LegalTech: A Change of Era in the Legal Sector

Author: Adriana Julian i Melero

Digital transformation affects all sectors, from agriculture to tourism and education. Among its objectives are the optimization of processes, the improvement of the customer experience and even the promotion of new business models. 

The legal sector is no exception, which is why in recent years we have seen an important increase in solutions and tech tools aimed at helping lawyers to perform their work more efficiently.

The 4th revolution first reached mechanical tasks, replacing machines with automatic systems, but nowadays it has also reached intellectual tasks, reaching knowledge-based industries, like ours. The irruption of information technologies is unstoppable and involves solving problems faster, at a lower price, more precisely and more efficiently.

2021 was a big year for the expansion of legal tech solutions. For this reason, 60% of firms plan to boost their investment in new technologies between 2021 and 2023, according to the results of the 2021 Wolters Kluwer Future Ready Lawyer Survey. The objective is to be able to take full advantage of these innovative tools that can help us reduce margins of error and improve the precision and speed of lawyers.

Experts concur that the most significant trend in 2023 will be the increased budget that firms and legal departments will dedicate to investing in legal tech tools. COVID-19 has sparked an acceleration in the transformation of strategies that the sector was already employing, and it’s likely that legal tech spending will continue to increase in 2024 in order to improve production and efficiency.

As the American Bar Association indicates, legal departments will have automated 50% of their work by 2024 thanks to these tools.

But what exactly are we referring to when we talk about legal tech?

The LegalTech concept refers to the use of the most innovative technological developments to design adapted and useful solutions for the area of legal services, regulatory compliance and law in general.

In other words, by LegalTech we can understand the use of technology in the legal sector in any of its fields, making the commercialization of the service more efficient. Technology that provides added value to professionals in the legal sector. Its main objective is to facilitate legal practice by minimizing waiting times, costs and increasing productivity.

The 4.0 lawyer will be more specialized, with a fee system different from the one we know of, more collaborative and with support in fully automated areas.

The digital lawyer must be able to integrate the effects of these technologies in the way of understanding the profession, this requires being familiar with the tools that the digital ecosystem provides, that is, using them, being in the digital environment and being digital, all in all, acquire a digital culture. This technological update must be widespread, from professionals to law firms, through professional associations, law schools and other legal operators.

In this way, we can say that broadly speaking, there are several levels in the legal sector at which LegalTech is impacting:

Legal research

There are tools capable of extracting the content of court rulings, using Natural Language Processing (NLP) techniques. The aim of these tools is to facilitate the filtering and location of information of interest, as well as to make it available to the user in a visual way. This helps lawyers to carry out a better investigation and, consequently, to reduce the preparation time of cases and to define more solid procedural strategies. An example of a tool in this area is Ross Intelligence. 

Case prediction and data analysis

There are tools aimed at analyzing sentences and making predictions that anticipate the outcomes of cases, using artificial intelligence. Case prediction technologies analyze massive libraries of settled or filed litigation to develop predictions about an ongoing case. These tools try to answer questions such as how long a judicial process will take, what is the most probable sentence or if there is a possibility of appeal. Tools of this type are LexMachina, Blue J, IBM’s Watson or Jurimetria.

Digital platforms for legal advice (Virtual legal assistants)

This refers to intelligent chatbots that support lawyers in the undertaking of daily tasks through the automation of certain processes. This technology is used primarily to respond to uncomplicated and repetitive operations, such as how to overcome parking fines, how to appeal bank fees or how to file a complaint.

These types of tools free lawyers from simple tasks, allowing them to spend their time in more valuable activities. An example of legal chatbots is DoNotPay.

According to a McKinsey & Company study, it is estimated that virtual legal assistants (VLAs) will address 25% of internal claims made to the legal departments of large corporations by the year 2023, increasing the operational capacity of internal corporate teams.

Document automation

This concerns generating documents and automatically managing their full lifecycle, assisting in drafting contracts and lawsuits. This is the case of Contract Express, which automates the drafting of standard legal documents. A huge part of a lawyer’s time is dedicated to the creation, analysis and management of legal documents. According to another McKinsey & Company study, 25% of this time could be automated with the right legal tech solutions.

Resolving legal disputes

This applies to online dispute resolution. There are some claims that can be resolved simply using open-source technology tools such as Kleros, an online dispute resolution protocol. Kleros uses blockchain to resolve disputes as fairly as possible.

eDiscovery or electronic discovery

It refers to the process of collecting and processing electronic material for its use in litigation. The primary function of eDiscovery is to organize data to ensure that the litigation review process runs accurately and efficiently. eDiscovery software also allows legal professionals to process, review, tag, and produce electronic documents as part of a lawsuit or investigation.

Artificial intelligence

The term “artificial intelligence” can be applied to computer systems which are intended to replicate human cognitive functions. In particular, it includes “machine learning”, where algorithms detect patterns in data, and apply these new patterns to automate certain tasks. Modern artificial intelligence algorithms are not capable of fully imitating legal thinking; however, artificial intelligence tools enable law firms and legal departments to achieve greater efficiency through the use of algorithms that establish patterns in the management of their data. Its current use is mainly as a support tool that allows lawyers to facilitate their most repetitive tasks. Although we’re still far from AI becoming a key tool in the sector, we’ll very likely see a widespread use of it for some specific tasks, such as contract lifecycle management.

Smart contracts and blockchain

Smart contracts use computer programs based on blockchain technology. The terms of the agreement are handled through code, allowing their execution to be fully automated. Any time a smart contract is drawn up, it’s stored as a block of data on the blockchain, making the contract immutable. Once the conditions of the contract are met, it then self-executes the terms. For example, in the case of a purchase agreement, once the agreed-upon product is delivered, the payment is released automatically. If a party fails to follow through on its obligations, that party is charged the agreed-upon penalties. Smart contracts also gather other benefits of blockchain technology, such as enhanced security and permanence. Currently, smart contracts are limited to contracts transferring funds or ownership. Contracts that require more subjective interpretations are not well-suited to the black-and-white analytic nature of computer code.

To conclude this article, we must say that the irruption of technologies in the legal sector is unavoidable. Although its arrival has been perceived by part of the sector as a real threat to traditional legal services, legal technology provides added value for all legal professions. LegalTech has developed software and online services in different formats to completely transform the way in which legal services are offered. The usual methods have been affected by the current social and economic context and have met the needs of today’s clients, more demanding and with the need to operate online.

It is already clear that we can no longer ignore LegalTech. Even though the phenomenon is still in its infancy, we can already observe a number of diverse effects that LegalTech is having on legal practice, which in turn gives us an idea of where the journey is headed. We have seen that with the help of technology, legal work and access to justice can be improved, becoming cheaper, more efficient, and more accessible. We are convinced that LegalTech will optimize the legal system and it is necessary both for law firms and for the proper functioning of justice.

Referring to a classic phrase said by Darwin: “It is not the strongest species that survives, but the one that best adapts to change”; and in the 21st century, the change is towards the digital transformation.