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Legal tech – automation of legal activities

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The term legal tech, short for legal technology, is not uniformly defined[1]. The tendency seems to be to understand the term broadly and to include any “information technology (IT) that is used in the legal field”[2]. Legal tech is therefore about “the use of technology in a legal context”[3]. Legal tech became popular in Germany around 2016; however, the phenomenon referred to by the term has existed for some time[4]. Advances in the field of artificial intelligence (AI) have given new impetus to the discussion. Digital policy is also concerned with legal tech: for example, the legislator reacted to the increasing emergence of legal tech companies with the Legal Tech Act, which primarily modified the law on debt collection services and the law governing the legal profession[5]. Furthermore, a law is planned under which online court proceedings can be tested in civil law disputes[6]. In order to drive innovation in this area, the Legal Tech Colab, an innovation hub that supports start-ups in the field of legal tech, was founded in Bavaria, for example, with the support of the BayStMJ[7].

Legal tech is initially used in traditional legal fields of activity, for example in law firms and courts. Lawyers can use software, for example, to analyze and create legal documents such as contracts[8]. In the courts, for example, software is being tested to support mass proceedings, such as those resulting from the diesel emissions scandal[9]. The judiciary is also discussing and testing the use of an electronic basic document to better structure the subject matter of proceedings[10]. Other traditional players that use legal tech are the public prosecutor’s office, administrative authorities and legal departments in companies. Investigations by the public prosecutor’s office can be facilitated by special search engines for the darknet, for example[11]. Under certain conditions, official decisions can even be made completely automatically, for example in tax law[12]. Companies can use software, for example, to keep an eye on relevant compliance requirements[13]. In all fields of activity, legal tech can facilitate legal research, e.g. in the form of online databases or AI chatbots that evaluate legal texts and materials, case law and literature[14].

Legal tech is also opening up new areas of legal activity. Legal tech companies should be mentioned here in particular. Their business models are based on using digitalized procedures to collect the claims of their clients – often consumers – out of court or in court[15]. For this activity, they receive remuneration from their clients in the form of a success fee. This relieves these litigants of the risk of losing a case they have brought themselves, possibly with the involvement of a lawyer, and having to bear the costs. One disadvantage for those seeking legal advice is that they cannot realize their claims in full due to the company’s profit-sharing, unlike in conventional legal proceedings. Legal tech companies usually operate in areas in which the examination and collection of claims can be standardized and thus automated. Examples include air passenger rights and claims in connection with the diesel emissions scandal[16]. Legal tech therefore opens up new ways of initiating legal proceedings. Legal tech can also sometimes be used to avoid court proceedings: Out-of-court online dispute resolution is another area in which digital technologies can be used. Providers of such procedures can be public bodies, such as the European online consumer arbitration system, which is currently being renewed[17], but also private actors, in particular digital platforms[18]. Finally, legal tech may also be able to avoid legal disputes from the outset. So-called smart contracts can sometimes automate the exchange of services and thus make a lawsuit for performance unnecessary[19]. However, these same smart contracts can themselves cause new disputes, for example if the functioning of the software is disputed[20].

Comparability with analogue phenomena

Legal tech makes it possible to automate existing processes that were previously carried out manually. In law firms, for example, the document analyses that are required in connection with the acquisition of companies during due diligence audits are traditionally carried out manually. This is very time-consuming and cost-intensive. AI software in particular, which can process a large amount of data very quickly (generation and processing of large amounts of data), allows an increase in efficiency (high speed)[21]. In a similar way, AI can help the courts to analyze pleadings and other file contents, cf. the press release of the BayStMJ of 31.07.2024 on a corresponding research project, [22]. Online court proceedings could reduce the localization of judicial and legal activities and thus also the effort involved in prosecuting cases (ubiquitous availability)[23]. A reduction in the cost of legal action is also achieved by legal tech companies enabling litigants to instruct them online to enforce their claims with just a few clicks instead of having to find and instruct a lawyer. The new business models not only reduce the litigation risk for those seeking legal advice, they are also very convenient. Approaches such as the electronic basic document in the judiciary allow better structuring of information than with the conventional exchange of pleadings (networking and data integration).

However, legal tech also opens up new possibilities that have no equivalent in the analog world[24]. Legal tech companies sometimes enforce claims that would not have been enforced without the digital technologies used for this purpose. Small claims in particular, e.g. air passenger rights, are often not realized by conventional means, i.e. by the litigants themselves, as there is a rational lack of interest on the part of the litigants in pursuing legal action in view of the associated cost risk[25]. The same applies to judicial or alternative online proceedings: This allows conflicts to be resolved that might have remained unresolved without the technologies due to high costs and effort[26].

Social relevance

Legal tech can make law enforcement easier, faster and cheaper or even, as in the case of small claims enforced by legal tech companies, make it worthwhile in the first place. In this way, access to justice can be fundamentally improved[27]. At the same time, legal tech raises a number of questions: Is it sufficient for access to justice to be provided by private companies that initiate or resolve legal disputes for commercial purposes? What requirements should be placed on such companies? How much automation is permissible and desirable when authorities and courts make decisions about individuals? What data may be collected by digital technologies, e.g. surveillance software? These questions are just a selection, but they show the social relevance of the topic.

Further links and literature

Recommended reading:

  • Domej, T. (2024). Effektive Zivilrechtsdurchsetzung: Zugang zur Justiz, Prozessfinanzierung, Legal Tech – Welcher rechtliche Rahmen empfiehlt sich?. Gutachten A zum 74. Deutschen Juristentag Stuttgart 2024. München.
  • Ebers, M. (Hrsg.) (2023). StichwortKommentar Legal Tech. Baden-Baden. Legal-Tech.de, https://legal-tech.de/legal-tech-blog [14.10.2024]..
  • Meisenbacher, S. et al. (2024). Legal AI Use Case Radar 2024 Report, TU München. https://mediatum.ub.tum.de/1748412 [14.10.2024].

Sources

  1. Herberger, M. (2023). Legal Tech, Begriff. In: Ebers, M. (Hrsg.). StichwortKommentar Legal Tech, Nr. 56.
  2. Wagner, J. (2020). Legal Tech und Legal Robots, 2. Aufl., S. 2; ähnlich Rollberg (2020). Algorithmen in der Justiz., S. 24.
  3. Biallaß in: Ory, S./Weth, S. (Hrsg.) (2022). jurisPraxisKommentar.-Elektronischer Rechtsverkehr, Band 1. 2. Aufl., Kap. 8 (Stand: 23.11.2022) Rn. 14; siehe auch Rn. 2 ff. zu weiteren Definitionen.
  4. Herberger (2023). Legal Tech, Begriff. In: Ebers (Hrsg.), StichwortKommentar Legal Tech, 2023, Nr. 56 Rn. 10 ff.; Hartung, M. (2018). In: Hartung/Bues/Halbleib (Hrsg.), Legal Tech, Kap. 1 Rn. 10 ff.
  5. Gesetz zur Förderung verbrauchergerechter Angebote im Rechtsdienstleistungsmarkt v. 10.08.2021 (BGBl. I S. 3415).
  6. Entwurf eines Gesetzes zur Entwicklung und Erprobung eines Online-Verfahrens in der Zivilgerichtsbarkeit v. 30.09.2024, BT-Drs. 20/13082.
  7. Pressemitteilung des BayStMJ v. 12.09.2022, https://www.justiz.bayern.de/presse-und-medien/pressemitteilungen/archiv/2022/157.php [14.10.2024].
  8. legal-tech.de, https://legal-tech.de/was-ist-legal-tech-ffi/ [14.10.2024].
  9. Pressemitteilung des BayStMJ v. 18.06.2024, https://www.justiz.bayern.de/presse-und-medien/pressemitteilungen/archiv/2024/81.php [14.10.2024].
  10. Althammer/Wolff (2024). Abschlussbericht des Forschungsprojekts Reallabor Basisdokument im Auftrag der Justizministerien Bayerns und Niedersachsens, 23.07.2024. https://www.uni-regensburg.de/assets/forschung/reallabor-parteivortrag-im-zivilprozess/Abschlussbericht_2024-07-24.pdf [14.10.2024].
  11. Pressemitteilung des BayStMJ v. 27.07.2020. https://www.justiz.bayern.de/presse-und-medien/pressemitteilungen/archiv/2020/69.php [14.10.2024].
  12. § 155 Abs. 4 AO; siehe auch § 35a VwVfG.
  13. Meisenbacher, S. et al. (2024). Legal AI Use Case Radar 2024 Report,  10 ff. https://mediatum.ub.tum.de/1748412 [14.10.2024].
  14. Meisenbacher, S. et al. (2024). Legal AI Use Case Radar 2024 Report. 48 ff. https://mediatum.ub.tum.de/1748412 [14.10.2024].
  15. Begründung des Entwurfs eines Gesetzes zur Förderung verbrauchergerechter Angebote im Rechtsdienstleistungsmarkt v. 17.03.2021, BT-Drs. 19/27673, 13 ff.
  16. Begründung des Entwurfs eines Gesetzes zur Förderung verbrauchergerechter Angebote im Rechtsdienstleistungsmarkt v. 17.03.2021, BT-Drs. 19/27673, 15.
  17. Vorschlag der Europäischen Kommission zur Überarbeitung des Rahmens für alternative Streitbeilegung (ADR-Rahmen), dargestellt unter https://commission.europa.eu/live-work-travel-eu/consumer-rights-and-complaints/resolve-your-consumer-complaint/alternative-dispute-resolution-consumers_de [14.10.2024].
  18. Ausführlich dazu Liebig (2024). Außergerichtliche private Streitbeilegung durch digitale Plattformen.
  19. Woebbeking, M. K. (2019). The Impact of Smart Contracts on Traditional Concepts of Contract Law. Jipitec, 106 (112).
  20. Fries, M. (2018). Smart Contracts: Brauchen schlaue Verträge noch Anwälte? Zusammenspiel von Smart Contracts mit dem Beweismittelrecht der ZPO. AnwBl 2018, 86 (90).
  21. Wagner, J. (2020). Legal Tech und Legal Robots, 2. Aufl. S. 3.
  22. BayStMJ (2024). Pressemitteilung v. 31.07.2024. https://www.justiz.bayern.de/presse-und-medien/pressemitteilungen/archiv/2024/111.php [14.10.2024].
  23. Entwurf eines Gesetzes zur Entwicklung und Erprobung eines Online-Verfahrens in der Zivilgerichtsbarkeit v. 30.09.2024, BT-Drs. 20/13082, 33, 37 f.
  24. Wagner, J. (2020). Legal Tech und Legal Robots, 2. Aufl., S. 4 f.
  25. Begründung des Entwurfs eines Gesetzes zur Förderung verbrauchergerechter Angebote im Rechtsdienstleistungsmarkt v. 17.03.2021, BT-Drs. 19/27673, 14.
  26. Begründung des Entwurfs eines Gesetzes zur Entwicklung und Erprobung eines Online-Verfahrens in der Zivilgerichtsbarkeit vom 30.09.2024, BT-Drs. 20/13082,  21.
  27. Domej, T. (2024). Effektive Zivilrechtsdurchsetzung: Zugang zur Justiz, Prozessfinanzierung, Legal Tech – Welcher rechtliche Rahmen empfiehlt sich?. Gutachten A zum 74. Deutschen Juristentag Stuttgart 2024. München.