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And what are we doing about LawTech?

Out of the blue your CEO asks you a question about some latest trend in the legal world, which they have heard about from a fellow CEO over a gin and tonic. The CEO didn’t quite catch all the details, but it sounded like “that thing” could save a lot of money and allow lawyers to concentrate on doing more strategic work. So, if LawTech was “that thing”, how do you explain to your CEO in two minutes what it is and what you are doing about it?

The LawTech Delivery Panel, a body established by the UK government with the overarching objective to promote the use of technology in the UK legal sector, defined LawTech as:

“broadly, technologies which aim to support, supplement or replace traditional methods for delivering legal services, or transactions; or which improve the operations of the justice system.”

This definition is technology-neutral, sufficiently clear and precise enough to explain the concept, and at the same time broad enough to capture various possible applications of such technologies in the legal sector.

Is there a difference between LawTech and LegalTech?

The question of whether LawTech and LegalTech is one and the same or two different things continues to generate lively discussion among authoritative figures from across the world of legal technology. My view is that there is as much difference between LawTech and LegalTech as there is between “Law Department” and “Legal Department”. I think it is more important what’s “inside the tin”, rather what it says on it. Hopefully in time one name will prevail, but at present it seems that while LegalTech is the term commonly adopted across Europe and beyond, the UK, in somewhat Brexit-like style, has opted for and continues to use LawTech.

LawTech companies initial focus was on the law firm market

In February 2019 the Law Society of England and Wales published a report on LawTech adoption, which contains a comprehensive analysis of:

  • The LawTech market.
  • Available legal technologies.
  • The level of awareness of legal technology.
  • Drivers and barriers to the adoption of legal technology.

The report concludes that “GC pressure – in particular around reducing legal costs – has been the strongest catalyst for innovation.” At the same time, this pressure was largely directed at external law firms, causing them to directly engage with LawTech:

“while a large proportion of legal work takes place outside law firms, lawtech has not yet engaged with in-house professionals directly in a way that is anywhere near comparable with activity among the large B2B law firms.”

The report explains that, while the partnership structure and the billable hours model were the main limiting factors for a wider adoption of LawTech among law firms, the main limiting factor for the in-house community was the cost centre mentality. In-house legal functions are perceived (especially within larger organisations) as a “back office” operation, attracting a much lower priority in comparison with revenue generating functions.

The biggest demand from in-house departments was for technical solutions, such as:

  • Tools giving better visibility and predictability of legal spend.
  • Document review systems.
  • e-signature.
  • Robotic process automation (RPA) tools.

There are some good examples of these solutions being successfully implemented and used by in-house functions, and in some areas, such area as e-signatures, in-house adoption is well ahead of law firms. RPA tools are another good example of in-house functions’ use of technology to improve efficiency and drive down operational costs. These tools could also provide a solid foundation for further technological developments, for example by combining them with artificial intelligence (AI) or machine learning (ML) capabilities.

Legal services are currently lagging behind other sectors in tech adoption

Generally speaking, the legal services profession is lagging behind other sectors (especially finance and insurance) in adopting new technologies. LawTech remains in an “embryonic” state, with a fragmented ecosystem and an ever-increasing number of start-ups often developing one particular product for one particular client. However, the report’s researchers thought that the legal profession was “on a similar path to technology adoption”, and while being less developed at present, there was “little to suggest that it will not eventually follow a similar route” to other sectors.

12 months on from the report’s publication, although LawTech has yet to fundamentally transform the legal sector and the predicted wave of consolidation has not transpired, it would be wrong to say that nothing has changed. The level of awareness of LawTech among the legal profession has increased dramatically and the Law Society of England and Wales has played an important role by leading the legal, regulatory and ethical debate. It has helped explain the role of emerging technologies and their impact on the law and legal services, and how technology can be applied in legal practice, by:

In-house is now a target for LawTech start-ups

The UK LawTech sector remains in pole position in Europe, with a heathy supply of finance and brain power available. One prominent success story is the Barclays LawTech Eagle Lab, which was established 18 months ago in partnership with the Law Society. The focus for LawTech start-ups is gradually shifting towards in-house teams as they find them easier to work with than law firms. While in-house legal functions might not have the same IT and financial resources as City firms, they often have a much greater flexibility to share internal data with LawTech providers. In addition, in-house functions are also more adept at:

  • Understanding business and operational requirements.
  • Providing access to internal knowledge and data to turn the requirements into technical solutions.
  • Getting technical solutions adopted throughout the entire legal function.

LawTech solutions utilising AI and ML are “data hungry”, and their effectiveness and accuracy is directly linked to the volume and quality of data fed into them. The regulatory restrictions that law firms must impose on LawTech providers’ ability to access and utilise clients’ data is also a strong limiting factor.

In-house lawyers should regard LawTech as a helping hand that can enable them to continue to meet and exceed internal clients’ expectations and satisfaction levels while still:

  • Cutting their budgets.
  • Reducing the number of legal and support staff.
  • Doing more legal work in-house.

However, the in-house community needs to reach out for this helping hand and become more actively engaged with the LawTech sector, and start shaping its direction so that it can better serve the needs of in-house lawyers. Please get involved and take a moment to look at the resources produced by the Law Society and the Eagle Lab, and then perhaps the CEO’s question about LawTech will not catch you off guard.

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