Europe poised to take advantage of #LegalTechBoom

| January 13, 2020

If the unprecedented investment levels recorded in 2019 are any indication, legal tech is gearing up for large-scale disruption. Funding for the sector had already comfortably slid past the $1 billion threshold by the end of the third quarter of last year, overtaking the previous year’s total by some margin and notching up a number of success stories along the way.

Among others, Big Four accountancy firm EY picked up legal outsourcing business Pangea3 from Thomson Reuters, while legal tech ‘app store’ Reynen Court launched in beta mode and secured $3 million in extra funding just last week. Tech-driven litigation finance companies, including Legalist and Validity Finance, also received significant cash injections, with e-signature pioneer HelloSign being acquired by veteran file-hosting service Dropbox.

Silicon Valley is losing ground to Europe

Although Silicon Valley continues to lead the way in tech innovation overall, European companies are rapidly gaining ground—and are actually ahead in the legal tech industry. The rapid adoption of tech advancements in the legal sector has sparked a high level of uptake that’s currently outpacing American progress. UK-based contract collaboration startup Juro, for example, is continuing to attract VC investment for a platform that is designed to streamline the legal contract-building process. Incorporating features including e-signing and automatic contract tagging, Juro distils each contract into a simple, interactive and easily tracked project that trims time and resources to a minimum.

Like Juro, many of Europe’s legal tech innovations have arisen out of smaller firms’ pressing need to optimize working practices to protect dwindling margins on admin-heavy fixed-fee projects. It’s easy to see the draw: intuitive AI-based systems enable businesses to remain competitive and profitable, at the same time freeing staff for more strategic tasks. Innovation hasn’t been such a key factor in the US, where the billable hour is still normal practice.

National barriers are hampering progress

However, although Europe as a whole is an early adopter of legal tech, Germany is a surprising laggard – it’s no secret that the country’s major publishing houses, such as Verlag CH Beck, have taken their time to digitize. What’s more, German legislators have also been slow to publish judicial decisions. Current laws restrict the parameters of legal advice provision, a roadblock which has further thwarted progress for legal tech companies in Germany. Reformers would like to see lawyers’ effective quasi-monopoly on legal services ended, to enable clients to benefit from a more competitive market, although lawyers are – naturally – reluctant to relinquish their grip on this profitable sector.

Germany’s relatively slow adoption of legal tech also reflects wider reservations about AI in in the country, with some politicians cautioning against the silent imposition of a surveillance state by tech giants who harvest and monetize data from phones and other smart technology – a development that’s considered at odds with European values. The Organisation for Economic Co-operation and Development (OECD) has expressed concern over Germany’s reluctance to adopt digital technologies, claiming that the country needs to reap ‘the opportunities of digitalisation’ in order to drive productivity growth and improve living standards. As one IT director at a major German law firm noted, “it’s no secret we’re behind the curve”.

As late as 2016, many law firms still did not have computers on their desks, instead relying on massive binders with thousands of pages that need to be viewed manually and recording their thoughts on tape recorders that dedicated staff has to type out. However, things are slowly changing, especially in smaller and medium-sized law firms, which have become more aware and excited about the advantages legal tech has to offer in automizing many processes. In a highly-anticipated judgment last month, the German Federal Court of Justice held that legal tech firm LexFox—which recently raised a seven-figure round of venture capital funding—did not violate the country’s Legal Services Act.

Driving innovation in the legal sector

The ruling has cheered innovators who are hoping that artificial intelligence and machine learning will revolutionise legal research in Germany as they have elsewhere in Europe. For example, French legal search engine Doctrine.fr, which harnesses technological innovation to display results as much as 180 times faster than rival LexisNexis, raised €10 million in a 2018 funding round—a whopping 40% of the total capital raised by France’s legal tech sector that year. Software like Doctrine’s has already seen widespread application in France, but could streamline the operations of German law practitioners – and law-makers alike – to a significant extent.

Across the Channel, Thomson Reuters recently announced its acquisition of London-based legal software provider HighQ to beef up its suite of cloud-based products. Meanwhile, US insights specialist Clarivate Analytics has snapped up Belgian-based IP data provider Darts-ip, so it can expand its analytics offering to the legal sector.

These developments show that legal tech is certain to fundamentally alter the way law will be practiced. Encouragingly, most of Europe is willingly adapting to the opportunities AI and machine learning are presenting the legal sector—and even notoriously conservative Germany is now entering the digital age.

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