Future of law: courts debate legality of legal ‘bots’
The Hanseatic Bar Association Hamburg – a self-governing body representing over 10,000 lawyers in Hamburg – has mounted a successful challenge against a ‘legal bot’, with the regional court of Cologne finding in October that the bot, an online contract generator, was in effect providing legal services. Under German law, only lawyers, not computer bots, can dispense legal advice.
The bot – Smartlaw – is operated by publisher Wolters Kluwer. It produces standard legal contracts through a fully automated process for around €29.90 per month.
‘The tool is clearly delivering “legal services”’, says Dr Thomas Kaiser-Stockmann, IBA Legal Practice Division Council Member and Managing Partner at tkslegal Berlin. ‘Not only does it ask you a lot of questions in order to fill in the contract but it will also tell you about any relevant cases, any changes in the law and whether you might need a permit or licence for something. Under Germany’s Legal Services Act only a lawyer can provide that service and so, technically, Smartlaw breaks our laws’.
If you de-regulate all activities, how do we protect consumers and maintain the high standards required of the solicitor brand?
Chair of the Technology and Law Committee at the Law Society (of England and Wales)
Legal bots are typically customer-facing applications that use artificial intelligence (AI) to automate part of the process of getting legal advice, in order to provide free or low cost legal support. AI is deployed in many other activities in the legal sphere such as due diligence and e-disclosure as well as lawyer-facing contract generation. It is at a more nascent stage in a customer-facing environment, with only a handful of examples – such as DoNotPay and Lawbot – currently available. Despite this, the area has been highlighted as potentially a major growth market.
In the United States, similar cases have been brought against LegalZoom, also an online contractor generator, in a number of states. LegalZoom was challenged as an unauthorised practice of law.
Neither LegalZoom nor Wolters Kluwer had responded to requests for comment at the time of publication.
However, Kaiser-Stockmann argues that the Smartlaw case may only have ‘limited scope’ and applies to the specific German laws in this area. He does not believe the case will have general application.
Dr Marc Hilber, Senior Vice-Chair of the IBA Technology Law Committee and a partner in the Cologne office of Oppenhoff & Partner, says that the regional court of appeal might ‘find a way out’ for the legal bot on appeal.
‘For years we have been using bots like this where the software asks for your information online and it processes that information for you into some sort of an agreement, such as a typical tax declaration,’ says Hilber. ‘Smartlaw is not that different’.
A contrasting case in Berlin involved the Berlin Bar Association, which took action against an online tool, wenigermiete.de. The tool assists tenants with legal letters to get their rents reduced. Here the German Federal Court of Justice found that the tool fell within a special category of legal services, namely debt collection. As there are different rules about the level of lawyer involvement required, the tool was consequently not in breach of the law.
In the Berlin case, ‘the court adopted a very broad definition of debt collection so that the tool did not break the law, and its decision is much more in line with the principle of the deregulation of professional legal services, which is very much supported by the German Constitutional Court and EU law,’ explains Kaiser-Stockmann. ‘This is the direction of travel for us in Germany: greater liberalisation of legal services.’
This direction is mirrored in the United Kingdom. For instance, many legal services are no longer ‘regulated’, in that numerous types of legal advice, such as non-contentious commercial and corporate advice, can be provided by an unregulated person or firm. Legal chat bots are, broadly speaking, free to operate in this space.
Hilber believes that the development of the legal bot will continue whether lawyers like it or not. ‘Some lawyers are scared about what impact these technologies will have. Will they just give someone bad but cheap legal advice that could create bad law? They are also scared that their business will be taken away. But my view is you cannot stop it.’
Pavel Klimov is Chair of the Technology and Law Committee at the Law Society (of England and Wales). He explains that the debate is now about whether or not all legal services, including those currently reserved for solicitors, such as litigation, probate and land transfers, should be opened for other alternative providers. Another question is whether any law technology that replicates the role of a lawyer should, in fact, be subject to regulation or not.
There are significant challenges around these proposals, says Klimov. ‘If you attempt to regulate legal bots in the UK then how do we deal with providers in other jurisdictions? But if you do de-regulate all activities, how do we protect consumers and maintain the high standards required of the solicitor brand?’
There may be more pragmatic solutions available. In the US, for instance, bots operate with a disclaimer to clarify to the consumer that the bot is not providing, and cannot provide, legal advice. Many of the LegalZoom cases ended in compromise with the company ensuring that, for instance, actual licensed attorneys are involved in the reviewing of online template contracts. The future may see customer-facing applications that stop short of full automation, combining human and AI skills in the delivery of legal services.