“Not yet” is still the short answer.
Private sector adoption by law firms in Hong Kong has been growing pretty well, and the buyers’ market reflects comparably to leading international trends in the U.S. and Europe. So, what would it take for Hong Kong’s legaltech moment to truly arrive?
Hong Kong should be an excellent investment as a legaltech hub (and, perhaps, lawtech, too). Here are some fundamentals to build on:
- Robust institutions supporting the rule of law, including the court system and arbitration centers.
- Reliable legal system with track-record supporting Hong Kong’s international finance center status.
- Home to all the major international and national law firms.
The overall commercial environment is internationally competitive and favorable to the adoption of innovations.
- Under the “One Country, Two Systems” regime, Hong Kong is the only common law jurisdiction in China.
- Set to remain as top 3 of IPO markets globally in 2020 (180 companies expected to raise US$33.4 billion); total assets under management (AUM) is over US$1 trillion.
- Third easiest place to do business; following New Zealand and Singapore (World Bank Doing Business 2020 Report).
The long-term demand for legal services should be quite strong.
As noted in the December 2019 report “Lawtech: a comparative analysis of legal technology in the UK and in other jurisdictions“:
“[t]he UK is playing a significant role in lawtech on the world stage. The closest competitors are Singapore, Hong Kong and the Netherlands.”The Law Society of England and Wales (2019).
What are the key indicators that Hong Kong is on track to develop a good legaltech market?
Tones from the Public Sector
“Tone from the top” is key to change management. In the case of the legal sector, the tones from the judiciary and the executive branch are foundational to legaltech market growth. A few examples:
- Court Proceedings (Electronic Technology) Bill gazetted in December 2019;
- Nearly US$ 20 million committed by the HKSAR government to develop the electronic Business Related Arbitration and Mediation (eBRAM) system;
- Section on LawTech in the Secretary for Justice’s 2019 Opening of the Legal Year speech;
- eDiscovery Practice Direction SL 1.2 (and case law, see e.g. analysis on Pyrrho Investments; English case on A.I. tech adoption in discovery).
- The Hong Kong Monetary Authority‘s virtual bank framework, Open API, and other tech initiatives;
- The Insurance Authority‘s virtual insurance firm framework and other tech initiatives;
- Continuing improvements in eGovernment services, such as the Companies Registry and Land Registry.
These initiatives drive baseline digital transformation in the private sector. They motivate small, medium, and large firms alike to adopt more tech to take advantage of digital efficiencies.
The Continuing Rise of NewLaw and Alternative Legal Services
Many overseas alternative legal service providers (ALSPs) have been set up in Hong Kong in recent years, following the major international law firms and banks established locally:
- Vendors of eDiscovery and litigation support solutions;
- Flexible legal staffing providers;
- Document assembly and other legaltech vendors.
Room for growth: even in the mature eDiscovery market, providers, like Inventus, have started operations in Hong Kong in the last two years.
2015-16 saw several law firms launch their own captured flexible legal staffing and tech-enabled services in Hong Kong, including Allen & Overy’s Peerpoint, Evershed’s Agile (now Konexo), and Pinsent Mason’s Vario. It is interesting to note that, unlike traditional legal process outsourcing (LPO), the ALSP market has now expanded to include staffing of professionals with senior legal experiences.
ALSPs are effective channels for the distribution and adoption of legaltech; further enhancing access to tech-enabled efficiencies by private practice and in-house lawyer clients (while minimizing overheads).
- The InnoTech Law Hub of the Law Society of Hong Kong;
- Legaltech hackathons (e.g. Law Society’s Access to Justice Hackathon; Hong Kong Chapter of the Global Legal Hackathon);
- Law school legaltech initiatives (e.g. Chinese University of Hong Kong’s Machine Lawyering; University of Hong Kong’s LITE).
The InnoTech Law Hub has published an analysis in December 2019 of its Innovation Value Chain Survey, which polled the innovation priorities of solicitors and registered foreign lawyers in Hong Kong.
These initiatives are important for the growth of the legaltech ecosystem. Not-for-profit settings, such as academia, community interest groups, and professional associations, often provide safe forums for experimentation and cultivation of innovative minds.
Where to from here?
Hong Kong has the potential to become a great buyers’ market of legaltech. On its strength in English-Chinese bilingual legal services alone, we could foresee high adoption of legaltech solutions from legaltech developers in the U.S., U.K., and China in the long term.
The legal sector is by-and-large a slow adopter of technologies, and faces a lot of challenges to develop and execute innovation initiatives. And, Hong Kong’s legal sector is no exception. A few areas for incremental improvement:
- Better organizational transformation (i.e. supporting champions of change, openness to proof-of-concepts, and pilot projects);
- A lot more market education initiatives and calls for innovative action, including conferences, seminars, and meet-ups with legal innovation and legaltech themes;
- Growth in local legaltech talent and relevant skills training; continuing the trend of hirings of legal project managers and legal operations specialists by firms and corporates.
These are not fanciful goals.
But, transformative change is needed for Hong Kong to be a leading legaltech hub. This would require policies to support healthy development in the local legaltech ecosystem. Unpacking this:
- Strengthening the supply-side market, including the legaltech startup community;
- More public and community sector initiatives to support broader growth in legaltech (e.g. to fill the gaps where the practice areas are most lagging behind);
- Legal and regulatory reforms (from legal practice to cybersecurity and data protection.
Each of these points pertain to massive areas of discourse, all for later posts.
To paraphrase Professor Daniel Katz, Chicago Kent College of Law, “law’s future is finance’s past.” If this were the case, Hong Kong’s status as an international finance center and fintech hub bodes well for its legaltech future.