GC: Can you tell us a little about the rationale behind the International Arbitration Centre?
Owen Lawrence (OL): In the past, arbitration was always an alternative dispute resolution. You did it to be confidential or you went through the courts if you were happy with the press. Arbitration is now the default form of dispute resolution. And given how many disputes are international, certainly I see arbitration growing.
GC: What was your vision for the International Arbitration Centre?
OL: Our vision from the start was to build something for the client. Then we looked at what the lawyers needed in terms of the technology of the space, and we fitted all the operations in and around that.
We feel we’ve built the perfect ADR venue – from just minor things, like the clients (each party) have their own toilets, the arbitrators have their own toilets. The retiring room is soundproof – they can retire at lunchtime and not be bothered. They don’t have to go through the circus of the hearing room; we even have a private entrance for clients who require absolute privacy.
If a GC has made it to the court room, obviously something’s gone very wrong, they will be feeling uncomfortable, but also their MD, their CEO, whoever is called to give evidence will be very unhappy. So we’ve tried to make it as comfortable as possible for those people. They can come in, the shutters come down, they can come up in a private lift, not even my staff or I will know which clients are coming in. They can also watch the hearing from our luxurious breakout suites and enter the hearing room when needed.
I spent 20 years as a barristers’ clerk and spent a lot of time in Asia and the UAE. You’d walk into one of the big hotels and you’d see the names of the law firms in reception. And then you’d watch the client walk in, and you’d know who they were and who was instructing who. For me, it was just so uncomfortable and that was my real driver – creating somewhere where the client can relax and know that it is private. A place where they won’t bump into other lawyers.
GC: What is the market like for arbitration in London?
OL: London has a rich history of law – English law is often the default in many contracts. And location-wise, it’s a middle ground. East meets West. It’s a premier legal hub, now with premier facilities. We’re trying to create a supreme court for arbitration, somewhere that top-tier law firms expect to have their hearings and somewhere that lower law firms aspire to have their hearings.
We have the location and we’ve gone for it, and I think a lot of people are quite pleased by that.
When you talk to people and you say, ‘Oh, we’re creating a new arbitration centre,’ it doesn’t sound that exciting. But when you come in and you see what we’ve built and the level of detail we’ve gone into, people’s jaws drop, they’re like, ‘Wow, this is incredible.’ We have the location and we’ve gone for it, and I think a lot of people are quite pleased by that.
We are in the heart of legal London – you can touch the Royal Courts of Justice (RCJ) from where we are, we’ve got the Rolls building round the corner, and Fleet Street, Chancery Lane, the Inns of Court are central legal London. So when the venue came up it, it was the right time to move.
GC: Has the response from the market been positive?
OL: We’ve had 120 of the top lawyers in the UK around for a UK arbitration photo shoot, and everyone who has seen the venue has loved it. One or two silks haven’t quite liked the level of luxury we’ve gone to – I think they prefer the old kind of RCJ antique features. Nothing’s antique in our centre. Everything’s cutting edge, like the technology in the breakout suites. With any kind of web-based application you can put a presentation onto the walls. You can email any documents you want to the photocopier. So hopefully everyone, even tech-averse people, can use all of our systems.
GC: As you were developing your ideas, were you consulting with barristers and the arbitrators?
OL: We were. The arbitral world is a very cliquey, small pool of people and I have good relationships with a lot of those, so I did seek advice from some top arbitrators who gave us some really good tips. Equally, I’ve spent the last 20 years in arbitration rooms so I know what the clerks need, I know what the arbitrators need and I know what counsel need. We’ve added all that into to this one package, hopefully creating the perfect ADR environment!
GC: When do the doors open?
OL: The first hearing floor comes live on 25th February and then we’re on to the next floor. We’re also looking at our own members list. For example, when GCs come to 10-20 years before retirement, some of them will naturally look to the arbitration world. It’s a good profession to end your career on – you can pick and choose which hearings you accept, how many you take as chair, how many you take as wing. For those in the law-firm world, who have always had a marketing team and an accounts team and now all of a sudden find themselves out in the big wide world as arbitrators, we will be providing a template to step into in terms of website clerking services, fee negotiation and everything that kind of goes into running an arbitrator’s practice in due course. We also have a roof terrace, which lends itself quite nicely to drinks receptions!
GC: If you were to describe your vision as the different floors come online what would you like to achieve?
OL: I would simply say my business plan is global expansion. I don’t think London alone needs this; I see the need to expand into various countries in Asia as well. My worry is we will not be able to accommodate the demand and we will need more space here in London.
GC: What would be the thing that you’re most proud about throughout this whole process?
OL: I am genuinely super proud to be part of raising London’s game. It’s become our motto: London is a premier legal hub, now with premier facilities, and we have delivered that without a doubt. Take our staff, for example. We’ve not just looked at legal backgrounds, we’ve taken people from the Mandarin Oriental, for example, to offer that level of service and that kind of concierge mentality. We’ve partnered with high-end restaurants to provide great food options – we know that armies march on their stomachs and so do arbitration counsel! No stone has been left unturned in bringing this facility to market.
In its Global Gender Gap Report 2017, The World Economic Forum (WEF) states that female leadership stands at less than 50% in all industries, based on an analysis of LinkedIn membership in 12 sectors from more than 100 countries.
The WEF’s analysis also found that industry sectors with the highest representation of women in leadership positions tended to recruit more women leaders, hinting not only at the talismanic power of role models, but also the importance of leveraging professional prominence to create change.
The success stories of the Finnegan partners and their general counsel counterparts we spoke to are all the more remarkable, as many of these women are pioneers not only in business and law, but also science – a field notoriously underpopulated by women. They reflect on effectively navigating the traditionally male-led legal world as a trusted advisor, a leader – and as a woman.
The most successful leaders are, by definition, trailblazers. While a manager delivers a vision, a leader has to create that vision – setting goals, strategies and boundaries, but then stepping back and trusting team members to deliver. Through our conversations, successful leadership often emerged as a willingness to take ownership, the guts and judgement to make hard decisions, as well as the integrity to carry the can.
‘Sometimes it can be very difficult to be the one to make a hard call, but the leader’s job, among many, is to be the one who takes responsibility for the ultimate direction of the team, be brave enough to do it, and then brave enough to stick with it, even in the face of potential adversity,’ says Erika Arner, partner at Finnegan and president of the PTAB (Patent Trial and Appeal Board) Bar Association.
Nurture by nature?
The narrative surrounding successful leadership has been defined by the leaders themselves – which have been primarily men. As more women are gaining the opportunity to develop leadership skills and take leadership positions, old assumptions around what a leader should be are being tested, and opportunities to find new ways of leading are being embraced.
If a certain steely tenacity is inevitable among effective leaders, what often counters that quality is the capacity to nurture team members and provide support when the going gets tough. Interestingly, a few of our interviewees ascribed success in this area among female leaders to a sense of maternalism, but given the fact that all the women we spoke to believed that the challenges facing leaders remain the same regardless of gender, perhaps successful male leaders also benefit from this traditionally ‘female’ quality.
GC magazine partnered with leading IP law firm Finnegan to host a full-day summit in Washington DC, focused on female leadership within the legal profession. Beginning with a comprehensive roundtable discussion and ending with a series of one-on-one interviews with senior female lawyers from both private practice and in-house legal teams (pictured opposite and on following pages). GC learned how those at the top of their legal game think about what it means to be a leader, the challenges faced by aspiring female leaders and the responsibility on everyone to create an environment in which potential future leaders are recognised, developed, and given the opportunities they need to succeed.
Elizabeth Ferrill, a partner in the firm’s DC office, spent five years in the US Air Force before becoming a lawyer, and her military training has played a formative role in her understanding of leadership.
‘The phrase we used to say was, “The leader eats last and sleeps last.” Which means that you take care of your people, and you make sure that they have everything that they need to be successful,’ she explains.
‘I think that that means you really have to be organised, and you have to make sure that you have the right type of support around you, to make sure that you can provide an organised vision to the people that work for you.’
Stubborn adherence to archetypical impressions of what a good leader looks like also runs counter to the idea that leadership must come from a place of authenticity – not only in order to engage others, but also in order to function effectively.
‘There was a woman who was in-house at a large corporation in Atlanta, which was a client of the firm. I got to meet her very early in my career, and she was a great champion for me. She worked in the telecommunications industry, which was very much male-dominated, and she had managed to be very successful, but she was true to herself at the same time – she didn’t try to become one of the guys,’ recalls Atlanta-based partner Virginia Carron.
‘That was eye-opening to me in many ways because, at the time, most of the women leaders that I saw had changed their style somewhat to fit in and to be effective in the positions they were in, but you could tell once you knew them outside of that role that it wasn’t really their authentic self. I felt like it gave me a great example to try to adopt that type of leadership myself.’
Adds DC-based partner Mareesa Frederick: ‘The key is not everyone can lead the same way – so I am careful not to adopt ways that are inconsistent with who I am as a person.’
The specifics of being a female leader in law
While the ability to navigate group dynamics is an important skill for leaders to learn and develop regardless of gender, there was a sense in our conversations that it may unfortunately be more likely to be tested if it is a female leading the room than a male. But, while navigating unconscious bias can be frustrating it may provide the opportunity to hone vital listening skills that may otherwise never be challenged.
‘I think sometimes for women you have to watch your audience a little bit in terms of if you come across a little bit too strong – sometimes that’s an issue for the audience, depending on who it is,’ says Susan Denigan, chief legal officer of Nestlé Purina PetCare North America.
‘You have to weigh who you’re talking to and listen to who you’re talking to in order to make sure your message is being delivered the way you want it to be delivered. You’re not a real leader if nobody’s listening.’
Leadership in a legal context is unique in its own right. Despite many universal characteristics of good leadership, success in the legal profession has additional components, courtesy of the exacting technical proficiency that lawyers must demonstrate. Those in-house must also marry that expertise with corporate savvy, and a further role as company conscience.
‘We’re often viewed as just trying to find the legal boundaries of things that we do. But we also, I think, can bring ethics to the conversation, to make sure we’re doing the right thing, and not just the legal thing,’ says Stacey Antar, general counsel for Ferring Pharmaceuticals.
But the legal profession – particularly within law firms, where most lawyers begin their careers – is also unusual in being less purposeful than other sectors in developing non-legal skills. The law is an arena where leaders progress through their technical prowess as much as their softer skills.
‘I grew up in a law firm, like a lot of people do – and you become a leader by default typically,’ says Kristin Westgard, deputy general counsel IP and litigation at Koch Industries.
‘You start growing in your responsibilities and then you’re supervising other people on a case as you move up. But you may not be given formal training on how to be a leader or how to effectively lead a team. Now that I’m in-house with a corporation, we’re part of other leadership training that we do throughout the organisation.’
Despite a relative absence of formal leadership training for law firm lawyers, there are, of course, other avenues that good leaders can and do take in order to develop their skills – such as reading books or attending classes to study the topic. But many of our leaders agreed that learning by doing can be a more effective means of acquiring the requisite skills, while still actively seeking out opportunities to grow.
‘It’s not an academic exercise. It’s not like learning how to do things in law school. It’s getting the opportunity to either lead a small team, or lead a part of a case or lead an organisation, or even a section of an organisation,’ says partner Dori Hines, who leads Finnegan’s electrical and computer technology practice group.
Role models
The leaders we spoke to all credit the role models, mentors and sponsors they have worked with over the course of their careers with moulding them into the leaders they are today, particularly (although not exclusively) fellow female leaders. And, they said, there is no need to leave meeting these inspirational individuals to chance if opportunity doesn’t throw them your way.
‘I think if you’re a woman and you don’t have anyone in your organisation to look up to, you can seek out female leaders in other organisations. For example, if you don’t have a woman leader in your company, you perhaps could join a community organisation that has female leadership,’ says Ferrill.
There are three types of luminary that our leaders cited – the role model, the mentor, and the champion. And while being a role model might simply be something thrust upon a person in the leadership spotlight, those in such a position can nevertheless be intentional about the influence they have on younger or less senior colleagues, particularly as a major barrier for budding female leaders in organisations is the lack of female leaders in place to aspire to and emulate.
‘I think one of the most important things that women leaders can do to foster others, is simply being in the room. I attended a conference recently and when I was picking out what I was going wear each day, I intentionally chose bright colours. I knew that when there were younger women in the room and they were looking around, they would see a sea of navy and black suits, and possibly not be able to tell how many women were there, but I wanted them to see there are other women here in the room,’ says Arner.
‘I try and make sure that, whenever I’m on a panel at a conference, there are other women on the panel so that other younger, aspiring leaders see themselves in those roles, and can envision it. In addition to giving them that view, I think it’s also important for women to be in the room, because we are often the ones who can raise our hand if there is some unconscious bias going on. I think being present is the most important thing we can do.’
Good mentors have played a similarly indispensable role in the professional lives of the women we spoke to, providing direct opportunities (occasionally a nudge) and guidance – without clipping the wings of the mentee.
‘Women need mentors. Good mentors help you figure out how to navigate tricky work issues, they empower you, and give you advice on how to grow professionally and personally,’ says Frederick.
But mentors have a broader impact than just the individual careers they support, and in addition to seeking out opportunities for personal growth, successful leaders often feel honour-bound to just as actively identify openings for influencing those lower down the chain, with knock-on effects throughout the organisation – and beyond.
‘Mentors also help to develop the pipeline to leadership within a firm. When younger attorneys have relationships with more senior attorneys at a firm, they feel valued and part of the community. This ultimately improves retention and results in more women attaining leadership roles,’ explains Frederick.
‘Mentorship and sponsorship does not happen just within an organisation – women attorneys should look for opportunities to mentor someone in law school, at another firm, or even a high school student. I recall helping out in a moot court competition for girls from a local high school. All the girls did a great job thinking up arguments and were really engaged in the competition. I made sure to let them each know how impressed I was with every single one of them. One of them asked me whether I thought she could be a lawyer one day. I said absolutely – the expression on her face showed that she was now considering a path that had perhaps never crossed her mind before. So even something as simple as offering words of encouragement to a young girl could lay the foundation for a budding young leader.’
There are also champions, those with more skin in the game, who stick their necks out to develop others in whom they have made a real investment, even to the point of pushing them to take opportunities they might not have thought to seek themselves.
The legal world is often unstructured in terms of one-to-one leadership development, largely leaving it up to individuals to take the initiative, either as mentees or mentors. This can have mixed consequences, because although an assigned relationship can fail if it feels artificial, an absence of such schemes could result in talent falling through the cracks.
‘I think that champions can be grown in a number of different ways inside a legal organisation or perhaps even just generally. I think that some of it can be structured, and it needs to be at some level, or it might go undone,’ says Carron.
‘On the other hand, it’s difficult to pair two women together or just a leader and a non-leader, or a younger person or less experienced person and say, “This is going to be your champion,” because so much of it has to do with the personal investment of time – and it’s always much easier to spend time and energy on somebody whose company you enjoy.’
Inviting others to meetings, providing hands-on experience – ‘I’m going to give you enough rope,’ Hines was told by a former partner – were all agreed to motivate team members and provide insight into life on the next rung up. But to ensure a truly level playing field, Carron and others contend that a certain amount of structure is necessary – whether that is through mentoring assignments or the process of development itself.
‘A lot of people relate to people who remind them of themselves, and I think it’s important to try and remember that you need to cast a wide net and give a lot of people opportunities,’ says Washington DC-based partner, Linda Wadler.
‘I’ve found that it’s not always the people who are the top performers at a junior level who end up being the leaders. Some people are late bloomers, some people plateau, and so I think it’s really important to give opportunities to people to take responsibility and step up to the next level as broadly as you can.’
All in the mind?
Although leadership is usually understood as a task, it is also a mindset. An essential skill in an effective leader is the ability to be reflective over the entire course of a career. A key component in any kind of success is the willingness (and capacity for self-forgiveness) to risk failure, but a leader could be doomed to repeat mistakes if they are unable to honestly reflect on and absorb the learnings from missteps – and then share them.
‘A lot of the women leaders that I’ve interviewed or spent time with, when asked who was the first person to tell you no, where did you get that first discouragement that you had to overcome, so many say, “It was from myself”,’ says Arner.
‘I think perhaps women, a little bit more than men, tend to have a bit of self-doubt that causes them, at least initially, to not raise their hand for an opportunity, or to not feel that they are ready for a job that they really are ready for. Getting out of your own way is one of the lessons that we learn as we age.’
‘I also think it’s because we’ve heard it so many times, although maybe not directly. I don’t remember anyone coming up to me saying, “You could never be a leader”,’ adds Carron.
‘It wasn’t like that. It was watching choices and opportunities come along and be largely given to males who I thought didn’t have superior skills to the ones I had.’
Is enough being done?
The input of others, particularly other women, is crucial to the progress being made across the legal profession, and this was an obligation keenly felt by the women we spoke to, who were all eager to extend a helping hand to those on the rungs below. But should the responsibility of elevating and empowering potential female leaders rest solely on the shoulders of other women? Of course not.
‘I think one really important thing is for more men to see developing the female talent in their organisations as not just the responsibility of other female leaders. We need every leader to recognise and encourage good talent, and we need to develop all the talent we have,’ says Antar.
Adds Hines: ‘Where I think additional work could be done is getting men more actively involved, engaged, and understanding of the benefits of having women in leadership roles, and that having women in leadership roles isn’t a zero-sum game. Having a woman leader doesn’t mean that it’s a loss for men.’
Although the challenges facing leaders are often the same no matter who is in the post, there are additional factors that pioneering women often find themselves taking into consideration when conducting themselves in their roles – particularly an awareness that they might be the first female leader the team had experienced.
‘I think when I first entered leadership positions, I second-guessed myself a lot. I needed to be able to be who I was and feel okay with that. I needed to be able to recognise that I wasn’t going to be accepted by everyone. And part of it was because of my gender, part of it was because I was a change,’ says Carron.
Achieving that parity in numbers with male counterparts is an ongoing journey for women in law, as well as outside, and there are complex factors still to address along the entire pipeline before that change will occur. But budding women leaders can be grateful to those who have stepped up, risen to the leadership challenge, and then, both by virtue of simply serving as a role model demonstrating the benefits of diverse leadership, and becoming an empowering figure by extending the hand to others, widened the horizon for women in law.
Despite clear interest from the in-house community, the growth of legal tech hasn’t achieved the same blistering pace that fintech has managed. The rate at which the financial sector has caught on has meant wide-ranging technological innovation, at every level of the industry.
‘As successful fintechs have rapidly matured from start-ups to mature technology disruptors, banks have started the journey to transform their core digital capabilities, with several areas of focus. These include: a digital-native customer experience; big data and advanced analytics; moving towards a scalable technology landscape through cloud and automation; adoption of APIs (Application Programmable Interface),’ says Giulio Romanelli, associate partner at McKinsey & Company.
Part of the reason for the legal profession’s shortfall is a lack of enthusiasm on the part of the legal community and a natural aversion to change, but that doesn’t tell the whole story.
‘There’s a lot of hype in the space and I think there are often very clever technical solutions looking for problems,’ says Chris Wray, chief legal officer of Mattereum, a start-up working to bring blockchain technology to business.
‘Although there is interest in the theory or the potential, I think there’s also, quite rightly, a demand for: what’s the use case right now? I’m not sure I would criticise the profession generally for being somewhat cautious. I do think there’s a curiosity and a willingness to try and learn about both the potential implications and to update skills accordingly but there’s also, I think, the correct recognition that a lot of the use cases are still in the future.’
The reality is that, for blockchain, alongside more prosaic types of technological assistance, many legal teams remain in monitoring mode – surveying the field and keeping tabs on likely applications, but not necessarily investing just yet.
‘We simply have to be clever in finding the right applications, and also doing a little bit of trial and error rather than just rushing to one of the service providers, buying their generic application and then learning later that it was not the most suitable application,’ says Dr Alexander Steinbrecher, head of group corporate, mergers and acquisitions and legal affairs, Bombardier Transportation.
‘I’d rather invest a little bit more time window shopping and defining our needs rather than rushing ahead and being the first users.’
The sense among the in-house counsel surveyed was that their private practice counterparts aren’t faring much better: just 40% of respondents said their external legal advisers were implementing new technology to deliver their legal services and solutions. Still, one common sentiment among those interviewed was that private practice has a role to play in being a first mover in the legal tech takeover, setting the example for in-house teams to follow.
‘When we first undertook the research process of finding out what was in the market, it came as a pleasant surprise to see that law firms are leading innovation in the legal sector and how many are doing things like working with start-ups in developing new technology,’ says Cristina Álvarez Fernández, head of legal Europe at transport infrastructure developer Cintra.
‘Clients in particular are trying to change the way that they invoice, looking at alternate fee arrangements or, in some cases, bringing more work in-house. As a result, I think they have been forced to find ways to reduce cost and maintain their profitability. But at the same time, they will have no doubt seen other industries disrupted by technology and seen that this is the way forward.’
In an increasingly competitive European marketplace for legal services, corporate pressure on the billable hour is driving law firms (including those at the sharper, mid-sized end) to increase their own efficiencies, and reshape their service offering and value add for companies.
‘Let’s be fair: some parts of a lawyer’s job are not very fun. You want to be doing the legal work and so the technology enables that by taking away a lot of the drudgery. The smart lawyers understand that they can pull that off, they can get more work, win more competitive panels, they’ll grow their share of clients and have a more fulfilling legal practice,’ says a spokesperson at one law firm-sponsored legal tech accelerator.
Bridging the Gap between Technology and Four Generations
When acting for in-house counsel, adaptability is a quality that independent law firms have in their favour. It is the agility of their operations and the ongoing awareness of novel developments that can give them the competitive edge.
Globally, experts predict that by 2020, millennials and generation Z will account for more than half of the world’s working population. For the first time in history, four generations with an age gap of over 50 years will be working side-by-side in the same environment. Millennials are rapidly becoming the most powerful connector between these generations and will soon be in leadership roles within firms and in-house counsel positions. They are the first generation to grow up in a fully digital society, which accounts for a completely different approach to objectives. Leveraging the most technically savvy talent, coupled with a firm’s visionary decision-makers, will inevitably create a lucrative approach to meeting and exceeding client expectations.
As found by a survey for millennial lawyers and their millennial clients conducted by World Services Group, firms should look to develop expansive multigenerational strategies for their new client groups, offering the most comprehensive array of professional services. They should look internally to create committees that focus on the millennial client, on process efficiencies, and on keeping current with the latest technological developments. Then, by focusing on the client’s business as a whole, savvy firms may quickly become trusted partners asked to act on their strategic advice for deals or territories that they had not previously supported.
The biggest evolution to the legal industry is yet to come, and while technology is the cause, it is also the very thing that is bridging the generational gap in the industry. The successful law firms will be easily identifiable, not because of the technology they utilise, but because as a firm, the indispensable need for flow among the generations will create a new culture that more easily matches client needs.
But some in-house are more sceptical about the extent to which law firms are truly aboard the innovation wagon.
‘It’s mainly driven out of fear. It’s less: “Let’s be super innovative and change the market and then ultimately be super profitable”, it’s more: “I think something’s happening and it may have a negative impact on our business model so let’s work on it to manage the negative impact”,’ says Matthias Meckert, head of legal at PGIM.
‘The activity on the side of the law firms – all of them talk the talk but only a few are actually able to deliver. It may have something to do with the fact that law firms are run by lawyers and rarely by entrepreneurs. Behind the scenes, many admit that they are fearing the investment. The ones who invest do really exciting stuff.’
While in-house teams might be more cautious when it comes to making decisions on which solutions to adopt, at law firms, the conversation is sometimes clouded by existential angst.
‘The conversations we are having with in-house teams on the application of AI technology are different to the conversations we are having with law firms. With law firms, there’s always that concern of: “If we adopt this technology, how is it going to affect our model? How is it going to change the way that clients perceive us? Is it going to make the client value us less because we’re using technology to support us in the work?” Whereas with in-house teams, it’s fairly straightforward: “I need to make a change, and I can see that this is going to make my life more efficient, more interesting and more stimulating” – it’s a much less complicated discussion,’ says Emily Foges, CEO of legal AI platform, Luminance.
Disruption – at the margins
When asked whether technology had the potential to disrupt the legal profession over the next five years, 84% said they believed that technology will be disruptive. The real trouble comes when trying to drill down on what form this disruption might take.
Just 6% of those who believed technology will be disruptive in the next five years thought that the disruption would be negative. 66% felt that it would be somewhat positive, and 29% thought that the disruption would be entirely positive.
Between the believers and non-believers, there is room for nuance. Many GCs are taking an approach that falls dead in the middle of those who think that tech is going to revolutionise the profession in moments and those who think it’s all smoke and mirrors with no real capacity for change. Instead, they believe that rather than technology being a disruptor of the in-house legal role, it does not go far enough to modernise and truly transform.
‘By implementing some tech tools you get a 10%, maybe 20% efficiency increase. This is not really disruptive, this is where I am improving a little bit, I’m streamlining existing structures, but not changing the fundamentals,’ says Meckert.
‘Change gets really exciting once you say, “Let’s start big picture and not with the details – why are we doing that, how do we create value for our business, should we outsource or should we collaborate with others?” Then you start really changing the game.’
Most in-house commentators are confident that the core tasks carried out by lawyers are unlikely to face the kind of disruption that renders the profession obsolete. Although standard and routine work is likely to eventually be automated, businesses will still require lawyers to provide advice on more complex issues such as risk management and corporate governance. Many anticipate an opportunity to engage in more strategic, value-added work, such as relationship-building, lobbying and training across the business. Jobs lost are predicted to be on the routine end – perhaps paralegals, those providing exclusively contractual or notary services, or those providing non-complex high street advice.
private practice has a role to play in being a first mover in the legal tech takeover.
‘According to one global consulting firm, 85% of the jobs that people will have in 2030 don’t exist today – which is quite frightening, because it means that only 15% of today’s jobs will survive to 2030. But I would not say that 85% of what I’m doing with my legal team will no longer be done by us in 2030,’ says Steinbrecher.
‘… Smart in-house legal teams will have managed to develop in-house legal expertise and knowledge in areas where they are no longer dependent on external lawyers, and they can only do that because they are no longer wasting their time and energy on low-skilled, legal administration work.’
Far from reducing headcount in-house, it will actually help combat attrition, some predict.
‘People are less interested in doing day-to-day work on a repetitive basis. People would like to do projects which are more challenging, would like to be empowered. So if you could outsource more administrative and bureaucratic things to a service provider or a tech solution, super, as those tasks need to be completed,’ says Meckert.
‘We embrace those solutions as resources would become free to do higher value, higher risk, more intellectually challenging, more fulfilling work. This keeps my team engaged and allows a better contribution towards the business.’
Similarly, on the law firm side, a digital revolution must be accompanied by an analogue one for any real disruption to occur.
‘Law firms need cultural disruption. Lots of law firms talk about being disruptive, but very few are. There has been very little disruption of law as a service and the change that will be best received by their clients is unlikely to be technology led,’ says Ruth Pearson, general counsel of LendInvest.
A (value) chain reaction
The ecosystem of law firms, their clients, businesses, their in-house teams, and third-party legal tech providers has always been delicate, but the surge of innovation and technology is challenging the value chain to shift to accommodate the changing roles played by each link.
In light of this, each player must go through a process of understanding the space they occupy in this new value chain. Suddenly liberated by the digitalisation of research, due diligence, analysis and document drafting, lawyers will be free to build on the customer relationship by being more responsive and alive to the impact of their advice – particularly in companies moving at a highly innovative pace.
‘If my business is now fully embracing, for example, processing and collecting data and I could patch my piece of the puzzle – the legal data – into that platform, that’s great. In the age of platform industries, the law department can’t be an island, it needs to be integrated and fully aligned with the business and its digital strategy.’ says Meckert.
‘The best inspirations are those I get from conversations outside my “home” industry or with non-lawyers. Those ideas challenge the way we think traditionally.’
Patching into the corporate zeitgeist enabled the Cintra legal team to leverage company-wide investment in technology for the legal team and plan its own technological upgrade. The legal team has worked closely with the IT team to investigate potential new legal tech tools.
‘This isn’t something that’s unique to legal, it’s been happening in other departments already. In general, our company and the group are very interested in innovation and new technology,’ explains Álvarez Fernández.
‘I think that in time, we will see the relationship between in-house departments and external firms change as a result of technology – mostly where fees are concerned. I suspect that the fees of law firms can be reduced, or at least controlled, depending on the market and matters at hand. But I don’t think the interplay will shift.’
Many agree that they do not see an Uber-type revolution arriving on the horizon for the external legal services market, although most concede that there will be some future adjustment of legal service providers.
‘It will be a game changer in the end. Alternative service providers are entering the market in Europe (some have been in the States for a long time now) and some of them have their own technology,’ says Sánchez Soriano.
‘I’m also seeing small law firms with very, very specialised people in technology projects. I think that is becoming interesting because these are not the typical law firms that we are used to working with, but maybe for very technological projects, you’d call these people who are doing things in blockchain or using other technologies.’
Human resources
One other very significant way in which this trend towards technology is changing legal departments and private practice firms is in the makeup of their personnel. 60% of those surveyed for this report felt that today’s lawyers were not adequately equipped to adapt to technological changes within the legal profession.
In response, a focus on technology innovation has led, in some cases, to the creation of roles to specifically facilitate transformation, as innovation managers, data scientists and legal technology administrators begin to enter the field, particularly in law firms. However, such functions are currently less common in-house.
‘Sometimes I have found people in-house who, additionally to their own duties, are in charge of innovation, but the problem in many cases is that these people don’t have a real budget for implementation or even worse, that they don’t have the support from the general counsel or the wider business,’ says Sánchez Soriano.
But, at least on the technical side, some predict that these roles could eventually permeate the in-house ecosystem, as legal specialists with the responsibility for licensing and maintaining tools and platforms like the standardised written and coded terms utilised in smart contracts. Digital legal officers or lawyers that compile software tools with intelligent applications could evolve.
‘The new role of lawyer is more likely a legal process designer to some extent,’ says Dr Volker Daum, general counsel of B. Braun Group.
‘… This will create and maintain jobs, and may even create future jobs, because it’s not just legal advising anymore – we are part of the process and the value chain.’
But equally, although the nature and nascence of new technology makes it difficult to immediately separate the truly transformative from the passing curiosity, hard tech skills of some sort will inevitably be in need of an upgrade.
‘We have projects focused on everything from blockchain to machine learning, so as lawyers, we need to understand these technologies but also provide legal advice for the new questions and challenges that will arise as a business,’ says Sánchez Soriano.
‘We put a high premium on lawyers who understand our business well.’
‘…We will be considering all this for the training we need to give to our lawyers and the people we will be hiring in the future, so that we are able to provide legal advice to innovative projects. If you don’t understand blockchain, for instance, it will be very difficult for you to provide advice on it.’
Counsel are divided over the extent to which it will be necessary for lawyers to learn coding, beyond the skills that will likely be taught as a routine part of elementary education for future (and, to some extent, current) generations.
Shaking the foundations?
If lawyers entering the profession today are required to be of a different breed than those that came before them, the question must be asked: are legal education institutions preparing them for this?
Up until now, the bedrock of a solid legal training has been the time spent as a trainee or junior lawyer on due diligence, contract drafting and analysis.
‘We can already remember (fondly or not) the time when, not so long ago, junior lawyers would spend hours preparing first drafts of transactional documents and hence were indirectly trained to the underlying issues behind a specific drafting or wording,’ says Olivier Kodjo, general counsel of ENGIE Solar.
But even if the potential impacts of automation and AI are overblown, these institutions will have to adjust to avoid an undermining of the experiential foundations of the profession. Alternative training models will likely have to be found: a training that neglects the technological skills that are becoming part and parcel of the job is becoming increasingly unfeasible.
‘As educators, we need to be doing these things… Even if you are not convinced, you need to better train your students on these kinds of tasks because they ask for it,’ says Professor Christophe Roquilly, Dean for Faculty and Research at EDHEC Business School.
However it is achieved, demystifying technology for lawyers at all levels – and thereby equipping them for an innovative, digital future – will likely be a bridge to the elusive culture change that underpins the successful evolution and future-proofing of the industry.
‘Innovation flows much better when people are able to see machine learning not as magic, not as something that someone with a magic wand goes ‘Ping!’ and it starts working,’ says Professor Enrique Dans, Professor of Information Technologies and Systems at IE Business School.
In today’s business world, more than ever before, learning is a lifelong pursuit and it is the responsibility for those at the top of each organisation – the corporation, the law firm, the law school – to have the foresight to set a tone that prioritises innovation and agility. For true innovation to take hold, there needs to be an agreement of what constitutes good service and an alignment of priorities and mindsets throughout the organisation and the value chain – to avoid each party being left incompatible with the other.
Much has been said about whether disruptive technologies could spell the end of the legal profession as we know it, but GCs aren’t worried. In fact, they’re excited.
Of those in-house counsel surveyed for this report, the vast majority agreed that technology will disrupt the legal profession in the next five years, with 94% acknowledging that technology will be at least somewhat disruptive. 32% said that they feel this disruption will affect the profession to a great extent.
Every respondent that said they expected there to be some disruption in the next five years felt that this would be positive, with 71% saying that the disruption will be ‘somewhat positive’, and 29% saying that it will be ‘entirely positive’.
‘I’m fully convinced of the benefits of the AI, and we all need to adapt to what is coming, because it is coming, whether we like it or not,’ says Cristina Álvarez Fernádez, head of legal at Cintra. ‘I’m 100% optimistic this technological revolution is going to be good for us: we’re simply going to provide legal services differently.’
This positivity is echoed by the approach many of the GCs interviewed for this report have taken to the issue: embrace disruption and reap the benefits.
‘The legal function needs to and can play a role in showcasing the benefits of introducing technological solutions in an enterprise,’ says Johan Huizing, associate general counsel at Itron. ‘We must be leaders in adoption of high-performing technology and not merely followers. Only then can we play a role as thought leaders and will we be accepted as team members that have value for the business.’
To what extent do you agree that technology has disrupted the legal profession in the past 5 years?
‘Legal professionals who want to thrive in modern business must lean towards technological transformation,’ adds Tobiasz Adam Kowalczyk, head of legal at Volkswagen Poznan.
‘The great news is that lawyers have the tools at their disposal to enable this change. The digital revolution offers us the chance to compete, and it provides law firms and legal departments with the ability to transform into something much more exciting. The legal profession will not disappear, but it will surely change due to technology. This shift will most probably trigger new forms of what being a lawyer means. The sooner we accept it as the new normal, the better off we’re going to be.’
One general counsel from a prominent international engineering firm, who did not think that AI will be a factor within the next ten years, said that their main concerns were ethical.
To what extent do you agree that technology will disrupt the legal profession in the next 5 years?
‘How can you build trust in code? There are ethical questions around its use in certain applications such as disciplinary actions or other employment-related areas,’ they said.
‘It’s not all hype, but the profession is very conservative and the ultimate question is: to what extent will management trust a “machine”?’
Virtually all of those surveyed agree that AI will be a disruptor in the legal industry, with just 9% feeling that it will not be a disruptor at all. Despite this apparent enthusiasm, just 6% said their team currently uses an AI solution, all of whom said they only use it to assist in low-level work. Within this small group, overall feelings on AI’s ability to act as a disruptor in the industry are positive: 83% agreed that AI would be a disruptor, with half feeling that such disruption would come between the next five and ten years.
When asked which factor was more important when considering adopting an AI-based tool, all respondents cited either the reduction of costs (38%) or an improvement in quality of work (62%).
‘Looking forward, AI will be able to cover all technical and easy legal work: cost reduction, quality improvement,’ says Artem Afanasiev, general counsel of DIXY Group.
Overall, the key disagreement comes over the question of when, not if. Over half feel that AI-based disruption would come between the next five to ten years, but a portion said they thought the disruption would come much later: 23% think it won’t be a factor for at least ten years.
Overall, how positive do you think technology disruption will be?
Then comes the question of preparation. If disruption is coming for the legal profession, all eyes will turn to the incumbent lawyers to see how they fare in response to the seemingly inevitable changes heading for their profession. Whether or not legal education institutions and professional development programmes throughout Europe have left today’s lawyers well placed to adapt and thrive will be imperative.
When asked about current lawyers’ preparedness for technological disruption, the in-house counsel surveyed and interviewed were less enthusiastic. 14% felt that today’s lawyers, on average, were adequately prepared; 61% did not. The rest were unsure.
‘AI is limited for the majority of in-house right now because the base data sets are not in place, substantial enough or well enough maintained,’ explains the general counsel for a prominent consumer goods brand.
‘This is a real point of difference with the accounting/finance world where recording data in a structured way has always been the order of the day – that area will see a huge impact from AI in the near future whereas in-house legal first needs to get its ducks in a row, change its behaviours and set that foundation upon which expensive AI solutions are built.’
As corporate leaders, in-house counsel are faced with the challenge of determining which new technologies can bring the biggest impact to their operations. As we hear from in-house lawyers and others who have contributed to this survey, AI and other forms of technology can enhance in-house legal departments in many ways: due diligence review, first-draft contract preparation, contract management, legal operation analysis, litigation analysis, legal research and much more. AI can create efficiencies in previously labour-intensive legal processes, and therefore provide counsel with the luxury of time for problem solving and applying legal judgement and analysis.
But the pace with which technologies are developed necessitates a complicated analysis of return on investment, and whatever path is chosen is always done so with risk.
These new processes will certainly influence change within in-house departments and law firms alike. Focusing on where time is best spent and developing a strong base objective is only the tip of the iceberg as these developments continue. Going forward, the legal leaders in organisations will be constantly tasked with seeking technologies that best fit their unique business needs and objectives.
The key for decision makers will be to strategically choose and implement systems and processes that unlock the true potential of their teams, and point the way to the future of their organisations. It will require a change of mindset.
As a strategic business partner to in-house counsel and our members, WSG makes technology and innovation a cornerstone of its core service objectives. With immediate access to distinguished professionals and the real-time sharing of leading-edge information, we support firms and clients in their ability to capitalise on business objectives.
As customers, professionals in and around the legal profession – such as those leaders featured in these pages – will be arbiters of the success, or otherwise, of new tools, applications and services. Professionals such as these are at the helm of this potentially unbounded – yet risky – integration as machines and humans share everyday challenges.
WSG congratulates those who participated in this report, and thanks them for their keen analysis of new technologies – and the future of the industry.
Between the reams of paper (literal and virtual) spent discussing the question of how technology will affect the legal profession, as well as the thousands of legal tech companies springing up around the world, technology is on the minds of in-house teams of all sizes and from all sectors.
But, often, what isn’t communicated is exactly how in-house counsel feel about the technological revolution hitting their profession and how their teams and businesses have responded – if at all.
To that end, GC magazine in partnership with World Services Group went out to a selection of elite general counsel from across Europe with a comprehensive survey covering all things related to the use of legal tech at in-house teams.
The responses came from a vast selection of in-house counsel in a diverse range of industries. From finance and insurance, to healthcare and IT, the opinions collected and presented in this report paint a fascinating picture of the contemporary state of technology within the in-house legal community in Europe.
These responses, explored in detail in this report, provide a valuable framing of the wider discussion about technology and its various applications, both from the perspective of an in-house remit, as well as a broader look at its impact on the profession. From the pressures on external advisers to get ahead of the technological curve, to the so-called revelation of blockchain and its predicted effect on how legal work is conducted, the topic is vast.
It’s evident that technology is already making an impact on the profession. Of those surveyed, 84% of in-house respondents reported that they use some form of specialised legal technology within their legal department, with 82% revealing that their department’s use of technology had increased in the past five years. For a profession that’s often accused of being filled with technological laggards, that’s a significant change, and one which only stands to become more pronounced when you consider that every single survey respondent acknowledged that technology can enhance outcomes for in-house departments.
there is clearly an appetite for the kinds of solutions being offered in the legal tech marketplace.
At a base level, there is clearly an appetite for the kinds of solutions being offered in the legal tech marketplace. Why this need has arisen, what form it should take, and what effect this is likely to have on the profession in the long term are more nuanced questions, requiring a holistic view of not just the survey responses, but the opinions and activities of the various players in the legal tech market.
Why bother?
With over 1,400 legal tech companies around the world, the world of innovation has exploded into the lives of lawyers – in-house and private practice alike – with some interesting (and, at times, conflicting) results, not least given the notoriety of the legal profession as an outpost of conservatism.
But there is a clear need, and to predict where legal tech is going, it is crucial to understand what is driving that need for in-house counsel.
For the 84% of survey respondents who indicated that they were utilising specialist legal technology within their departments, increased efficiency was the most frequently cited factor that general counsel were considering when implementing new technology, at 84%. That was followed by ease of use at 50%, customisability at 32% and ability to integrate with existing systems at 31%.
If the pressure driving the push to adopt legal tech is the need to provide the business with better efficiencies and more value for money, then the cost of entry for many of these legal tech solutions is a barrier that needs to be overcome in order to gain the support of the wider business. A clear-sighted approach to tech only intensifies the imperative for a cost-benefit analysis, and, seldom a profit-centre, in-house departments know more than most about the need to do more with less.
How is technology changing relationships in the legal industry?
The headlines are fraught with impending doom and gloom for lawyers today. The reality is that there are only a handful of law firms racing to implement the latest innovations that technology has to offer. Law firms are slow-adopting, service-based partnerships driven by providing the best value to their clients. It is the relationships that hold the most significance for both in-house counsel and law firms alike. Therein lies the reason why, ultimately, the true drivers of change within firms are their clients.
In-house counsel can better identify reasons to pressure firms to evaluate their processes, and firms are doing just that to find opportunity. However, it is the re-evaluation of simple processes and the use of current technology within the firm that can bring enormous gains in creating better efficiencies without ever adopting anything new.
For the leading firms who are a part of World Services Group (WSG), being able to leverage innovative technology with firm relationships globally is just one resource that has enhanced the speed with which firms can react to in-house needs. Though technology will continue to play an incremental role in the firm’s evolution, it is the ‘people’ that will continue to be the key to success in the legal industry.
Like the motivation for WSG, which is to create a powerful relationship-based network among the premier firms in each location of the world, it is not the technology, but the access to important technology, that will be paramount. There will be no ‘robolawyer’ to take away the personal relationship required between in-house counsel and their advisers to achieve true results. It is the proven, results-focused relationships that are becoming the true innovation.
Firms are not losing business because of their lack of cutting-edge tech, but they should take time to analyse processes, investigate new technologies and invest in access to long-term solutions for their clients. That is what will retain ongoing, long-lasting client relationships in the face of an increasingly tech-heavy world.
‘To remain competitive, we need to increase productivity while enhancing the quality of legal processes against an ever decreasing cost base. In order to achieve this there is no other solution than to embrace technology,’ explains Johan Huizing, associate general counsel EMEA at Itron.
It was common refrain to hear a willingness from general counsel to adopt legal tech solutions throughout their department – but getting buy-in from the business and the necessary budget to execute was a clear hurdle for many. While 70% of the in-house counsel surveyed for this report felt that their company was supportive of implementing new technologies, only 56% had seen this translate to a bigger budget allocation on their balance sheets.
‘If you consider that it’s a strategic issue for you, probably it’s better to internalise, or to invest into some legal tech and then to see the results. I mean invest in terms of putting money into external projects, not only buying a product or a service,’ advises Professor Christophe Roquilly, dean for faculty and research at EDHEC Business School.
But for teams with a smaller head count in particular, taking that first step was often the hardest. Teams with smaller headcounts had the worst rate of uptake of technology, with 42% of departments with less than ten people saying that they didn’t use any legal technology at all. They were also less likely to have received an increase in budget for technology over the past five years, with only 47% reporting an increase in budget for technology (compared with 57% overall). Yet, in many cases, it was smaller teams who thought they stood to benefit the most from tools that can deliver better bang for the buck.
‘There is still the need for smaller teams to provide increased efficiencies, but the budget doesn’t allow for it. It’s then left to us to find ways to use technology to provide efficiency, but essentially for free. That’s not to say it can’t be done, it’s just more difficult,’ said one general counsel from the consumer goods sector.
Some corporates we spoke to were lucky – or large – enough to have internal resources for tackling bespoke software development projects, or budgets for cultivating start-up arrangements – though the latter is much less common for in-house teams than for law firms. But whatever the infrastructure or budget available, investment in tech requires bravery, given the unpredictable return on investment and, in many cases, the long-term nature of that return.
But while budget proved to be one of the biggest predictors of tech use and implementation within in-house legal departments, communication and demonstrating the value – particularly for larger companies which required a higher degree of coordination across existing systems – was also proving a challenge.
the predictive power of technology is encroaching on the legal system itself.
‘Money is nice, but implementing a new bit of technology will require the cooperation of the whole business – from the board down to the IT department. So money is something, but it’s not the only thing,’ explains one general counsel from the utilities sector.
Types of tech
The legal applications of technology are vast, ranging from the rudimentary to the complicated. Generating by far the most interest among those surveyed were the basics: for example, the most commonly cited use of technology was for contract management, from 55% of respondents.
But technology can provide legal departments with solutions far beyond a contract management system (often little more than a repository of documents) or a standard contract template.
Software for law firm relationship management, including e-billing and increasing transparency around legal spend, is often seen as a boon, and such tools can be make or break for a frictionless relationship. At present, 20% of respondents cited that their use of technology included tools for law firm relationship management, but based on the interviews complementing the quantitative research, this is an area that appears to be prime for expansion in the short term.
‘We demand use of our billing platform and insist that our rules for invoice submitting are followed. This has increased our understanding of the drivers for outside legal spend and budgeting and resulted in a better control of such spend,’ explains Huizing.
‘We move away from firms that are low performers when it comes to the use of our billing solution or that execute poorly on following our instructions for entering reports or invoices.’
At the least, technology can assist external firms to be more cost-efficient, so that those savings can then be passed on to their in-house clients. But there are more benefits to be reaped from an internal-external relationship that leverages technological solutions. Through this, the firm and the in-house department can cut through the noise that comes from two independent, far-away entities trying to collaborate with one another.
‘We’re building collaborative tools. We saw that a lot of time goes into emails and phone calls between a lawyer and a client. Now obviously that’s part of the personal relationship with the lawyer and client, and that’s not going anywhere. But if you’ve got five emails back and forth trying to describe what part of the land the lawyer is talking about, that’s just inefficiency. So by bringing both the lawyer and the client onto a collaborative workspace on [our] platform, you can cut out a lot of that needless, repetitive back and forth,’ says Ed Boulle, co-founder of legal tech company Orbital Witness.
‘The baseline is that we must be able to communicate very effectively with our external law firms. This requires that they use state-of-the-art communication and cloud-based collaboration software,’ adds Gábor Kukovecz, head of legal and operations at Diageo.
‘In the near future, we will implement a collaboration software, in which we work together with our external law firms, that they must fully implement.’
Far from being limited to external relationships though, tools and platforms which assist legal in becoming more accessible to the wider business also proved popular.
‘Legal is building knowledge management tools to get to a single source of truth – a lot of the technology we’re using, because we’re operating at scale, supports us when we need to have information held reasonably accessible, so that everybody can rely on them,’ explains Nina Barakzai, general counsel for data protection at Unilever.
IBM also has a shared knowledge platform called the Legal Community, which is used to integrate items such as contractual provisions, presentations and internal processor memos on regulations.
‘It’s a collaborative community space, and that’s very useful. You have owners, who can replace or change things on a particular subject, and it is shared with all the rest of us who are members,’ says Vincent Martinaud, counsel and legal manager at IBM.
Teams with smaller headcounts had the worst rate of uptake of technology.
Legal case management is another popular focus and 40% of in-house counsel surveyed cited case management as one of their uses for technology. This can include the basic paperwork-inducing case management tasks, but can also extend to case review administration and analytics.
Increasingly underpinning many tools is artificial intelligence (AI), as machine-learning tools are designed to quickly parse and categorise vast amounts of information, presenting it back for lawyer review in a fraction of the time taken for junior associates or paralegals to do the same.
‘I really think that our job will change, especially the analysis of documents, because of the way AI now is able to read and understand natural language – including your notes and the ability to decipher a picture, for instance,’ says Martinaud.
At the outer reaches of technology applications in the sector are predictive justice tools, employed to forecast case outcomes, including judges’ decisions – although these are by no means widespread or particularly popular among those who contributed to this report. But, as algorithms creep into our everyday lives, often unseen, the predictive power of technology is encroaching on the legal system itself, for example, in the criminal justice system.
‘[In Spain] work is being done on “algorithmic justice” – for petty thefts and things that are repetitive, the possibility of being able to come up with a first verdict, of course allowing the two parties to appeal if they don’t agree with the verdict, but releasing many human hours that could add value in more complex cases,’ says Enrique Dans, professor of information technologies and systems at IE Business School.
‘All the things related to an insurance claim, traffic problems when there’s no victims for example, these could be very well examined right now, with the current state of technology, by algorithms. You could ask one insurance company to negotiate with the algorithm of the other and get into an agreement, only bringing the human lawyers in if they are really required. That could take away a significant part of the burden for lawyers right now.’
Measuring the impact
When asked whether technology had the potential to disrupt the legal profession over the next five years, 84% said they believed that technology will be disruptive. The real trouble comes when trying to drill down on what form this disruption might take.
Just 6% of those who believed technology will be disruptive in the next five years thought that the disruption would be negative. 66% felt that it would be somewhat positive, and 29% thought that the disruption would be entirely positive.
Short of profession-changing disruption, technological tools like collaborative platforms, AI document review and smart contracts, and the increased automation that they facilitate could adjust the day-to-day lives of lawyers in subtler ways, by disrupting routine, everyday processes. However, introducing more technology often means more constraints on flexibility.
‘It does start to mean a little less flexibility and a bit more rigidity around the terms you’re putting in place and the structure of the relationships – because it has to have been thought out in advance, especially if you have multiple parties involved in supply chains,’ says Chris Wray, CLO of blockchain start-up Mattereum. ‘It’s kind of legal design – mapping out who are the parties here, what are the contractual relationships and what are the key provisions and then, given all that, once that’s clearly in mind, what is it we’re trying to automate, and have we mapped out different kinds of disputes that may arise and provided appropriate procedures for the resolution of those disputes?’
Of all current technological innovations, artificial intelligence has undoubtedly generated the most hype, and the most fear. Wherever AI goes, the image of a dystopian future is never far away, nor is a conference room full of nervous lawyers.
The reality, of course, is quite different. Some corporate legal teams, particularly those already in the tech field, or those at companies handling huge amounts of customer data are ahead of the curve. But, for many in the legal world, the future is a far-off land – for now.
‘When you hear people saying that tomorrow everyone will be replaced by robots, and we will be able to have a full, sophisticated conversation with an artificial agent… that’s not serious,’ explains Christophe Roquilly, Dean for Faculty and Research, EDHEC Business School.
‘What is serious is the ability to replace standard analysis and decisions with robots. Analysis further than that, when there is more room for subjectivity and when the exchange between different persons is key in the situation… we are not there yet.’
Much of the conversation around AI, particularly in the in-house world, remains a conversation about potential. The expanding legal tech sector is teeming with AI-based applications in development, but on the ground, even in the legal departments of many of Europe’s biggest blue chips, concrete application appears to be limited.
‘I think the US may be a bit further down the road than Europe. AI is coming, people are thinking about it, some in a partial way, but it will be developing quickly in the coming years. It may have more or less the same role as the internet had 15 years ago changing radically the way we work, but we’re not there yet,’ says Vincent Martinaud, counsel and legal manager at IBM France.
‘While the legal function may change to the extent that there are tasks we may not do anymore in the future, does that mean we will be disrupted? I don’t think so.’
Those views largely align with the general counsel surveyed across Europe on AI.
Only 9% of those surveyed anticipate AI becoming a disruptor in the legal industry within the next two years. 59% of those surveyed expected AI to be a disruptor within the next five to ten years, with the remaining 32% saying it would not be a disruptor within the next decade.
Understanding Argument – Professor Katie Atkinson, head of the department of computer science at Liverpool University
‘You can model argumentation in all sorts of different specific domains, but it’s particularly well suited to law because arguments are presented as part of legal reasoning.
It could be a computer arguing with a human, or it could be two machines arguing autonomously. But it’s basically looking at how arguments are used in order to justify a particular decision and not another alternative. We do that through constructing “formal models”, so you can write algorithms that can then decide which sets of arguments it is acceptable to believe together. That provides you with automated reasoning and, ultimately, a decision about what to do and why.</lip
It’s not necessarily trying to replicate what humans do, it’s more trying to take inspiration from how humans argue and then get an idealised version of that. There’s literature going back to the time of the ancient Greek philosophers on how people argue, so we take a lot of inspiration from that work, and also from legal theories – we look specifically at how legal argumentation is conducted.
What you’re trying to do is come up with a model that can be applicable over multiple situations and then you just feed in the specific facts of specific cases into those models to determine the decision in that case.
Looking at an idealised form of argumentation doesn’t necessarily mean that we can’t consider nuances, preferences and subjective information – all of which can also be modelled.
My own particular research has looked at how we can build these models of argument and then test them using sets of legal cases that are well known in the published literature on AI and law. Over three domains we got a 96% success rate in replicating the human judges’ decision and reasoning, and we’ve published work on that evaluation exercise.’
While the legal industry may represent a potentially lucrative market for software developers, it does not offer the potential gains of sectors like healthcare or finance.
‘In AI, we see many developments with our cars, many developments in the healthcare sector, and therefore changes in these sectors will probably come faster. In the legal field we do see changes, but I don’t think we are at the edge of it,’ notes Martinaud.
With relatively few lawyers utilising AI solutions at present (8.8% of survey respondents reported using AI solutions – with all applications being in low-level work), perhaps it’s time for a reality check.
Applications
For many in-house counsel, the chat bot is the most readily available example of how AI (in a first-stage form) can make life easier for in-house teams. At IBM, Martinaud is using Watson, the company’s deep learning AI for business. Through this platform, the legal team uses, for instance, a chat bot called Sherlock, which can field questions regarding IBM itself – its structure, address, share capital, for example. The team is also working on a bot to answer the myriad queries generated by the business on the topic of GDPR, and on a full data privacy adviser tool which can receive and answer questions in natural language.
‘These are the kinds of questions you receive when you’re in the legal department, and it’s very useful to have these tools to answer them or to ask the business to use the tool instead of asking you,’ says Martinaud.
‘An additional example of Watson-based technology that the legal team has started using is Watson Workspace, a team collaboration tool that annotates, groups the team’s conversations, and proposes a summary of key actions and questions, which is organised and prioritised.’
Another early use-case for AI in the legal profession has been the range of tools aiming to improve transparency in billing arrangements.
Last year, IBM stepped into the mix with Outside Counsel Insights, an AI-based invoice review tool aimed at analysing and controlling outside counsel spend. A product like Ping – an automated timekeeping application for lawyers – uses machine learning to track lawyers as they work, then analyses that data, turning it into a record of billable hours. While aimed at law firms, its applications have already proved more far-reaching.
Daniel Saunders, chief executive of L Marks, an investment and advisory firm that specialises in applied corporate innovation, says the technology is a useful means of monitoring service providers’ performance.
‘As someone who frequently is supported by contract lawyers et al., increasing the transparency between the firms and the clients is essential. Clients have no issue paying for legal work performed, but now we want to accurately see how this work translates to billable hours,’ he says.
‘Furthermore, once law firms implement technologies like Ping, the data that is gathered is going to be hugely beneficial in shaping how lawyers will be working in the future.’
Information management
The clear frontrunner in terms of AI-generated excitement among the corporate legal departments who participated in the research for this report was information management, which can be particularly assisted by developments such as smart contracting tools.
‘Legal documents contain tremendous knowledge about the company, its business and risk profiles. This is valuable big data that is not yet fully explored and utilised. It will be interesting to see what AI can do to create value from this pool of big data,’ says Martina Seidl, general counsel, Central Europe at Fujitsu.
Europe’s race for global AI authority
Artificial Intelligence (AI) is on course to transform the world as we know it today. A 2017 study by PwC calculated that global GDP will be 14% higher in 2030 as a result of AI adoption, contributing an additional €13.8tn to the global economy. The same study states that the largest economic gains from AI will be in China (with a 26% boost to GDP in 2030) and North America (with a 14.5% boost) and will account for almost 70% of the global economic impact. In addition, International Data Company (IDC), a global market intelligence firm, predicts that worldwide spending on AI will reach €16.8bn this year – an increase of 54.2% over the prior 12-month period.
The runners in the AI race are, unsurprisingly, China and the United States, but Europe has pledged not to be left behind. The European Commission has agreed to increase the EU’s investment in AI by 70% to €1.5m by 2020.
Closing the gap
The European Commission has created several other publicly and privately funded initiatives to tighten the field:
Horizon 2020 project. A research and innovation programme with approximately €80bn in public funding available over a seven-year period (2014 to 2020).
Digital Europe Investment Programme will provide approximately €9.2bn over the duration of the EU’s next Multinational Financial Framework (2021 – 2025). These funds will prioritise investment in several areas, including AI, cybersecurity and high-performance computing.
European Fund for Strategic Investments (EFSI). An initiative created by the European Investment Bank Group and the European Commission to help close the current investment gap in the EU. The initiative will provide at least €315bn to fund projects which focus on key areas of importance for the European economy, including research, development and innovation.
However, AI funding is not the only pursuit. While China has pledged billions to AI, it is the US that has generated and nurtured the research that makes today’s AI possible. In the research race, Europeans are striving to outpace the competition with the creation of pan-European organisations such as the Confederation of Laboratories for Artificial Intelligence in Europe (CLAIRE) and the European Lab for Learning and Intelligent Systems (ELLIS). CLAIRE is a grassroots initiative of top European researchers and stakeholders who seek to strengthen European excellence in AI research and innovation, and ELLIS is the machine learning portion of the initiative.
One main hurdle stands in the way of Europe and its run to the finish: the EU’s General Data Protection Regulation (GDPR). GDPR regulates EU organisations that use or process personal data pertaining to anyone living in the EU, regardless of where the data processing takes place, at a time when global businesses are competing to develop and use AI technology. While GDPR forces organisations to take better care of personal client data, there will be repercussions for emerging technology development. It will, for example, make the use of AI more difficult and could possibly slow down the rapid pace of ongoing development.
Individual rights and winning the race
Europe has plotted its own course for the regulation and practical application of legal principles in the creation of AI. Ultimately, the advantages of basing decisions on mathematical calculations include the ability to make objective, informed decisions, but relying too heavily on AI can also be a threat, perpetrating discrimination and restricting civilians’ rights. Although a combination of policy makers, academics, private companies and even civilians are required to implement and maintain ethics standards, continue to question AI’s evolution and, most importantly, seek education in and awareness of AI, it will be a coordinated strategy that will make ethics in AI most successful.
For Nina Barakzai, general counsel for data protection at Unilever, AI-powered contracting has proved to be a real boon in understanding the efficacy of privacy controls along the supply chain.
‘Our combined aim is to make our operations more efficient and reduce the number of controls that are duplicated. Duplication doesn’t help those who are already fully loaded with tasks and activities. Where there is confusion, it should be easy to find the answer to fix the problem,’ she says.
‘That’s where AI contracting really comes into play, because you analyse how you’re doing, where your activity is robust and where it isn’t. It’s a kind of issue spotting – not because it’s a problem but because it could be done differently.’
At real estate asset management company PGIM Real Estate, the focus of AI-related efforts has been to build greater efficiency into the review of leases, to enable a more streamlined approach to due diligence. The legal team approached a Berlin-based start-up that had developed a machine-learning platform for lease review.
‘Since we do not want the machine to do the entire due diligence, we use a mixed model of the software tool reviewing documentation and then, for certain key leases which are important from a business perspective, we have real lawyers looking at the documentation as well,’ says Matthias Meckert, head of legal at PGIM.
‘It’s a lot of data gathering and a machine can do those things much better in many situations: much more exact, quicker of course, and they don’t get tired. The machine could do some basic cross checks and review whether there are strange provisions in the leases as well.’
Similarly, transport infrastructure developer Cintra has looked to the machine-learning sphere for the review and analysis of NDAs, and is almost ready to launch such a tool in the legal department after a period of testing is completed.
‘People always find the same dangers in that kind of contract, so it’s routine work. It can be done by a very junior lawyer – once you explain to that lawyer what the issues are, normally it’s something that can be done really quickly,’ says Cristina Álvarez Fernández, Cintra’s head of legal for Europe.
Far from being a narrative about loss of control, AI in the in-house context is as much a story of its limitations as its gains.
Do you think that AI will be a disruptor in the legal industry?
‘If your own process is not really working right, if you don’t have a clear view on what you’re doing and what are the steps in between, using a technology resource doesn’t really help you. What do I expect, what are the key items I would like to seek? You need to teach the legal tech providers what you would like to have – it’s not like somebody coming into your office with a computer and solving all your problems – that’s not how it happens!’ says Meckert.
When introducing AI solutions – or any technology for that matter – having a realistic understanding of what is and isn’t possible, as well as applying a thoughtful and strategic approach to deployment is critical to gaining buy-in and maximising potential.
‘The risk is of treating new software capability as a new shiny box: “I’ll put all my data into the box and see if it works”. My sense is that AI is great for helping to do things in the way that you want to do them,’ says Barakzai.
Emily Foges, CEO, Luminance
‘The decision to apply our technology to the legal profession came out of discussions with a leading UK law firm, and the idea of using artificial intelligence to support them in document review work was really the genesis of Luminance, which was a great learning experience. For example, we had to teach Luminance to ignore things like stamps – when you have a “confidential” stamp on a document, to begin with, it would try and read the word “confidential” as if it was part of the sentence.
We launched in September 2016, targeting M&A due diligence as an initial use-case: an area of legal work in pressing need of a technological solution. Since then, Luminance has expanded its platform to cater to a range of different use-cases. The key to Luminance is the core technology’s flexibility, making it easily adaptable to helping in-house counsel stay compliant, assisting litigators with investigations, and more.
When a company’s documents are uploaded to Luminance, it reads and understands what is in them, presenting back a highly intuitive, visual overview that can be viewed by geography, language, clause-type, jurisdiction and so on, according to the user’s preferences. The real power of the technology is its ability to read an entire document set in an instant, compare the documents to each other to identify deviations and similarities, then through interaction with the lawyer, work out what those similarities and differences mean.
I view the efficiency savings of Luminance as a side benefit. As a GC, you want to have control over all your documents – know what they say, know where they are, know how to find them, know what needs to be changed when a regulation comes along, and have confidence that you have not overlooked anything. I think the real change we are seeing with the adoption of AI technology by in-house counsel is that lawyers are able to spend much more time being lawyers and much less time on repetitive drudge work. They are freed to spend time providing value-added analysis to clients, supported by the technology’s unparalleled insights.’
‘If you’ve got your organisational structures right, you can put your learning base into the AI to give it the right start point. My realism is that you mustn’t be unfair to the AI tool. You must give it clear information for its learning and make sure you know what you’re giving it – because otherwise, you’ve handed over control.’
Tobiasz Adam Kowalczyk, head of legal and public policy at Volkswagen Poznan, adds: ‘Although we use new tools and devices, supported by AI technologies, we often do so in a way that merely replaces the old functionality without truly embracing the power of technology in a bid to become industry leaders and to improve our professional lives.’
What’s in the black box?
Professor Katie Atkinson is dean of the School of Electrical Engineering, Electronics and Computer Science at the University of Liverpool. She has worked closely with legal provider Riverview Law, which was acquired by EY in 2018, and partners with a number of law firms in developing practical applications for her work on computational models of argument. This topic falls within the field of artificial intelligence and seeks to understand how people argue in order to justify decision-making. Her argumentation models are tested by feeding in information from published legal cases to see if the models produced the same answer as the original humans.
For Atkinson, a key aspect of the work is that it does not fall prey to the ‘black box’ problem common to some AI systems.
‘There’s lots of talk at the moment in AI about the issue of an algorithm just spitting out an answer and not having a justification. But using these explicit models of argument means you get the full justification for the reasons why the computer came up with a particular decision,’ she says.
‘When we did our evaluation exercise, we could also see how and why it differed to the actual case, and then go back and study the reasons for that.’
From a practical perspective, engendering trust in any intelligent system is fundamental to achieving culture change, especially when tackling the suspicious legal mind, trained to seek out the grey areas less computable by a machine. But Atkinson also sees transparency as an ethical issue.
‘You need to be absolutely sure that the systems have been tested and the reasoning is all available for humans to inspect. The results of academic studies are open to scrutiny and are peer reviewed, which is important,’ she says.
‘But you also need to make sure that the academics get their state-of-the-art techniques out into the real world and deployed on real problems – and that’s where the commercial sector comes in, whereas academics often start with hypothetical problems. I think as long as there’s joined-up thinking between those communities then that’s the way to try and get the best of both.’
British legal AI firm Luminance also finds its roots in academia. A group of Cambridge researchers applied concepts such as computer vision – a technique typically used in gaming – in addition to machine learning, to help a computer perceive, read and understand language in the way that a human does, as well as learn from interactions with humans.
CEO Emily Foges has found that users of the platform have greater trust in its results when it creates enough visibility into its workings that they feel a sense of ownership over the work.
‘In exactly the same way as when you appoint an accountant, you expect that accountant to use Excel. You don’t believe that Excel is doing the work, but you wouldn’t expect the accountant not to use Excel. This is not technology that replaces the lawyer, it’s technology that augments and supercharges the lawyer,’ she says.
‘That means that the lawyer has more understanding and more visibility over the work they’re doing than they would do if they were doing it manually. They are still the ones making the decisions; you can’t take the lawyer out of the process. The liability absolutely stays with the lawyer – the technology doesn’t take on any liability at all – it doesn’t have to because it’s not taking away any control.’
This understanding of AI as a tool as opposed to a worker in its own right was essential to framing the measured response that many of our surveyed general counsel took to the revolutionary potential of AI.
‘Depending on the role of AI, it can be an asset or a liability. However, AI will prove useless to make calls or decisions on specific cases or issues. It can, however, facilitate the decision-making process,’ says Olivier Kodjo, general counsel at ENGIE Solar.
A balancing act
The increasing prevalence of algorithmic decisions has caught the attention of regulators. A set of EU guidelines on AI ethics is expected by the end of 2018, although there is considerable debate among lawyers about the applicability of existing regulations to AI.
For example, the EU General Data Protection Regulation (GDPR) addresses the topic of meaningful explanation in solely automated decisions based on personal data. Article 22 (1) of the GDPR contains the provision that:
‘The data subject shall have the right not to be subject to a decision based solely on automated processing, including profiling, which produces legal effects concerning him or her or similarly affects him or her’.
This mandates the presence of human intervention (not merely processing) in decisions that have a legal or significant effect on a person, such as decisions about credit or employment.
The UK has established an AI Council and a Government Office for Artificial Intelligence, and a 2018 House of Lords Select Committee report, AI in the UK: Ready, Willing and Able? recommended the preparation of guidance and an agreement on standards to be adopted by developers. In addition, the report recommends a cross-sectoral ethical code for AI for both public and private sector organisations be drawn up ‘with a degree of urgency’, which ‘could provide the basis for statutory regulation, if and when this is determined to be necessary.’
Europe’s Race for Global AI Authority
Artificial Intelligence (AI) is on course to transform the world as we know it today. A 2017 study by PwC calculated that global GDP will be 14% higher in 2030 as a result of AI adoption, contributing an additional €13.8tn to the global economy. The same study states that the largest economic gains from AI will be in China (with a 26% boost to GDP in 2030) and North America (with a 14.5% boost) and will account for almost 70% of the global economic impact. In addition, International Data Company (IDC), a global market intelligence firm, predicts that worldwide spending on AI will reach €16.8bn this year – an increase of 54.2% over the prior 12-month period.
The runners in the AI race are, unsurprisingly, China and the United States, but Europe has pledged not to be left behind. The European Commission has agreed to increase the EU’s investment in AI by 70% to €1.5m by 2020.
Closing the Gap
The European Commission has created several other publicly and privately funded initiatives to tighten the field:
Horizon 2020 project. A research and innovation programme with approximately €80bn in public funding available over a seven-year period (2014 to 2020).
Digital Europe Investment Programme will provide approximately €9.2bn over the duration of the EU’s next Multinational Financial Framework (2021 – 2025). These funds will prioritise investment in several areas, including AI, cybersecurity and high-performance computing.
European Fund for Strategic Investments (EFSI). An initiative created by the European Investment Bank Group and the European Commission to help close the current investment gap in the EU. The initiative will provide at least €315bn to fund projects which focus on key areas of importance for the European economy, including research, development and innovation.
However, AI funding is not the only pursuit. While China has pledged billions to AI, it is the US that has generated and nurtured the research that makes today’s AI possible. In the research race, Europeans are striving to outpace the competition with the creation of pan-European organisations such as the Confederation of Laboratories for Artificial Intelligence in Europe (CLAIRE) and the European Lab for Learning and Intelligent Systems (ELLIS). CLAIRE is a grassroots initiative of top European researchers and stakeholders who seek to strengthen European excellence in AI research and innovation, and ELLIS is the machine learning portion of the initiative.
One main hurdle stands in the way of Europe and its run to the finish: the EU’s General Data Protection Regulation (GDPR). GDPR regulates EU organisations that use or process personal data pertaining to anyone living in the EU, regardless of where the data processing takes place, at a time when global businesses are competing to develop and use AI technology. While GDPR forces organisations to take better care of personal client data, there will be repercussions for emerging technology development. It will, for example, make the use of AI more difficult and could possibly slow down the rapid pace of ongoing development.
Individual Rights and Winning the Race
Europe has plotted its own course for the regulation and practical application of legal principles in the creation of AI. Ultimately, the advantages of basing decisions on mathematical calculations include the ability to make objective, informed decisions, but relying too heavily on AI can also be a threat, perpetrating discrimination and restricting civilians’ rights. Although a combination of policy makers, academics, private companies and even civilians are required to implement and maintain ethics standards, continue to question AI’s evolution and, most importantly, seek education in and awareness of AI, it will be a coordinated strategy that will make ethics in AI most successful.
‘From my end, it is the same old battle that we have experienced in all e-commerce and IT-related issues for decades now: the EC does not have a strategy and deliberately switches between goals,’ says Axel Anderl, parter at Austrian law firm Dorda. ‘For ages one could read in e-commerce related directives that this piece of law is to enable new technology and to close the gap with the US. However, the content of the law most times achieved the opposite – namely over-strengthening consumer rights and thus hindering further development. This leads to not only losing out to the US, but also being left behind by China.’
Anderl speaks to an uncomfortable reality nestled in among the ethics portion of the AI debate. While some remain concerned about the ethical questions posed by AI technology, this concern may not be shared by everyone. However, like most things, those who feel unrestrained by codes of ethics will be at a natural advantage in the AI arms race.
‘We are aware that if other, non-European global actors do not follow the fundamental rights or privacy regulations when developing AI, due to viewing AI from a “control” or “profit” point of view, they might get further ahead in the technology than European actors keen on upholding such rights and freedoms,’ explains a spokesperson from Norwegian law firm Simonsen Vogt Wiig AS.
‘If certain actors take shortcuts in order to get ahead, it will leave little time to create ethically intelligent AI for Europe.’
The ethics dimension also extends to the future treatment of employees. Despite headlines spelling doom for even white-collar professions, those we spoke to within in-house teams were reluctant to concede any headcount reduction due to investment in AI technology.
‘I don’t think this will replace entirely, at least so far, a person in our team other than in the future we would have a negotiation or similar, that we will cover that person with technology,’ says Álvarez Fernández, head of legal, Europe at Cintra.
‘I think this is going to help us to better allocate the resources that we have. I don’t think this will limit the human resource.’
And nor should it, says Atkinson:
‘You wouldn’t want to automate absolutely everything. One of the key aims with my work has been: let’s automate what we can, let’s try and improve consistency and efficiency,’ she says.
‘That ultimately helps the client and it frees up the people to do more of that people-facing work with their clients. People still want to speak to a human being on a variety of options and we still absolutely do need those checks from the humans on what the machines are producing.’
Whatever the future holds, the consensus for now seems to be that any true disruption remains firmly on the horizon – and although the potential is undeniably exciting, to claim that the robots are coming would be… artificial.
When it comes to the implementation of technology for in-house legal departments, getting buy-in from the rest of the business proved to be one of the most influential factors in the likelihood that a team was to have implemented technological solutions within their department.
71% of the in-house counsel surveyed for this report said that they felt their company was supportive of implementing new technology solutions. The remaining 29% did not.
This support manifested in the amount of budget allocated to in-house departments for technology spend: just 27% of counsel from non-supportive companies had been given an increased budget to spend on new technology, while 67% of those from supportive companies had seen an increase.
‘Money is nice, but implementing a new bit of technology will require the cooperation of the whole business – from the board down to the IT department. So money is something, but it’s not the only thing,’ explains one general counsel from the utilities sector.
Is your company supportive of implementing new technology solutions?
Those who did feel that their businesses supported them were empowered to actually implement legal technology into their departments: 95% reported that they had used specialised legal technology within their department, compared to just 58% of those who did not receive the same support. They also tended to be from larger teams, with over half being responsible for teams numbering ten or more.
Despite being a predictor for the level of technology use within departments, comparing those who felt their organisation was supportive of the implementation of new technology with those who did not unveiled some interesting insights.
Those who were well supported in the implementation of legal technology (and therefore more likely to have actually done so) were, on the whole, less cynical about technology: just 34% felt that it would greatly disrupt the legal profession in the next five years. At the same time, 39% thought that today’s lawyers were adequately equipped to deal with technological disruption within their profession.
Compare this to those who were not well supported, where 42% were as positive on the question of current lawyers’ preparedness. Just 27% felt that technology would greatly disrupt the legal profession in the next five years.
6% of those who said they did feel that their organisation was supportive of implementing new technology said that they felt that technological disruption would be a negative for the legal industry, compared to 4% of those who did not feel supported.
The amenability of teams to the use of new technology was also significantly different between the groups: 73% of those in non-supportive organisations said that their team members were receptive to the use of new technology, as opposed to 94% in supportive organisations.
This may have as much to do with the composition of those groups as anything. Counsel whose businesses did not feel supported tended to be from larger companies in more traditional sectors. 80% of those that felt their businesses did not support them belonged to businesses with annual revenues of at least £1bn, and 31% were responsible for a team of more than 10 lawyers. Over half were from companies involved in financial services – the likes of banking, insurance and audit.
‘With a smaller team, you tend to be more agile in your budget choices,’ says one general counsel in the fintech sector. ‘Also, with a smaller headcount, the actual investment you’re asking for from the business is likely to be much less than if a multinational bank was to look to adopt a global legal tech solution.’
Of those who reported their company as being supportive of implementing new technology solutions, just 39% felt that today’s lawyers were properly equipped to deal with technological change, 92% felt that AI would be a disruptor to the legal industry and 94% felt that their team members were receptive to new technology. For those who felt their company was not supportive of implementing new technology solutions, the numbers were 42%, 88% and 73% respectively.
Unease with the anticipated digital and disaggregated future is real in many dusty corners of the legal profession, and with around 1,400 legal tech companies fighting for a share of the global legal services market, the prevailing story has been the threat these offerings pose to traditional law firm models. However, this narrative hides a subtler shift in how some law firms are approaching this impending disruption: they are working with the innovators, not against them.
Getting into bed with the enemy
In the past two years, law firms have started to create technology incubator programmes within their own walls. Much like the ecosystem of incubators and accelerators famous in Silicon Valley and tech hubs around the world, the idea is to take a business concept in the early stages of development and provide any combination of support, mentorship, facilities and even investment.
This shift might seem counterintuitive to some: why would the old hands team up with the young upstarts whose end goal, in many cases, is to capture the law firm’s own clientele of general counsel who are under continued pressure from the board to minimise their contribution to the $600bn dollar global industry that is big law?
For some firms, engagement with start-ups is the result of a process of introspection, one that began in an attempt to root out the pain points of its lawyers’ working lives.
This growing cohort of law firms is convinced that that there is much to be gained from a willingness to demonstrate a pragmatic grasp of today’s legal marketplace.
Typically, the rewards for the law firm are financial: should they hit on a unicorn, the monetary returns can be huge, as well as the reputational boost given by being associated with a true disruptor in the legal market.
But while the money and fame are both good, oftentimes, the best rewards are less tangible.
‘It’s true; it’s difficult to show to the business real and tangible KPIs. They are more intangible ones,’ says Francesc Muñoz, chief information officer at Cuatrecasas, one of the many law firms around the world who have entered this space. Cuatrecasas is a Spanish firm that has teamed up with innovation platform Telefónica Open Future to create Cuatrecasas Acelera, an accelerator now on its third call after launching three years ago. Cuatrecasas Acelera supports companies at the pre-series A1 phase with mentorship in marketing, finance and business models, as well as 20 hours of free legal advice from 40 participating Cuatrecasas lawyers.
For Cuatrecasas, working with a multinational blue chip like Telefónica has amplified the reach and impact of its Acelera programme. But Telefónica itself also reports the benefits of collaboration in extending influence in the innovation space.
‘On one hand, our network of partners extends our reach and provides us with shop windows to new industries and ecosystems. This allows us to learn from them and eventually enter new markets, hand in hand with market leaders. On the other hand, our partners help us improve our value proposition to entrepreneurs by putting more resources, investment and business development opportunities on the table,’ explains Agustín Moro, global head of partnerships at Telefónica Open Innovation.
‘But some of the start-ups that we are helping become small clients and we hope that they become, in the future, big clients. So you are putting some seeds into the business sector to see if start-ups grow in the future,’ Muñoz adds.
Edmond Boulle, co-founder, Orbital Witness
‘The team comes from the space industry and, when we set up, we were looking at how we could use satellite imagery to solve problems in real estate transactions and litigation. But the real pain points were around other datasets – so accessing all of the information that is required for searches, making that information easier to digest, easier to report back and then communicate to clients. Our system is learning what features to look for from the data, which trains our system to recognise the types of, for example, restrictive covenants, easements, restrictions on the Land Register, and other data sets outside of Land Registry data, that may be indicative of a particular risk in a given type of property transaction. We were one of the first start-ups chosen for the joint PropTech accelerator programme, Geovation, run by HM Land Registry and Ordnance Survey, which means we have their help to innovate with their data.
We came to MDR LAB with very much a fledgling concept, being the earliest stage company they had taken on in the first cohort. The lab was helpful in a number of ways: in terms of access to great advisers, in understanding the wider real estate industry – not just the legal side. By far and away the most important thing was being able to sit down with over 40 of their real estate lawyers, day-in day-out, and just go through how they work in an almost forensic way. This allowed us to identify which bits don’t add value to their practice and were time consuming and repetitive, which we could then meaningfully make an inroad into, in terms of helping them with speeding up or automating.
A good solution is one which works at both ends, so they made introductions to their clients – in fact we’re piloting with a few of them as well. It will be between the law firm and the client to decide how best to allocate the use of our platform, so maybe the client can do some of the work in-house, and then the law firms can maybe do the deeper dive on the due diligence themselves a little later on, and still get the benefit of using us to work more quickly and more effectively.
Lawyers are still typically very risk averse – even among the firms who are pushing innovation, fundamentally, some individual lawyers are more risk averse. I think there’s a sense in which you can be welcomed in initially, and then it can soon feel that you’re having to battle more traditional attitudes. But then, I don’t even put that on the law firms. They are responding to the risk that their clients are willing to take. So if their clients express a desire to take a little bit more risk, the reward from it will be a faster and lower cost service. Quite often, they want to reduce fees as well, but they still want that quality service.
Very recently, at an insurtech conference, someone made a really nice point that when lawyers talk about innovation, they often use the image of a robot. And when they talk about machines replacing lawyers and a) how concerned they are by that, or b) how ridiculous they think that is, they also use the image of a robot. So even in the industry, they’re not quite sure what to make of this.
We’re starting to make some great headway; we’re working with a number of early adopter law firms who are highly respected in the field, and a leading title insurance company and we are going to continue along that path, at least until the end of the year. There’s a point at which you can’t call the next client an early adopter any more!
We’re working very closely with our first customers because their feedback really helps accelerate product development. And Mishcon de Reya was our first customer. We’re also piloting and testing our products with small teams and GCs at the clients of the law firms that we work with. The issues around that are quite interesting because if you’re working with a big law firm with upwards of 50 lawyers, you have one pricing model, which has to scale appropriately and allow for disbursable cost elements. But then you come to an in-house team with three or five people, so you have to think, “How do I make my pricing model work for them?” It’s a different game. How do you go from being a product that’s serving large departments, to serving a client with a smaller number of lawyers in-house if, for example, you are offering a subscription service?’
Those seeds could include investment, although that is not the point, says Muñoz. At Cuatrecasas Acelera, the firm doesn’t take a stake in the businesses that pass through the programme. But the agreement includes an option that, at the next investment round, Cuatrecasas could invest under the same conditions as the lead investor, up to a percentage.
‘It’s really quite a minor percentage of the start-up. It’s completely an option, but other acceleration programmes take a stake in advance of 2%, 3% or 5%,’ says Muñoz.
Culture change
But there is a broader cultural benefit to be enjoyed much sooner, according to Muñoz. ‘You are putting the most innovative people that you can find in your sector in contact with your lawyers, with your teams. It creates a really beautiful circle and a lot of passion within the people that are interacting with them and giving advice,’ he explains.
The head of another law firm-founded incubator agrees: ‘I’ve seen how the legal sector is quite traditional, but also how the firm’s people – the partners, the associates – have actually become a lot more innovative in their thinking just by spending time working on a day-to-day basis with those start-ups based in their building. And actually, with the companies from last year, the majority have continued to work with the firm and have integrated inside, so the firm is now using these new technologies, making them a whole lot better, and they’ve changed their own mindsets, too.’
However, opening up to innovation often means letting go of a mindset focused on success, ingrained by the often adversarial nature of both litigation and corporate law. The reality of start-up life is the ever-present whiff of failure, and that is something that law firm lawyers, accustomed to being the experts, must adjust to. For many, that’s a case of learning how to ‘fail better’ and move on. Being the expert in one vertical might simply not be enough in today’s marketplace, where openness to innovation might be less of a soft skill and more of a business imperative.
‘As a former lawyer for stock markets, I always keep an eye on the new trends in the legal tech niche. The transformation speed in this traditional vertical is so fast that I could not think of a law firm that aspires to be market leader without working with start-ups and using their technologies. All the leading firms that I am aware of have programmes or initiatives to capture and benefit from innovation,’ says Moro.
Making a mark
In a profession often noted for its resistance to change, there can be kudos for those bold enough to be a first mover. According to Edmond Boulle, co-founder of Orbital Witness, a start-up real estate intelligence platform that employs satellite imagery and property data analysis to flag legal risk in real estate transactions, there is a clear advantage for those who get in on the ground at an early stage in technological development.
‘They have a meaningful say in product development. We are listening to that and we are designing our products around the things that they are telling us are painful. They are seeing iterations of the product and feeding back on that, so if you’re an early adopter, you’re bespoking it a little bit to your style of working. As soon as you’ve got a critical mass of customers, it ceases to scale from the start-up’s perspective to adapt your product to individual needs and preferences, and from the customer’s perspective, it’s more of a fixed offering,’ he says.
But, perhaps the bottom line speaks loudest. A spokesperson at one law firm accelerator claims that a growing willingness to embrace technology has meant that not only is there no better time to be a lawyer – but that the efficiency savings of legal tech could even grow market share.
‘Let’s be fair, some parts of a lawyer’s job are not very fun. You don’t want to stay up reading the same lease a thousand times, you don’t want to chase signatures at midnight or hang out at the printer. You want to do the legal work and so the technology enables that by taking away a lot of the drudgery. The smart lawyers understand that they can pull that off, they can get more work, win more competitive panels, they’ll grow their share of clients and have a more fulfilling legal practice.’
A helping hand from Goliath
For the legal tech start-ups themselves, the benefits are much more tangible. For Orbital Witness, coming into the MDR LAB, run by UK law firm Mishcon de Reya, was an opportunity to adapt a fledgling space tech concept – it was the earliest stage company the lab had taken on in its first cohort – into a viable legal tech one, by gaining an inside view of the workings of a law firm.
‘The genesis of the Orbital Witness platform, frankly, was seeing lawyers’ desks covered in papers – from the local authorities, from specialist search providers, from the Land Registry – and every time they were trying to find a piece of information talking about a property, instead of being able to jump to what they wanted, they were either searching through document management systems on their computer or rooting through the desk strewn with papers. It just struck me as very laborious,’ recalls Boulle.
But on top of the opportunity to forensically analyse the working methods of 40 lawyers in the firm, Orbital Witness was able to learn about the real estate industry beyond the legal side and, crucially, meet some clients.
‘We’re piloting with a few of them now. And we’re actually going a little bit further than that as well: we’re building collaborative tools. We saw that a lot of time goes into emails and phone calls between a lawyer and a client. Now, obviously, that’s part of the personal relationship with the lawyer and client, and that’s not going anywhere. But if you’ve got five emails back and forth trying to describe what part of the land the lawyer is talking about, that’s just inefficiency. So by bringing both the lawyer and the client onto a collaborative workspace on the platform, you can cut out a lot of that needless, repetitive back and forth,’ explains Boulle.
For some firms, engagement with start-ups is the result of a process of introspection.
Other benefits for start-ups that join such innovation spaces might include the opportunity to adapt an existing product to a new legal and regulatory environment, or to get that first customer. Those in the latter position face a slow, and sometimes demoralising sales cycle into big law of 18-24 months.
‘We started as a DMS (document management software) six years ago with a focus on law firms. After some years, we realised that law firms are slow to decide and that they don’t have the big budgets large corporations have for growing their organisations. Therefore, we changed our strategy and began offering our product and service to large corporations,’ explains José Manuel Jiménez, CEO of Webdox, a Chilean start-up and beneficiary of Telefónica’s Wayra Chile programme.
Beneficiaries of law firm accelerators benefit from compressing that cycle by piloting their technology to an audience with an intellectual, if not financial (yet) stake.
If a law firm doesn’t ultimately take the bait, the legal tech model, often comprised of Software as a Service companies charging per user even while their founders sleep (as opposed to billing hours), seems to be increasingly appealing for institutional investors – which bring professional management expectations and software company economics into the legal tech ecosystem.
Don’t fear the new legal ecosystem
The result of all this is a new ecosystem within the legal community. Firms are no longer at odds with legal innovators, and lawyers shouldn’t let a fear of ushering in their replacements stop them from securing benefits of their own out of this new norm.
But is any residual fear within the legal services industry justified? At Cuatrecasas, Muñoz thinks not: ‘We don’t see lawyers disappearing from here; we see keeping probably the same amount of lawyers – doing different things, sure, and in a different way, sure – with more support of technology, probably working much more with engineers in order to set up a full legal service, not only legal advice.’
Boulle agrees that the sector will change, but not necessarily to the detriment of lawyers. ‘Certainly the product that we have now is just about starting to make their lives easier and better, and it works in symbiosis with them – we can’t work without lawyers,’ he says.
‘I think there is room in certain parts of the industry to remove particular tasks from lawyers altogether. I don’t think of ours as a “putting lawyers out of a job” tool, it’s just simply saying there are some things where, if the volume and cost of the work means it’s not feasible to have a professionally qualified individual doing a detailed analysis, it makes more sense to balance the risk and the cost and have a machine to assist in the process.’
The realist of start-up life is the ever-present whiff of failure.
In-house legal departments, driving this market with their continued disaggregation of external support, also stand to benefit from a diversified job market for their own skills, as the legal tech sector expands, offering hybrid legal-entrepreneurial roles.
Of course, this is likely to be some way off. Legal tech companies with true brand recognition remain few and far between, with much of the investment cultivating companies applying state-of-the-art technology to commonplace tasks like contract review – hardly the stuff of dreams. And as companies progress beyond the start-up stage, growth will be a challenge, as multiple small operations compete for the bandwidth of law firms.
If the law firms incubating and accelerating legal tech are to believed, private practice has more to gain than lose from embracing technology. An easier life, greater professional satisfaction, and an enlarged – and happier – circle of clients who remain loyal because they share in the efficiency dividend all beckon for those with open minds.
But for those who think that is too good to be true, perhaps becoming a stakeholder in the digital future is at least a way to avoid ending up at its sharp end – sharing the gains of technology rather than counting among its casualties.
It’s no secret that general counsel are being asked to do more with less – in fact, that’s likely true for almost all facets of business in the current climate. But rather than piling up hours at desks to make ends meet, the results of our survey suggest that an increasing number of in-house teams are turning to technology in order to improve efficiency within their departments.
80% of the in-house counsel surveyed reported that the use of technology within their departments had increased over the past five years, with 21% describing that increase as significant. But that number didn’t align with an increase in budget for technology, with only 56% reporting an increase in budget over the past five years – a figure which the underlying numbers reveal to be significant.
Of the 44% of respondents who did not receive an increase in budget, only 4% reported a significant increase in the use of technology within their departments, with 30% reporting no change or a decline in use. That figure stands in contrast to those who did receive an increase in budget, where 86% of departments reported a subsequent rise in technology use – suggesting that those teams who did receive an increase in budget were not only spending it, but ensuring that it was being deployed across their departments.
For those with stagnant budgets but a desire to utilise new technological solutions, looking internally instead of externally was a common solution – although the numbers suggest that it’s not having the impact seen by those with deeper pockets.
‘Because we’re at heart a technology company, we’ve been able to mobilise our internal resources to help our department become more modern. Our IT department have been proactive in working with us to implement new systems, while members of the legal team have sought solutions which emulate what other departments are doing, only without the associated cost,’ reported one general counsel from the IT sector.
That sentiment wasn’t uncommon – particularly from general counsel heading smaller departments. For legal teams of ten people or less, only 47% reported seeing an increase in their budget for technology.
‘There is still the need for smaller teams to provide increased efficiencies, but the budget doesn’t allow for it. It’s then left to us to find ways to use technology to provide efficiency, but essentially for free. That’s not to say it can’t be done, it’s just more difficult,’ said one general counsel from the consumer goods sector.
Have you received an increase in budget for technology over the past five years?
Teams with smaller headcounts had the worst rate of uptake of technology, with 42% of departments with less than ten people saying that they didn’t use any legal technology at all (compared to 7% of departments with more than ten people). Despite that, all of the general counsel from smaller departments who were yet to implement specialist legal technology said that they believed it can enhance outcomes for in-house legal departments.
One general counsel from the food and beverage sector said that while they saw the potential for technology to have a positive impact on in-house legal departments, for smaller teams, the type of work it could currently assist with meant that it would not provide a meaningful return on investment.
‘Technology will improve efficiency on a long-term basis, however, this will most apply for standardised processes or transactions. Larger teams will see higher benefits. At present, I do not yet see a great benefit for small teams dealing with non-standard issues,’ they said.
While reporting a moderate increase in the use of technology within his own legal department, Konstantin Pogrebezhskij, deputy head of legal for Kronospan GmBH, says that a small headcount – not necessarily budget – can make implementing meaningful technology solutions a challenge.
‘The main disruption for us, generally, is the time required to customise the technology solutions and fill the data into it. At some point, you feel that you waste the time saved by the technology just to keep it running,’ he says.
For teams with a larger headcount, particularly those with more than 50 people, technology was seen as a higher prerogative. 100% of respondents in legal teams numbering between 50 and 100 employees said that they had both received an increased budget and had actually increased their technology use in the past five years.
Those with very large legal teams – those with a headcount of more than 100 employees – fared slightly worse than those with a headcount of between 50 and 100, with 61% reporting an increased budget and 72% saying their use of technology had increased.
One general counsel from the banking sector attributed a lower increase in budget and technology for the very largest teams to an unwillingness of these general counsel to upset the status quo.
‘Technology forces in-house teams to identify low-level repetitive work and to find solutions for it which do not involve large amounts of legal manpower,’ they said.
‘That remains a challenge and perceived threat for a certain cohort of in-house lawyers, but an opportunity for those genuinely keen to focus on more strategic work.’
