We have all heard various iterations of the term; âlegal-techâ, âdisruptive technologyâ and âinnovationâ, but what do they really mean beyond the mere cover letter buzzword? Who develops it? What does it mean? Here, we aim to capture a broad snapshot of the state of legal-tech in the UK to give you a comprehensive understanding of such technology and its implications.
Legal technology (âlegal-techâ) is the use of technology and software to provide or aid legal services. Contrary to popular belief, this does not entail an anthropomorphic robot delivering legal advice to a client. Instead, it encompasses a plethora of technological applications that aims to support, supplement or replace traditional methods for delivering legal services. These can range from simple contract drafting aids to complex data visualisation solutions.
Although there isnât a widespread adoption of some standardised mainstream technology akin to a Bloomberg Terminal for law just yet, the past few years have seen admirable efforts - not just in departing from a reluctance to technology - but a genuine driving force that is transforming the way legal practitioners fundamentally work. London, above all other countries, is the intersection where law and technology meets, and is spearheading the frontier towards industry-wide transformation. We see this in firms such as Allen & Overy or Clifford Chanceâs incubators, the emergence of various startups and companies in delivering modern solutions to practical problems, and a steady adoption from various legal professionals in adopting new technology.
London as a hub for investment and development
A recent and growing demand from clients for faster, cheaper and more transparent legal advice has pushed the need for firms to harness legal-tech to increase efficiency and reduce costs. The UK is ahead of the legal-tech curve when compared to the rest of the world, as many medium to large city firms are increasingly buying, testing and adopting various legal-tech; most notably AI driven softwares.
On a global level, 2019 saw $1.2Bn in legal-tech investments, with the UK playing a significant role. A Law Society analysis in 2019 reports that global tech investors are drawn to London for its âstrengths in developing the latest cutting-edge technologiesâ. A potential catalyst to the growth of UK legal-tech innovation could be attributed to the Legal Services Act 2007, whereby accounting firms and other professional services can now provide legal advice; a possible explanation for the lawyersâ ârace to the topâ for innovation and/or client retention?
Beauhurst reports that whilst UK legal-tech equity investments remained largely dormant for years leading up to 2017 Q4 (compared to FinTech and general AI), the last two years saw a modest yet promising rise, with UK equity investments standing at $782m at about 80 rounds of funding. Moreover, London provides a healthy ecosystem for innovation, particularly in AI, with multiple suppliers providing AI solutions, universities offering AI related degrees, and long term institutional capital support for AI. This is underpinned by the cityâs draw as a global financial hub, itâs melting pot of diversity and itâs robust legal market in creating a strong foundation for innovation. This gives the UK a competitive edge over leading Asian legal-tech hubs such as Singapore and Hong Kong.
However, the UK (and the world in general) is still in its infancy when it comes to legal-tech compared to established industry-tech developments such as FinTech and RegTech; that is, whilst the UK beats the US in start-ups per capita, most companies are in the seed/Series A stage of funding, meaning they have yet to fully develop their end-user products, while more established legal-tech solutions like ThoughtRiver may only be wholly adopted by a handful of select firms. What this tells us is that while there is a growing appetite for technological solutions, technological providers are plentiful albeit scattered and premature.
What are these solutions then? We can broadly split them into two categories: Business-to-Business (B2B) and Business-to-Consumer (B2C).
Image by techMarketView in the report LawTech Adoption Research (Law Society 2019 p.16) Â retrieved the 1st of June 2020.
B2B
B2B legal-tech applications include most of the solutions you may have heard of: automated contracts, cloud-based services, eDiscovery, case management...etc. Law firms realise a level of efficiency to be attained with technology taking on the laborious workload often resulting in hours upon hours of sub-productive work. By streamlining operational processes such as the classic contract drafting and review or due diligence, firms may see a reduction in overhead costs in the long-run, although they might suffer the initial blow of investment, from reduced fees to complete training restructuring.
Clifford Chance, Allen & Overy and Barclays Bank, amongst many other professional services firms, have some type of legal-tech initiative, thus showing a promising future for innovation in the short to mid term beyond the mere âinnovation status quoâ.
Allen & Overyâs Fuse incubator provides a platform for innovation by allowing legal-tech companies to join their yearly âcohortsâ for collaborative innovation with lawyers and clients. Of these companies, London based Avvoka - an end-to-end contract automation company founded in 2016 - allows lawyers and clients to collaboratively draft and edit contracts without the need to go back and forth in email when making amendments. Avvokaâs competitive edge lies in its user experience, whereby it markets itself as an easy and comprehensive tool to use for all parties to a contract, whether it be an NDA or a loan agreement.
ThoughtRiver provides another good example of a meaningful B2B application, whereby it screens contracts using natural language processing capabilities (an AI subset) to highlight risks and noteworthy areas of importance to highlight to a lawyer, thus cutting down their task from hours of reading to a matter of seconds.
Whilst contract management seems to be increasingly pervasive, legal project management is making waves in the field. Another time consuming aspect of corporate legal advice is the laborious âback-and-forthâ between lawyers, clients and various stakeholders in a potentially complex deal. Project management softwares thus allows for a more seamless procedural experience by software solutions such as automated task lists, templates, workflowâŚetc, which potentially increases margins regardless of fee arrangements.
London based HighQ does exactly that by providing management solutions to multiple aspects of firm-client relations all in one comprehensive platform similar to Blackboard.com for university students. For example, their litigation management platform allows for clients and lawyers to track and exchange important documents while updating or even completing outstanding administrative tasks in real time, thus reducing the many hours spent by a secretary or paralegal. HighQ was recently acquired by Thomson Reuters, which shows some degree of Allen & Overyâs success with Fuse in providing and accelerating promising startups.
UK law firms and institutions appear to be embracing technology much more than their US counterparts. ThoughtRiver for example, has been adopted by Shoosmiths and Eversheds Sutherland, and HighQ claiming â53% of Global 100 law firmsâ as their clients, including Linklaters and Morgan Stanley (London offices).
The list does not end there. There are countless more companies offering more cutting-edge solutions such as case outcome prediction, data visualisation and automated risk management currently in the works that would not fit this article. Nevertheless, it is safe to say that the UK is leading the world in legal-tech development and adoption especially within larger corporate focused firms.
B2C
The B2C side of legal-tech is less mature in comparison to the operations-heavy focus on B2B technologies, and is less of a focus within the legal-tech ecosystem for the time being. Â Here, technology is harnessed directly for a consumer; the aims of which differ from that of streamlining complex corporate grunt-work. Â
Various legal B2C initiatives focus on providing greater access to justice to people without an absolute need for a lawyer or firm. Similarly in finance and accounting, we see the rise of robo-investors and websites such as TurboTax allowing people to negate the need to hire a professional to handle their financial affairs. The same innovation should apply to law to allow for individuals or businesses to know their rights and liabilities.
The greatest application for B2C lies in e-conveyancing through Robotic Process Automation such as Land Registry integration tools in streamlining dealings in land. London based Farewill offers a platform for comprehensive and easy will writing services using technology. In the same vein, legal chatbot solutions are in its infancy, which provides simple automated advice for simple legal matters (such as road traffic disputes). However, much of this software is limited to the extent of NLP development in truly becoming commoditised for the average consumer.
While B2C legal-tech has the potential to truly disrupt the consumer relationship with law, a Law Society research finds that B2C remains small and fragmented for the time being, with little appetite or capabilities for now past the simple procedural solutions outlined above.
Image by LawTech Adoption Report (Law Society 2019 p.41) retrieved the 5th June 2020
The future?
While legal-tech is certainly gaining traction as a whole, there is still much to be done for certain technologies to become mainstream or commoditised. The B2B and B2C softwares outlined above only scratch the surface in the greater/global legal market, with emerging softwares with case-outcome and blockchain capabilities currently being developed into the legal space. While it should be noted that steady progress is being made in the UK, widespread adoption is still far away, with critics observing that many of the firms buying new technologies are doing so for the sake of demonstrating innovation to their clients.
Another reason for adoption barriers is that legal-tech solutions are just that: solutions. It is largely reactive to client needs, which is why we may see a contrast in legal-tech development in Asian capital markets (i.e Singapore and Hong Kong) where there is a greater demand for RegTech and Anti-money laundering solutions, whereas the UK sees a greater AI/contract focused presence in light of it being a hub for business and transaction.
The embryonic nature of legal-tech also means that proper regulations need to be set in place, and that is before even considering exogenous factors such as the global economy and appetite for innovation in these uncertain times. Nevertheless, the international exposure of the UK, combined with its solid position in law, technology and finance creates a promising ecosystem by which London leads the legal-tech race worldwide, with close competition in Asia.
The inherent uncertainty of tech startups also means that legal-tech funding, incubators and softwares - while indicative of some degree of legal-tech market maturity - cannot directly correlate to mainstream adoption, let alone success or industry disruption. Project management-esque company Atrium (which had a $75m valuation) Â shut down due to operational difficulties with their business model; a sober reality emerging companies may have to face before we ever get close to true industry disruption.
One thing is certain though, and that is that change is the norm; innovation is inevitable regardless of whatever software or machine it manifests in in the near future. While we wonât see machines âreplacingâ lawyers who possess the human psyche clients pay for, the profession will definitely see a shift towards retraining and cross specialisation. Firms may start hiring new tech specialist roles within their teams, and we may even see âlegal-techâ vacation schemes emerging. With all that being said, it is therefore better for professionals to adapt now before they are eventually forced to.
Author: Ryan Fong
Edited: Bryher Rose
Links for further reading:
https://www.lawsociety.org.uk/support-services/research-trends/lawtech-adoption-report/
References:
Allen & Overy LLP âFuseâ (Allen & Overy website, Advanced Delivery & Solutions) Â <https://www.allenovery.com/en-gb/global/expertise/advanced_delivery/fuse> accessed 3 June 2020
Avvoka Ltd âHow are we different?â (Avvoka website) <https://avvoka.com/how-are-we-different/> accessed 4 June 2020
Beauhurst âThe Deal: Equity Investment in the UK 2018â (Report, 2018) <https://growthinvest.com/wp-content/uploads/2019/07/Beauhurst-Report-Equity-Investment-in-the-UK-2018-7.pdf> accessed 3 June 2020
Josh Constine, â$75m legal startup Atrium shuts down, lays off 100â (TechCrunch, 4 March 2020) Â <https://techcrunch.com/2020/03/03/atrium-shuts-down/> accessed 3 June 2020
CognitionX âLondon: The AI Growth Capital of Europeâ (Report, 2018) <https://www.london.gov.uk/sites/default/files/london_theaigrowthcapitalofeurope.pdf> accessed 5 June 2020
HighQ Ltd âAbout usâ (HighQ website) <https://highq.com/en-us/about-us/> accessed 4 June 2020
Law Society, âA comparative analysis of legal technology in the UK and in other jurisdictionsâ (Report, November 2019) <https://www.lawsociety.org.uk/support-services/research-trends/lawtech-comparative-analysis-of-legal-technology-in-the-uk-and-other-jurisdictions/> accessed 2 June 2020
Law Society, âLawtech Adoption Researchâ (Report, February 2019) <https://www.lawsociety.org.uk/support-services/research-trends/lawtech-adoption-report/> accessed  29 May 2020
Legal Services Act 2007
Marc Shoffman, âFarewill Review - The smartest way to do a will?â (moneytothemasses, 11 March 2020) <https://moneytothemasses.com/tax/inheritance-tax/farewill-review-the-smartest-way-to-do-a-will> accessed 2 June 2020
ThoughtRiver Ltd âHow it worksâ (ThoughtRiver website) <https://www.thoughtriver.com/how-it-works> accessed 3 June 2020
