“Tension” between legal and non-legal firms holds back ‘justicetech’

Lennox: Supercharging sector

“Tension” and a “lack of collaboration” between tech firms from legal and non-legal backgrounds is holding back the development of lawtech services for small businesses and consumers, or ‘justicetech’, a report has found.

LawTechUK said “innovative new approaches to attracting investment” were needed, along with a new approach to data and more support for entrepreneurs in navigating a “complex” regulatory landscape.

It described justicetech as “a promising subset of lawtech that has the potential to democratise legal support and make it accessible to all”.

“By focusing on justicetech, we can create a thriving ecosystem that empowers individuals and businesses alike to access the legal support they need at a price they can afford.”

Earlier this month, it was announced that LawTechUK would be run by global tech network Legal Geek and incubator CodeBase under a new £3m contract with the Ministry of Justice, and the unmet needs of small business and consumers would be a priority.

In the report, Building an entrepreneurial ecosystem to improve access to justice, LawtechUK said lack of collaboration between tech firms from legal and non-legal backgrounds was one of the barriers to the development .

Researchers said there was a “clear division” in the way entrepreneurs from the two groups engaged with the justicetech market.

“Both groups bring different expertise that the other one requires, however, there is little collaboration between the two and overall a feeling of a lack of co-ordination and collaboration in the sector.”

Sharing of knowledge and skills “does not seem to be happening at the moment” but could be “deeply beneficial”.

“If collaboration and knowledge sharing does not happen, it can increase the likelihood of failure with innovation and duplication of solutions to market, resulting in lower adoption of each solution.”

Researchers said entrepreneurs from a legal background “seem to be frustrated by startups from the non-legal sector, operating without regulatory compliance and legal qualifications, while external startups are not given clarity on what they need to do, in order to be compliant”.

One entrepreneur from a legal background commented: “There is a regulatory gap in the fact that ‘legal services’ is not a protected term. There are online offerings in legal services like family and others and they’re not lawyers. They’re not regulated. They’re not trained. They’re not supervised.

“It’s not against the law to say on your website ‘we are legally trained’ even if they’re not.”

Meanwhile, entrepreneurs were faced with “an overall lack of clarity and guidance from regulators” when “struggling to navigate” a fragmented market.

Researchers said: “There is a tension between justicetech providers from a legal background who are not getting the support they expect from the regulator who they pay, and those from a non-legal background who don’t understand the regulatory requirements and don’t see the benefit of being a associated with a regulator due to lack of clarity provided.”

An entrepreneur commented in the report: “Regulators gave us this wishy washy kind of answer. They don’t say yes or no, they basically say probably, but it’s up to you to figure it out. So you take the legal risk, you decide, so it’s up to us.”

On funding, the report said the justicetech sector could be “highly attractive to less traditional sources of funding, such as impact investors, who are motivated by the positive social impact and accepting of a slower return on their investment”.

For example, specialised justicetech investor networks had been established in the US, including by Village Capital.

Researchers said very little data was available to entrepreneurs, which limited their ability to test, launch and scale solutions and businesses.

They called for data holders to “come together to agree and prioritise the mechanism for collection and sharing of data” in both public and private sectors.

In her foreword to the report, LawTech UK director Alexandra Lennox said: “Fast-growing lawtech companies are developing new and innovative ways to deliver legal services and law firms are investing and using technology at scale.

“Whilst we’ve seen this developing sector go from strength to strength, the affordability and accessibility of legal support has remained largely unchanged, particularly for consumers and SMEs.”

Ms Lennox said a “supercharged” justicetech sector could change this, backed by the “public, private and third sector”, to create a “vibrant, well-connected” community.

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