Lawyers across the world like to talk about rubber stamping things, even though few who qualified in the last 15 years will have seen a rubber stamp let alone used one to certify a document. But, as we found out speaking to GCs across Asia Pacific for this special report, when a lawyer in that region talks about rubber stamping something, they often mean it literally.

‘Most documents I deal with require physically stamping,’ lamented one Indian GC. ‘Even if you want to automate some part of that process in the end you will need to get a stamp. That means a trip to another office, a taxi ride somewhere else in the city, a long wait in a queue. All to get that piece of paper stamped.’

India may be notoriously bureaucratic, but the problem was far from unique to that country. GCs from Japan, Korea, Indonesia, and even ultra-efficient Singapore told us of cultures rooted in face-to-face contact, deference to senior decision makers and established hierarchies. As a result, even that simplest of legal technologies, the electronic signature, had failed to take root.

The obstacles facing GCs who wanted to introduce technology felt unmovable. Until a pandemic hit. After nearly a year of lockdown, businesses across Asia have embraced new ways of working.

To understand just how much lawyers have adapted to tech in these strange times, GC magazine teamed up with World Services Group to survey over 100 of Asia Pacific’s leading general counsel. We asked them about everything from the impact of Covid-19 on the legal team’s efficiency to their use of AI, how they find the right software (and the money to buy it), and their expectations of outside counsel when it comes to technology.

We found evidence of a region that is almost uniformly embracing technology, a region where even the most entrenched cultural habits may be coming to an end. But let us not get carried away.

Any discussion of how GCs in the Asia Pacific region are using legal tech is liable to fall into the trap of focusing on culture first. Certainly, this special edition shows much evidence of country-specific traits that are restricting or encouraging the use of technology, but it also shows that GCs the world over are facing the same issues when it comes to technology.

Broadly, there are three steps involved in the acquisition of legal tech, all of which are things lawyers have historically struggled with: Knowing what’s out there; understanding and benchmarking the capabilities vs the cost, and convincing the business that it is going to save time and money. Until GCs get to grips with these procurement-driven approaches to buying technology their successes in finding suitable platforms is likely to remain limited.

On behalf of all of World Services Group, I am delighted to welcome you to the third edition of our GC special reports, looking at the importance and impact of technology on the legal profession.

This issue of the report is indeed a timely one, as at no point in our professional lives has the profound effect of technology been more evident. Since the onset of the pandemic, private practice and in-house counsel alike have universally transitioned to new ways of working largely driven by technology, demonstrating on one hand the adaptability of the profession, while on the other, dispelling tired notions of lawyers as technological luddites.

As the legal leaders featured throughout the report illustrate, innovation – particularly as it pertains to technology – is apparent in every corner of the profession. Just as we saw in the first two editions, neither budget nor business size need to be obstacles to innovating, with much of the counsel-driven development originating from little more than an idea and an opportunity.

Yet as we celebrate the shared successes seen across the legal industry, we must remain cognizant that innovation is a journey on which we will never reach a final destination. And with evolution emerging from every corner, it would be all too easy to rest on our collective laurels instead of continuing to build on the progress made. So, while we look on at the innovators and their accomplishments detailed throughout the report, we should also consider what we can do to foster and facilitate the emergence of the next wave of visionaries, set to take the profession further still.

Here at World Services Group, we want to embody the change that we advocate for. As an organization, we have seen that investing in technology, talent and corporate sustainability best practices that foster social and economic development are essential elements for ongoing business success – all of which represent key commitments I have made for my tenure as Chairman in 2020-21. By taking a strategic approach to our proprietary digital platform, empowering emerging leaders across our network, as well as improving training and accessibility to technology for all our membership, World Services Group is committed to ensuring that we are properly prepared to capitalize on the growing wave of technological innovation, for the benefit of both our members and clients.

In closing, I’d like to thank all of those in the legal community who contributed their thoughts and insights as part of the research for this report. By sharing your own lived experiences along this journey, I have no doubt you will help to shape and inspire the coming generation of leaders and innovators, set to once again disrupt the idea of what it means to be a lawyer.

Ramon Moyano
Chairman
World Services Group

Partner
Beccar Varela

Legal tech is becoming big business in the Asia Pacific region, so much so that the Singapore Academy of Law (SAL) has opened a legal tech accelerator. But much of the industry’s focus remains on selling to law firms. For GCs and in-house legal teams, making sense of the myriad systems can be a daunting task.

It is no surprise then that GCs would like to see law firms doing more to help them make sense of the market. While more than half of respondents to our survey (62%) said their external firms were using technology to deliver legal services, under a quarter (23%) said their firms had offered to share information on how technology might benefit their legal team’s operations.

‘Law firms need to demonstrate the value to in-house teams of adopting technological solutions’, noted one respondent, a Hong Kong-based legal manager at an international consumer goods company. ‘Right now, I think the focus of law firms is using technology to improve their bottom line rather than creating value for clients.’

Another respondent, an Indonesia-based head of legal at a large insurance provider, added: ‘It would be great if the external firm could also offer the service of helping in-house teams find the right legal tech solution for their team. They are often far more aware of the trends and services being used in the market so this would really help us understand things.’

Given the clear client demand, it is surprising that law firms are not seeing the opportunity here. Then again, law firms themselves may have a lot to learn. Just 22% of respondents were satisfied with the technology being used by their external firms.

Law firms should take this dissatisfaction seriously – 94% of respondents said it was important for law firms to keep up with new technologies, while 59% said they had started assessing their firms’ use of technology as part of their formal panel review process.

The incentive for law firms is clear. While legal tech is often seen as a disintermediator, disruptor or challenger to the established order, it does not have to be treated as a zero-sum game. As Susan Cattell, senior legal operations manager at Australian financial services company AMP, notes: ‘Clients and law firms have to work together to ensure the right tech solutions have been put into place and that they benefit both parties.’

Seemingly unable to move on from damaging #MeToo allegations; suggestions of an inappropriate drinking culture; an incomplete UK move to Bishopsgate; and a succession of high-profile departures culminating in Skadden’s poaching of Bruce Embley on the eve of Dawson’s appointment; all have contributed to keeping Freshfields in the press for the wrong reasons.

At the same time, and perhaps most important of all, there is the reputational elephant in the room: namely, the cum-ex scandal in Germany. This involves aggressive tax strategies that were championed by a former Freshfields partner so as to take advantage of apparent loopholes in German dividends tax law. (See ‘Der Freshfields-Skandal‘ for detailed analysis.)

What seems striking to outsiders is that other prominent (and respected) law firm tax departments in Germany – notably Linklaters and Hengeler Mueller – said no to their clients on these trades and refused to sign off legal opinion letters. So it seems that what Freshfields was doing was not common market practice (in other words, it cannot be said that every other law firm was doing the same, which is the usual excuse when a tax ploy proves to have been ill-conceived).

The consequences have been enormous. Firstly, it is estimated that cum-ex claims in Germany amount to €11bn (obviously, not all were signed off by Freshfields). Secondly, the Freshfields partner, along with a more junior colleague (also a partner at Freshfields), has since been arrested and faces criminal prosecution. Thirdly, Freshfields has settled a claim from the aggrieved administrators of Maple Bank (a cum-ex client of the firm that reclaimed €380m in tax that was never paid – and which has since gone bust) for €50m.

The two Freshfields partners involved have resigned. But the concern must be that there are potentially other cum-ex clients who might be minded to bring a claim against the firm, if only because German tax authorities now take such a dim view of such tactics. No doubt Freshfields has sufficient professional indemnity cover to meet claims that might be made, although it’s reasonable to suppose that partners in London (and other non-German locations) might be unhappy at having to make contributions.

Meanwhile reputational damage is already obvious – the German government has distanced itself from Freshfields and made clear it will not instruct the firm (when asked whether firms like Freshfields or others should be excluded from receiving future instructions, the German finance minister replied: ‘I cannot imagine that new assignments will be placed there’ – which is a nice way of saying they will not get any work). Might other EU governments follow its lead?

Similarly, in the corporate sector, German semiconductor manufacturer Infineon (market cap of $30bn) was forced to justify retaining Freshfields as legal counsel after one of its shareholders challenged the firm’s ethical standards. GCs we surveyed for The Legal 500 Deutschland voiced their anxiety about being ‘thrown into the same pot’ by continuing to instruct a firm associated with ethically suspect advice. And with peer firms in Germany already grumbling about the impact of the scandal on recruitment into their tax departments, how can Freshfields hope to safeguard its own longer-term position in the market?

There are indications that this is not a one-year problem, and that there are more deep-seated causes for concern. At The Legal 500 it is noticeable to me that in recent years there has been a sharp decline in the number of Legal 500 top-tier recommendations globally for Freshfields (compare 90 in 2017 and 51 this year). Perhaps that is due to the firm being less open and transparent about its work, but I suspect it runs deeper than that – and it reflects less enthusiastic recommendations from clients and peers, as well as a change in the culture of the firm.

Global law firms build their practices on the basis of global expertise (which Freshfields has in abundance), but also on a global reputation. In effect, global clients want to be associated with the best and they want to be associated with legal brands that enhance their own corporate values. The danger for Freshfields is that cum-ex makes it a target of global activism (for instance, by tax-transparency campaigners in the UK) which might escalate into further bad PR. And that may then lead some major clients to question whether there are other law firm brands that they might prefer to be associated with.

That is the big unknown for Freshfields. With good fortune this will remain a localised (German) crisis. With bad luck it could turn into an international embarrassment.

The future reputation of Freshfields will be decided in the medium to long term. In the short term, I note the firm’s decline in our rankings. I note the negative comments from German GCs. I note some significant departures. I note a culture that seems to be more inward-looking and less transparent than it was a few years go. And I worry that the firm may have become over-aggressive in its pursuit of profits.

Above all else, it is client perceptions that matter. On that basis, if Freshfields was quoted stock, my buy/hold/sell recommendation would be: ‘Sell’.

John Pritchard