AI & Legal Tech - How is the Legal Market Changing?
For a long time, the legal labour market was static. Studies were hardly affected by the Bologna Process, at least not in the crucial areas. But since 2002, the number of fully qualified lawyers has been falling steadily. At the same time, the industry is facing a large number of potential clients due to an increasingly connected world and general economic growth. What role do legal tech and AI play in this context? Will they make lawyers redundant and ditch an entire profession? Or can they perhaps even solve the problems facing the legal profession?
What is legal tech?
Legal tech refers to digital applications that make life easier for lawyers. In the simplest case, this can be databases for laws or precedents or even AI programmes that analyse contracts. The possibilities are enormous for the industry and clearly show that digitalisation has reached the legal profession. While legal tech has already been used in the USA for some time, German lawyers have been reserved for the time being. However, the trend has also made its way to us, and the number of legal tech start-ups has been rising steadily since 2015. This new technology is also finding its way into German legal departments and large law firms. Despite the sometimes mind-blowing capabilities of legal tech, it must be clear to everyone that the lawyer is more than just an expert opinion machine. Analysis of contracts and cases, as well as the search for legal literature and judgements are tasks that can be taken over by legal tech. However, the legal practitioner must have a high level of social intelligence, especially as a judge or lawyer. They must be able to overview and link complex issues. They must weigh things up. And legal tech cannot do all that. It will not replace the lawyer, but will help them, make them more efficient. But what challenges in the industry can legal tech help solve?
The lawyer shortage
However, it is not only legal tech that has reached the legal industry, but also the shortage of skilled workers. Since 2002, the number of fully qualified lawyers has been falling, and the number of licensed lawyers is also declining. At the same time, many judges and public prosecutors are approaching retirement and will soon be out of office. All these positions cannot be filled. In addition, the private sector and large law firms have left the state behind as an attractive employer. Today, those who have earned a good second state exam are given the red carpet by the big law firms. So it is becoming increasingly difficult for law firms and companies to recruit new talent, while the work is not getting any less. At the same time, the pressure on Germany as a business location is growing. If legal disputes can be prevented better in the US than in Germany because the legal departments there work more efficiently, then that is a clear disadvantage for the location and a deterrent for investors.
So the individual lawyers have to be more efficient than those of the (international) competition. Legal tech can help with this. Analytical tools and databases in particular can make a lawyer’s day-to-day work much easier, regardless of whether he or she is in a legal department or a law firm. But lawyers in the civil service can also benefit from the new tools. Since the private sector has managed to attract many top lawyers from the graduating classes, the number of young lawyers in the judiciary has shrunk considerably. Combined with the work remaining the same or even increasing, this means a much heavier workload per lawyer. This is where legal tech applications specifically for the court system could help. For example, digital court hearings can reduce the workload of judges and streamline their daily work.
The generational issues
So there are now fewer lawyers entering the labour market. But what distinguishes them? The new Generation Z differs greatly from its predecessors in its attitude to work. For them, work-life balance often takes precedence over salary and flexibility is important. In law firms, diligence work such as literature research is often passed on to the newcomers so that the experienced lawyers can deal with the more demanding tasks. Also, the previous working hours for lawyers in large law firms are reasonable considering their salary, but still high. Neither of these things quite fits the ideal image of Generation Y.
However, a lot is being done here. The old partner structure in law firms is being softened to some extent, and working life is becoming more flexible in some places with home offices. In order to do justice to the many new female lawyers, large law firms are increasingly adapting childcare. That is already quite a lot, but legal tech can make legal employers even more attractive to young lawyers. After all, when technology takes over the research and junior lawyers are trained more on the complex problems, it immediately makes their workday more appealing. Above, we noted that legal tech makes lawyers more efficient. So if a new lawyer delivers more results through new technology, then law firms could use that to, for example, reduce his working hours or increase his salary. Either way, it would make the job more attractive to young lawyers and attract more of them to law firms
In connection with legal tech, Generation Z also has another advantage: they are digital natives and thus already experienced in dealing with digital technology. They could therefore also bring about a major turnaround in the legal profession.
Legal tech and AI applications do not replace lawyers, but make them more efficient. It is precisely this efficiency that the industry needs more than ever. The new generation of lawyers in particular will be decisive here and will probably unleash a wave of digitalisation as soon as they are firmly established in professional life in the next five to ten years. But teaching must also play its part. While all new generations are already trained in the use of digital media, it is precisely the application of legal tech that is not taught in law school. Many foreign universities already offer Master of Legal Tech degree programmes. These offerings are likely to increase in the future. The new technology has earned a firm place in the legal profession and neither can, nor should it be removed. For it has the chance to lead courts, prosecutors’ offices, legal departments and law firms to a high level of efficiency and to deal with their current and future problems.
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