The Legal Technology industry (LegalTech) was valued at $27.6 Billion in 2021 and is estimated to grow at an exceptional pace with a CAGR of 8.9% to reach US$ 69.7 Billion in 2032. Statistics show that the market revenue of Legal Tech would grow significantly in the US and Europe and would go slightly downhill in APAC countries. In this article, I discuss the possible challenges the Legal Tech sector faces.
Technological advancements are influencing various sectors of the economy, and thus, it has become imperative for every industry to acclimatise itself to this revolution. However, the legal industry has been opposed to such changes. Legal technology is steadily taking shape and has found its ground in India. Regardless, there is hesitation among legal professionals towards the adoption of such tools and techniques, which might stray away from their archaic methods. The reasons behind such an aversion are twofold –challenges faced at the manufacturing level and uneasiness of the end-users to adopt such technologies. The revolutionising of LegalTech must not only remain about the manufacturing of new age systems but also the implementation of such systems, which gives effect to its industrial applicability.
According to a report released by Legatics, while 95% of trainees and associates and 75% of the partners of the law firms indicated a positive approach and realisation of the importance of LegalTech for the future of their law firms, it was also observed that the very same professionals were apprehensive and did not seek to work more innovatively in their day-to-day practice. This observation takes us to our first barrier- the lack of conviction in using LegalTech, driven by the thought that one could not prioritise the time invested in learning these new working methods against chargeable working hours.
Simon Chester has been a pioneer in applying LegalTech in the practice of law. One of the most important points he puts forth in relation to why the implementation of legal technology is limited leads us to analyse various technical constraints. He notes that the solutions to legal problems depend on the relevant jurisdictions, with a few having a clear yes/no answer. For others, the nature of legal reasoning can become complex, which can be a potential barrier to implementing LegalTech.
A related constraint on the technical front is also the access to data because major legal publishers are unlikely to share expensive materials on which they have propriety rights. Secondly, in the case of law firms, the data is protected by various confidentiality obligations. Therefore, as data is the food for any machine learning algorithm to improve its training and efficiency over time, different constraints in accessing data or access to limited data may paralyse the effectiveness of the entire LegalTech ecosystem. In the words of Aikenhead, it is like IBM’s supercomputer Watson needs fuel to run, but the gas stations are closed.
Once the legal ecosystem overcomes the challenge of access to data, the bigger question which will need to be addressed is the protection of such data. To counter and effectively redress cybersecurity threats, lawyers and law firms need to be educated to create a “security-aware culture” and to seek assistance [even from outside the firm] when needed
Adopting LegalTech is not merely about shifting to new ways to accomplish our tasks but also about being aware of the technical know-how. In the case of adversity, the legal ecosystem rarely knows when and to what extent their databases have been breached or whether there is a risk of a breach. Since law firms and lawyers collect a wealth of confidential information such as personally identifiable information, trade secrets, financial data, etc., in case of a data breach, the very law firms and lawyers are uncertain about what steps need to be taken and whether the breach has resulted into harm. The bigger challenge is faced when such firms wish to ascertain the reasons behind the breach or identify the source of the breach, as such processes can incur a lot of costs and expertise, something that only some players in this ecosystem can afford.
The lack of an ‘industry standard’ makes it challenging for law firms to focus on the tools that fit best with their work. To work around this problem, law firms need to critically identify the causes and ascertain the nature of the product they need instead of getting trapped in the ‘one size fits all’ approach of the LegalTech companies. Because of this very issue, firms sign up for complicated products and eventually start finding it troublesome to navigate through them.
A study conducted by the University of Oxford on the adopters and non-adopters of LegalTech pointed towards the lack of financial capital to invest in technology as the topmost barrier to the adoption of LegalTech. However, this issue was more prominent in the case of PeopleLaw (firms serving individual clients and small businesses) than in BigLaw (firms serving large businesses). Considering India gradually opening up to foreign law firms, the lack of financial capital can further broaden the gap between PeopleLaw and BigLaw, as and when these law firms begin adopting LegalTech.
It is also true that if we allow such barriers to discourage us from taking further initiatives, the opportunity for improvement will slip away from the hands of the practitioners. However, barriers, be they technical, psychological, or financial, can be overcome. Innovation, awareness, and education are key in habituating the legal profession with technology.
NIKHIL NAREN
Chevening Scholar, Author
Assistant Professor of Law, Jindal Global Law School