The Nordic countries have a good brand. They are known as progressive welfare-states with happy citizens and liveable cities powered by environmentally-friendly windmills on every hilltop. The Danish concept “hygge” is sold as an international remedy for increasing stress-levels, the New Nordic Cousine has become the avantgarde of fine dining and Nordic Noir is currently the dominating label for quality crime stories whether in books or on TV. Furthermore, the countries still draw on the old brand awareness that they acquired from Scandinavian design, Swedish fashion and progressive participation in the sexual liberation movement.
Combined, all of these factors create the perfect platform for modern Nordic tech companies to thrive. Especially within legal tech as the Nordic countries are also known as stable states with little to no corruption, a fair legal system, and a trust-worthy ethos. Who would not want to use a well-designed, eco-friendly legal tech product from Scandinavia?
As also noted in Merete Nygaards article on Nordic legal tech this May, trust is key to the success of Nordic legal tech products. Solving a problem is not the only thing you want a legal tech product to do. You also want it to be trustworthy and comply with the highest legal standards. Legal matters are delicate, and clients expect their lawyers to meet certain ethical norms. That should be reflected in the legal tech products. The move-fast-and-break-things ideology is not compatible with legal tech - especially in times where data privacy has become such an important factor in Europe. Last but not least, you want a legal tech product to be well-designed, with a UX/UI that is both functional and intuitive.
So how what is the state of Nordic legal tech?
The State of Legal Tech in the Nordics
According to Nordic Legal Tech Hub's mapping of the Nordic ecosystem, a total of 110 legal- and reg tech companies exists in the five Nordic countries Denmark, Iceland, Finland, Norway and Sweden. That covers everything from digital marketplaces for legal services and online dispute resolution to contract management platforms and various compliance tools to handle GDPR compliance, insider lists etc.
A few highlights are worth a mention. An obvious case is the Copenhagen-based GAN Integrity that just raised 15 million dollars in a Series B Funding to accelerate their global compliance platform. Such numbers are scarce in the Nordic legal- and reg tech scene but it shows the massive potential. Another worth a mention is the Swedish company InsiderLog that managed to exit within their first year on the market. They have since launched their solution to manage insider list information all over Europe. Both companies are great examples of tech companies taking maximum advantage of new regulations. As Nordic countries are known for taking laws and regulations very seriously, this law-abiding behaviour has boosted the reg-tech industry significantly.
I will also mention my own company Contractbook. We won the Danish Legal Tech of the Year in 2018 for our client-centric contract management platform that has 40.000 users and a stronghold in the Nordic legal market. It shows that Scandinavia is an amazing place to launch and test a solution. Nordic companies are used to working digitally. For example, registering a company in Denmark is a 100 % digital procedure. Companies are used to working in SaaS-platform when they handle scheduling, salary and everything related to accounting. They trust digital products and expect to be able to handle their legal work online. So if innovation is client-driven, then the tech-savvy Nordic market will undoubtedly lead the way.
Of course, the Nordic legal industry is risk-averse and traditional like everywhere else, but the law firms generally have a high understanding of digitisation. Contrary to when we have meetings with law firms in Central Europe, we do not have to explain the perks of digital signature and cloud storing to Nordic lawyers. In fact, much of their scepticism comes from their knowledge of the legal tech market and its current immaturity.
I will also give a few examples of law firms in the region that seems to have understood that it requires innovation and digitisation to make it in tomorrow's legal market.
When you arrive in the lobby at the largest law firm in Denmark, Kammeradvokaten, you are greeted by a robot. That reflects their engagement in the digital transformation as they have invested in more than 10 different legal tech solutions. Elsewhere, the Norwegian law firm BAHR has created Bahr Leap - a law tech lab that educates legal professionals and enhances new technologies. Also, the Swedish law firm Synch is putting a tremendous effort into applying AI in their practice and helping young legal tech startups to mature their product in Synch Sandbox. However, the most innovative law firm in the Nordics probably goes to the Finish firm Dottir. They apply lean principles to business and founded the legal consultancy Dot. where they use design-thinking to reimagine the way legal services are communicated and delivered.
Despite of all these great initiatives, there are some fundamental challenges to the Nordic legal market.
Challenges to Nordic legal tech
The biggest challenge to the Nordic legal tech scene is that the market is atomised. The total population of all the Nordic countries is 27 million which makes a fine beginners market. That is, however, divided into five different jurisdictions with five different legal markets that operate in five different languages. There is no formal legal unity between the countries, and Norway and Iceland are not even part of the European Union. That makes it hard for legal tech companies to target the market with a single strategy.
Launching a legal tech product in all five Nordic countries require that you translate the solution into five languages and more often than not suit it to five different jurisdictions. The level of digitization and the willingness to invest also differs from country to country, which makes it extremely hard to get deeper market insights without engaging multiple people locally. For example, Swedish law firms are not allowed to own software companies and offer non-legal services, while Norwegian law firms can. The result is that Norwegian law firms can approach legal innovation in a much more flexible way.
The language barrier can also harm international legal tech solutions' willingness to market in the Nordics. The fact that the Nordic market is divided into five makes it a lot less lucrative. This is especially a concern for AI companies since efficient AI requires a lot of language-specific training material. An AI trained to review English NDAs is not useful for a law firm which is creating contracts in Finnish so larger languages are obviously first in line when AI companies scale their solutions internationally.
This atomisation creates a narrow limit to how big a legal service provider can grow on the local legal market which exposes them on the global legal market. Law firms in more prominent jurisdictions and with a bigger customer-base usually have more capital. Consequently, they are in a better position if the global legal market converges.
As also mentioned in Nygaards article, there are plenty of responses to this atomization. For example, the Nordic Legal Tech Hub, a rather new initiative, is trying to bridge the gap between the countries and connect all the communities. They have started a collaboration with some of the biggest law firms in the region and also collaborate with both legal tech companies and universities to create a sense of unity and enable frictionless knowledge-sharing.
The 3 waves of legal tech
Despite this atomisation, and even though the current state of the Nordic legal tech market does not look overly impressive, I am still very confident in the Nordic legal tech scene. As people are law-abiding and respect data-ethics, they also get more comfortable with testing new stuff. That is evident from the fact that the Scandinavian countries are some of the most digitised places in the EU and the world. Let us further investigate that point.
When we see past the hype of futuristic technologies, the Nordic countries are in front in regards to the essential digitisation that is necessary to even make it to a point where advanced AI is useful.
The technological transformation of the legal market happens in three waves. The first wave was the introduction of computers, website, emails, Office-products like Word and maybe even the first case management systems. This transformation made legal work much more efficient and it democratised access to the law significantly. We sometimes forget how important it was that people could use just use the internet to browse the law and find legal information instead of calling a lawyer for help. This wave has already changed almost all parts of the world. The second wave is that of digitisation. It comprises features like digital signatures, cloud storing, advanced case management, e-billing, client-facing platforms and contract lifecycle management. This is the current wave of technological transformation, and it lies the foundation for the third wave. The third wave is that of artificial intelligence, advanced automation, blockchain solutions etc. This third wave attracts a lot of hype and attention but the technology is mostly immature and it has only just begun. It is not rare to see simple automation branded as complex AI and the fact is that most law firms have a hard time releasing the full potential of the technology. Either because it is immature or because they do not even have a digitised overview of the data that is required to use it properly. Compare this to the transformation of the transportation industry: The first wave as ordering your taxi online. The second was the total digitisation of the experience that came with Uber's entrance on the market. And the third is driverless cars.
Like everywhere else in the legal industry, the third wave is yet to be unleashed in the Nordics. The second wave, however, is well underway. In Denmark company and property registrations are done 100 % online. All sensitive personal information from the state is transmitted via a cloud-based electronic email and the national ID can be used as a two-factor verification digital signature. In general, people trust digital tools and they are used to working with them. Inevitably, that has an effect on the legal industry as well. No-one questions the validity of digital signatures or the overall security of cloud storage and a digital workflow is taken for granted by most companies. That is also why we have been able to gather 40,000 (mainly Nordic) users to our digital contract management platform.
So if the legal innovation is client-driven, then there is a good case for Nordic legal tech. All the prerequisites are there: a digital culture, an innovative spirit, a flair for design and a reputation for respecting regulation and doing things right.
About the Author Niels Martin Brøchner is founder and CEO of the Danish legal tech company Contractbook. He was recently awarded one of the most promising young businesses talents in Denmark and has a strong voice in the Nordic legal tech community where he often participates in debates about innovation in the legal industry.