Banks the world around are subject to a level of supervision and regulatory scrutiny over and above almost any other entity. In certain parts of Asia, and in an increasing number of Western countries, banks have even more to contend with. In Southeast Asia, where Muslims number 240 million and over 40% of the population, the demand for financial products that adhere to Sharia legal principles is similarly high.

Ernst & Young estimates that Islamic banking assets grew at an annual rate of 17.6% between 2009 and 2013, and further estimates that it will continue to grow by an average of 19.7% up to 2018. A report by Thomson Reuters in 2017 projected global Islamic financial assets to be worth $3.2tn by 2020.

‘A credible Islamic finance offering is becoming one of the key differentiators among banks in Southeast Asia,’ explains Lee Chin Tok, group general counsel at CIMB, Malaysia’s second largest bank.

In 2015, 65% of the global assets were held by those based in Saudi Arabia, Iran and Malaysia. Another report by the Islamic Financial Services Board, an international body based in Malaysia, which is responsible for setting standards and giving guidance on Islamic banking and finance, reported that the total value of Islamic financial assets had grown from $1.4tn to $1.5tn in 2017.

Sharia on the ground

In many countries, Malaysia and Indonesia included, the demand for Islamic financial products has carved out an increasingly prominent role for Sharia within the traditional legal system. Naturally, this is felt by legal teams operating within these jurisdictions and this industry, where Islamic finance isn’t just a public relations issue, but a regulatory one, too.

‘We have a dedicated Islamic Legal team that covers Islamic finance. However, I also encourage my other legal colleagues who are not on that team to also have familiarity with the Islamic principles that we use for our Islamic products,’ explains Lee.

‘Although we do have various specialist legal teams for a particular area of law or particular area of business and notwithstanding the fact that we have a dedicated Islamic legal team, the rest of our legal colleagues are encouraged to learn about Islamic finance because it is an important component for our business.’

Indonesia has begun to solidify the boundary between Sharia and non-Sharia offerings. The country introduced the so-called ‘New Insurance Law’ in 2014, which is intended to be the definitive source on insurance law in the country. One of the requirements it introduced was that all Sharia business units within conventional insurance companies must be segregated.

‘In terms of regulation, insurers have to be ready to spin off their Sharia units, as required by the 2014 insurance law. We have to submit the blueprint for the spinoffs by 2020, and they have to be spunoff by 2024, so this is becoming a hot topic of conversation everywhere in the industry. We have to be able to ensure that the process is running smoothly and successfully,’explains Randi Ikhlas Sardoni, head of legal at Panin Dai-ichi Life.

‘Now, the issues relate to how to ensure that when the spinoff company is independent from the holding company or the conventional company, it will be competing with the other Sharia companies in Indonesia, and not with the conventional company.’

‘There will also be a lot of discussion about how to train the financial advisers. Currently, we have financial advisers that hold two licences, a conventional licence and a Sharia licence. But after the regulation takes effect, they have to advise just the conventional or just the Sharia businesses. So these will be several things that have to be taken care of and discussed properly.’

Pious Regulation in Malaysia

According to Thomson Reuter’s Islamic Finance Development Indicator, Malaysia is the best-developed Islamic Finance market by a significant margin, scoring 128.87, ahead of the next-best, Bahrain, by over 45 points.

The regulation of Islamic finance in Malaysia is sophisticated. Islamic financial products and services are regulated by the Central Bank of Malaysia, which regulates specifically for the Islamic finance market in the hopes of establishing Malaysia as a global hub. Islamic finance is specifically provided for in the Central Bank of Malaysia Act 2009, which states that ‘the financial system in Malaysia shall consist of the conventional financial system and Islamic financial system’.

‘The legal infrastructure in Malaysia, in the context of Islamic products, is generally quite well-established by the regulatory authorities. On the banking side, we have the Malaysian Central Bank (Bank Negara Malaysia) and on the capital markets side, we have our Securities Commission’ says Lee.

‘Both Bank Negara Malaysia and the Securities Commission have their respective Shariah Advisory Councils to, amongst others, deliberate, provide guidance and issue rulings on all Sharia matters, including products and structures and and therefore. helps the banks to structure their products in a Sharia compliant manner.’

The Malaysian Central Bank, referred to as BNM, is empowered by statute to legitimise the duality of both Malaysia’s conventional and Islamic financial systems. It has a dedicated Shariah Advisory Council, to which all questions of Islamic finance under Sharia should be referred.

The Securities Commission is similarly mandated to regulate the Malaysian capital market, which includes the Islamic capital market. According to the Securities Commission, the Islamic capital market in Malaysia accounts for over 60% of the total capital market. To bolster this, the Securities Commission set up a dedicated Islamic Capital Market Department, mandated to carry out research and development aimed at strengthening the long-term prospects of the Islamic capital market in the future.

Court system

Malaysia’s dual judicial system is supported by two separate courts: the Civil Court and the Sharia Court. Unlike the Civil Court, the Sharia Court only has jurisdiction over those professing the religion of Islam, and on select areas of Islamic law, including family law and the administration of trusts. Islamic banking and finance, while subject to Sharia law, are dealt with in the civil court system.

‘Here in Malaysia, we have the regular courts and then we have the Sharia courts. If you’re a muslim and you want to get a divorce, you cannot go to the regular courts – you go to the Sharia courts. Sharia is very important, but where we don’t see it play a big role, is in business disputes,’ explains Harald Sippel, head of legal services at the Asian International Arbitration Centre.

‘For Islamic products which are being offered to bank customers in Malaysia, they come under the jurisdiction of the Malaysian civil courts, and not the Islamic courts. That helps in terms of making sure, in terms of the treatment of Islamic products, that they also follow the same principles in terms of enforceability,’ adds Lee.

‘That also helps to keep the wider public informed of any issues about Islamic products, as the cases are also litigated in the civil court system.’

This position has been affirmed on the basis that disputes over Islamic financial transactions still involve the application of civil law statutes; that Sharia courts hold few powers in terms of enforcement and remedies to function as a banking court; and that the Sharia courts are independent state courts with their own lines of appeal – making them a confusing source of authority on financial matters.

Despite this, the line between Sharia and civil law when talking about issues of Islamic finance, is not as well defined as it appears. Even in the civil courts, adjudicating on Islamic finance requires an application of both Sharia and the civil law. That Islamic finance cases are filed in the civil court at every level has muddied the procedural waters and has often left judges who are not sufficiently trained in Sharia law in the position of presiding over Islamic finance cases. Worse still, Islamic finance cases are often brought before lower courts who are not empowered to grant the kinds of remedies that would normally be appropriate in cases of non-compliance, leading to costly delays in proceedings.

The obvious answer may be to establish a dedicated court to hear matters of Islamic finance, but Malaysia’s legal architecture makes this difficult. In Malaysia, the courts are set up based on territoriality, with the intent of providing easy access to the legal system for citizens. This focus on geography would not lend itself to the establishment of dedicated sharia courts, where the volume of Islamic finance cases will vary greatly depending on location.

A dedicated court, the Muamalah Court, was established in 2009 and is designated to hear all cases on Islamic finance. While viewed as a positive step, the scope of the Muamalah Court is limited and it still defers to Malaysia’s other commercial courts for execution proceedings. Further, appeals from the Muamalah Court follow the same path as appeals from other lower level courts, meaning that cases appealed will eventually end up before a panel of non-Sharia experts, despite their origins in the specialised Muamalah Court. Additionally, this court is resident only in Kuala Lumpur, meaning it can only hear cases filed in Kuala Lumpur. This renders citizens based in regional Malaysia without easy access.

While various figures within the Malaysian legal system have called for the establishment of the Mualamah Court at state level, citizens outside Kuala Lumpur have no option but to take the traditional route to justice. That means applying to non-expert commercial civil courts to rule on matters of Islamic finance, or seeking alternative methods of dispute resolution altogether.

Dispute Resolution

Malaysia is one part of a tightly knit collection of economies in Southeast Asia. Despite their geographic proximity and co-dependence, these countries are diverse culturally and, as a result, legally. Whereas a small niche of Sharia law sits alongside the civil code in Malaysia, some of its would-be trading partners see Sharia take a much more dominant part of their legal code. This, Sippel explains, can be a barrier to trade.

‘Now, there is a quickly growing volume of deals for halal product. That’s where we see a huge market for growth because these halal products are being traded more and more on an international scope. But the moment you have a second country involved, you will automatically have more disputes because of the cultural differences,’ explains Sippel.

‘When it comes to halal products, for a Malaysian company to do business with an Indonesian entity, for instance, they would be reluctant to agree to be subject to anything other than Sharia experts, which is where the Asian International Arbitration Centre (AIAC) would come in.’

Malaysia has embraced the value of alternative dispute resolution methods, which has allowed entities such as the AIAC to thrive. Formerly the Kuala Lumpur Regional Centre for Arbitration, it looks to leverage its dominance in Malaysia and establish itself as Southeast Asia’s premier arbitration hub.

‘We were established 40 years ago, in 1978. What we don’t have to a great extent yet are the international arbitrations. Of around 150 arbitrations a year in total, 80% of that is domestic,’ says Sippel.

‘It’s something that we are trying to expand, because the AIAC is the only, or is one of the only arbitral institutions in the world that has Sharia-compliant arbitration rules.’

In 2012, the AIAC introduced a new set of arbitration rules for Islamic arbitration. Called the i-Abritration rules, they are the first adapted ruleset to cater exclusively to disputes arising from commercial contracts containing issues of Sharia law.

The rules were a necessary introduction for global legal frameworks, and form a big part of the AIAC’s vision to become the go-to arbitration service in Asia. The hope for the AIAC is that it can offer another avenue to international parties looking to do business in Malaysia or wider-Asia, specifically with regards to Islamic finance.

GC: Tell me about your role and how you came to be the general counsel – East Asia and Japan at Schneider Electric.

Paul Fredrick (PF): In 2015, Schneider Electric hired me to handle legal and compliance matters for the East Asia and Japan Zone, which includes 15 countries: Brunei, Cambodia, Indonesia, Japan, Laos, Malaysia, Mongolia, Myanmar, Philippines, Singapore, South Korea, Taiwan, Thailand, Timor-Leste, and Vietnam.

I lead a team of nine lawyers based in six different countries and together we handle all of the deals/transactions/projects for about US$1.8 billion of commercial operations in our 15 countries. We also handle work for various functional departments – credit, customs, finance, HR, import/export, tax – for Schneider Electric entities in our region. Our legal team is focused on being an effective partner with the business units we support.

For the EAJ Zone, I lead the compliance council (comprised of senior management for the Zone) that addresses all of the ethics cases that arise related to the 12,000 employees who work for Schneider Electric in these 15 countries.

From the list of countries that comprise the EAJ Zone, one can see: (i) a wide diversity of laws to understand and comply with; (ii) differing levels of business and economic maturity; and (iii) varied judicial systems with different levels of efficiency and transparency.

GC: How did you come to work in Asia?

PF: In 1995, my law firm in Hawaii seconded me to the legal department of the Tokyo headquarters of ITOCHU Corporation. While there, I handled real estate, corporate and litigation/dispute resolution matters for ITOCHU’s projects in the US. Upon completing that secondment, I joined a Japanese law firm to work on outbound M&A and corporate projects throughout Asia. In 1998, ITOCHU Oil Exploration Company hired me as its first general counsel. After seven years handling the global legal affairs for ITOCHU Oil, I returned to private practice in Tokyo in 2005.

Chevron Corporation hired me in 2008 to work on its LNG and other energy projects in Asia and elsewhere globally. Five and a half of my seven years with Chevron were based in Singapore, handling LNG, oil, power and other projects / transactions throughout the A-P region including in Australia, China, Indonesia, Japan, Korea, Singapore, Taiwan, Thailand and Vietnam, which are many of the same countries I now have responsibility for with Schneider Electric.

Looking back, upon completing law school and a federal court clerkship in Indiana, I had no idea that a significant part of my legal career would involve transactions and projects throughout Asia and elsewhere internationally. I have enjoyed the variety of deals I negotiated and important projects handled over many years now along with the quality lawyers and colleagues I have worked alongside in Singapore, Tokyo and elsewhere.

GC: Did you find it difficult to make that transition?

PF: I was fortunate to have good mentors, both on legal and commercial teams, who helped to teach me how best to be culturally aware of actions in the various countries where I worked. So those lessons were of great value over the years as I negotiated deals and progressed projects in the A-P region and other parts of the world.

Whether working in the US or internationally, it is important to listen well and be able to ‘see between the lines’ to grasp the unspoken parts of a situation in order to understand what is going on in a negotiation or meeting and how to efficiently progress a mutually beneficial conclusion. I am always striving to further improve this skill.

GC: That must be challenging to keep a broad mind, a bit of your brain focused on each country.

PF: Yes, at times it can be. As most GCs will acknowledge, we are only as good as our team enables us to be. So I have worked diligently to empower my nine lawyers to process a large amount of work in their respective countries and to keep me fully informed on all matters that could escalate up and require the attention of legal or commercial management at my level and above.

GC: Schneider Electric is obviously a very big company with a diverse portfolio of interests, is that something that your legal team feels? You must get a really wide variety of work coming across your desk.

PF: Schneider Electric is the global specialist in energy management, energy efficiency solutions and industrial automation. With commercial operations in over 100 countries, Schneider Electric is known worldwide for our electronic products, services, software and solutions.

On a daily basis for the 15 countries in my region, I will spend time on negotiations, drafting / revising agreements, handling compliance issues, advising management on potential litigation / dispute resolution or other issues, conferring with external counsel and various other matters related to board resolutions, corporate governance, IP or global supply chain. Every day is busy and different, but never dull.

I also try to spend some time every week developing or improving ‘plain-English’ template agreements that help to increase efficiency and enable my team and also commercial colleagues to focus on areas of high risk / high value to Schneider Electric.

Throughout the year, our legal team conducts internal seminars to highlight awareness of Schneider Electric policies and guidelines on contracting, compliance / ethics and other issues including:

1. anti-bribery / corruption / conflict of interest
2. gift and hospitality to customers / government officials
3. data privacy and cybersecurity
4. effective negotiating / contracting practices
5. dawn raids by government officials

Because Schneider Electric has commercial operations in in 100 countries, the legal department strives to have consistency, as much as possible, for the variety of contracts that the company enters into globally.

In the EAJ Zone, we are mindful that contractual arrangements put in place in our 15 countries can have a precedential effect with the same counterparty in other countries. Our legal department has a comprehensive internal database for agreements signed on all strategic accounts. Such database, accessible to our global legal team, helps to ensure there is some uniformity for key provisions related to liability / indemnity, warranties, dispute resolution, and financial or other critical issues.

GC: Does that become difficult to manage? How do you stay on the same page with the international departments?

PF: My team and I always check on: (i) whether Schneider Electric has entered into a similar agreement anywhere globally with the same counterparty; and (ii) if so, then what were the final position on key provisions negotiated / agreed to in that executed contract. Schneider Electric also uses global framework agreements that will establish the key terms & conditions for the contractual relationship and then enables the companies to enter into service / work orders or purchase orders anywhere in the world under such framework agreement. A global framework agreement also helps to streamline the overall negotiations that are required at the local level, which can focus on the specific order to be put in place.

GC: I imagine that would require a very robust contract menagement system.

PF: Yes it does. Schneider Electric has that in place and our lawyers / legal professionals work diligently to ensure the contract management system and other internal databases stay current and inclusive of important contracts we execute around the world. Our global legal team also communicates smoothly and effectively across geographical regions. I am regularly speaking with law colleagues in Australia, India, France, the UK and the US on matters related to compliance, data privacy, insurance, IP protection, trademark and other issues.

GC: What are your thoughts on additive manufacturing?

PF: I emphasise to my team the importance of understanding the business of Schneider Electric and our products, solutions, software and related services. Because my own training/background was not in computers, engineering or in manufacturing, I have made extra effort to learn as much as I can about digitisation, Cloud technology, the Internet-of-Things-enabled system architectures, and lots more involved in our industry. Schneider Electric has an impressive variety of products and systems we manufacture and the related platforms that are interconnected to ensure energy management and automation for our clients. Smart technologies will continue to enable lower overall energy usage in buildings and better environmental sustainability as urbanisation continues in Asia and elsewhere.

Additive manufacturing (AM) and 3D printing are important for Schneider Electric and have been for many years. These technologies allow for significant time and cost savings (up to 90%) along with reduced manufacturing and production times for injection moulds, product prototypes and products/spare parts. Plastic moulds can be done in about a quarter of the time required for an aluminium mould.

Technologies such as AM and 3D will continue to enable our company to reduce time-to-market for the new solutions that Schneider Electric is developing every year. So the innovative use of AM and 3D printing in manufacturing is a key strategy of the ‘Factory of the Future’ that will help Schneider Electric expand our leadership in global energy management and bring more sophisticated products to consumers at a faster rate.

GC: Do you see any issues arising as 3D printing is adopted more widely?

PF: My team and I closely review provisions in every agreement to ensure that the proprietary and confidential intellectual property of Schneider Electric is fully protected. We insist on comprehensive IP provisions in the contracts we prepare and add these same important protective provisions to contracts received from counterparties. Schneider Electric’s subject matter experts for IP, patents and trademarks/copyrights work well with my team.

Robust contractual provisions, however, are only part of a best practice for protecting IP. We also actively monitor and address situations when other entities attempt to produce (via 3D printing or other traditional technologies) or sell counterfeit products in similar packaging that violates local and international laws.

GC: In your experience, has the businesses interest changed as the nature of the manufacturing has changed?

PF: Quality IP provisions have always been important for manufacturing companies such as Schneider Electric. With new and developing technologies, however, our lawyers review and consider even more carefully now about the overall scope of information and materials / schematics, etc. will be protected in an IP provision. The breadth of information and documents available on the Internet has also had some effect also on the scope of IP that companies may be able to fully protect. Thus, competition among manufacturers of electronic and other products will likely continue over the next decade and beyond.

For Schneider Electric and other MNCs who create and manufacture products, as new technologies are developed and existing technologies advance, there will be new and different challenges that arise. Accordingly, our lawyers will continue to be vigilant about how we can best protect the strategic assets of the company.

GC: What are your thoughts on artificial intelligence?

PF: AI is changing the legal profession and that will continue in the coming years. There are so many facets to AI and now governmental agencies in the region are more actively addressing the topic. In June 2018, the Personal Data Protection Commission in Singapore released a discussion paper on AI and personal data, so we continue to review that.

My team and I strive to work efficiently because there is an increasing amount of work while our team remains stable. Thus, we welcome new technologies that might enable us to more effectively process our work. Software or online research tools powered by AI can be useful and their practical benefits will expand further over the next five years.

AI tools that can analyse contractual provisions will save valuable time. There is some lead time required, however, to ensure that the substantive text (about governing law, indemnities, liability caps, warranties, IP protection and more) of what a legal team requires in your own contract is effectively flagged by the AI programme used. For simple documents such as a confidentiality agreement, basic sale & purchase contract, and routine lease or loan agreements, AI software could be useful. Similarly, in litigation / dispute resolution matters or for due diligence on an M&A deal, both of which can involve the review of voluminous files and documents, AI programmes can save significant time by quickly locating / highlighting information on specific key issues.

For negotiations on a complex transaction and for the structuring of project finance on a large deal, my view is that AI is unlikely to assist lawyers too much at this time. For predicting results on litigation, such as personal injury cases, AI is already proving to be a valuable tool for private practice lawyers when advising clients on a likely outcome. Accordingly, law firms and in-house legal departments continue to review the most practical uses for AI and continuing legal education courses now cover AI topics.

GC: Is that something that your team currently uses?

PF: Our legal department has been actively studying a variety of AI tools and how best we can benefit from using them. We want to ensure the basic AI platforms (programmes and software) being considered will work effectively considering the types of negotiations and contract drafting progressed by our lawyers. The smarter / more interactive the platform, then the greater the overall efficiencies and likelihood of use by my legal team.

GC: There is a trend of companies and by extension electrical appliances capturing more data. What are your thoughts on the implications?

PF: Schneider Electric has a wide variety of products, solutions, services and software that improve energy efficiency and help to reduce the overall energy use in office buildings, hospitals, data centres, airports and numerous other locations including at home. On the industrial side, Schneider Electric products and services can reduce energy consumption by up to 25% or more, which translates into significant overall cost savings for the customer. For a platform to support on energy management, various information is collected about how and at what times a building is using its energy. However, this information is always well protected and often the primary control of our customers who have programs in place to safeguard such data.

GC: So suddenly, the business will have all of this data, is that concerning for you as a legal team?

PF: Our lawyers and other management, along with our IT professionals, should always be concerned about: (i) the protection and security of all types of data and how best to prevent a potential breach; and (ii) what corrective actions should a company take when such a breach occurs. As Singapore learned this past summer, when a breach occurred at the Ministry of Health affecting 1.5 million citizens (including the Prime Minister’s records), no computer system is infallible and cybersecurity breaches will happen.

Our legal team makes the best efforts possible to ensure that the contracts we put in place require proper security and protection for all data shared between companies and other information that may be collected somehow from using Schneider Electric products and services. Companies who store data in the Cloud should continue to work to improve their cybersecurity systems in order to mitigate future risks to the extent possible. This is true for Schneider Electric and also other MNCs such as Microsoft and Google (both of which have large operations in Singapore) or social media companies such as Facebook, which recently announced plans to build in Singapore its first data centre in Asia at a cost of over US$1 billion.

Historically, the words ‘innovation’ and ‘lawyer’ have not sat well together. Ask a cross section of legal service users to describe a typical lawyer or law firm, they’d just as likely conjure up the image of a Dickensian solicitor toiling away by candlelight as they are some brash, quick-witted Hollywood type from Suits whose only claim to innovation would be in how often they can implausibly avoid disbarment. Sure, these are unfair stereotypes, but there must be a reason why they persist.

If their marketing efforts are anything to go by, many major law firms want to shake the idea that lawyers can’t innovate. Indeed, during The Legal 500’s Asia Pacific research process, many partners were keen to stress how their provision of legal services is ‘cutting edge’, ‘disruptive’, or ‘novel’. These claims don’t always stand up to scrutiny, or at least it is hard to really describe the innovations spoken of in the glowing terms seen in submissions and press releases. So, just how do you make supposed legal service innovations – for want of a better word – sexy?

Designed to do exactly what they say on the tin, ‘innovation hubs’ have been all the rage in Europe and the United States for a number of years, and firms seem to have great faith in their ability to solve the most vexing of client problems, either now or in the future. In fact, some firms are so confident in their ability to act as genuine game changers that hubs are starting to spring up across the Asia Pacific region.

In March, Allens and UNSW Sydney officially launched the Allens Hub for Technology, Law & Innovation. Led by UNSW academics, the hub aims to ‘investigate wide-ranging issues, from data as a source of market power, to the concept of legal responsibility for artificial intelligence, to the legal status of synthetic life forms, to legal models governing cooperatives’ use of digital platforms.’

At the time of its launch, Anna Collyer, partner and head of innovation at Allens, said the new hub will play a leadership role in navigating the disruption in Australia’s legal system.

‘The unprecedented pace and scale of technological advancement has meant that our legal system is in many cases no longer fit for purpose,’ she said in a statement.

‘This not only runs the risk of legal uncertainty, but also of hampering Australian businesses’ ability to harness innovation. It is essential that the law strikes the right balance between limiting risk and promoting innovation during this period of disruption.’

Two months later, in May, Clifford Chance announced the launch of its Best Delivery and Innovation Hub. Based in Singapore, the hub is Clifford Chance’s first outside Europe and the US, and will act as the Magic Circle firm’s regional centre to ‘drive more innovative, efficient, effective and robust client service delivery’, as well as ‘identify, develop, test and roll out new legal technology solutions across Asia Pacific and beyond’.

Geraint Hughes, the firm’s regional managing partner, said the hub ‘not only marks our ongoing commitment to Singapore as a global legal hub, but also reflects the rapidly evolving changes affecting our clients and our profession. We aim to combine market leading technology and project management expertise, with the highest quality legal input, to deliver the best service for our clients today and into the future.’

Meanwhile, the likes of Clyde & Co, Baker McKenzie, Linklaters and Rajah & Tann are members of the Singapore government-backed Future Law Innovation Programme (FLIP), a resource established to facilitate lawyers, entrepreneurs, and regulators collaborating on legal technology and innovation projects. As a result of the initiative, Rajah & Tann launched a separate company – Rajah & Tann Technologies – earlier this year, which allows other professionals, such as technologists, as well as policy and cybersecurity experts, to become partners in the business and provide cybersecurity, regulatory and compliance advice to the firm’s clients.

And then there is Kennedys, which is taking its innovation hub global. Launched in the summer of 2017, Kennedys’ Ideas Lab is a platform through which any member of the firm can ‘come forward with innovative ideas about how to create future products’. The only stipulation is that all ideas must align with the firm’s core principle of helping clients use lawyers less. It’s a bold proposition that seems counterintuitive, but Richard West, partner and head of innovations, insists the principle is in the best interests of both the firm and its clients.

‘We have long viewed technology as an enabler of change that can transform legal services for the benefit of both the industry and our clients,’ he says.

‘It’s important to understand that our innovations are aimed at helping clients only to use lawyers when they really need one. This is something we are incredibly strong advocates of.’

It would be easy to assume that helping corporates avoid law firms would reduce the interaction between lawyers and clients, ultimately damaging the hard-built relationships between in-house and external legal teams. West, however, dispels this notion and points to the firm’s development of its virtual lawyer, KLAiM, as an example of how a two-way innovation process between firm and client can work.

‘We have rolled [KLAiM] into some of the UK’s largest insurers and we’re developing it in Hong Kong, Sydney and the East Coast of the US,’ he says.

‘That has involved more, not less, engagement, which has, in turn, built deeper, stronger relationships rather than loosening ties with our clients. We become, in many ways, a 21st-century trusted adviser.’

According to West, this approach has realised instant savings on client costs.

‘They save millions of pounds a year in avoiding the need to instruct a lawyer when they may have otherwise been persuaded to use one. By empowering clients to deal with claims more efficiently and reducing the cost of these claims, we build additional relationships and win new clients because we can demonstrate that we have proven innovations and are trusted advisers – growing market share, while supporting our clients’ business along the way.’

Despite their lofty goals, there is some healthy scepticism surrounding innovation hubs: are they all they’re cracked up to be, or just a clever marketing gimmick designed by law firms to appear more forward-thinking and client-centric?

‘I understand the cynicism that has grown around such hubs, when many of them simply produce ideas intended to benefit the lawyers and not their clients,’ says West.

‘Some improve operational efficiency within their parent organisations. I don’t consider that to be innovative.’

For West, lawyers have to evolve, become more innovative, but also understand what innovation really means.

‘Too many try to define innovation as something that should be internally focused on their own processes to protect their own margins. My view is that innovation should be aimed at clients, and creating solutions for them which either saves them money or makes them money.’

Kennedys’ latest gambit has been the launch of a firm-wide innovation competition, in which staff can pitch their own legal start-ups for development and ‘become their own CEOs’. The Ideas Lab received over 100 proposals, which the firm’s research and development board has narrowed down to six to be turned into prototypes. Their creators range from a senior partner in London to a paralegal in New Jersey, and members of the firm’s Melbourne and Hong Kong offices are also shortlisted.

Just as Denise Morrison muses, lawyers wishing to innovate would be wise to adopt an experimental mindset, even if that experimentation costs them in the short term. The economies of scale enjoyed by global law firms mean that they are best placed to invest in the research and development of future legal products. And with Asia Pacific’s growing reputation as the place to go for tech talent, it makes sense that firms are investing in the region.

The proof, however, is in the pudding. Through their external PR, firms can shout until they are blue in the face about how innovative they really are, but their clients may take a different view unless they can see tangible results before them. So, as with all things in the business of law, law firms should think how the innovation will benefit the client first, rather than how the innovation sounds in a press release or how it will benefit the firm internally. Only then will their endeavours be truly innovative and – dare I say it? – sexy.