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When Alejandro Alvarez says “greater access to legal documents is an important component to achieving greater access to justice”, the UN legal expert is underlining the importance of contracts to how society and business function from day to day.
As head of the rule of law unit in the UN secretary-general’s office in New York, he is close to the UN’s Agenda 2030 for Sustainable Development, under which the global organisation aims to help countries “enact effective, accountable and transparent institutions at all levels of society”.
Business has a role to play in this societal challenge, Mr Alvarez says. “Much of the innovation in using technology for access to legal documents is happening in the private sector, and we encourage partnerships between the private sector and states,” he says.
Tim Cummins, chief executive of the US-based International Association of Commercial Contract Managers, agrees that greater innovation and efficiency in business contracts will lead to better access to justice. “In their current form, contracts can become a barrier to social inclusion,” he says. “People can be intimidated by the entire process of contracts.”
One route to improvement, he says, is to overhaul the “artisanal nature of present-day contract writing”. Mr Cummins adds that idiosyncratic contracts may be liked by law firms, which bill by the hour for drafting them, but they are often unnecessary — and achieving efficiency in contracting is good for all.
Aine Lyons, deputy general counsel at US-based software company VMware, says one of the main aims of “smart contracting” is to make legal services simple and to replicate in digital form what people are used to in daily life.
VMware’s legal department has developed some digital innovations that make the process of contracts and negotiation easier, including a self-service portal for creating non-disclosure agreements. When employees need to generate an NDA, usually on sharing commercially sensitive information with suppliers, they use a smartphone app or tablet to answer a few questions, from which a contract is generated.
“There [are] considerable efficiencies in the process but, as importantly, we’re empowering our employees to take responsibility [for] the process and protect our data,” says Ms Lyons.
In Ukraine, Yuriy Zaremba is exploring how machines rather than lawyers can handle contracts. The co-founder of Kiev-based AxDraft says people are surprised by the breadth of work that can be automated. “Even the most complex M&A deals have a lot of code-able patterns,” he says.
For shipping and manufacturing clients, AxDraft can develop “smart forms” for common requirements such as claims against suppliers for delay of delivery and violation of contracts. Almost any legal document can be coded and formulated in about a week, he says. “The key is to determine the pattern and develop a template.”
US tech start-up Ironclad is also working on improving the efficiency of contracting by applying technology to “problems [that] machines are better at than humans”, says James Honsa, who oversees deployment at the company, based in Silicon Valley. He says legal teams in many industries are dealing with the “same poor contracts problems” of inefficiency and lack of helpful analytics.
Automation and good data processing are not the only benefits technology brings to contracts. Security and trust are also vital to contracting parties, which is where innovations such as blockchain can help. “The whole point of a contract is to create an unassailable account of an agreement. But when an organisation is dealing with tens of thousands of contracts, traditional contracting becomes burdensome,” says Chad Jerdee, general counsel at Accenture.
The management consultancy’s legal team has developed a platform based on years of contract analytics and blockchain technology, which provides an immutable record of every contract, including the contract’s lifecycle and an auditable history. “This platform helps [Accenture] build trust in relationships,” Mr Jerdee says. “Access to legal services beyond the privileged few who can afford it is becoming an increasing issue in society.”
Entrepreneur David Fisher says trust is the key to better contracting, which led him to set up Integra Ledger, a blockchain to support legal documents.
While most blockchains — such as the one governing bitcoin — are public and can be accessed and interrogated by anyone, Integra Ledger is a private blockchain overseen by the legal industry and is a system for hosting contracts and other legal documents.
“Legal contracts, which need to be kept confidential, can benefit from the immutability that blockchain provides,” he says.
For Mr Fisher, blockchain technology has good potential to improve access to legal documents in developing countries.
“In the developed world, where there is already a high degree of social trust, blockchain will create incremental value and add efficiencies to contracting,” he says. “For developing countries — especially where the rule of law is more tenuous — blockchain will become a massive disrupter in the same way that mobile technology leapfrogged wired telephone lines.”
Case studies: intelligent contracting
VMware, Apttus, QuisLex and ThinkSmart (Mitratech)
As the contracts essential to VMware’s global technology service business increased in both number and in complexity, the company’s legal team rewrote its entire contracting process.
In 2013, the team first reduced their involvement in contracting with the help of contract management software from Apttus. This halved the number of contract templates while managing the risks and liabilities in the complex agreements. VMware automated simple contracts such as non-disclosure agreements with the help of QuisLex, the legal process outsourcer. It used ThinkSmart’s portal to enable contract approval on “any device, anywhere”.
Finalising contracts now happens 50 per cent faster and the work with QuisLex saves more than $8.4m a year.
Smart contracts and blockchain
Thousands of EU residents experience flight delays of more than two hours every year, but only a few claim compensation. The insurance group Axa is making the process easier with Fizzy, a smart contract launched in 2017 that uses blockchain to automate compensation.
Customers enter their flight details and the application uses data from the previous seven years to show the risk of delay and quotes for coverage. If a flight is delayed for more than two hours, the smart contract self-executes and compensates the policyholder. It currently covers 70 per cent of EU flights.
Axiom and the University of North Carolina
When the University of North Carolina set out to reduce the time spent negotiating clinical trial and confidentiality agreements, it looked at where negotiations had failed previously. With the help of Axiom, the managed services provider, it was able to identify contractual clauses that caused repeated problems. As a result, negotiation times have dropped by up to 70 per cent since April, generating revenues of more than $30m a year.
Smart contracts and blockchain
Professional services company Capgemini operates in 40 countries, employs more than 200,000 people and works with contracts in multiple languages. The range and diversity of its contracts had grown each year, until it exceeded company capacity. Lawyers used Symfact to collate and digitise more than 10,000 contracts, storing them in a searchable central repository.
Next, iManage Ravn was used to review high-value portfolios. The technology tracks obligations, flags breaches and identifies renewals. Visualisation tool Tableau was then used to create digestible reports, summarising entire client portfolios.
Dropbox and Ironclad
The Dropbox legal team wanted to reduce the time spent reviewing simple legal contracts and turned to Ironclad, a US West Coast-based provider of contract management software. Together, they created a playbook for non-disclosure agreements that non-specialist business colleagues could execute. Almost a quarter of the company’s estimated 6,000 annual contracts have been executed on Ironclad since 2016.
The software integrates with other technology and is easy to adopt, which allowed the lawyers at Dropbox to focus on more complex transactions.
eBay and LawGeex
Simplifying the approvals process
Working with Israeli artificial intelligence company LawGeex, eBay streamlined the way it handled its high volume of “low-risk, low-dollar” contracts. When simple contracts reach the management system, the AI reviews them and assigns them a risk level. Low-risk “green” documents receive a brief human review before being sent for immediate signature. If it identifies a more significant risk, the contract is escalated for review. This triage approach reduced review times by up to 50 per cent in some cases in the past year.
HPE and Apttus
Reducing lawyer involvement
The enterprise information technology company HPE implemented Apttus’s contract management tool to store contracts, manage and automate parts of the process, and collect new data. This cut contract response times in half from 48 to 24 hours, and halved negotiation times. The tool has also collected more than 3m data points, which are used to identify risk, predicting contracting costs with 99 per cent accuracy.
London Stock Exchange Group, Radiant Law, Lawyers on Demand
Facing an increased need for legal services, the London Stock Exchange Group first standardised contract templates and automated its processes in 2011 with the help of Radiant Law, a technology and outsourcing boutique.
Early this year it enlisted flexible resourcing firm Lawyers on Demand to help with procurement and intragroup agreements. The dual-provider model also trials technologies for the London Stock Exchange, allowing it to bring products to market faster.
When the legal team at Shell decided to make its contracting process easier for non-English speaking customers, they designed a visual contract, which was piloted this year. Starting with Shell’s marine lubricants business, the legal team rewrote its general terms and conditions in plain English, added clear headings and visual elements and reduced the word count by 38 per cent. It has led to a significantly faster renewal of hard-to-close accounts since the change.
The AA and Thomson Reuters Legal Managed Services, Syke, Thomson Reuters Contract Express, eBrevia
Integrating different technologies
With just eight weeks to review and amend 2,600 contracts before the introduction of the EU’s GDPR (General Data Protection Regulation), the AA engaged consulting group Syke. Thomson Reuters then used eBrevia’s artificial intelligence tool to review and extract contract data from the AA’s agreements and automatically generate new contracts with Contract Express software.
The automated process allowed the AA to meet the deadline at a fifth of the cost of a traditional approach, and agreement data were added to the AA’s SAP systems.
Case studies research: RSG Consulting
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