate throughout the Canadian economy and business community. More uncertainty and rapid change are on the horizon. Businesses need to prepare appropriately for the implications for their operations and their customers and clients. While AI presents untold opportunities that can foster greater efficiencies, it raises significant concerns if its use is not properly governed and monitored. The Build Canada and Buy Canada landscape that is currently dominating the national political mindset will continue to affect legal and regulatory perspectives. Trade relations with the U.S. and other trade partners will inevitably continue to shift. Those prepared to react and respond quickly to these developments will be best placed to take advantage of the opportunities presented.
AI is a dominating force to be reckoned with
AI appeared in common parlance in dramatic fashion in 2023. Predictions of widescale replacement of many human roles and functions in the short term were clearly hyperbolic. However, as we move towards 2026, AI has become so sophisticated that many businesses are now relying on agentic AI — replacing human agents with AI tools that have the capacity to plan, reason and act independently. These tools raise significant legal considerations in areas such as intellectual property, privacy, data management, contracting, tax and others.
AI is increasingly transforming legal advocacy, including drafting and supporting legal submissions in courts across the country. While potential advantages include greater access to justice, there are significant ethical issues for courts to wrestle with. The efficiencies offered by AI can be undermined by the errors and hallucinations routinely caused by generative AI tools. Substantial implications arise for lawyers, for clients whose cases may be jeopardized, and for the accurate development of the law. Courts and regulators are introducing tools aimed at counteracting these issues.
AI also raises important questions about the ownership and use of copyrighted material as part of the training data sets for AI models. Judicial decisions in the U.S. and in Canada are beginning to grapple with the appropriate application of existing copyright laws, as well as the availability of the fair use and fair dealing doctrines to defend infringement allegations. Legislative reform may be on the horizon.
The federal government is seeking to position Canada at the forefront of the AI revolution. This will likely involve a multifaceted strategy implemented through privacy legislative reform, policy and investment. Beyond AI, a variety of new privacy and data legislative frameworks are likely forthcoming, including a new federal private sector statute. Companies doing business in Canada will need to have a thorough understanding of their personal information and data practices and implement documented governance plans.
Part of the federal AI framework will likely address data sovereignty. In the face of global growth in data, as well as heightened concerns regarding national security, cybersecurity and global uncertainty, the government is likely to respond with an approach seeking to preserve and protect Canadian data, in some measure, from foreign intervention and access. The government will have to balance the desire to protect Canadian data against the competitive costs to businesses of excluding foreign data providers.
The rapid increase in AI demand has significant practical implications for provincial electricity regulators and, indirectly, ratepayers. Data centres require vast quantities of power to operate the servers needed for AI tools, in orders of magnitude that far exceed grid capacity. Given these limitations in the near term, provinces are being forced to reconsider longstanding grid connection policies. These policies will shape the future of grid connections for data centres and other large electrical loads as we move into 2026 and beyond.
Building an independent Canada in response to global change
The significant change in U.S. relations has inspired a renewed focus on ensuring that Canada is able to stand independently and take advantage of the country’s plentiful resources and talents. The new federal government is actively promoting economic growth and project building. This has resulted in the creation of the Major Projects Office in an attempt to expedite regulatory approval of projects of national interest. Building Canada is now a core theme nationally and among provinces and territories. It remains to be seen how quickly these efforts can drive change and reduce regulatory burdens and timelines.
These developments are a key element of Canada’s response to the dramatic pivot in U.S. trade policy. The use in the U.S. of emergency powers to implement global tariffs, including on Canadian goods, has affected much of the North American market. The outcome of Canada’s efforts to mitigate these impacts through new trade relationships, reduced interprovincial trade barriers and Buy Canadian initiatives remains to be seen. Uncertainty will certainly persist, particularly with the pending maturity of the Canada-U.S.-Mexico trade agreement.
The changes in U.S. relations are having broader effects on Canadian businesses beyond trade. Shifting economic crime enforcement priorities and trade policies in Canada and the U.S. have created and are creating significant uncertainty, administrative burdens and compliance risks for businesses. It will be critical for companies to assess and address their compliance programs, particularly in areas such as anti-money laundering and ongoing oversight in the context of disrupted supply chains.
The Canadian government is introducing enhanced measures directed at anti-money laundering and enforcement actions have ramped up. Beyond AML, financial institutions and payment service providers are facing heightened expectations and evolving regulatory frameworks that will demand robust risk management programs. Guidance has also been released regarding use of AI by federally regulated financial institutions.
Strong domestic efforts to build major Canadian projects to ensure a strong, independent nation may face a further challenge in the form of recent Canadian jurisprudence recognizing Aboriginal title over lands subject to private property rights. Courts have indicated that reconciliation of Aboriginal title and private property rights is best achieved through Crown-First Nation negotiations. However, Aboriginal title is a prior and superior right to Crown title to land. The implications of this recent case law, which remain to be worked out, may strike at the core of private property interests in unceded areas.
Policy shifts both north and south of the border have led to a recalibration of Canada’s efforts to establish itself as a powerhouse in the global electric vehicle market. This shift has been influenced by U.S. trade policy, including tariffs, the elimination of certain government incentives, as well as ongoing challenges with charging infrastructure and several high-profile insolvencies in the EV ecosystem. However, a number of ongoing initiatives, including focus on critical minerals and nation building, suggest that Canada’s EV ambitions remain directionally intact.
Transactional activity is rebounding and regulators are responding
Following the election of Donald Trump, stock markets reacted favourably with the expectation of regulatory burden reduction and investment support. While stock markets remain strong, the Canadian M&A market has seen a decline in overall deal volume, countered by significant growth in transaction values. However, market dynamics, regulatory challenges and deal complexities are making deals more difficult to complete and a focus on execution is paramount. The outlook for M&A markets in Canada remains tenuous but is trending positively following a late fourth-quarter drive.
One area of significant growth in Canadian M&A that is likely to continue in the coming years relates to financial services. Several major deals were announced or completed in 2025 with a particular emphasis on wealth and asset management targets. Many of these deals reflected the involvement of private equity. A number of buyers have taken advantage of higher valuations and strong conviction in their share prices by using equity as consideration or relying on market issuances to fund purchase prices.
Beyond financial services, corporate issuers looking to streamline their portfolios, reduce leverage and gain access to capital are looking to new structures. An asset joint venture is of interest to those needing to fund large, long-dated capital programs in a higher‑rate environment. If executed properly, this structure can provide significant capital while allowing an issuer to retain operational control over business-critical infrastructure. However, governance challenges and potential operational constraints need to be considered.
An alternative path used by entrepreneurial venture seekers to raise capital is a search fund. This structure allows a searcher to locate capital to fund a search for an acquisition target and then, once identified, raise further capital for the acquisition and operation of the business. As search funds gain popularity in Canada, cross-border tax implications and structure options need to be properly considered to position the searcher and search fund for long-term success.
At the boardroom table, directors have also been faced with a shifting environment. Governance efforts in Canada have recently been focused on reacting to U.S. policy dynamics and the effects on diversity- and sustainability-related disclosures. Beyond that, shareholder engagement and stakeholder communication remain critical to managing uncertainty and placing the business on a stable footing for long-term value creation.
These objectives can be challenged by efforts from shareholder activists seeking to generate near-term catalysts for positive share price movement through campaigns focused on board composition. For many boards, ensuring alignment on a corporate strategy and compelling governance plan can support defensive positioning. A common tool for issuers in the face of hostile activity can be the adoption of a shareholder rights plan. Having a compelling rationale and ensuring the plan fits within regulatory expectations can mitigate the risk of an adverse regulatory decision against the plan.
Meanwhile, securities regulators have adopted a moderate stance, pursuing enforcement action largely where there is outsized investor harm or where there are impacts on market integrity. Canadian regulators have been pursuing cases involving illegal distributions, unregistered trading, misleading statements and promotions, fraud, misuse of investment fund assets and insider trading and tipping. These efforts are likely to continue, although regulators will need to keep a keen eye on policy direction from U.S. securities regulators.
The cryptocurrency market continues to attract the attention of both securities and traditional financial institution regulators. In a first for the industry in Canada, new federal legislation specifically aimed at regulating stablecoins is likely on the horizon. Further regulation of cryptoassets in Canada under securities laws is also forthcoming. Enforcement and compliance pressures are likely to intensify as trading platforms transition into the Canadian Investment Regulatory Organization’s full regulatory orbit and as reporting regimes take effect.
Regulatory developments continue to progress
Changes to competition legislation in Canada last year are already having an impact. Transactions are being subjected to heightened scrutiny, requiring a proactive approach from merging parties. Uncertainty arising from amendments to the civil commercial agreements provision will need to be addressed. The implications of the expanded private enforcement right and the new maximum administrative monetary penalties available under certain civil provisions will continue to unfold over the year to come.
At the same time, significant consumer protection reform is under way across the country. Several provinces have introduced a range of new requirements and restrictions for consumer-facing suppliers. Suppliers will need to consider customer contract terms, streamline pre-contract disclosure practices, revisit consent and cancellation processes and update compliance practices throughout their operations to prepare for these changes.
In another consumer-related field, three historic plans of compromise or arrangement under the Companies’ Creditors Arrangement Act (CCAA) were approved in 2025 in respect of three Canadian manufacturers and distributors of tobacco products. The plans represent the successful resolution of multiple litigation proceedings commenced or threatened against the tobacco companies in relation to tobacco-related harms caused by their products. This industry-wide restructuring took six years to achieve and laid the groundwork for the use of the CCAA in future resolutions of industry-wide claims.
These and many other significant legal and business developments in 2025 are setting the stage for continued reform in 2026. With heightened and ongoing political uncertainty in the Canada-U.S. trade and political relationship, continued efforts to bolster a strong and free Canada will be welcomed by many. We are optimistic that Build Canada endeavours will begin to bear fruit in 2026 and beyond. Ongoing efforts to grapple with the implications of rapid development of AI will undoubtedly be required. Business “as usual” — whatever that looks like — will need to continue. At the same time, businesses need to continue to prepare for the unexpected. By adopting a pragmatic approach to business initiatives and planning, there is great opportunity for success in the future.
We hope you enjoy reading our new Osler Legal Outlook. As always, we would be pleased to discuss these developments and the implications for your business with you.
