Art collector's court case signals potential legal and contractual issues with NFTs
Out-Law Analysis | 23 Mar 2021 | 9:49 am | 9 min. read
This priority reflects the expectations leading financial services companies have of their legal function: that they will lead and shape strategic direction and implementation of business strategy and be more accountable for companies’ performance and costs.
According to 10 leading UK-based banks, insurers and asset managers we talked to, the anticipated revolution of AI-powered legal tech solutions has yet to materialise. Many in‑house teams recognise that they need a more advanced strategy for harnessing data to make the most of the potential AI offers. Instead, many are focussing on existing corporate IT tools rather than bespoke legal technology applications.
Many in‑house teams recognise that they need a more advanced strategy for harnessing data to make the most of the potential AI offers. Instead, many are focusing on existing corporate IT tools rather than bespoke legal technology applications
Attitudes to legal technology have changed in UK financial institutions since we last gathered views on the topic in 2018. Back then, while there was some enthusiasm over what the future of legal technology could offer, there was also scepticism from some about its potential impact.
Our latest engagement with institutions on the topic of legal technology found that Covid-19 and the necessity of remote working have changed attitudes.
The move to remote working was achieved more rapidly and more successfully than many expected. More than three quarters of the people we talked to agreed that this has increased either the adoption of or the desire to adopt technology in legal teams. It is unclear if this will be permanent. The successful adoption of video calling has served as a catalyst, and the necessity of e-signature tools, also driven by the move to remote working, has played a part.
All are now taking a considered approach to their use of technology, and developing appropriate strategies.
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Different approaches are being taken by different institutions. Some are scaling back after poor experiences integrating or adopting third party technology, or simply through a recognition that the way they are providing legal services to the business cannot be enhanced further by technology.
Where businesses have invested more slowly, they are looking at this from a needs-based approach, asking themselves what problems need solving, rather than having their views coloured by the clever features of the tech.
However, some – typically major banks – have significantly accelerated the adoption of technology. In these instances we also saw investment in dedicated expertise to support implementation and roll out. These adopters are actively looking across their legal tech and the wider corporate IT estate to assess where the gaps are in what they need and what solutions they have available, as well as the effectiveness of specific niche legal tech applications versus better and more effective use of the existing corporate technology stack.
We explore below the barriers to adoption of technology – the formulation of specific technology strategies is playing a role in making it easier to embrace technology, but the difficulties in integrating systems and the narrow application of some legal technologies are still causing problems.
Some of the legal tech that was popular in 2018 remains the most commonly-used, such as e-billing software, data rooms and contract drafting tools. There had been a shared expectation that AI tools would be central to the next wave of legal technology innovation by 2020, elevating technology from merely driving automation to informing decision making. This has not materialised.
Where AI is effective to support large-scale document review for litigation, audit and due diligence, the vast majority of institutions rely on legal services providers to supply the tech needed on a project-by-project basis. A few, though, have invested in e-discovery software to support identification of evidence and fewer still have looked at AI contract review themselves.
Some institutions hope that AI will soon be deployed to support the review of business-as-usual contracts as part of the contract negotiation lifecycle, enabling greater self-sufficiency for commercial and procurement teams. However, in-house teams continue to see significant value in tools to support their operational and costs efficiency, such as e-billing, instruction portals, workflow and case management, and online Q&A tools for the business.
This focus is consistent with the pressure in-house teams are facing to reduce costs and the associated search for greater efficiency. Legal technology can play an important role in this respect.
The analytical potential of AI is still recognised, but gaining insights from AI is dependent on the quality of underlying data and many see the need to develop existing data strategies to reap the full benefits of the technology.
We found that, while legal teams are supporting institutions in their push to digitise services and use data to deliver better services to customers, most are not yet looking at how they can use data to improve their own performance, or to assess metrics around legal supplier performance. Though some are using data from workflow and e-billing systems, even the most advanced recognise how much is still to be done to develop data strategies that deliver actionable improvements.
Beyond data, other barriers to adopting legal technology remain.
Many of the issues identified two years ago are not as significant now, with teams developing strategic visions for use of technology, meaning that it is easier to get the whole team on board. This has been supported by getting some better support from technology providers for training.
Lawyers also have better technical skills than before, especially where in-house teams have dedicated effort to training on this topic, even if many still lack confidence.
However, obtaining budget and demonstrating return on investment remain a challenge, increasingly so in some cases, as costs pressures grow. There is a recognition that a clearly articulated, strategy-led business case may well get traction, particularly if the right technology can help generate management intelligence to address legal spend and other inefficiencies and ultimately help in-house teams navigate increasing demands on their time.
The legal technology landscape itself still presents a set of specific challenges. There are very few industry standard applications, and teams are nervous about investing in technologies from businesses that may not survive long. Many legal tech applications also only focus on solving a single narrow legal issue, meaning that several technologies are still needed to solve a real world problem.
Some in-house teams are also finding it challenging to ensure that legal technology fits with corporate IT systems. They can find it difficult to get support from internal IT teams to help integrate third party legal tech, or to develop specific technology for the legal team. The cost of implementing tech is rising as information security, cloud and data protocols are taken into account. Some have started calculating, and recognising in their decision making, the internal cost of on-boarding any new piece of technology.
The challenge of migrating from analogue to digital systems is also a recurring theme.
Technology is seen as only one of a range of tools to increase the efficiency and effectiveness of the legal team. Tried and tested techniques are becoming a focus again, such as agreeing standard negotiating positions and sharing these with the business to use itself through basic Word or laminated hard copy checklists.
Where these initiatives sit alongside clear governance approaches identifying what the legal team will do and what the business should do itself, there has been room to focus on supporting the higher value-adding activities that the business needs.
As the demands on legal teams change, they are introducing new skillsets to sit alongside their lawyers. Over half of the teams we spoke to had introduced roles such as legal technologists, legal project managers, legal operations professionals or relationship managers.
Some planned to bring in new roles to support legal change and transformation projects.
Others focused on training their lawyer teams in these areas, incorporating these skills into the roles of their lawyers themselves.
Technology is seen as only one of a range of tools to increase the efficiency and effectiveness of the legal. Tried and tested techniques are becoming a focus again, such as agreeing standard negotiating positions and sharing these with the business to use itself through basic Word or laminated hard copy checklists
Financial institutions and their in-house legal teams are now looking at how existing corporate technologies, such as workflow tools and project management, can be configured for use by the legal team to meet their needs. This has been spurred in part by the effective use of communication technologies such as Microsoft Teams for collaboration and supporting team wellbeing during Covid-enforced remote working. Extending these to third party advisers will be the next challenge.
Costs pressures and demand from the wider business for the legal team and their expertise are only expected to increase. So efficiency in delivery – particularly in helping commercial teams become less reliant on legal through self-service tools – will be the main focus of technology implementation.
AI is still on the agenda, but it will take longer for it to have an impact than we thought would be the case two years ago. There is a broad recognition that data strategies need to develop further before the benefits of such tools can be fully realised.
16 Mar 2021
Art collector's court case signals potential legal and contractual issues with NFTs