Artificial Intelligence and robotics are changing how legal work is done. Applications are ranging from relatively simple contract generators to sophisticated AI applications supporting due diligence before acquisitions, generating and reviewing complex contracts, mining precedents, and other documents useful in litigation and analysing actions, to identify potential misconduct or fraud. Also, Lawtech start-up companies are entering the legal market in a similar way to the Fintech phenomenon.

service innovations in the legal profession

Salla Vainio, CEO, Fondia

LAWTECH START-UPS BLOOMING

Lawtech companies seek to automate or streamline the routine tasks of legal work and try to disrupt the old business models and established law firms. Between 2012 and 2016 over 280 Lawtech start-ups raised $717 million according to technology start-up research firm CB Insights. Usually the start-ups focus on specific fields of law, such as patents or bankruptcy, but there are also companies offering more general applications.

WIDE VARIETY OF AI AND ROBOTICS ENABLED APPLICATIONS AVAILABLE

Contract generators are offered both to private persons and to companies for handling simple agreements like commercial or non-disclosure agreements, testaments, and divorce agreements. Applications available range from mere intelligent “fill-in” templates to complex applications. Templates have always been used in legal work, and these applications automate the filling of contracts with some reasoning added.

A Swedish company avtal24.se offers a wide variety of simple agreement types, prices starting from 5€ for a sales contract of a vehicle up to 150€ for a testament or a divorce agreement. For a company, prices range from 70€ for a proxy to 250€ for a Shareholder’s Agreement. The same approach can be used for drafting more complex contracts. For example, a Finnish law firm Castrén & Snellman is adopting automated contract drafting and document assembly.

Many international law firms, such as Linklaters, Berwyn Leighton Paisner and Clifford Chance, use AI for mass data searches. A Canadian start-up ROSS Intelligence offers an application to help legal teams sort through case law to find details relevant to new cases. With standard keyword searches on legal databases, the process takes days or weeks. ROSS is augmenting the keyword search with machine learning, which reduces the time needed by 90% and improves the relevancy of items found by 30%.

ROSS is using a combination of off-the-shelf and proprietary deep learning algorithms for its AI stack and IBM Watson for at least some of its natural language processing. Currently ROSS Intelligence is working with 20 law firms and they are offering their platform free of charge to law schools, bar associations, and non-profit organisations. In October 2017, the company raised $8.7 million from private investors to secure further development of the platform.

In some assignments there are huge amounts of legal documents to be reviewed, e.g. due diligence process in mergers & acquisitions. The initial review of contracts used to be tedious work for lawyers, and was usually performed by junior staff or paralegals. If there are any findings, they are handled by senior staff when necessary. The basic productivity challenge is that you do not know if the document is worth reading before you read it.

For the initial review, companies like LawGeex, ThoughtRiver and RAVN Systems are offering AI, machine learning, text analysis and natural language processing based services. AI -based review spots the potential risks, with proven better accuracy and within a fraction of the time needed previously. And AI tools are especially beneficial in cases where laws of different jurisdictions must be considered.

CASE FONDIA: DISRUPTION BY SERVICE INNOVATION

Disruption can also take place by developing new service models enabled by more traditional digital technologies. Finnish business law firm Fondia Oyj is a pioneer in renewing the legal industry in Finland. As their CEO Salla Vainio states: “Fondia’s strategy is to provide increased customer value by combining the benefits provided by an internal legal department and those provided by external legal service providers into a unique service concept loved by customers. This is a continuous service business model, where a legal department covering the daily business legal needs of a client company is offered as a service to companies. Not surprisingly, we call this LDaaS – Legal Department as a Service.”

Traditionally, assignments with outside legal advisory are agreed on a case by case basis and advisors invoice hourly. This leads to the tendency of minimising the use of expensive advisory services and sometimes yields less than optimal end results. The alternative to have an in-house lawyer or legal department, a luxury afforded only by larger companies. And even if a company could afford an in-house lawyer, the numerous special fields of legal knowledge require the use of expensive outside advisory, or taking unknown risks. LDaaS therefore makes it possible for small or medium sized companies to access lawyers familiar with company’s business and receive continuous advice like in-house legal departments.

The new service model is facilitated by the use of a digital collaboration platform, as Salla Vainio states: “The MyFondia platform is a digital working environment, developed by Fondia, intended for managing legal affairs as a whole; internal collaborative working; cooperation and communication between Fondia’s lawyers and their customers. The MyFondia platform enables digitalisation of the core legal workflow, whilst also bringing transparency. My Fondia development started in 2016 followed by launch in the beginning of 2017, and the platform is constantly being developed.

The service always starts with the evaluation of the client’s situation, resulting in an action plan to increase the legal maturity of the customer. The evaluation is supported by the MyFondia platform, using a digital interactive tool. All the information, findings, and project plans are stored in MyFondia. Both Fondia and the customer benefit from the results. For the customer, it gives a clear view on their legal maturity and risks, and makes the agreed actions transparent and easily traceable. Fondia experts involved with the client can subsequently use this info as an efficient induction to the customer case.

After the evaluation, the actual work with the legal department service begins. Managing the legal workflow is completely digitalised, even though the substance of the legal work is still human brainwork. Digital workflow introduces a lot of benefits compared to the traditional way of organising legal work. MyFondia provides tools for agreeing on, scheduling and reporting of the assignments, all communications, version control, controlled distribution, review and archiving of the work in progress and final documents. My Fondia also allows for both Fondia and client employees to work time and place independently, thus allowing for easier scaling and expansion of the LDaaS business concept.

Traditionally, lawyers tend to keep the documents and the interactions with the client in their own archives due to confidentiality, privacy and other good reasons. The MyFondia collaboration environment offers control over the distribution of sensitive information, only persons really needing information are given access. There is no need to send decrypted emails and attachments any more, as all information is stored within the secure environment. And when consultation or handover to another colleague needs to happen, it is easy to transfer all the necessary history of the case by granting access to new employees.

In the LDaaS concept, the greatest value for the customer comes from the established relationship with the virtual legal team knowing the specifics of the customer’s business and the digital workflow covering the relevant aspects of legal work, providing transparency and clarity not available in a traditional legal workflow. And where AI and robotics can add value, it is possible to integrate new tools and functionalities into an already fully digitalised workflow.

Fondia had a 15M€ turnover in 2016, being the 11th largest law firm in Finland and made an IPO in April 2017. They are the only listed law company in the Nasdaq First North Finland market. Salla Vainio states:

“LDaaS is the engine for Fondia’s growth. In 2016, 42% of the turnover came directly from LDaaS services, and 30% from additional assignments from LDaaS customers, totalling 72% of the turnover. Investors really trust our concept. The IPO was subscribed well over 10-fold. Our share price has now almost doubled during the first half year after the IPO.”

EFFECTS ON LEGAL SECTOR WORKFORCE

Professor Richard Susskind, co-author of The Future of the Professions: How Technology Will Transform the Work of Human Experts, predicts an unseen revolution in legal work:

“One question lurking in all this is whether someone can come in and do to law what Amazon did to bookselling. We won’t see anything as dramatic, but we will see incremental transformations in areas like the way documents are reviewed and the way legal risk is assessed.”

A study released by Deloitte in 2016 suggests that technology is already leading to job losses in the UK legal sector and predicts nearly 39% of jobs in the legal sector could be automated in the next 20 years. A 2013 Oxford University study “The Future of Employment: How Susceptible are Jobs to Computerisation” states that “We find paralegals and legal assistants are in the high-risk category… At the same time, lawyers, who rely on labour input from legal assistants, are in the low risk category.”

Andrew Arruda, CEO and one of the founders of ROSS Intelligence, has a more positive view on employment:

“I think we will see a rise of more jobs in the legal market because of AI. At the firms where ROSS is at, we see more work being done, more clients being able to be served, and therefore not a decrease in staff, but an increase in productivity and output.” He also predicted the demand for legal services will grow as they become more affordable “At present, the majority of individuals who need a lawyer cannot afford one.”

ADOPTION OF NEW ADVANCED TECHNOLOGIES VARIES BETWEEN THE FIRMS AND MARKETS

However, the adoption of different advanced technologies varies case by case. Legal firm giants are exploring new technology, but the adoption is not always as fast as it could be. Professor Richard Susskind suggests that technological disruption of legal services could take a generation: “It is very hard to convince a room of millionaires they have their business model wrong” referring to the wealthy equity partners at leading law firms.

There are also a lot of smaller law firms not yet interested in new tools and applications, especially in the statutory law markets, where search and discovery of precedents and other supporting documents is not high volume.

But in general, how should legal professionals relate to AI? Sophia Lingos is a lawyer and board member of the Legal Technology Resource Centre of the American Bar Association. Her answer is very practical and clear: “It is inevitable that AI will have a profound effect on the future of our profession. It is wise to embrace it now so that it can be a tool as opposed to an impediment. No one wants to be competing against Watson, but if you can’t beat ’em, join ’em!”

TAKEAWAYS

  • Technology is enabling new legal services to operate, allowing small companies to access legal services that are comparable or better than an in-house team.
  • Digitising facilitation between companies can reap benefits from enhanced security, efficiency and transparency by opening the door to using AI related tools.

The author is Mikko Laine.

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