Is LegalTech transforming legal services?

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Who will be affected by LegalTech first?
The ‘first cabs of the rank’ for the digitisation of legal services concern legal services digitisation of large transactions, e.g. the sale or purchase of assets such as companies or commercial plants and property, and high-stakes litigation / investigations. The transformation of due diligence and discovery as these processes are known, is already well on the way. Due diligence describes the process of assessing the suitability and value of an asset for sale or purchase. Major transformation opportunities also arise when managing large portfolios of similar legal documents, e.g. the management of IP portfolios such as trademarks and patents, leases or complex company structures and governance obligations. E-discovery in large scale litigation and investigations is the area of rapid change. LegalTech for e-discovery, due diligence and investigations continue to evolve at a rapid pace. Here LegalTech is often the only way to ‘find the needle(s) in a haystack’ quickly and with predictable costs. The highly profitable eDiscovery/investigations and Due Diligence LegalTech segment itself generates approximately 70% of LegalTech global revenue and profits. It is also an area of law that is mostly governed by common law principles, but used globally, even in countries with a civil law system. In addition, the entire process surrounding the automation, creation, negotiation, collaboration, management and renewal of contracts has started to transform the sector. This is known as contract lifecycle management and applies both to common and civil law jurisdictions, e.g. Switzerland and the EU. It also included aspects of blockchain technology.

In all these areas, it is helpful to look at who the actors are at present and will be in future. What do you think, who will be affected?
Historically, there were three participants, i.e. inhouse legal teams, commercial law firms and the courts. Today and moving into the future, the players are becoming far more diverse. Beyond the three incumbents, we find for example:
• Contingent workforce players such as LOD (Lawyers On Demand) or Axiom to cover peak workloads for which the inhouse teams cannot cater.
• IP management LegalTechs that offer a combination of services and platforms.
• Legal Project Management platforms that offer inhouse legal teams services and technology for competitive tendering and monitoring of large transactions.
• Specialised e-billing and bill analysis LegalTech providers help monitor law firm invoices and ensure that they conform to pre-agreed rules.
• Transaction platforms with facilities to share documents securely in so called data and deal rooms and manage the structured ‘question & answer’ process that is integral to the competitive sale of an asset.
• The rapidly growing legal arms of the Big4 accounting firms are getting involved in many of these areas by partnering with LegalTech platforms and providing a mix of project management, advisory and legal services in ‘co-opetition’ to commercial law firms.
• Even some of the largest court systems have started to digitalise their services. For example, the UK is in the midst of transforming all its courts to a digital platform. The same applies to China, New Zealand and some EU countries.

Will LegalTech take off in Switzerland? How can commercial law firms and inhouse legal departments prepare for digitisation?
Law firms – and to some degrees inhouse legal departments – are known to mostly act as ‘fast followers’. This seems especially true in markets like Switzerland, Germany and Austria where at the top-end demand for legal services continues to outstrip supply. The need for change is only just now becoming obvious as large multi-national corporates have experienced digitised legal services elsewhere and are pushing for their local providers to fall into line globally. The lag in LegalTech adoption in Switzerland and Germany is in part due to the court and regulatory environment lagging other geographies. For example, Swiss regulators are only now coming to terms with some of the ‘digitisation basics’ like electronic identities, electronic signature, the use of cloud technologies in general and software as a service in particular. This has put Swiss LegalTech start-ups at a serious disadvantage when compared to the UK, the Benelux countries and Scandinavia.

Can we learn from what others are doing?
Learning from expert practitioners is one of the most effective ways to start the LegalTech journey. It is far preferable than having to sift through the hype and sometimes questionable claims from LegalTech vendors. Practitioners are also able to convey what it takes beyond technology to succeed in transforming one’s business. The Executive School at St.Gallen University, for example, offers a learning series called ‘Fit 4 LegalTech’ that is dedicated to learning from experienced LegalTech leaders working for law firms and inhouse legal teams. Fit 4 LegalTech is a new initiative which was run for the first time in 2019. Another very effective way to get started with a LegalTech project is the participation in the Swiss or European Legal Tech Associations, SLTA and ELTA. Both offer outstanding conferences, meetups and other events.

What is the outlook?
DACH law firms, regulators and the courts have a great opportunity to make up for what may appear as ‘lost time’ when it comes to transforming their businesses with the help of LegalTech. Many innovative corporate legal departments are leading the way, in the DACH region and elsewhere. We will do our utmost to contribute a lively, well-informed, practical and constructive dialogue to foster the successful transition of the LegalTech industry in the corporate world.

Portrait Gerard Neiditsch