Legaltech and the legal services industry in Spain
What does Legaltech mean?
Legaltech describes a company that is dedicated to information technology and communication to create and offer legal services more efficiently and at lower cost.
Accordingly, if a law firm uses technology in such a way that it ends up offering its clients a value equal to that offered before implementing the technology, that is not a case of legaltech. For example, the corporate website of a law firm usually does not represent an example of legaltech, but an application that allows the clients of an office to download legal documents in a secure way and allows real time to all queries formulated could be. Thus we could say that the key to knowing if we are dealing with a legaltech case lies in the creation of relevant “added value” for the client and for the firm thanks to the use of technology.
Legaltech manifests itself in various legal activities and at various times in the provision of legal services (which includes not only services offered by law firms but also services provided by notaries, judges, prosecutors, legal publishers, etc.). Such activities and topics can be categorized in the following groups: automation and document review, legal research, information analysis, compliance with obligations, online dispute resolution, legal practice management and process improvement, digital platforms or marketplaces, and legal education.
The year 2017 will likely be remembered as the year where, at least once, all lawyers have spoken the word “legaltech”. And in Europe, probably, the Legal Industry Forum has been, so far, the most representative European event of the year in legaltech (April 6, 2017). I was fortunate to attend and participate in this legal innovation event where I was the only Spanish lawyer.
The event convened a select group from the European legaltech scene and revolved around four major themes: legal design, artificial intelligence, big data, and marketplaces.
The main idea that I take from this event is that technology is at the service of the human being and not the other way around. Therefore, technology is at the service of the lawyer who in turn is at the service of his client. Legaltech does not consist of implementing technology in your office; it involves understanding the market, society and especially your clients and as a consequence, offer them a better professional service using the tools that technology puts at your disposal today.
If you want to know what was discussed in Zurich as well as my personal reflections on the event I invite you to read the official chronicle that the organization put me in charge of producing.
Legaltech in Spain
The Spanish entrepreneurial ecosystem continues to grow. After the protagonism of fintech, insurtech, healthtech and proptech it is time for legaltech entrepreneurs.
And indeed, in recent years the number of legaltech companies and projects in Spain have increased (currently it is calculated that there are 98 legaltech companies and more than 100 legaltech projects installed throughout Spain, source “Legaltech in Spain, very first steps” by Jorge Morell). Among them, there are projects that I find very powerful and others, in contrast, that I do not think will last many years due to the absence of a viable and scalable business model.
Along with legal entrepreneurs and legal startups, there have appeared digital publications – blogs and portals – devoted totally or partially to the study of this phenomenon (to cite the most relevant: Replicante Legal, Legaltechies, Derecho Práctico, ExO Profesiones, Juristas con Futuro and Algoritmo Legal); companies dedicated to offer consultancy and advice related to the subject (to mention some of the best known: Tucho Consulting and the Instituto de Innovación Legal); prominent legal journalists concerned with reporting on developments in legal technology, such as LuisJa Sánchez, Carlos Fernández Hernández from Wolters Kluwer, and Hans A. Böck from Lawyerpress; interesting events such as the Legal Hackaton, JustiApps and Congreso de Legaltech y Startups Jurídicas; and programs for the selection, incubation and acceleration of legal startups such as Cuatrecasas Acelera and Legaltech en South Summit, promoted by the law firms Cuatrecasas and Garrigues, respectively, and Legálitas Lab sponsored by the firm Legálitas. And I must also mention the publication of studies on trends and innovation in the legal sector, such as this report by Lefebvre El Derecho.
There is no turning back. Legaltech has come to Spain to stay. The transformation that it will generate in the legal services industry, though gradual, I believe will also be decisive and intense. The fervent desire for profitability has begun to push law firms and corporate legal departments to adopt technologies that make them more efficient.
Nowadays, the legal industry is more complex than before (there are more laws, more regulation and more branches of law) and the legal obligations imposed on companies (and individuals) are greater than in the past. However, the budget that companies have to hire lawyers has been reduced.
Therefore, although the range of services offered by lawyers has increased, today they face the challenge of having to offer more legal work for less money. One way to compensate for this decline will be to expand the spectrum of legal services but within a framework of technological innovation. Therefore, in my opinion, technological innovation will be the main way to achieve efficiency in the legal sector over the next few years.
What will happen in the next years?
Computer programs and software should help lawyers to perform their legal duties more efficiently in order to provide better service to their clients. Therefore, software that automates simple processes and does not change the obsolete modus operandi of the legal production chain will institutionalize waste. The challenge is to identify what, how and when to automate a legal task. In order to overcome this challenge, law firms must seriously consider contracting legal technology experts to assist them in this work.
Lawyers will not be replaced by software. Only a portion of their legal work will be automated in order to achieve performance improvement. Younger lawyers will focus their work on less repetitive activities as these will be done by computer programs.
While not all legal services are likely to be offered through a business model of platforms or marketplaces, those that are suitable for it can generate profitable business for their creators (not lawyers but legaltech companies). It is expected that there will appear analysts of the dynamics of the provision of services in the legal industry who are dedicated to detecting business opportunities in order to propose the creation and distribution of legal services through platforms.
In my opinion, contract automation works best in a B2B (business-to-business) business model than in a B2C model (business-to-consumer) because in the first model, profitability can be higher and deontological problems do not exist. Legal startups who intend to offer a contract automation service directly to final clients will have to overcome two challenges: (i) clearly identify the lawyer who makes the final revision of the legal document before delivering it to the final customer, in order to leave no doubts as to who actually provides the legal service and thus respect ethical codes and consumer regulations, and (2) take into account the possible civil liability that could be assumed by the company in the face of its clients in the event that a judge subsequently declares their automated contract invalid or ineffective.
On the other hand, I believe that it will be the great legal publishers that will end up dedicating themselves – directly or indirectly – to the automation of legal documents (they have the technological infrastructure for this task). Proof of this is the agreement reached by the American legal startup Rocket Lawyer and Lefebvre El Derecho to offer in Spain what they call “Simple Law” (“El Derecho sencillo”).
The main ideas of this post can be read in Spanish in an article published here.