法律科技公司LawVu近期发布的《2023企业法务科技报告》（2023 In-house Legal Technology Report）指出，今年，疫情对全球格局带来的“洗牌”效果继续，这意味着企业仍面临较高的风控、监管及政策压力，法务团队繁重的工作也将继续。
TECHNOLOGY TO THE RESCUE
As in-house counsel struggle with increased workloads thanks to growing compliance burdens, they realise how much legaltech can make their lives easier. However, challenges still remain when it comes to adopting these new-age tools.
As the pandemic starts to recede, one of the most visible casualties appears to be the workloads of in-house legal departments. The 2023 In-house Legal Technology Report, recently released by legal technology firm LawVu, finds that with continued negative impact of COVID-19, companies worldwide face growing pressure when it comes to regulatory risks, significantly adding to the workloads of in-house legal teams.
And while almost all in-house teams are aware of technology solutions that can lighten their loads, the actual usage of these tools has been patchy. In-house teams are still spending significant time on manual administrative tasks, and “legal inefficiencies are impacting business outcomes,” the report found. In this light, legal teams need to take a big step toward more efficient and consolidated working methods.
Regarding China, Cai Jianjun, CEO of Thunisoft Yuandian, observes the “growing interest of domestic companies and governments in legal technology solutions in recent years and an increasingly urgent need to use legal technology tools to solve problems at work".
Thunisoft Yuandian, an intelligent legal service solution provider, is committed to offering corporate clients a complete compliance management tool with its legal affairs management platform Yodex, which uses legal AI as the underlying technology.
Cai gives three reasons for this market enthusiasm. "First, data is becoming more valuable in the legal business. Secondly, it is increasingly imperative for in-house legal teams to improve efficiency, and ever-changing technological advances have shown that tools can replace human work on an hourly basis."
Thirdly, the Chinese government and judicial organs are promoting the application of legal technology, "especially the Supreme People's Court, which has made many new attempts in legal AI and inspired more legal practitioners to pursue better technological solutions."
Wang Guan, APAC senior director at the U.S.-headquartered Exterro, also notices the increased interest and more specific needs of domestic in-house teams and law firms regarding legal technology tools. First and foremost, this is attributed to the increased importance of data assets in society as a whole. "Chinese companies are generating massive amounts of data, and it is increasingly difficult to handle rapid and incremental data growth by relying on traditional manual or spreadsheet methods. Legal technology tools are necessary to reduce costs and increase efficiency.”
Exterro provides a suite of governance, risk and compliance software products for enterprises. Thanks to its localised products, Exterro can support Chinese companies with integrated legal technology solutions covering data compliance, e-discovery, and overseas litigation.
Wang also finds other factors driving usage. For example, since The Data Security Law and The Personal Information Protection Law came into force in 2021, data compliance has become a topic of great concern for almost all enterprises operating in China, and software systems are urgently needed for effective internal data governance.
Meanwhile, more and more Chinese enterprises are expanding their business overseas, and global compliance and litigation response have become new topics. By applying relevant legal technology tools, these enterprises have realised that good tools can help them cope with overseas regulatory challenges and protect corporate data security with less effort.
As for client types, Wang points out that companies showing higher interest in legal technology tools mainly hail from strongly regulated industries such as pharmaceutical, automotive, and financial and industries with higher relevance to big data, such as the Internet and toC manufacturing.
Cai shares a similar finding, "Large and listed enterprises are more proactive," but with the rise of large language models (LLM) this year, more small and mid-size enterprises may enter the fray and explore technological solutions to routine legal affairs.
HELPING IMPROVE COMPLIANCE
As clients are more comfortable with legal technology tools, the market has developed its definition of "good tools" and “good legal technology companies”. On the one hand, top legal technology companies should have industry-leading advantages; on the other hand, they are also sensitive to the pain points faced by in-house teams and create practical technology tools effective in real business scenarios.
As mentioned above, compliance has been the hottest topic in the past few years because Chinese companies face increasingly complex regulations. Compliance is extremely complicated, and legal technology tools are necessary and useful in this respect. This is what Thunisoft Yuandian wants to help in-house teams with.
Cai explains: "We often say businesses should pursue revenue growth on the one hand and manage risks on the other. There is a large number of digital tools at the growth level, such as CRM, ERP, and financial systems, but many companies have no risk management system or use a simple approval process to accommodate different compliance needs."
Thunisoft Yuandian wants to help corporate clients build a flexible and diversified system at the risk management level. Cai delineates a "three-step process" to achieve this goal. "The first step is to help enterprises create their compliance knowledge graph. Each point on the graph corresponds to a specific compliance obligation, and the obligations that are easy to violate and easily adjusted to regulatory changes are indicated. Then the obligations on the graph are linked to specific tasks and external cases so that employees can visually understand potential litigation and penalties for non-compliance."
The second step is to set up internal processes for high-risk obligations, such as determining whether a matter requires self-examination by the business department, legal, or third-party approval. These processes are then used to document the entire compliance process.
When all the behaviours are recorded on the system as "digital touchpoints", the in-house team can evaluate the effectiveness of the compliance system after a certain period. Therefore, a full chain management process will be in place, from touchpoints to processes and feedback.
In this process, "a large number of natural language processing (NLP) technologies are required to break down, label, and manage massive obligations. Our AI platform, Yuandian Ruihe, brings together all our technological achievements in legal cognitive intelligence since its inception, including text parsing, retrieval, and reasoning," says Cai.
He adds that compliance relies on not only in-house teams but also business personnel who are also a line of defence in corporate compliance. Thunisoft Yuandian is designing a series of automatic review tools that help in-house teams improve efficiency and create greater value.
For example, he explains that the advertising copy of the marketing department used to be reviewed by in-house teams. Still, in the future, they can be automatically checked by AI tools to avoid inappropriate expressions. At the end of the year, the in-house team will play a more active role by collecting and analysing relevant data, recognising areas that often go wrong, and providing targeted suggestions based on product characteristics.
As one of the first global e-discovery software providers, Exterro has always been committed to cutting-edge solutions combining technology and law. Wang tells ALB that Exterro early on proposed the concept of Legal GRC, meaning "an ecosystem that integrates corporate governance, risk management and compliance review". The concept is embraced by more and more legal technology companies today.
According to Wang, Exterro's products in the Chinese market target two major scenarios—exactly the top two hottest topics among domestic in-house teams in recent years.
The first is corporate data compliance. Since China implemented its new data laws, Exterro has helped many companies build their internal data compliance system. The comprehensive platform can semi-automatically sort out the data and privacy compliance of businesses and include a wizard that guides businesses through embedded regulations from dozens of countries and regions, including China's Personal Information Protection Law, Europe's GDPR, and the U.S. CCPA, thus providing scenario-based solutions.
Wang cites a recent case. A large pharmaceutical company recently wanted to upgrade its data compliance system for rapid online data management and review. Exterro helped the company put all processes online through the SaaS model so that the system can automatically import corporate data and applicable laws and regulations to complete semi-automatic grading and risk assessment, and the upgrade has greatly relieved legal compliance personnel from routine, repetitive tasks.
The system can also sort out the company’s overseas data and generate logs and reports based on internal data flow. Exterro also helped the company connect multiple databases to supervise data access, flow, and storage, “making corporate data and information genuinely compliant,” says Wang.
Another scenario is overseas regulatory and litigation challenges that companies going abroad may encounter. Wang tells ALB that Exterro's eDiscovery is used in the scenario. It can help enterprises with efficient data forensics and analysis to meet "procedural justice” principles; that is, overseas regulatory authorities can recognise their data forensics process.
There are also examples in this respect. Not long ago, Exterro provided services to a leading manufacturer in China that is developing new products for overseas markets. To deal with possible product quality and litigation issues, it has incorporated eDiscovery to record massive R&D and production data so that it can move fast to conduct data discovery in line with overseas judicial processes when regulatory challenges arise.
"This is a precautionary measure. The system allows clients to assess data and take precautions before risks occur," adds Wang.
On the technological edge of the above tools, Wang says that many products of Exterro, an early starter, boast a vast technological lead. "For example, machine learning which triggered heated discussions, has been adopted by Exterro many years ago and lots of internal training have been completed... Exterro has also transformed algorithms into effective digital tools that can replace manual work with software to solve most legal problems throughout the data lifecycle."
LONG WAY TO DIGITAL
In working with Chinese companies, especially their legal teams, legal technology companies observe that in-house teams still have a long way to go digital from their traditional work models.
Wang from Exterro points out that many companies do not have dedicated internal systems or tools for data compliance, and "some third-party agencies are still using Excel forms for compliance assessments, which are difficult to maintain and fail to satisfy the sustainable development of enterprises."
"At the root of these pain points is that the data is not examined, and a complete internal data map is not prepared. If an enterprise can't even know where a particular piece of information is stored, how can it sort and display the data and form valid compliance conclusions?" says Wang.
Cai from Thunisoft Yuandian agrees. He notes that legal departments generally need to catch up to other departments in the digitalisation drive. He explains that "the process is generally divided into two stages. The first stage is informatisation of the internal approval system for data records, and next comes digitisation, which is about refining and analysing the big data recorded to facilitate the business development."
Many corporate departments are already at digitalisation, yet legal departments may still need complete data records. "We work to help legal departments get past the two stages in a short time and catch up with the digitisation drive of the enterprises," Cai suggests making the most of external data, such as external cases and penalty records while increasing internal digital touchpoints.
"We have been telling many companies that legal technology tools are not simply moving work from offline to online, and the greatest thing they do is to store digital touchpoints in the system to collect massive information and present the business status quo for the legal department. After analysing and refining these data, they can find improvement measures and better supervision methods," says Cai.
Beyond catching up quickly, Cai believes corporate clients face another challenge: "integrating legal business with next-generation information technology." He said, "In the past, companies were looking mainly for technology vendors to help the legal department turn an idea into codes, but the process was super inefficient as it could take months to communicate legal concepts. At Yuandian, we have both technology teams and legal teams and when we integrate them perfectly, companies would see fast progress when working with us."
Cai observes that some multinational companies have included "legal operations managers" in their legal teams, whose primary responsibilities are improving departmental efficiency, optimising costs, income, and expenses, and applying technologies. "This job may become a new trend."
IMPACT OF AI BOOM
Since late last year, generative AI has been all the rage, particularly in the form of tools such as ChatGPT, and legal technology companies confess that it presents both opportunities and challenges.
"LLM applications have been sprouting fast in the last six months," Cai says. "Some foreign papers state that the future may be polarised. A few generic LLMs can satisfy general jobs, while vertical AI models are needed for legal, medical, financial, and other high-value-added jobs. Yuandian hopes to focus on the development and application of vertical models."
Wang is keen to see how LLMs can benefit the whole industry. "Many existing process systems are mature, yet companies still need a lot of human and material resources to operate and control these systems and generate the required conclusions. Such operations are often repetitive. If ChatGPT-like technologies can be used to learn and recognise common scenarios and help clients reduce such repetitive operations and judgments, we can minimise the daily routines of legal and compliance personnel," he notes.
While exploring opportunities in technology, legal technology companies are also aware of their role as a bridge in the rapid iteration of technology. Cai admits that during his recent exchanges with clients, "I find there are two extreme opinions on LLMs. In which scenarios can LLMs be made the best use? What are the judging criteria? Legal technology companies need to play their role as a promoter and help clients use good products in the right scenario.”
Wang also has some thoughts on this. He believes that "legal technology companies play a critical role as a node to connect law, technology and business across industries. On the one hand, legal technology companies and their products can help legal and compliance personnel respond to new big data information more accurately and efficiently. On the other, they enable business and data technicians to understand legal compliance requirements in an easier and more efficient manner. That way, the two can ensure legal compliance of internal data information."
So, will the AI boom in 2023 translate into real gains for legal technology companies?
Cai says that "there may not necessarily be a rise in business revenue this year, yet we all are excited about it. There are many problems to solve too. In addition to the technical flaws of LLMs, Chinese companies also need to solve compliance challenges. For example, the Cyberspace Administration of China recently released the Draft Measures on Managing Generative AI Services for public comments, which sets out strict compliance requirements. When these issues are solved, subsequent revenues can be guaranteed."
"As the regulatory environment changes, compliance offers a bigger stage for legal teams to play their role. As long as legal technology companies can join hands with in-house teams to better explain that technologies can bring more value, there is no worry about investment from the clients," he adds.