Originally published on Artificial Lawyer. Written by Laura van Wyngaarden.
Diligen COO – Laura, explores client pressure on legal fees and how legal AI technology can play a positive role.
Client pressure on legal fees is nothing new.
More and more clients are looking for new ways to engage with law firms using fixed fee, capped fee or success-based engagements.
According to the Thomson Reuters Legal Tracker LDO Index, a new report based on anonymized data from more than one thousand legal departments, 83% are using alternative fee arrangements.
But before you think that’s the efficiency answer that everyone has been seeking all these years, it’s worth digging further in the report. Yes, many legal departments are taking advantage of alternative fees, but it’s a small percentage of overall legal budgets.
For most companies, alternative fees represent less than 20% of their total legal spend.
Meanwhile, the workload is mounting. Most legal departments in the Thomson Reuters Index said the volume of legal matters rose in the last six months, while less than a third of those firms got a bigger budget with which to address it. The bottom line: law firms will need to keep finding ways to be more competitive with their bids; and they’ll have to operate more efficiently to preserve margins.
For firms facing the conundrum of needing to produce high-quality legal work much more efficiently, leveraging the right technology may be the solution. In the area of contract review, for example, attorneys can quickly and automatically identify key provisions, summarize contracts and manage the contract review process with the help of an AI-powered contract assistant. This results in contract review that has been found in some cases to be 50% faster and 80% more accurate than manual review alone.
AI lends itself well to improving efficiency and accuracy of certain kinds of tasks within the contract review workflow. Here are the areas of lowest hanging fruit that can contribute towards more competitive and predictable fees:
1. Find Critical Issues
Deals often change mid-course which may mean starting the due diligence process over practically from scratch. Instead of re-reviewing all those contracts manually looking for those that include a new provision, an intelligent contract assistant saves enormous time and effort by surfacing new provisions quickly. It provides a high level overview of what is in the contracts and allows user to find, for example, all the change of control provisions within hundreds of documents, giving users the ability to rapidly navigate to what is most important for them to review.
2. Document Summary
Summarizing contracts can be a painstaking process. Intelligent contract assistants give attorneys a jump start on document summaries by extracting the key provisions that need further attention and analysis. Hundreds of documents can be reviewed and summarized nearly instantly. This serves as a springboard for further analysis and helps attorneys avoid investing hours in summary work.
3. Manage Review Process
One of the most time consuming aspects of contract review is the upfront work to sort and organize documents. Hours are spent simply categorising documents (Is this a contract or some other document? What type of contract is it? What is the governing law?
AI-powered contract assistant software can intelligently sort documents by a range of key criteria, assist in assigning documents out to review by team members and tracking the review process, making it easy to monitor progress towards completion.
We’re all familiar with the old adage ‘Fast. Good. Cheap. Pick two.’ This idea has held true in the practice of the law for as long as the profession has been in existence. Using traditional methods, document review can happen quickly and inexpensively but at the expense of thoroughness. Or more accurate review by experienced attorneys can slow down the process and add adds cost through higher rates. But with the introduction of AI contract assistants, for the first time clients won’t need to make tradeoffs between fast, good or cheap. They can have it all.