The Status of LegalTech In Central Eastern Europe: 2017 in Retrospective

With digital transformation going mainstream for businesses across Central Eastern Europe (CEE), innovation of legal processes and services is also gaining an early phase momentum in the region. Given the growing number of legal innovation events across Europe (conferences, meetups and hackathons), 2017 appeared to be the year when the change in the legal profession became a hot topic among lawyers in CEE, but one without relevant practical insights for the vast majority. Although legaltech has certainly become a buzzword within many law firms and corporate legal departments, the attitude among lawyers and business clients could be described more as “curious” rather than proactive and focused on implementation. Hopefully, 2018 will mark the year when we increasingly see the adoption and implementation of legaltech solutions by law practitioners and businesses of all sizes across the region.

For now, here are:

  • 5+1 insights into the CEE legaltech market and

  • a list of top 3 legal innovation events in CEE in retrospection of 2017.

#1 Attention to legaltech growing, but generally lawyers still reluctant to embrace innovation

Overall, there seems to be a lot of anxiety among legal professionals as to how their careers will be affected by technological change in the industry.

At a recent legaltech themed seminar we held for the legal department of a telecom company in Hungary, one of the heads of legal asked early on: are we going to speak about the robot lawyers taking away our jobs? The team of 12 in-house lawyers attending the seminar was manifestly relieved when I reassured them that the actual goal of our meeting was to empower them with tools that help more efficiently deal with everyday work pressures. Indeed, it is vital for legaltech service providers targeting CEE to keep in mind that clients in this region may be more reluctant to replace traditional operations and less eager to implement change in legal processes. Shifting industry dynamics is a difficult and complex process irrespective of location, but regions with more traditional mindsets could prove even more challenging. It takes time and courage to grasp the benefits that innovation may bring to legal services and corporate business processes.

#2 In terms of investments in technology, clear division among BigLaw offices, mid-sized and small law firms, although new market players may significantly change industry dynamics

Advances in legal technology and the urge to get to grips with innovative tools, in particular artificial intelligence (AI) assisted solutions, is apparent with BigLaw firms. Due to their scale, both in terms of financial conditions and geographical reach, BigLaw networks are better placed to face the shifting client demand of better value for money and to locate the funds necessary to invest into innovation. Pricy AI tools and sophisticated clients’ demand for more transparent and tech-assisted legal service are generally not something that mid-sized and smaller law firms in CEE would be pressed to deal with at this point in time. Interestingly, even though legaltech tools are theoretically available for BigLaw offices present in CEE, these solutions are often not yet applied in practice in CEE client projects (on this thought, see also point #3 below). On the other end of the spectrum, there are a number of innovative mid-sized and small law firms keen to ride the wave of shifting market trends, but have less funds to invest into technology. With the new forms of competition emerging from within and outside the profession, however, players such as legaltech consultancy firms may play a significant role in connecting the technical legal expertise of CEE boutique law firms with the technology solutions offered by legaltech vendors. Such combined legal service packages may provide a powerful incentive to business clients to look beyond BigLaw services and extract more value from external legal work.

#3 BigLaw innovates globally, but actual implementation of legaltech tools lagging behind in CEE local offices

Despite global BigLaw efforts around legaltech, the CEE regional clients’ access to tech-assisted solutions is often less apparent. For example, investments into M&A project management platforms or AI tools to carry out legal research, contract analytics, document review, e-discovery and due diligence in a fraction of the time it takes junior lawyers or paralegals to extract relevant legal data from large document sets are publicized but not yet applied in CEE client projects. This phenomenon likely results from a complexity of reasons. It may be partially due to the local language or jurisdiction barrier, given that legaltech tools are typically developed for large legal markets and AI assisted (machine learning based) tools primarily trained for English language documentation.

Another reason could be the organizational structure and business model in which BigLaw operates, with many global brands having limited focus on CEE markets. Often, CEE offices excel in local legal expertise, but innovation in terms of offering tech-enabled services, efficient legal project management and more transparency to clients is not high on their agenda. Finally, innovation as a mindset is very much dependent on the individuals working for an organization. With local lawyers generally reluctant to embrace change (see our insight in point #1 above), it is difficult to sell tech-assisted legal service to regional clients and to manage client projects with innovative tools. Without investing into tech-savvy lawyers on the ground, global BigLaw efforts in legaltech is hard to materialize in CEE.

#4 Change driven by tech-focused local communities and alternative legal service providers, rather than traditional law firms

With new market players (consultancy firms, alternative legal service providers and legaltech vendors) emerging in the legal sector and traditional CEE law firms generally resisting modernization in practice for now, it remains to be seen which organizations will be the best placed to serve client demands for increasing transparency and efficiency in legal services, as well as preparing the next generation of lawyers for the digital age. We see established lawyers transitioning to consultancy roles, building new law firm structures or launching legaltech startups. Also, law student and young lawyer communities are organizing regular meetups across CEE focused on innovation in the profession. In this region, instead of traditional law firms driving the change, it is primarily through these new initiatives that alternative business structures and funding mechanisms are considered in practice.

Generally speaking, the impression among clients and corporate lawyers is that traditional law firms could work on their attitude towards their clients and personnel. Clients increasingly in-source more of their legal work, and engage less with law firms primarily due to high hourly rates or lack of specific expertise required by in-house teams. Lawyers working for traditional CEE law offices are often unmotivated, lacking diversity (gender, thought and beyond) and support for independent thinking in their work environment. Although traditional law firms still offer a relatively secure background for financial stability in CEE, working in this environment is becoming less attractive and provides no valuable long-term perspective for many lawyers. Innovation focused community events prove to be a great forum for discussions on legal sector developments, tech-assisted tools for lawyers, as well as career plans and viable options for new legal roles. For example, how do these potential job descriptions sound like: contract management specialist, legal process designer or legal big data expert?

#5 Innovative cross-disciplinary initiatives and local tech communities particularly active in CEE

These days it is probably easier than ever before for individuals passionate about digital transformation in business and the legal industry to gather for in-person meetups, virtually exchange ideas and join interest groups on social media. Whether locally focused or integrated into global movements, these events often look beyond a given area of expertise and bring together creative thinkers across disciplines. Fintech is usually seen as the big brother for legaltech, and blockchain technology is a shared interest among professionals working in various industries, including lawyers interested in transition to smart contracts.

A great example of cross-disciplinary teams are the CEE local chapters of the Legal Hackers initiative. Legal Hackers is a fast-growing global movement of individuals passionate about developing creative solutions to some of the most pressing issues at the intersection of law and technology. As a grassroots initiative, Legal Hackers focuses on ethical hacking and joins together designers, entrepreneurs, lawyers, policy advocates, researchers, students, teachers, and technologists who explore and develop creative solutions in a casual co-working environment, in particular meetups and hackathons. In 2017, Legal Hackers had local chapter-based communities in Bucharest, Kiev, Minsk, Tallinn, Skopje, Sofia, Warsaw and Zagreb. Legal Hackers groups do not function as a commercial enterprise, trade association, or advocacy group but are volunteer-run initiatives and organize events that are free to join and open to all.

2017 also marked the establishment of the European Legal Tech Association (ELTA), a platform gathering law firms, companies, legal technology providers, start-ups, and individuals in Europe. ELTA’s primary goal is to promote knowledge about the availability and application of technology assisted solutions in the legal market. ELTA is actively involved in social and political debate about legaltech, speaks openly about the interests of and the challenges faced by its members and thereby aims to strengthen the position of legal technology in the European legal market. Through the ambassador program launched in late 2017, ELTA ambassadors from the CEE region were also invited to exchange practical insights and market developments with legaltech pioneers from the rest of Europe.

+1 Insight: “Technology knows no borders, but local markets can create barriers” (Richard Tromans, TromansConsulting)

In an ideal world, digitalization of the legal industry expands globally and is not hindered by local or regional ecosystems that reject change, nor by service providers that are ignorant of the CEE legal market. In a shifting

legal environment, it takes plenty of effort to bring together demand for legal innovation from local clients (typically skeptical about how LegalTech will benefit their business), and supply of legaltech tools from vendors (possibly skeptical about the CEE legaltech market potential). Indeed, given the complexities of the individual jurisdictions and the respective local languages, implementing legaltech in CEE presents itself as a challenge. One way to deal with it may be to target regional clients with local presence in several CEE jurisdictions, show openness for pilot projects and stay flexible about pricing schemes.

Shifting the CEE lawyers’ and clients’ mindset towards legal innovation is a process that requires closing the knowledge gap: informing them about legaltech solutions and making sure they understand the benefits these tools bring to their respective businesses. The success of this transition process in CEE depends on market players proactively bringing new solutions to local clients, as well as legaltech vendors getting involved in pilot projects and their ability to apply dynamic and alternative pricing models for local clients. In our vision, innovation in the legal industry needs to be a collaborative effort of the various market players involved and we need to cooperate across borders and regions for the good of all providers and users of legal services.

In summary, in terms of the adoption curve, innovation of legal processes and services in CEE is currently within an early stage. Implementation of legaltech solutions is yet to gain traction before eventually going mainstream across legal departments and law firms. For us, this means that this is the right time to form strong partnerships and lay the foundations for a close cooperation with innovative lawyers and the new players of the legal sector: legaltech vendors, design thinking specialists and forward-thinking businesses. It also means that this is the momentum to roll up the sleeves on pilot projects and inspire the local market by proactively leading legal innovation projects.

We will look to use our unique perspective across the sector to support the market players in CEE to identify the right opportunities and find the legal technology and partners we all need to succeed.

Top 3 cross-border CEE events that were worth visiting in 2017 and to look forward to in 2018

I. Innovative Legal Services Forum – Prague, Czech Republic

Organized for the second year in a row, the 2017 Innovative Legal Services Forum focused on three main areas: worldwide inspiration, clever use of technology and the law firm business in CEE. The event was aimed at lawyers and thus the audience consisted primarily of partners from the BigLaw firms, heads of corporate legal teams, legal innovators and legal business leaders. The main topics of discussion revolved around legal big data, legal process outsourcing, law firm business models and compensation schemes.

The third annual Innovative Legal Services Forum is planned for May 17, 2018 and will address the developments in the three major areas of technology, business and CEE visions in legal innovation.

II. Legal Edge Conference – Sofia, Bulgaria

Instead of discussing vague and distant challenges that the legal profession may face in the future, the Legal Edge marked an international conference on practical legal innovation and explored topics relevant for current client service delivery. Speakers presented best practice methods to improve efficiency for both in-house legal work and law firm business. Discussion topics also addressed the practical use of artificial intelligence and blockchain technologies, the challenges of innovating in large organizations, “newlaw” and a non-traditional take on legal services, agile transformation and startup approach in doing business. The 2018 Legal Edge conference dates are yet to be announced.

III. What’s European in Legal Tech? ELTA’s First Conference – Berlin, Germany

Founded in 2017, the newly established European Legal Tech Association (ELTA) organized its first conference with the primary goal to focus on people rather than specific discussion topics. In June 2017, ELTA brought together legaltech pioneers from various European countries and set the scene for a casual exchange of views, ideas, experiences, practical solutions and approaches to Legal Tech. At its first conference, ELTA effectively combined the numerous small national and regional Legal Tech “campfires” to create a huge signal fire for what was European in legaltech.

The conference also highlighted how local legal ecosystems influence the design and implementation of technology assisted solutions and processes in the European legal market. The 2018 ELTA conference dates are yet to be announced.

About the Author

Orsolya is the co-founder and CEO of InvestCEE LegalTech Consultancy, a Budapest (Hungary) based company providing legal technology assisted strategic advice to help innovate legal processes across Central Eastern Europe. In the context of digital transformation, InvestCEE helps companies redesign in-house legal operations and access their legal big data. Prior to her leap into legal entrepreneurship, Orsolya was a corporate transaction lawyer and spent 11+ years in BigLaw CEE offices advising on cross-border M&A deals. Orsolya is an ambassador for Hungary for the European Legal Tech Association and an advocate for implementing design thinking principles and human-assisted AI technology in legal services.

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