Fraser Milner Casgrain's Entertainment Law Practice: Moving With The Times

Wednesday, September 1, 2004 - 01:00

Editor: Mr. Esau, would you tell us how you came to Fraser Milner?

Esau: In 1980, as a third-year associate, I joined a new corporate and
tax boutique founded by two of the senior partners of a large Vancouver firm. In
1991 that boutique became the Vancouver office of Fraser Milner Casgrain LLP as
part of the first wave of mergers that created the Canadian national firms.

Editor: Would you share with us something about the evolution of your
practice? How did you come to represent some of the major Hollywood film
studios?

Esau: In the late 1980s I had a corporate finance and acquisition
practice, and one of the large Toronto-based law firms asked me to handle an
acquisition file for the parent of one of the U.S. television networks. That led
to some additional interesting corporate and tax files. In 1992 a vice president
for legal affairs with that network, whom I had never met, asked if I would
represent them in Canada in connection with a new type of film financing
transaction. I advised that I had no entertainment experience but that I would
find someone in Vancouver who could handle these matters for them. The response
was that they were not looking for entertainment expertise, which they had
in-house, but for cross-border corporate and tax experience and that I came well
recommended by two other divisions of their legal department. In 1992 the film
service production industry in Vancouver was in its infancy. Over the following
twelve years the volume of film production, and our practice in this area,
simply exploded. We now represent five of the seven Motion Picture Association
of America members on corporate and tax matters.

Editor: Would you describe the national entertainment practice at
Fraser
Milner?

Esau: We have one of the three largest entertainment practices in
Canada. We handle film production and financing matters for films shot
throughout the country. This includes tax planning, corporate structuring and
government relations issues related to this activity. The vast majority of the
films we work on are shot in Vancouver, Toronto or Montreal. We have active
practices for entertainment clients in our offices in all three of those cities.
We can also handle Alberta matters from our Calgary and Edmonton offices. The
majority of our practice base comes from the Hollywood studios and other U.S.
based production companies or from Canadian or foreign based banks. We
selectively act for Canadian producers, but limit that representation for
conflicts reasons.

Editor: In addition to your very busy practice, you have had a parallel
career as a lecturer and writer. You have also been very active in the Canadian
Bar Association. How do all of these different threads in your professional life
fit together? How do you manage to juggle all the things you do?

Esau: Early in my legal career I became active in the Business Law
Section of the Canadian Bar Association. I served as British Columbia and then
National Chair of the Business Law Section. My tour of duty ended in 1992,
coincidentally as I became more involved in the entertainment industry. I have
presented papers and lectured in the areas I have practiced on an ongoing basis.
This does not tend to be overly demanding from a time perspective, so long as
you are presenting in the areas in which you work.

Editor: Vancouver and Toronto are leading film production centers in
North America today. What has brought this about? What are the things that

attract film producers to Canada over, say, the United States? Why Vancouver
over, say, Los Angeles?

Esau: Canada has had an indigenous film and television production
industry for many decades. In the early 1990s U.S. independent producers started
looking to Canada as a production center that offered relatively favourable
production costs when compared to Los Angeles. The industry has grown steadily
in Vancouver, Toronto and Montreal over the last 12 years. The attraction has
been a combination of a favourable exchange rate, lower costs for certain goods
and services, highly skilled crews and excellent film locations. Added to this,
Canada and several of the Canadian provinces have tax credit programs not
dissimilar to government-sponsored incentives for the film industry available in
something like 30 of the American states.

Editor: What kinds of productions seek a Canadian site? Are there
things that favor Vancouver over, say, Toronto or Montreal?

Esau: Historically, television production and particularly
movies of the week have made up a large part of the Canadian film production
activity. Over the last two years, the volume of television production has
declined, with the increase in reality TV programming. This has been replaced
with larger budget theatrical motion pictures. Vancouver has been particularly
successful in attracting these sorts of film productions and enjoyed a record
year of film production last year, with slightly more than $1 billion U.S. being
spent in the province. One of the main advantages Vancouver enjoys over Toronto
and Montreal is being in the same time zone as Los Angeles. It is possible for
the U.S. talent working in Vancouver to fly back to Los Angeles for the weekend
if they are not shooting on the weekend. The milder climate also helps in the
winter.

Editor: This is a very competitive business. How do the various
Canadian sites go about attracting film productions?

Esau: The film commissions from the primary producing provinces have
an important role in responding to enquiries from U.S. producers as to what
their provinces have to offer. They all have informative websites and regularly
take marketing trips to Los Angeles. Many municipalities have full time staff
who assist with shooting in their city. Even some businesses, such as St. Paul's
Hospital in Vancouver, see so many film shoots that they have staff who
coordinate the film crews.

Editor: You have referred to "the changing mix of productions being
undertaken." Please elaborate on this.

Esau: The shift to more full budget theatrical motion pictures has
affected different parts of the Canadian film production community in different
ways. The decrease in the total number of productions brought about by the
decrease in the number of TV movies has led, for example, to less work for
Canadian actors. The increase in big budget theatrical motion pictures has led
to more work for carpenters building complex sets.

Editor: Please tell us about the impact of NAFTA on the development of
your practice.

Esau: The expectation was that the Canada-U.S. Free Trade Agreement
and its successor, NAFTA, would lead to an increasing integration of the
Canadian and U.S. economies. The film production industry has been one of the
industries where such a development can be observed. Some film production has
moved from the relatively expensive Los Angeles location to Canada and other
parts of the U.S. The sale internationally, including sales to Canada, of rights
in film and TV product has been very beneficial to the U.S. owned production
companies.

Editor: And its impact on other practice areas at Fraser Milner?

Esau: Our Canada/U.S. cross-border practice is critical to our
national law firm.This area of practice has, as all expected when the Free Trade
Agreement was executed, greatly increased the economic interchange between the
two countries, who are, of course, the largest trading partners in the world.

Editor: Globalization, among other things, is moving film production
all round the world. Would you tell us what you think is going to happen next in
this very volatile industry? What is going to be the next
Vancouver? Why?

Esau: Some film productions have gone to very low cost production
locations. The often discussed example is Cold Mountain, an American
Civil War film, which was shot in Romania. Most of these locations do not have
the depth of film crews required to produce several movies at the same time.
They are also all a long way from Los Angeles. With the numerous film incentives
being offered by American states, the next Vancouver could well be in a state
outside California.

Editor: The rule of law, the recognition of basic human rights, freedom
of assembly and freedom of speech are all themes that our publication supports
on an ongoing basis. Would you tell us how a global film
industry serves to
support these themes?

Esau: Hollywood Studio films tend to support these themes as a matter
of course, sometimes consciously, sometimes not. Most of the themes you cite owe
their origins to the English common law that both the United States and Canada
inherited and adapted. They are part of the ways in which we communicate. I
don't know enough about non-English language film to express an opinion on other
cultures' support of issues such as the rule of law. I suspect that the
treatment would be affected by the laws and traditions of the producing country.

Editor: What about the future? This is a fast-moving industry. Where do
you see it in five years? What will Vancouver's role be at that point? And
Canada's? Where do you see Fraser Milner's entertainment practice group at that
point?

Esau: The industry is highly dynamic and mobile. Vancouver's and
Canada's positions are dependent on our ability to remain efficient low cost
production centers. Our practice in the area has grown at a faster rate than the
industry, and we will strive to continue that trend.

Editor: Is there anything you would like to add?

Esau: Trade between Canada and the U.S. flows both ways. As an
example, Canada spends roughly twice as much buying rights to U.S. owned film
and TV product as it receives as payment for production services performed for
U.S. owned productions. This trade has benefited both countries. With the rising
tide of protectionism in the U.S., the mutual benefit of reciprocal trade should
not be forgotten.