Can Canadian lawyers use AI for clause extraction without breaching privilege?

Yes, Canadian lawyers can use AI for clause extraction without breaching solicitor-client privilege, provided they implement proper safeguards around data handling, platform selection, and client consent. The key is ensuring your AI platform operates under Canadian jurisdiction with appropriate technical and legal protections that preserve the confidential nature of client communications.

Privilege isn't automatically waived by using technology — it depends on whether you've maintained reasonable expectations of confidentiality throughout the process.

---

Understanding privilege in the AI context

Solicitor-client privilege protects confidential communications between lawyers and clients from disclosure. Under Solosky v. The Queen [1980] 1 S.C.R. 821, privilege extends to documents created in the context of seeking or providing legal advice.

When you use AI for clause extraction, you're potentially exposing privileged documents to a third-party system. The critical question isn't whether AI is involved — it's whether the processing maintains confidentiality or creates a risk of unauthorized disclosure.

"Privilege is not lost merely by using technology to process privileged documents, but lawyers must ensure the technology platform maintains the confidential nature of the attorney-client relationship through jurisdictional controls and explicit contractual protections against unauthorized access."

The Law Society of Ontario's guidance on technology (Rule 3.4-1 of the Rules of Professional Conduct) requires lawyers to take reasonable steps to ensure client information remains confidential when using third-party services.

---

Data residency and cross-border risks

Canadian lawyers face specific jurisdictional challenges when client data crosses borders. Under PIPEDA Principle 4.1.3 and section 4.1.3 of Schedule 1, organizations must provide comparable protection for personal information transferred to third parties and notify individuals when information may be disclosed to foreign authorities.

Most major AI platforms — including ChatGPT, Claude, and Google's offerings — process data through US infrastructure. This creates two problems:

• CLOUD Act exposure: US authorities can compel disclosure of data processed by US companies, regardless of where it's stored
• Cross-border transfer obligations: You must notify clients under PIPEDA section 4.1.3 when their information may be disclosed to foreign authorities

For Quebec firms, Law 25's sections 17-19 impose additional restrictions on transfers outside Quebec, requiring explicit consent and adequacy assessments. Non-compliance carries administrative monetary penalties up to C$25 million under section 94.

A Toronto corporate lawyer using US-based AI to extract clauses from M&A agreements would technically need to notify all parties that their information might be accessible to US authorities — hardly practical for confidential transactions.

---

Technical safeguards for privilege protection

Maintaining privilege through AI clause extraction requires specific technical controls:

Encryption standards: Data must be encrypted in transit (TLS 1.3 minimum) and at rest (AES-256). This prevents interception during processing.

Access controls: The AI platform should implement role-based access with audit logging. Only authorized personnel should handle client data.

Data retention policies: Clear deletion timelines prevent indefinite storage of privileged materials. Many platforms retain training data indefinitely — unacceptable for legal work.

Processing isolation: Client data should be processed in isolated environments, not used to train general models or shared across customers.

"Technical safeguards preserve privilege only when combined with jurisdictional protections. Canadian data residency with contractual commitments against unauthorized access provides the legal framework necessary to maintain solicitor-client confidentiality in AI processing environments."

Augure's platform addresses these requirements through Canadian data residency, end-to-end encryption, and explicit contractual commitments not to access client data for any purpose beyond providing the requested service.

---

Professional responsibility considerations

Rule 3.2-1 of the Model Code requires lawyers to be competent in the services they provide. Using AI for clause extraction doesn't eliminate your duty to understand and verify the results.

Consider a commercial lease review where AI extracts renewal clauses. You're still responsible for:

• Verifying the accuracy of extracted terms
• Understanding the legal implications of identified clauses
• Ensuring nothing material was missed by the AI analysis
• Maintaining working knowledge of the subject matter

The Law Society of British Columbia's 2023 guidance on AI emphasizes that lawyers cannot delegate professional judgment to AI systems. Clause extraction can support your analysis, but you remain accountable for the final work product.

If AI misses a critical termination clause or misinterprets renewal terms, you bear professional liability — not the AI platform.

---

Client consent and disclosure obligations

Professional conduct rules require informed client consent for involving third parties in legal matters. Rule 3.3-2 of the Model Code addresses confidential information disclosure to service providers.

Your retainer agreement should specify:

• That you may use AI tools for document analysis
• The technical and legal safeguards in place
• Whether data remains in Canada or crosses borders
• How client information will be protected and deleted

For sensitive matters — regulatory investigations, family disputes, criminal defense — explicit written consent is prudent. Corporate clients may be comfortable with AI clause extraction; individuals facing personal legal issues may prefer traditional review methods.

"Transparency about AI use builds client trust and demonstrates compliance with professional conduct obligations around confidentiality and competence."

Document your AI usage in client files. If questioned later about your methodology, you'll need to explain how clause extraction supported your legal analysis without compromising privilege.

---

Practical implementation for Canadian firms

Solo practitioners and small firms can implement AI clause extraction with appropriate safeguards:

Platform selection: Choose AI services with Canadian data residency and explicit privilege protection. Augure Legal processes all data within Canadian borders with no US exposure, eliminating CLOUD Act risks and including specific contractual protections for solicitor-client privilege.

Document classification: Not all legal documents require the same protection level. Public filings, template agreements, and research materials carry lower privilege risks than client communications or confidential transaction documents.

Workflow integration: Use AI for initial clause identification, then conduct traditional legal analysis on flagged sections. This combines efficiency gains with professional oversight.

Audit procedures: Maintain logs of AI usage, including which documents were processed and verification steps taken. This supports professional liability defense and demonstrates competent practice.

Large firms may require additional controls like dedicated AI infrastructure, enhanced security audits, and specialized training for lawyers using extraction tools.

---

Regulatory compliance framework

Canadian law firms using AI must comply with multiple regulatory frameworks:

PIPEDA requirements (sections 4.1-4.9, Schedule 1):

• Obtain consent for collection, use, and disclosure (Principle 4.3)
• Limit collection to identified purposes (Principle 4.4)
• Ensure accuracy of personal information (Principle 4.6)
• Provide adequate security safeguards (Principle 4.7)
• Penalties up to C$100,000 per violation under section 27.1

Provincial privacy laws:

• Law 25 in Quebec (sections 93-94 require Privacy Impact Assessments for AI systems, penalties up to C$25 million)
• FOIP Acts in western provinces
• Emerging AI-specific regulations create additional obligations

Law Society rules: Each provincial law society maintains specific guidance on technology use, confidentiality, and competence requirements.

Cybersecurity frameworks: The Communications Security Establishment's cybersecurity guidance for legal services provides technical baselines for protecting client information.

Compliance requires ongoing assessment as AI capabilities and regulatory requirements evolve. The framework that works today may need adjustment as courts provide more guidance on AI use in legal practice.

---

Canadian lawyers can confidently use AI for clause extraction while maintaining solicitor-client privilege through proper platform selection, technical safeguards, and professional oversight. The key is choosing AI services that operate under Canadian jurisdiction with explicit privilege protections.

Success requires balancing efficiency gains with professional responsibility obligations. AI can accelerate clause identification and analysis, but lawyers remain accountable for accuracy, completeness, and strategic judgment.

For Canadian legal professionals ready to explore compliant AI clause extraction, Augure Legal provides contract review and clause analysis tools designed specifically for Canadian law firms. Learn more about maintaining privilege while improving efficiency at augureai.ca.