Blog. The future of legal services. Part 6 of the series ‘Disruption and new business models’
We live in a fascinating and rapidly changing world. Together, technologies such as robots, artificial intelligence, the Internet of Things, self-driving vehicles, 3D/4D printing, solar energy, nanotechnology, biotechnology and quantum computing are initiating a 4th Industrial Revolution. We are witnessing new products, new methods of production and new business models across all industries. This is Part 6 of the series Disruption and new business models, discussing the future of legal services.
Technology for lawyers: Legaltech
In the financial services industry we have Fintech, in healthcare Healthtech, in legal services Legaltech. Lawyers and notaries are perhaps not seen as being overtly innovative, but technological developments within this sector are gaining momentum and have become inevitable. Both technology companies and an increasing number of legal startups from home and abroad are forcing larger and more established offices to make changes. In the Netherlands, the legal platform for innovation, Dutch Legal Tech, now boasts 750 members.
Technological innovation can occur in a range of areas. Legal services’ marketing methods have changed due to the development of online platforms upon which service providers and customers can meet. Online tools used for drawing up contracts (DIY) are also gaining popularity.
Legaltech’s real breakthrough comes from the use of artificial intelligence and machine learning, affecting the core duties of lawyers and notaries. Robots take over routine tasks and do these more efficiently and cheaply. Don’t forget, a great deal of knowledge work is also based upon routine. Robo-lawyers significantly change the role of the legal professional.
Let’s start from the very beginning.
Platforms increase market transparency
One of the first consequences of digitisation was the advent of online platforms set up to help consumers and business owners find a lawyer or notary. Degoedkoopstenotaris.nl has been online since 2000 and provides users the means to request price quotes from notaries. Advocaatzoeken.nl and LegalDutch offer a similar service for law firms. Such platforms publish tariffs and collect customer feedback regarding work carried out by lawyers and notaries. They provide more transparency and more competition within the market.
In practice, the creation of a contract often comes down to cut and paste. For each section of a contract, lawyers and notaries have a list of variants with which they can create a custom contract. The more common contract types, such as contracts of employment and confidentiality agreements, are available on the internet as free samples. Websites including gratismodel.nl, tuxx.nl and personeelsman.nl work according to the freemium price strategy: you may download employment contracts or other contract types for free and only have to pay for additional advice or assessment by a lawyer.
Other firms, such as doehetzelfnotaris.nl, Firm24, VraagHugo and Ligo have automated their processes to such an extent that customers are able to draw up their own contracts using an online tool. For this service, these companies charge flat rates. Ligo and Firm24 focus solely on business owners and have notarial acts and attestations available for the setting up of and making changes to private companies using the same model. Doehetzelfnotaris.nl can be used by both businesses and private individuals who, for example, would like to set up a last will and testament or enter into a civil partnership.
Besides charging a fixed rate per contract, we also see subscription models whereby any number of contracts can be made for a fixed monthly fee. These are new revenue models which can also be found at an increasing rate within other types of legal services.
Automated contract review
Checking leases, employment contracts, purchase and sales contracts, and delivery terms and conditions is a time-consuming and, for most lawyers, a less than exhilarating occupation. In the United States, LawGeex can detect which contract clauses are unusual, missing or in need of adjustment within the hour through the use of algorithms. LawGeex’s customers are primarily company lawyers. Legal Robot is currently working on a similar application.
Investment bank J.P. Morgan has developed a self-learning system for analysing commercial loan agreements. They say this system saves 360 thousand hours (approximately 180 FTE) of lawyer and loan officer work per annum, as well as making fewer mistakes. The same technology is also applicable for other contract types and banking products.
Of even more interest and significance is the arrival of the robotised lawyer. The Dutch startup Lega Lloyd (‘legal self-service’) provides an automated lawyer known as Robo-lawyer. He not only creates contracts, but can also give legal advice.
IBM Watson’s ecosystem is hosting the artificially intelligent lawyer Ross. Following on from IBM Watson’s work within healthcare, Ross takes on significant amounts of research work and gives specific legal advice. Ross is self-learning, becoming smarter as more firms work with him. In May 2016, Baker & Hostetler became the first law firm to hire Ross. Since then, the names of 10 American law firms working with Ross have been made public.
As these systems become more widely available and less expensive, the legal departments of companies much smaller than J.P. Morgan can also start to make use of them. They will then be able to significantly reduce outsourcing to law firms. Routine work might be boring, but it is still very lucrative.
Arbitration and mediation by robots
If artificial intelligence systems which are able to forecast court judgements are used by all lawyers and judges involved in a case, we can also foresee robotised mediation. As we mentioned in an earlier blog, insurance claims for damages can be settled between two robots (machine-to-machine); it should therefore also be possible to digitally mediate legal conflicts.
Online arbitration is currently limited to the facilitation and optimisation of an arbitration process by allowing the exchange of documents between parties via electronic file and conducting meetings via webcam instead of in the office. Things become really interesting when an artificially intelligent robot, and not a human, reaches a verdict based upon available data. The technological possibilities are rapidly multiplying, but we have not yet reached this milestone.
Third party litigation funding: no cure no pay
We saw earlier that fixed prices and subscription fees for legal services are taking root. These address the customers’ need to know the exact legal costs involved upfront. In protracted proceedings where hourly rates are charged, legal costs may be high while the probability of a lawsuit being successful is never 100%.
For those companies who forego litigation because of the abovementioned reasons, third party litigation funding can offer a solution. Companies like Redbreast and Liesker Procesfinanciering will fund a lawsuit in exchange for a share of the proceeds should the case be won. For customers, this is the equivalent of ‘no cure no pay’. Of course, only the more promising cases are taken on by third party litigation funders.
Blurring industry boundaries and the focus on customer needs
We are used to the combination of lawyers and notaries at a single address. More full-service concepts are now emerging with businesses extending their services into the fields of taxation, accounting and risk management. Their market positioning as a legal service provider is not focussed upon a product, but upon total solutions which meet the customer’s needs. Firms specialising within a limited number of sectors are also a part of this movement.
Impact of technology on the industry
Technological developments lead to the democratisation of legal services. The consequences for lawyers, notaries and other legal professionals are huge and already observable.
On the one hand, law firms are under pressure to find alternatives to the traditional ‘hourly rate’ earnings model. Transparency in both pricing and customer reviews have resulted in more competition. In addition, the number of hours spent on a case can be considerably reduced through the use of a robot. Developments in artificial intelligence mean that lawyers will no longer enjoy a monopoly on legal knowledge.
In contrast, the demand for lawyers is constantly on the increase, one of the reasons being the importance that companies attach to compliance. Moreover, new platforms and fixed-price systems make legal practices more accessible, which may in turn result in more demand for legal services from private individuals, the self-employed and small businesses. And for the professionals, isn’t it fantastic to be able to spend less time on routine work and invest more in creativity, strategic issues and customer contact?