The pressure on general counsel to innovate could be having a trickle-down effect on the external legal advisers they instruct.

The overwhelming majority – 91% – of in-house counsel surveyed for this report felt that it was important that their external advisers kept abreast of new technologies.

‘It is absolutely essential,’ says Gábor Kukovecz, head of legal and operations at Diageo. ‘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. In the near future, we will implement a collaboration software in which we work together with our external law firms that they must also fully implement.’

How important is it that your external law firms keep abreast of new technologies?

Despite there being a common recognition that it is an important factor, nearly as many in-house counsel reported that they didn’t know if their external providers were implementing technology to deliver their legal solutions (36%) as those that answered that they were (40%). Just 37% felt satisfied with the use of technology by external firms; 25% were not satisfied, and 38% were unsure.

As the conversation around alternative fee structures and the traditional firm-client relationship continues, many in-house counsel made the point that there is no reason that their efforts to reduce costs and increase efficiency via technology shouldn’t be replicated by their external counterparts. After all, in a number of ways, the GC is to the law firm as the business is to the GC – which is to say, the GC is the client and it should be incumbent on the firm to provide the best value for money.

‘Clients are no longer willing to pay for high numbers of billable hours when they are aware that many tasks can be done faster and cheaper,’ opined Tobiasz Adam Kowalczyk, head of legal at Volkswagen Poznan.

Are you satisfied with the use of technology by your external law firms?

‘Paralegals and associates who once devoted hours for document review can be now easily replaced by e-discovery processes. In a constant pursuit for efficiency and optimisation, clients expect more for less, which has made the legal market even more competitive. Fresh players have entered the market, providing clients with automated and cost-cutting solutions. I see automation as the way forward, making projects smarter and more efficient. Legal automation won’t be un-invented, and – eagerly or not – more and more firms will need to adopt it out of necessity.’

There are also rewards to be reaped in terms of collaboration. The initiatives taken by external firms can serve as a useful model for in-house teams trying to create efficiencies of their own.

‘External firms must have technological systems updated in order to provide us with the most modern solution and to share it with our internal legal team,’ said Ana Soriano, head legal counsel at Inveravante.

Not everyone is as bullish on technology, however. To some, the use of technology is mostly smoke compared to other, softer competencies.

‘The improvement I actually want from law firms is not based in technology,’ said Ruth Pearson, general counsel of LendInvest. ‘I’d be far more inclined to instruct a firm that could demonstrate an investment in understanding their clients – for example, by hiring non-lawyers to improve their commercial acumen and understanding of what drives their clients, moving away from billable hours to a client-focused incentive structure, understanding risk appetite and being able to advise within those parameters, than a firm that thinks it can demonstrate technological innovation.’

‘I prefer a good lawyer not using tech to a bad lawyer using tech,’ stated the general counsel of one large French manufacturing company.

When asked if the question of technology arises when undertaking a panel review of external advisers, just 35% said that it was a factor, while the majority (41%) said it wasn’t a factor at all. With panels becoming narrower and more deliberate all the time, the points on which firms differentiate themselves will take on an increasing importance. Given GC’s evident interest in the use of technology by external firms, this factor may grow in significance in the near future.

‘Depending on the jurisdiction and the business activity being undertaken, it is of moderate importance,’ said the group counsel of one global engineering company. ‘However, in the selection of lead counsel for C-suite-led matters, it has moved to the forefront of selection criteria.’

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.

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.

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.’

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.

The proliferation of blockchain technology has forced nearly every sector to re-examine traditional ways of doing business. Nowhere is the potential more apparent, or the sector more traditional, than in the negotiation, creation and execution of contracts. If the blockchain evangelists are to be believed, the manner in which parties’ contract will be changing drastically in the not-too-distant future. But while a number of high-profile success stories illustrate the transformation potential of the technology, it’s clear that there is still a way to go.

Blockchain understood

To understand blockchain technology and the potential value that it brings to business, think of how an ordinary business transaction works: there is an agreement and exchange of goods or services between parties. Each party keeps their own ledger, which records the transaction. But because the ledgers are held independently, there is scope for discrepancy between them – be it through error, disagreement or fraud. Traditionally, this was mitigated by introducing a third party to the transaction – usually a bank. But reliance on a third party introduces cost and inefficiencies that need not be there if there was a way to create and maintain a singular, shared ledger – one that is equal parts transparent and secure.

Enter blockchain

A blockchain is a series of mathematical structures, inside which individual transactions are recorded. The record of each transaction – each ‘block’ – is mathematically contingent on the block that came before it. The transaction becomes a permanent part of the history of the blockchain and, in that way, it cannot be tampered with: once it is added to the blockchain, all subsequent transactions are recorded in relation to that block and all of the blocks that came before it. Following each transaction, the updated blockchain is distributed to each participant. In this way, blockchain becomes a decentralised ledger that is impossible to tamper with effectively: any attempt to change a record in the blockchain will put it at odds with the version held by every other participant in the blockchain, as well as all of the subsequent transactions that have been recorded.

Put simply, blockchain technology allows for a distributed, decentralised and secure ledger that eliminates the need for third parties, while providing a level of validity to participants that would otherwise have been impossible. It is this technology that has made cryptocurrency like Bitcoin a viable endeavour. But the applications of blockchain are far more varied.

Smart contracts

Smart contracts are one such innovation made possible by blockchain technology – though as a concept, smart contracts have existed since the early 90s. The idea is that instead of a paper contract – one that amounts to the words on a page and the interpretation that third parties give them – one could record a contract in the form of computer code. The code not only provides for the terms of the agreement, but the execution of it as well. When the obligations of one party are satisfied, the platform behind the contract will automatically release the benefit owed by the other party.

The key to smart contracts is decentralisation – there are no banks or other third parties involved in the execution of the agreement. The idea is to allow the creation and execution of a contract between two people to be as simple and direct as possible.

The obvious question follows: where is the smart contract actually stored and how can it be possibly be trusted?

Blockchain technology is the solution. The decentralised, theoretically uncompromisable central ledger makes for a perfect arbiter for the integrity of these agreements. Once coded, the smart contract is added to the blockchain ledger, with its integrity provided for in the same way as anything else on the blockchain. If the transaction calls for it, the money at stake can be paid by each party into the smart contract using cryptocurrency, at which point the contract will hold the money in escrow until the necessary conditions are satisfied.

In theory, removing the element of trust between parties to a contract should make for more reliability.

‘What we have realised is that smart contracts are rapidly becoming an alternative way to transact, with more than $10bn raised through smart contracts in the last 18 months,’ says Olga V. Mack, vice president of strategy at Quantstamp, a company working to build security infrastructure for blockchain-based smart contracts.

‘What we have also noticed is the rapid proliferation of this technology. The widely cited figure is that, globally, there were more than 500,000 smart contracts that existed one year ago. That number has grown to about five million that exist today. The use of smart contracts has been growing exponentially and is showing no sign of slowing down.’

Smart and secure

The trepidation surrounding blockchain and smart contracts is by no means limited to those that don’t understand it. Plenty of ardent advocates for the widespread adoption of this technology acknowledge that, like most innovations, users should exercise caution against overreliance.

The execution of the agreement is where the real value of smart contracts is realised, but the process of negotiating, agreeing and coding the contracts themselves necessarily requires a human element. As such, it is subject to the same kinds of vulnerabilities as virtually anything else. There have been a number of high-profile breaches and hacks brought about by improperly coded smart contracts that have resulted in the losses of millions of dollars. Because the process is decentralised, and the money is wrapped up in the contract itself, the normal process of testing, reporting on and fixing erroneous lines of code will not suffice. Smart contracts need to be airtight from day one.

The DAO is a smart contract protocol. By June 2016, over $250m worth of cryptocurrency had been invested in the DAO by nearly 20,000 individuals. On 17 June, a vulnerability in the core code of the protocol was exploited and used to drain over $50m in virtual currency.

Vulnerabilities in code are nothing new – even the most diligent traditional financial institutions commissioning software intended to govern staggering numbers of monetary transactions will not expect their code to be free of bugs or vulnerabilities. The potential for catastrophe should these vulnerabilities be exploited is limited: as soon as they are identified, they can be corrected and updated. But because smart contracts rely on the ever-present and immutable blockchain ledger, once a smart contract is let loose into the world, changing it becomes difficult, if not impossible.

This question has led to a burgeoning economy of auditors whose speciality is to review smart contract protocols in order to expose vulnerabilities. This isn’t perfect for the same reasons that any piece of code isn’t completely unexploitable, but the extra step of third-party verification may go a long way in making sure that would-be investors or end-users are confident.

Taking Blockchain In-House

Before taking on her new role as vice president of strategy at Quantstamp, Mack spent nearly a decade working as an in-house counsel, putting her in the unique position of being able to consider the impact of blockchain technology for corporate legal departments.

‘I think at a high level, the opportunity is not all that dissimilar from electronic signatures. I think it will free GCs to be more creative and more impactful on the business side. Smart contracts will be another tool at the disposal of the modern GC, but we’re probably not quite there yet – the infrastructure and platforms are being built as we speak,’ she says.

‘Once we figure out the platform protocol and infrastructure challenges, I would expect at that point the proliferation of applications to take place. It’s good for lawyers to get into this now, both to understand and frankly to help build it – so they are part of building applications as opposed to suffering the results of misinformed others building it.’

‘It’s certainly a revolution. But so far the most impressive applications I have seen are outside the legal world,’ adds Vincent Martinaud, counsel and legal manager at IBM. ‘The most advanced are in trade finance (we.trade consortium), global logistics (the cooperation with Maersk) and in the food ecosystem (Carrefour being the last eminent player joining Walmart, Nestlé and Unilever amongst others), and all these initiatives are underpinned by blockchain technology.’

The Maersk example that Martinaud refers to is TradeLens, the blockchain platform born out of a partnership between global shipping company Maersk and IBM. The aim is to bring the global supply chain into the future by using blockchain and smart contracts to enable smarter collaboration between importers, exporters, customs agencies and other governmental bodies to make international shipping a smoother process without compromising on auditability and security.

‘In the legal field, I don’t think there is anything comparable yet. I’m not saying smart contracts aren’t used or going to be used, but at this moment in time the technology is not as pervasive as in other, more mature sectors.’

It is not hard to imagine the potential uses of blockchain within the legal sphere: anything which relies on record-keeping between multiple parties could find value in the technology. Land registries, particularly in developing countries where record-keeping is beleaguered by inaccuracy and corruption, could be revolutionised, as could intellectual property registers around the world.

That blockchain technology hasn’t become a staple of the in-house toolkit makes sense: the broader business world is still working to realise its potential. It’s also a highly technical and often misunderstood area: while lawyers are used to quickly digesting and using foreign pieces of information, this is a different beast entirely.

As these innovations become increasingly common within business, lawyers will not only have to begin thinking about how they can be leveraged for use on their own in-house teams, but how they can put themselves in a position to give legal advice in a post-blockchain world.

This may not be a perfect fit for a profession that has long been accused of technological aversion.

Blockchain is a field where the two worlds of software development and legal expertise meet. As the applications of blockchain and smart contracts move towards the legal realm, the pressure is on for lawyers to grow their understanding of a field typically left to the CIO.

Gloria Sánchez Soriano, group vice president and head of transformation, legal at Santander, has considered how disruption of this kind might impact the kinds of lawyers that can thrive in in-house teams.

‘Lawyers, and the people we will be hiring in the future must be able to provide legal advice to innovative projects. If you don’t understand blockchain, it will be very difficult for you to provide advice on this. And we are also considering all this in our training programmes at the Santander Legal Academy,’ she says.

‘Santander has a department which is in charge of the legal advice of our innovation areas, but there are also many other areas – for example, corporate investment banking – which have just done a blockchain project with a very technological base, so the lawyers who were traditionally advising these businesses now need to be able to advise about technological issues.’

There is an appreciation among lawyers interviewed and surveyed for this report that while this technology will be important going forward, lawyers are currently not equipped to deal with the change. Just 14% of those surveyed felt that current lawyers were adequately equipped to deal with technological changes within their profession. 61% felt that they were not.

Ready or not, change is coming, but these changes don’t spell doom for the legal profession: they simply mean that there will need to be an adaptation.

‘I do think that it will transform the expectation of competency for lawyers. In doing so, I also ultimately think it will make our jobs more exciting so that we don’t have to do all those administrative things that can be minimised and we can really drive volume- and quality- generating for our businesses,’ says Mack.

‘I think the next 10-20 years will be an exciting time to practice law. We will have an impact, we will be true partners to other business units. There is an increasing trend for legal to be a partner, to be volume and quality generating and to measure all of that. I think this is a technology that will help us to get there sooner and will help legal to become embedded and solidify the support of any business.’

Trepidation and regulation

While businesses marvel at the potential of blockchain, governments around the world are fighting their own battles with the technology. With the potential of blockchain to have a major impact on many highly regulated areas of business, it is inevitable that a regulatory response is coming.

The philosophy at the foundation of blockchain already sits uneasily alongside current regulatory and governmental structures: for instance, the EU’s General Data Protection Regulation (GDPR) dictates that individuals be able to request for their personal information to be deleted by those that hold it, yet the biggest draw of blockchain is the permanence of its record.

The anonymity that blockchain provides for cryptocurrencies also lends itself to use in more illegitimate endeavours. Tax evasion is a concern. Because cryptocurrency transactions are not easily attributable to individuals (if at all, depending on the currency being used) it makes it difficult for tax authorities to detect the lost tax revenue and punish those involved.

Then there’s the hard kind of criminality – money laundering, terrorist financing and drug dealing. For these, the EU has already taken steps to include cryptocurrency in the existing regulatory framework. The latest iteration of the EU’s Anti-Money Laundering Directive (AMLD5) brought cryptocurrency exchanges and certain e-wallet providers within the scope of the regulation. It would put these entities in the same position as traditional firms when it comes to their obligations to implement preventative measures and report suspicious activity relating to money laundering. The new directive entered into force in July 2018, meaning that EU member states will be required to comply by 10 January 2020.

The AMLD5 is not comprehensive, and certain corners of the cryptocurrency world are not covered, including certain wallet providers and independent trading platforms. Also, being an EU creation, it is only applicable to EU member states. As adoption of this technology grows, the need for global collaboration will increase, given its borderless nature.

Other jurisdictions have taken a more suspicious view of the technology. China banned cryptocurrency entirely in 2017. In the same year, South Korea banned initial coin offerings and interested parties are now eagerly waiting to see how the government proceeds from here. Japan was one of the first countries to recognise Bitcoin as a currency, though regulators have been silent on other blockchain-backed innovations.

The tension at the heart of proposed cryptocurrency regulation is an old one. With convenience and efficiency at the core of the blockchain and smart contract value proposition, the inevitable attempt by world tax authorities to take their cut of these transactions may hinder the core draw of the technology. On the other side of the coin, is there really any need for complete anonymity when it comes to financial transactions? This tension will inevitably shape the approaches to regulation of blockchain technology and, ultimately, play a major role in uptake – both for in-house purposes and beyond.

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.

Francesco Gianni

Founding Partner Gianni, Origoni, Grippo, Cappelli & Partners Chairman

World Services Group

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.

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.

‘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.

‘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.

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?’