Survey: Canadian Firms Embraced AI. Billing Didn’t Follow.

In a single year, Canada’s law firms have dramatically increased their use of artificial intelligence tools, with the share of large and midsize firms fully implementing AI across multiple practices more than doubling since 2025, a new Best Law Firms survey shows.

One year ago, most law firms with 20 or more lawyers in Canada said they were either thinking about how they might use AI or had no plans to adopt the technology in the near future. This year, however, law firm resistance to artificial intelligence essentially disappeared.

The survey found that 73% of large and midsize firms said they were actively deploying AI tools, mostly through pilot programs in select practices. That compares with 44% in 2025. The share of firms that have fully implemented AI tools has grown from 7% to 15% at firms with 100 lawyers or more and from 7% to 26% at firms in the 20-99-lawyer range.

At the same time, as their use of generative AI has increased, more law firms are making artificial intelligence an important element of their pitch to clients, the survey shows. And far fewer firms are keeping AI usage confidential. In 2025, for instance, one in five large law firms said they did not disclose AI use to clients. In 2026, no large firms said they did so.

Embracing AI

Best Law Firms, as part of its annual research and rankings process, surveys Canadian law firms about their operations, clients, billing, finances, marketing and technology. This year, 357 firms from nine provinces participated in the survey (Prince Edward Island was the only province with no respondents). Firms ranged in size from rural solo practices to global megafirms, and taken together, employed nearly 19,000 lawyers, or more than 15% of the nation’s practitioners.

The survey asked firms a series of questions about artificial intelligence, including the current levels of adoption at large and midsize firms, what firms are doing with AI tools, how they are communicating with clients about AI, what they are doing to reduce AI-related ethical risks and the impact generative AI has had on their billing practices.

Adoption levels surged at large and midsize firms. Breaking down the percentages by size category, 95% of firms with 100 or more lawyers and 68% of those with 20-99 lawyers were either piloting AI in select practices or had already integrated the technology across multiple practice areas. (For purposes of the survey, large firms included 100 lawyers or more, midsize firms included those in the 20-99-lawyer range, and small firms had fewer than 20 lawyers.)

Testing and Deploying

As noted, the share of firms that have fully integrated AI into their practices has grown sharply. However, most Canadian firms are still in the testing phase. The share of large firms piloting AI tools jumped 23 percentage points to 80%. Midsize firms piloting AI tools rose from 33% to 42%.

Meanwhile, the share of large firms still exploring whether to adopt AI dropped from 36% to 5%. At midsize firms, it fell from 48% to 31%. Both shifts reflect the big jump in the number of firms that have moved from contemplation to actual usage.

When asked how they were currently using or planning to use AI, nearly eight out of 10 firms said legal research. That’s up from six out of 10 in 2025. More than half of firms are also looking to AI to draft contracts and other legal documents, and slightly less than half said they wanted to develop marketing content or pitches.

One of the fastest-growing use cases involved deploying AI to analyze litigation risks and strategies. Twenty-six percent of firms—a one-third increase over 2025—said they were using or hoped to use AI to assess previous cases, evaluate judge and counsel tendencies, weigh settlement vs. going to trial and review documents and evidence.

AI as a Selling Point

One of the clearest signals of a shift in law firm attitudes is in how they talk about AI with their clients. More and more, firms are not only informing clients about artificial intelligence usage, but they are also making their technology investments and AI tools a selling point.

Last year, 36% of firms said they were touting their investments in cutting-edge technology to enhance efficiency. This year, the percentage jumped to 43%. The share of firms with 100+ lawyers emphasizing tech shot up 10 percentage points to 73%. The growth curve was even steeper at midsize firms, moving from 31% to 49%.

Overall, 37% of Canadian firms said they are now discussing AI usage as part of their value proposition, a 28% increase over 2025. The increase was powered by firms on opposite ends of the size spectrum. The share of small firms touting AI use as part of their value proposition rose by 41%, while large firms doing the same jumped 14%.

At present, the largest share of firms—47%—disclose AI use only when clients inquire. However, that figure represents a slight decline from last year. Expect the trend to continue as more firms grow comfortable making AI prowess a key component of their sales pitch.

Also on the decline was the percentage of firms that said they do not disclose AI use at all. This year, 16% of firms kept AI usage private, down from 22% in 2025. This includes 15% of midsize firms and 19% of small firms. No large firms reported withholding AI usage from clients.

Building Guardrails

Canadian firms are also grappling with the ethical risks posed by artificial intelligence. A global database maintained by French lawyer and data scientist Damien Charlotin shows that during the first three quarters of 2026, judges in Canada issued 27 decisions that identified AI-generated hallucinations and misrepresentations. Most of the errors came in the form of fake case citations. Lawyers in many of those cases have been warned or sanctioned or referred to their provincial law societies for discipline.

The Best Law Firms survey found that, compared with last year’s survey, law firms significantly accelerated their efforts to ensure ethical AI use by their lawyers. The share of firms training their lawyers on the limitations and risks of AI exploded, from 24% to 84%—a 250% increase. The figures include nine out of 10 large and midsize firms and eight out of 10 small firms.

Last year, 23% of law firms had a clear policy in place on when their lawyers could use generative AI in client matters. Now, 73% have established a policy. The share of firms conducting regular audits of AI-generated content doubled year over year. And firms saying they seek client consent for AI use ramped up from 6% to 43%.

AI and the Billable Hour

Corporate clients have been turning up the heat on their outside counsel to increase efficiency and reduce costs with an eye toward breaking law firms’ dependence on hourly billing. For now, at least, the billable hour appears firmly entrenched—even when firms are offering alternative fee arrangements (AFAs). While 74% of firms in the survey said they offer AFAs, eight of the nine most commonly used arrangements hinge on the billable hour.

The two most popular types of alternative fee arrangement—flat fees (deployed by 69% of firms) and retainers (61%)—allow firms to retain a billable-hour model while attempting to satisfy clients who want more predictable pricing from their outside counsel. Other popular AFA options included fixed fees (used by 57% of firms), discounts for billable hours (50%), capped fees (45%), and hybrid fees (41%).

Contingency fees are common (used by 48% of firms). But other outcome-oriented fee arrangements are still exceedingly rare. While some in-house leaders long to use AI to align the legal fees they pay to successful outcomes, just one seven-lawyer corporate boutique mentioned deploying success fees as an alternative fee option in its survey responses. Two other firms said they offered value-based fees—one firm with 100 or more lawyers and one firm with six lawyers.

Is AI Changing the Math?

Still, AI is beginning to have an impact on billing. One-third of firms said their use of artificial intelligence tools has resulted in reduced billable hours for certain tasks. This includes a quarter of midsize firms, one-third of large firms, and four in 10 small firms. Another 31% of firms overall said AI had increased their efficiency but had not affected billable hours.

The numbers indicate that some firms are completing tasks faster with artificial intelligence, which, in turn, is trimming hours billed. What is not yet clear, however, is whether firms are passing those efficiency gains on to clients. Indeed, the survey shows that revenue per lawyer at Canadian firms rose by double digits last year. Average revenue per lawyer was up 12% and median revenue per lawyer increased 11%.

Clients anxious for AI to yield cost savings may not be celebrating firms’ revenue growth with much enthusiasm. As more firms move beyond the testing phase to fully implementing AI tools, expect those clients to question whether and when efficiency gains will be showing up in their bills.

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David L. Brownis a legal affairs writer and consultant, who has served as head of editorial at ALM Media, editor-in-chief of The National Law Journal and Legal Times, and executive editor of The American Lawyer. He creates in-depth content for legal industry clients and works with Best Law Firms as senior content consultant.