The idea for a comprehensive look at the state of legal technology development across the Asia Pacific (APAC) region was born of a very local need: Singapore’s Future Law Innovation Programme (FLIP) initiative was trying to groom new technology start-ups for success.
“But for those businesses to scale and thrive, they needed to look beyond the Singapore market from day zero,” says Paul Neo, the founder of FLIP and COO of the Singapore Academy of Law (SAL). “The Singapore legal market is only slightly more than US$2 billion a year in turnover. It’s really a very tiny market and, clearly, any legal technology start-up, or any start-up in any sector, has to produce products and services that are relevant for markets beyond Singapore if they are going to be sustainable.”
That need to understand legal tech markets in the region led SAL to commission a report under FLIP and produced in collaboration with the Singapore Management University Law School. The research was presented for the first time at the FutureLaw Conference at Stanford University Law School in the spring of 2019.
The report covers legal tech developments in seven jurisdictions: Australia, China, Hong Kong, the Republic of Korea, Malaysia, Russia and Singapore. As might be expected, the state of legal innovation varies quite a bit among those jurisdictions, given the very different market situations in each, including differences in size, nature of the legal system, legal education and “openness” of the various cultures.
Similarities Across the Region
Despite those differences, however, across the whole region legal tech is displaying what the authors call a “remarkable non-coordinated coincidence in legal innovation.” Without a high level of cross-border coordination, legal tech in the region has tended to coalesce around four use cases: marketplaces, research, document review and online advice.
One possible explanation might be the influence of Western-based institutions that have brought similar solutions to their Asian outposts: legal information providers such as Thomson Reuters and LexisNexis®; multinational law firms and alternative legal service providers; and the Big Four accounting firms.
However, Jerrold Soh, lecturer at Singapore Management University and chief editor of the report, believes there’s more to it than that. He thinks the legal tech developments in certain countries, especially Singapore, China and Korea, have been heavily influenced by the fintech space in the financial industry.
“Singapore has quite a progressive kind of regulatory fintech experimentation,” Soh says. “And a lot of the work and development happening in that space impacts our legal services sector as well, including core technologies like blockchains, smart contracts and so on.”
Another driver of legal tech in the region is the push to modernize legal education systems, explains Soh. “The Singapore legal market was opened up not too long ago, so right now, we have a lot more people taking the bar exam than just 10 years ago,” he says. Korea and Japan have also recently reformed their legal education systems.
An Arms Race? State Support of Legal Tech
Singapore stands out among APAC countries by clearly making the development of legal tech a national priority, supporting it with national programs such as FLIP, research such as this report and other centralized efforts to reform and modernize. But throughout the report are examples of other centrally driven initiatives that show legal tech to be a national priority in other countries as well.
Korea, for example, underwent a significant transformation of its legal education system, modeled after the US system with a three-year legal education following undergraduate studies. The reforms have resulted in a sharp increase in the number of lawyers there. Other Korean initiatives include opening the legal market to foreign firms, and more recently established a “regulatory sandbox,” an experimental regulatory environment where new models for legal service delivery can operate under temporary exemptions from current regulations.
“Yeah, it’s kind of a race,” jokes Soh. “I think that we do see competition in that area, including China’s efforts to become the AI [artificial intelligence] leader of the world.” Indeed, this is one of the more interesting findings of the report and one which contrasts with the situation in the US, UK and other Western markets, where the drive toward innovation tends to come from players within the industry or from private disruptors. In Asia, it seems, there is a greater tendency to centrally steer and support legal tech as a matter of national policy.
China’s App Culture
Chinese development of legal tech is fast-moving, and perhaps the most significant developments are in the application of AI technologies to legal decision making – a field, like many other industries, where China expects to dominate the world market.
It’s on the consumer side of the legal market, however, where many of the more interesting developments are occurring, particularly in helping people find nonjudicial ways to resolve disputes. This field shows how important a national culture can be as a driver of legal tech development.
The sheer size of the Chinese population, of course, makes consumer law solutions an attractive market, and legal apps have proliferated. Many of these apps connect consumers with lawyers, but many others find ways to help consumers resolve disputes outside the legal system.
FLIP’s Neo says the app culture in China is ready-made for business development. “I think the reason apps are so prevalent in China is because the average Chinese consumer lives just using apps on their smartphones. If you want to tap that market, you need an app-based business. In fact, the trend is not to have your own apps, but to have micro-apps that ride on other super-apps, like WeChat,” explains Neo.
In contrast to the US, where few apps of this sort have succeeded, China’s response is rooted in culture, notes Soh. “I think part of this can be attributed to cultural differences in how law and dispute resolution are perceived in each country,” says Soh. “Broadly speaking, I think judges and lawyers are put in very high regard in the US. In China, being a lawyer is kind of just like any other profession. So, when it comes to resolving problems, I think the whole system is not so centered around lawyers and judges, it’s more centered around getting the problem solved.”
Neo believes this goes back to the traditional village, and the way disputes among neighbors are resolved by the local commune chief. “If you scale it up, and with the advent of technology, you can in a way, disintermediate that intermediary by doing it peer-to-peer,” Neo says. “This is what we’ve heard from the Chinese themselves. They’d sometimes rather trust technology than the human beings in a judicial system.”
There are many more insights to be found in the full report, which will certainly be interesting reading for both practitioners and legal tech companies who intend to operate in any of these markets.
You can download the full report, 2019 State of Legal Innovation – Asia Pacific, here.