Law firms, in-house teams and individual lawyers are all struggling to stay abreast of legal technologies, and while some are faring better than others, the ways in which tech is reshaping traditional practice are beginning to take shape. Leo Long reports
In August, Baker McKenzie became one of the latest international law firms that have adopted artificial intelligence (AI), mainly in handling M&A and other transactional work. The firm hired eBrevia, which employs AI or cognitive computing to analyse and extract information from contracts. According to Ned Gannon, CEO at eBrevia, based in Connecticut, its products allow non-technical users to “train” the software themselves to extract custom terms and meet specific needs.
While lawyers have to spend hundreds of hours analysing countless documents and conducting reports, this kind of AI tool does it in a few seconds, after “training”. That means law firms and their in-house counterparts can save time and money, and inevitably, their headcount of lawyers, by having AI do the repetitive work.
The threat has never been so close for lawyers now that the first batches of AI tools have landed their jobs in law firms since last year. But the legal tech story started at least 10 years ago, when pioneering companies like Rocket Lawyer and LegalZoom elbowed into the legal market to compete with traditional law firms and information companies. These young players changed the legal market with new business models that were quickly picked up by start-ups around the world.
But compared to other tech industries with billion-dollar investments, legal tech is still nascent, even for relatively developed regions in Europe or North America. In 2016, the investment in legal tech was only US$155 million for 67 deals, the biggest one being a US$18.6 million financing of e-Discovery software CS Disco, according to consultancy CBInsights. Nonetheless, it is undeniable that legal tech is rising.
With economic growth in the Asia-Pacific region, Western legal tech pioneers have moved eastward. In early 2017, Cyril Amarchand Mangaldas deployed the AI tool Kira for its legal work, claiming to be the first law firm in Asia to use AI. In September, WongPartnership also embraced AI as the first Singaporean law firm of this kind adopting technology from London-based AI firm Luminance to support its corporate/M&A practice. The platform’s intuitive solutions to transaction documents ensure that the firm’s lawyers can focus on key documents from the outset to conduct due diligence and other contract review processes more effectively.
Noah Waisberg, the co-founder and CEO of Kira Systems based in Toronto, says its machine learning technology has gained “exciting momentum” in Asia.
“Just like in the other markets we’re present in, we’ve seen our customers in Asia adopt holistic approaches to innovation that show a real commitment to the long-term transformation of their business,” says Waisberg, who also sees “incredible growth in the number of legal tech companies and their impact on the practice of law across Asia”.
Gannon, from eBrevia, is also confident about his company’s growth in Asia. “The Asian market is open to adoption of legal technology,” he says. “To address the demand, we are rapidly iterating our software to meet the unique requirements of this market, including additional language capabilities and more pre-trained provisions.”
Learning from the Western forerunners, local tech-oriented legal start-ups are also mushrooming and catching up.
For example, under the Chinese central government’s initiative to promote entrepreneurship, dozens of Chinese legal tech companies were born and obtained rounds of multimillion-dollar funding in the past five years.
Wusong Technology is one of the leaders in China. At the end of last year, the Chinese online legal service platform raised US$17 million Series B round funding, making it one of the biggest investments for legal tech in the world.
The company started by running a WeChat account in 2014, then marched into the area of case database with more than 40 million cases, and in 2016 launched an AI chatbot called Faxiaotao, which offers users case analysis and helps them locate lawyers.
Jiang Yong, the founder of Wusong Technology, is positive about China’s legal tech market, though it is still in its infancy.
“The impacts of technologies like internet, big data and AI on legal technology in China are more obvious than in developed legal markets,” says Jiang. “Therefore, legal tech in China is quite promising.” He believes China will probably surpass the US in the near future in terms of data accumulation and scenario applications of AI.
Having contact with thousands of Chinese lawyers through his work, Jiang thinks both the country’s authorities and people are ready to embrace legal tech, and to some degree it has received more tolerance than elsewhere in the West, which explains the fast growth in the nation.
“What makes China different is that its authorities attach great importance to legal tech and drive the research in this area, while investors are also paying attention to legal tech,” he says. For example, many courts in China have already set up online portals for document submission.
Singapore has also taken an innovative and forward-looking approach, which allows the proliferation of new law models and technology for lawyers to better serve clients.
Earlier this year, the Singaporean government released a S$2.8 million (US$2 million) Tech Start for Law scheme, offering funding support for legal tech. In July, the Singapore Academy of Law announced a programme called Future Law Innovation Programme (FLIP), which aims to prepare legal professionals for impending technological disruption.
“We want to catalyse innovation within the sector, prepare our legal community to become future-ready, and provide them with the ecosystem needed to develop new business models and new legal technologies designed for the digital age,” says Noemie Alintissar-Mooney, the manager of FLIP and also a legal tech entrepreneur.
Countries like Indonesia also show positive trends. “The President of Indonesia [Joko Widodo] fully supports the establishment of innovative startups, and the number is expected to rise,” says Brilly Andro, vice president of innovation and operations at PopLegal Indonesia, a legal tech company in Jakarta offering products in company incorporation services.
Like many Asian countries, Indonesia has a low ratio of advocate to citizen, at 1:10,000, while in the US the ratio is 1:250. “When there’s a lack of manpower, we believe there’s a lot of demand,” says Andro, who believes the legal market there will soon boom and be “bigger than any other industry”.
Apart from eye-catching AI, legal tech also covers contract automation, lawyer searches, big data and analytics, e-discovery, legal research and deal management, practice management software, intellectual property or trademark services, and online legal services. New sectors such as litigation finance, smart contracts, online mediation and other cross-sectors are also gaining traction.
Products in niche legal areas covering real estate, compliance or debt recovery could also be applicable to tech upgrades. For instance, Averspace is the first block-chain-driven real estate renting platform in Singapore aimed to assist users signing rental agreements securely on a digital contracts system.
Primarily, there is interest in document automation and AI technologies. Hong Kong-based Dragon Law is an active player in this realm. “Dragon Law makes technology for creating, storing and e-signing legal documents,” says Daniel Walker, CEO of Dragon Law.
Walker says that more than 15,000 small and medium-sized businesses across the Asia-Pacific region now rely on the platform to digitise their back office and bring their legal work onto the cloud. Dragon Law also has a deep interest in AI and recently recruited the former CEO of an AI company to help build products.
Legalese is a web application in Singapore for startups to create, modify and generate fundraising workflows. “As we grow, we fully expect to be a full-stack startup,” says Alexis Chun, co-founder of Legalese. The company received S$600,000 (about US$440,000) in funding commitments earlier this year.
Chun says Legalese chose startup fundraising for two main reasons: the pain point of the startup fundraising domain for many startups; and a sufficiently complex set of documents that would allow them to build a tailored language for this kind of application.
PopLegal Indonesia also serves businesses, but focuses on incorporation or licensing services. Andro says there are more than 1,000 new established companies every month just in Jakarta. “Our aim is to become a one-stop legal solution, so we are gathering major legal needs from our market based on our data, and we provide services that fit to their demands.”
Andro says another promising trend in Indonesia lies in digital signatures. PrivyID, an Indonesian startup in this sector, is said to have more than 500,000 registered users for legally binding digital signatures, and secured a pre-series A round funding in June.
Lawyer search is another popular direction in many countries. “Up until now, the public could only find lawyers either through word of mouth or by referrals from bankers and property agents,” says Loo Soon-yi, founder and CEO of CanLaw, a lawyer-discovery platform in Malaysia. “This is due to lawyers having very limited marketing means, as strict publicity rules govern the profession.”
According to Loo, CanLaw allows users to send in their legal issues, compare, and then book an appointment. The company has formed a partnership with the Malaysia Shariah Lawyers’ Association and will launch a lawyer-discovery platform dubbed CanLaw Syariah in November.
Most legal tech products break down traditional barriers to “unlawyered” and “underlawyered” individuals and businesses in accessing legal services, while some are lifting lawyers out of labour-intensive routine workflow.
Similar to the lawyer search for individuals, some applications help lawyers find partners. For example, Locum Legalis is an application in Malaysia to help litigation lawyers engage other litigation lawyers for Mention-On-Behalf matters, where they are not able to attend.
The widespread application of technologies also brings to the legal community a trend of the gig-economy, which indicates the preference of law firms and in-house clients to independent contractors and freelancers rather than full-time employees. Many lawyers also prefer a more flexible work-life balance in this NewLaw style.
The legal consultancy firm KorumLegal, in Hong Kong, features this kind of flexibility. It has lawyers on-demand who provide support to clients, either within their teams or remotely as a virtual in-house counsel, according to Titus Rahiri, the consultancy’s founder and director.
“Clients have demanded more efficiency and alternatives to traditional law, which was, and in some cases still is, predicated on the Cravath hourly billing model and partnership structure,” says Rahiri. He adds that the consultancy also keeps close to developments in legal tech products and solutions, and is building its own technology solution.
FirstCOUNSEL in Singapore offers similar online on-demand legal support for startups. “Through our platform, which uses a combination of contract automation and omni-channel support, we are connecting customers with a curated group of specialist lawyers who work gig-economy style, on individual projects or longer secondments,” says Azmul Haque, co-founder and CEO of FirstCOUNSEL.
Haque says it has more than 200 active registered users enjoying their document templates and other services, and they have an average of three to five contracts purchased per customer. “Ninety percent of our customers are first-time users of legal-related services and so the growth potential is there,” he says.
Lawyers in charge
It is also interesting that the CEOs or founders in most of these legal tech companies are experienced lawyers. For example, Jiang of Wusong is the managing partner of Tiantong Law Firm in China; Haque of FirstCOUNSEL is a managing director at Singapore-based Collyer Law.
Most of these lawyers have ambitions to make a difference for the legal industry harnessing technology. Lai Chee Hoe, founder of Malaysian lawyer-search platform BurgieLaw, is also a founding partner of Chee Hoe & Associates, which he says he founded to offer “a better access to lawyers from the public” and to “do away with touts and word-of-mouth reference”.
By contrast, another professional service industry, accounting, tapped technologies long ago. The accounting software company Intuit has market capitalization of more than US$30 billion.
“Now, software is eating law. But who is the category leader in computational legal? That’s a billion-dollar question. We plan to be the answer,” says Chun of Legalese.
It’s not just individual lawyers; law firms are joining the competition, and China provides a good example. Top Chinese firms such as King & Wood Mallesons are investing in legal tech companies; JunHe has participated in a co-ordination platform for lawyers called Lvxie; and Han Kun Law Offices runs an agreement drafting platform called Jianfabang.
Challenges and opportunities
It is inevitable that some legal tech companies have been weeded out. When we review lists of legal tech companies launched in the past few years, some are no longer running and some haven’t shown any growth.
The competition is increasingly fierce after entrepreneurs rushed into the market, and bad performers will not survive. “There are legal tech solutions being built that over-promise and under-deliver,” says Rahiri. “There are also products being built where the design and user experience is poor. Knowing the pain points in running a deal, or managing a dispersed legal team, or building legal and compliancetools and products, requires knowledge of the industry. Solving those problems requires innovative thinking.”
Apart from improving competitiveness, legal tech companies in Asia, which is a complex region to operate in, also need to tackle barriers from governments, lawyers and users. This is especially so for those operating in more than one jurisdiction.
“This is largely due to the complexities in the legal systems and, to a lesser extent, business and cultural differences,” says Walker of Dragon Law. “However, there is a lot of demand for cloud legal services in the region and fewer competitors compared to the US and Europe.”
In contrast to China’s tolerance, the biggest challenge in countries like Malaysia lies in regulations on legal practice, which forms a relatively rigid ecosystem. “As far as Malaysia is concerned, the regulators still prefer to take the conservative position when it comes to technological innovations that involve non-lawyer third parties,” says Loo of CanLaw. He says there is a need for a clearly defined, engagement-based regulatory framework for legal tech startups in the long run.
Dragon Law faces a similar challenge when entering the Malaysian market. “Dragon Law is not aiming to disrupt the legal industry,” says Walker. “In each of the markets that we operate, we work closely with the legal industry, government officials and legislative councils to ensure that we strike the right balance between the legal industry and the end-users.”
It is clear that legal tech can benefit lawyers, but changing the traditional mindset of conservative lawyers, individuals and business leaders in the region to legal innovation is a huge task.
“The old model of legal services delivery is no longer sustainable and clients are expecting more value from their providers, faster turnaround and more transparent fee structures,” says Alintissar-Mooney of FLIP.
Andro says the number one challenge is building legal awareness. “We realize that the solution may solve the problem faced by the market, but the process of adaptation to the solution is not as easy as we thought,” he says, adding that a different strategy is needed to adjust to the market in Indonesia, for example.
One reason is that some lawyers, understandably, show an enmity with the idea that lawyers will be replaced by tech. But this is still open to debate. On Baker McKenzie’s adoption of AI in August, the firm’s partner, Andy Leck, revealed ideas shared by many legal tech leaders: first, technologies will help lawyers but not replace high-value human talent input; and second, lawyers need to be equipped well with knowledge of technology in order to adapt and catch up.
It also may be soothing for some to understand that innovation is not omnipotent. According to a general counsel report by GlobalLegalPostc.com, about 30% of respondents think that communication with their law firms has not been improved though law firms seeking innovations for working with clients.
More think law firms are not trying to understand their legal needs. How to stay true to the mission of serving clients better and tackling their pain points is a question to answer for both innovative lawyers and legal tech entrepreneurs.