Legal Risk Management in the Department of Justice
2.0 BACKGROUND
- 2.1. Context for the LRM Initiative: Integrated Risk Management
- 2.2. The development of LRM
- 2.3. The changing context: the devolution of LRM
- 2.4. Overview of the LRM Initiative
2. BACKGROUND
This section presents the background to the Legal Risk Management (LRM) Initiative and an overview of LRM today.
2.1. Context for the LRM Initiative: Integrated Risk Management
For most of the 20th century, risk management was a term used primarily by private enterprises and had not reached the public sector. While this began to change in the 1980s, the last ten to fifteen years have seen a rapid adoption of risk management processes by many governments. Canada has been at the forefront of risk management in the public sector. In 1997, the federal government launched the Modern Comptrollership Initiative by empowering an independent review panel to examine the comptrollership function. The idea was to modernize public sector management and improve government performance. As one of its recommendations, the panel called for the development of "a mature risk management environment"
.[3] The importance of sound risk management was reiterated in Results for Canadians (2000), which set out the government's commitment to improving public sector management and made it clear that effective management of risks is central to achieving results.[4]
In response to these initiatives, the Treasury Board Secretariat (TBS) and an interdepartmental Advisory Group on Risk Management began work on developing a government-wide framework for risk management. The result was the 2001 Integrated Risk Management (IRM) Framework, which was conceived as a management tool to assist federal departments in establishing their corporate risk profile and risk management function.[5] Risk management, a process of handling uncertainty by "identifying, assessing, understanding, acting on and communicating risk issues"
,[6] was to be integrated into each government organization's decision-making. This government-wide set of standards for risk management recognized that, even with the different policy environments of each government department or agency, there are common elements of risk, making a horizontal approach to risk management desirable.
Very much related to the IRM Framework is the Management Accountability Framework (MAF) that the TBS introduced in 2003 to identify expectations for public service management. Here again, a systematic approach to managing risks was identified as one of the ten key components of sound management.
2.2. The development of LRM
In December 1999, the Department and TBS launched the LRM Initiative as a response to the growing volume, cost, and complexity of civil litigation involving the federal Crown as well as to support the government-wide risk management efforts, of which legal risk was considered a key component. To support the Initiative, the Department and TBS undertook a Legal Risk Management Review in 2000 to assess current LRM practices, identify approaches to managing legal risk, and develop recommendations for an integrated, comprehensive, and flexible approach to LRM.
In developing the LRM Initiative, the Department recognized that the management of legal risk was not a new concept. In practice, the Department has always managed legal risks, as that is the essence of what lawyers do. However, the LRM Initiative takes a more systematic approach to managing legal risks with the additional goal of broadening the practitioners of legal risk management to include not just lawyers but also client departments. Because litigation and risk of litigation can affect client department operations, finances, and relationships at home and abroad, the more purposeful involvement of clients in the strategic management of legal risks is an important innovation of LRM. In short, LRM signalled the Department's intentions to more effectively anticipate, identify, prevent, or mitigate legal risks affecting the Government of Canada.
The LRM Project Support Office (the LRM Office) opened in 2000 to oversee the Initiative with funding largely from the Strategic Investment Fund. The LRM Office served as the functional leader of LRM with the responsibility of planning and implementing the LRM Initiative's projects and promoting a legal risk management culture in the Department. The funding for the LRM Initiative was time-limited and ended in 2003.
2.3. The changing context: the devolution of LRM
As part of the planning for the closure of the LRM Office, the Department decided to devolve the responsibility for legal risk management. To ensure the continuation of LRM practices, the Department adopted the LRM Accountability Framework and Governance Structure (AFGS). The AFGS sets out the accountabilities and management responsibilities for the LRM Initiative. The accountabilities cascade down through senior management to every Department employee. As the AFGS explicitly stated, "it is the responsibility of all employees and managers across the Department of Justice to know and apply LRM principles and methods appropriate to their particular positions and areas of responsibilities."
In addition, the AFGS established a new governance structure that included several new committees as well as an LRM Special Counsel to provide functional operational leadership. While the AFGS set out performance expectations for senior managers, it did not establish objectives for LRM.
After devolution, LRM continued in the Department, but in the last two years, a desire to revitalize the Initiative took hold. In January 2007, the Associate Deputy Minister of Justice announced the LRM Renewal Initiative with the goal of re-establishing LRM as a priority in the Department. As part of the renewal, the Associate Deputy Minister, the British Columbia Regional Office (BCRO), and the Office of the LRM Special Counsel organized a May 2007 retreat, which was attended by over 50 Justice counsel. The retreat was the first departmental gathering since the LRM Initiative was renewed to consider best practices, challenges, and the status of LRM in the Department. At this same time, the May 2007 Report of the Auditor General found that the Department "has made progress in managing legal risk"
, in particular, citing the LRM framework for assessing and communicating legal risk. The report also identified areas for further improvement, such as incorporating risk assessments into advisory work, ensuring consistent legal risk assessments, and considering the treatment of risk level 6 files.[7] The LRM retreat discussed many of the same issues raised in the Auditor General's report.
In addition, the governance structure of the LRM Initiative changed in 2007. To support recommendations concerning the management of legal services in the joint Justice-TBS Review of Legal Services 2004-2007, the Department established the Law Practice Management Directorate (LPMD) in August 2007. LPMD's mandate is "to ensure that national policies, processes, and tools are in place to support the efficient and effective delivery of legal services to government"
.[8] To fulfill this mandate, LPMD is to provide leadership on law practice issues, including LRM. Its LRM division is responsible for the development and coordination of national policies, structures, tools, and processes that support the integrated and efficient identification, assessment, mitigation, and management of legal risks in government. The development of LPMD and its LRM division are part of the revitalization of the LRM Initiative.
2.4. Overview of the LRM Initiative
The LRM Initiative has three main components:
- Identifying issues early and assessing potential legal risks
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Clients, with the assistance of the Department, monitor their activities for potential legal risks and assess the risk.
- Avoiding and mitigating legal risks
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Avoiding legal problems means that potential issues are foreseen during the policy-making, program development, or legislative process. At this early stage, the Department works with its client departments and agencies to determine how best to address policy and program management problems. This could mean legislation or regulations, but LRM also encourages, where appropriate, innovative approaches that can achieve results without requiring legislation (i.e., instrument choice) or raising the potential for litigation.
- Managing legal risks as they occur
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Once legal risk has materialized, the Department undertakes measures to reduce the potential costs (monetary and otherwise) that could result from the legal risk. This includes measures to strategically and efficiently handle litigation or the potential impacts flowing from high risk policy decisions and can include measures such as dispute resolution processes.
Under the LRM Initiative, the key to achieving these objectives is taking a systematic approach. These objectives are to be achieved through the following activities in Table 1.
| Activities | Brief description |
|---|---|
| Scanning (risk identification) | Client departments and agencies, with the support of the Department, conduct periodic scans of their legislation, policies, programs, and operations for potential legal risks. |
| Risk assessment | Department counsel assess risk by giving legal advice on the likelihood of an adverse outcome in court proceedings or the likelihood of liability of the Crown resulting from government action or inaction. Risk assessment includes consideration of the potential impact of that outcome on a client department or the government as a whole. |
| Instrument choice | Counsel should consider the best tool(s) to achieve government objectives and reduce the reliance on traditional legal tools such as legislation or litigation. |
| Information sharing | All counsel are responsible for sharing information on significant legal risks and identifying high risk files. This information should be reported to management within their office as well as with senior management at the portfolio and department level. |
| Informing and engaging senior officials and Ministers on key LRM issues | Key LRM issues are to be reported to senior management in Justice and within the client departments and agencies. |
| Case management and tracking techniques (e.g., iCase) | iCase is the Department's timekeeping and case management system. Counsel are responsible for recording legal risk information in iCase so that high risk files can be tracked and monitored. |
| Management of high impact legal risks | Once a file is identified as high impact, the legal risks presented in the file are to be actively managed. |
| Contingency planning | These plans are to be developed for all Supreme Court of Canada files and other high risk files as appropriate so that Justice and the client departments are prepared for any contingency and have options and strategies for how to handle the risks. |
| Dispute resolution | Counsel should always consider dispute resolution options, where appropriate. |
| Understanding of roles and responsibilities | Counsel must understand their unique role in that strategies for serving government clients differ from private practice. Good risk management requires understanding the roles of all government parties involved in managing a file. |
| Identification and analysis of government-wide trends | The Department should work to identify legal risk trends across Government and share this information within Justice and with client departments and agencies. |
Source: Department of Justice Canada. (2007). Practical LRM. Retrieved on November 20, 2007, from http://jusnet.justice.gc.ca/lpmd_e/lrm_home.htm.
To support these LRM activities, the Department and its various units have developed tools and processes. The primary tool associated with the Initiative is the LRM grid, which was developed to assess legal risks. The grid operates on two dimensions: the likelihood of an adverse outcome and the impact on the client department or agency or the government as a whole. These dimensions are assessed based on the criteria in Table 2.
Table 2: LRM grid dimensions
| Likelihood level | Description |
|---|---|
| Low | For litigation files, when the chance of losing the case is less than 30%For advisory files, when the likelihood of an adverse outcome arising is less than 30% |
| Medium | For litigation files, when the chance of losing the case is between 30-70%For advisory files, when the likelihood of an adverse outcome arising is between 30-70% |
| High | For litigation files, when the chance of losing the case is over 70%For advisory files, when the likelihood of an adverse outcome arising is over 70% |
| Unable to assess | If there is not enough information to permit a proper likelihood of adverse outcome assessment. Once more information is available and, at the very least, if the file involves litigation, before the matter is set for trial, a proper likelihood of an adverse outcome must be selected |
| Impact level | Description |
|---|---|
| Minor | Minimal effect on the client department or government as a whole |
| Moderate | Potential for moderate effect on the client department or government as a wholeSignificant Significant effect on client department's policies or programs or to government as a whole due to actions or third parties or where media coverage is high |
| Significant | Significant effect on client department's policies or programs or to government as a whole due to actions or third parties or where media coverage is high |
| Unable to assess | If there is not enough information to permit a proper risk level assessment. Once more information is available, a proper risk level must be selected. |
To determine whether an impact on the client department/agency or the government is significant, various parts of the Department have developed high impact criteria. Although the lists vary somewhat, they typically include but are not exclusive to, any legal matter that could have a significant impact on items such as: the national interest; the government's policies, laws, programs, or finances; federal/provincial/territorial or international relations; or public confidence in the government or the courts.
These two dimensions form to join a three-by-three grid that provides levels of legal risk as shown in Table 3. The LRM grid is also part of the risk evaluation screen in iCase; once the two dimensions are entered, iCase computes the risk level. The Department considers high risk files those with a risk level of 7-9 because they have the potential of a significant impact on the client department or government and, therefore, should be reported to senior management within Justice and the client department or agency.
Table 3: LRM grid
| Impact | Likelihood of an adverse outcome | ||
|---|---|---|---|
| Low | Medium | High | |
| Significant | Considerable management required Risk level 7 |
Must manage and monitor risks Risk level 8 |
Extensive management essential Risk level 9 |
| Moderate | Risk may be worth accepting with monitoring Risk level 4 |
Management effort worthwhile Risk level 5 |
Management effort required Risk level 6 |
| Minor | Accept risks Risk level 1 |
Accept, but monitor risks Risk level 2 |
Manage and monitor risks Risk level 3 |
Some areas within the Department have begun adopting their own guidelines for assessing legal risk. For example, the Legislative Services Branch uses the IRM grid where risk levels 6, 8 and 9 (diagonal) are considered high risk rather than the standard LRM grid where risk levels 7-9 (horizontal) are high risk. The Public Law Sector has also drafted guidelines for advisory work. These other methods of assessing legal risk are discussed in more detail in Section 4.2.2.
In addition to the LRM grid, the Department has developed tools and structures to assist with conducting LRM as well as incorporating some pre-existing tools into LRM (e.g., Briefing Notes). These include various committees and other forums to govern the LRM Initiative at the Justice and/or client department or agency level, communication and reporting tools for sharing information on LRM and high impact files, and tools to assist in managing legal risk. Table 4 provides an overview of these LRM supports with a focus on national tools, guidelines, and structures; the evaluation did not conduct an inventory of LRM supports, so this list is not intended to be exhaustive.
Table 4: LRM tools, processes, structures
| Description | |
|---|---|
| LRM risk assessment grid | See above description. |
| iCase risk evaluation screen | iCase, the Department's integrated case management, timekeeping and billing document management and reporting system, has a risk evaluation screen for inputting legal risk information, such as likelihood of adverse outcome, impact of risk, potential client impact (drop down list of types of risk), complexity of file, etc. |
| Specialized risk evaluation grids or scales | Several units of the Department are in the process of or have developed their own risk assessment grids or scales. |
| Description | |
|---|---|
| Early Warning Notes System (includes Early Warning Report, Radar Screen, Scanning News, Summary of High Impact Litigation, and Forward Agenda) |
Early Warning Notes are produced by litigation counsel (in regions and portfolios). Early Warning Notes advise senior officials of developments in high impact cases or other cases of interest to the Minister. On the Department intranet site for Early Warning Notes, a high-impact case (risk levels 7-9) is defined as a case which Each region has its own processes for approving and submitting Early Warning Notes. A template for Early Warning Notes is on the intranet and iCase. The template that is available on iCase is used mainly by the BCRO, the Quebec Regional Office, the Ontario Regional Office, and the Prairie Regional Office. The Early Warning Notes System provides some of the information that is used to produce various reports that are components of the Department's communication strategy to ensure that legal risk is effectively communicated throughout the Department (Early Warning Report, Upcoming Litigation Activity Report, Radar Screen, Scanning News, Summary of High Impact Litigation, Forward Agenda). The Early Warning Notes System is intended to contribute to national information sharing and LRM. |
| Early Warning Report | Early Warning Notes are compiled for the weekly litigation section of the Early Warning Report that is provided to senior management every Friday morning while Parliament is in session. When Parliament is not in session, the same information is compiled and submitted to senior management in the weekly Upcoming Litigation Activity Report. |
| Radar Screen | This is a weekly report that is distributed throughout the Department by email and provides information on upcoming hearings, anticipated decisions, and decisions rendered. This report includes most cases reported in the Early Warning Report in addition to other cases that are of interest to the Department as a whole. |
| Scanning News | The newsletter provides information on recent decisions as well as other developments of importance to the Department's legal community. Department legal staff can submit articles that sometimes include LRM best practices. This newsletter provides more detailed information than the Radar Screen. |
| Summary of High Impact Litigation | This report of high risk files is produced three times a year. It sometimes includes cases that are not rated as high impact in iCase (i.e., at risk levels 7-9). The various Department units, regions, and sectors can submit files that the Law Practice Management Directorate vets. Early Warning Notes are used to keep the database constantly updated. Initially created as the Top 100 Report, it has since evolved to track high impact litigation more generally, and includes more than 100 entries. This report is distributed primarily to senior management. |
| Forward Agenda (section on high impact litigation) | One-pager notes on high impact cases are compiled from the Summary of High Impact Litigation for the Forward Agenda. The Forward Agenda is a binder prepared for the Minister for each Parliamentary Session. One section of it provides information on high impact litigation. |
| DM Daily | This meeting occurs twice a week with direct reports to the Deputy Minister (Senior Regional Directors, Heads of portfolios and sectors). At these meetings, the Deputy Minister is given updates of activities in high impact files (recent or imminent). The DM Daily assists the Department in information-sharing and identification of horizontal linkages. |
| Briefing Notes (general and Cabinet) | These notes are prepared for the Minister on high impact cases or issues. |
| iCase LRM reports | iCase produces several LRM reports that are intended to help with planning:
|
| Contingent Liability Report | This quarterly report is produced from iCase and provides a snapshot of the contingent liabilities on Department files. |
| Description | |
|---|---|
| JUSnet intranet on LRM | Site where Department has LRM description and all tools listed below as well as links to resources on LRM or related issues (e.g., early settlement practice advisory) and regional/portfolio/sector sites. |
| Judicial Review Toolkit | This toolkit is to assist counsel who are involved in a Federal Court judicial review application. The tools outline major steps in the process with procedural issues to consider at each step. The tools also include several procedural charts which are intended to assist counsel with managing judicial review applications, as well as communicating at key points with clients and their LSUs. |
| Civil Actions Toolkit | This toolkit includes a flow chart of the litigation process with a checklist of the issues at each stage that should be discussed with those involved in managing the case (litigator, LSU, client department/agency, etc.). |
| Roles and Responsibilities (part of Civil Actions Toolkit) | This is a key component of the Civil Actions Toolkit. The Roles and Responsibilities checklist provides litigation counsel with a reminder of what issues typically should be discussed throughout the litigation process with involved parties (LSU, client department/agency, etc.). This approach should facilitate communication and ensure that expectations are understood. The checklist is shared with clients as it will help them consider in advance when they want to be consulted, and serves as an educational tool in showing clients that they need to consider the impact of the litigation on their strategic plans (financial, policy, operational). |
| Contingency Planning Guidelines | Contingency planning is where the Department and client department identify and assess risks on a particular case and develop a strategy for handling risks. These plans ensure that the government responds quickly and appropriately to situations that occur throughout the litigation process. All Supreme Court of Canada cases must have a contingency plan. Other files may require a plan that is appropriate to their level of risk. Department documentation is currently unclear on whether all high risk files are required to have contingency plans. Contingency plans are not developed for advisory, policy, or legislation files. In legislative/advisory files, counsel would recommend a strategic plan to minimize identified legal risks and mitigate the risk of litigation. There are no templates on the intranet for these strategic plans. |
| Critical Path Template for High Impact Cases | This is part of the Contingency Planning guidelines. This document sets out the roles and responsibilities for the Department and client department/agencies for the management of a case. The Critical Path describes what is to be done and by whom in the days leading up to and shortly after a judicial or quasi-judicial decision. The template is designed for high impact cases in the Supreme Court of Canada but can be adapted to fit other cases in other court jurisdictions. |
| Effective Communication of Legal Risk | These recommendations on communicating legal risk were drafted in November 2006 by a working group of senior staff. In particular, the report provides recommendations on (taken from JUSnet description of report):
|
The LRM Initiative encompasses all of the legal work of the Department. To understand the operation of the Initiative, the various contexts in which LRM is practiced in the Department must be distinguished. The operational structure is complex as, although Justice is ultimately the legal counsel to the Crown, it directly provides legal services to approximately 50 federal departments and agencies that, for ease of understanding, are referred to as "clients". Throughout this report, the implementation of LRM is discussed in terms of types of legal activities and various legal actors within the Department.
The main legal activities of the Department are:
- Litigation services - the handling of a case that is in the litigation process
- Legal advice - providing legal opinions or advice on legal matters
- Policy and program development - planning, developing, and implementing laws, policies, and programs in the justice sector dealing with family law, access to justice issues, and criminal law including youth criminal justice, Aboriginal justice, and anti-drug strategy
- Legislative and regulatory services - drafting, updating, and reviewing all government statutes, regulations, and bills.
Table 5 provides a brief description and overview of the structure of the Department for those areas that are directly involved in LRM and notes the legal activities in which they are typically engaged.
Table 5: Department of Justice units directly involved in the LRM Initiative
| Business and Regulatory Law (BRL) | Citizenship, Immigration, and Public Safety (CIPS) | Aboriginal Affairs (AA) | Tax Law Services | Central Agencies |
|---|---|---|---|---|
This portfolio group includes work for 24 client departments/ |
This portfolio includes departments/ |
This portfolio includes the Department of Indian and Northern Affairs and other departments/agencies that have policies, programs, or services that target Aboriginal clients. |
This portfolio serves the Canada Revenue Agency. |
This portfolio serves central agencies of government, such as the Treasury Board, the Department of Finance and the Public Service Commission. |
| Regional offices | Departmental Legal Service Units (LSUs) |
|---|---|
| The Department has six regional offices: Northern, British Columbia, Prairie, Ontario, Quebec, and Atlantic. Regional offices handle litigation and conduct advisory work. They support the portfolio structure. | The LSUs are grouped into the relevant portfolios and report directly to the portfolio heads. LSUs provide legal advice and assistance to their client department/agency, including operational advice, and legislation and policy development. They also provide litigation support, and some LSUs will handle litigation matters. LSUs are housed in the client department or agency. |
| Public Law Sector | Policy sector | Litigation Branch | Legislative Services Branch(LSB) | Dispute Prevention and Resolution Services |
|---|---|---|---|---|
This sector provides legal and policy advice and assistance on matters pertaining to public law issues. The Sector organizes its legal counsel by area of expertise. For example:
|
This sector plans, develops, and implements laws, policies, and programs in the justice sector dealing with family law, access to justice issues, and criminal law including youth criminal justice, Aboriginal justice, and anti-drug strategy. It consults with policy partners in other sectors, governments, and non-governmental organizations. | This branch includes two divisions (Civil and Criminal) each of which has many sub-sections, such as the Civil Litigation Section, the Management of Class Actions and Mass Litigation Unit, the International Assistance Group, and the National Security Group. The Branch has functional responsibility over all litigation involving the Government of Canada in the common law jurisdictions. | LSB provides legislative and regulatory drafting, revision, and advisory services to the Government and ensures that statutes and regulations meet the requirements of a bilingual society with two legal systems. | This branch provides legal advisory services on dispute resolution options as well as training, and policy development to assist the Government in preventing disputes that could result in possible litigation. In addition, it conducts systems-design work on conflict prevention resolution. As of August 2007, it is part of LPMD. |
Although the LRM Initiative was always intended to include the legal work of the entire Department, it initially had more of a litigation focus. This is, in part, because litigation lends itself to the risk management process: the legal risk has materialized, which makes it easier to identify and assess the legal risk; and the court process creates certain predictable moments that affect risk (production of discovery, hearings, decisions, etc.). The prevention side of LRM incorporates advisory services, policy making, program development, and the legislative process, and although this legal work necessarily involves identifying, assessing, and managing legal risk, the processes are less well defined than for litigation. Therefore, issues arise such as how to assess the likelihood of an adverse outcome or when to assess risk. As a result (and as reflected in Table 4 above), the early tools for LRM tended to address litigation legal risk management. In addition, the legal risk evaluation screen in iCase, a key tool of the Initiative, is not accessible to all counsel in the Department. Litigation counsel have been using iCase for some time, but many other branches and work units have only recently moved to the iCase system, and some only for timekeeping purposes.[9]
The intent for LRM to extend beyond litigation is reflected in the joint responsibility for avoiding and managing disputes and/or litigation between Justice and its client departments and agencies. LRM is considered a partnership that begins with Justice and the client department/agency working together during the program/policy development phase in order to minimize the potential for disputes and develop effective methods for handling disputes within program processes. The partnership continues when disputes do occur through using formal or informal dispute resolution mechanisms and managing any litigation that arises. Finally, the partnership also involves learning from past experience by reporting on litigation outcomes and suggesting legislative or program changes.
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