AI KNOW WHAT YOU’RE THINKING

Regulating AI is necessarybut the what, how andwhen remain unansweredPAGE 4

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Washington Post’s JenniferRubin is part of a panel ofrule of law expertsPAGE 5

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What are the main challengescurrently affecting the legalprofession?PAGE 10

What in-house want

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Tips and advice on what to look for when choosing outside counsel

The increase in cross-borderwork means that in-housecounsel need to rely more on

outside help to fill gaps and gain localexpertise. This was the key takeawayof yesterday morning’s ‘From Vancou-ver to Cape Town to Beijing: how tovet and select outside counsel in dif-ferent legal markets’ session.

Choosing between a localand an international firmis a question that in-house lawyers oftenstruggle with. Somefactors that need tobe considered arewhether legal adviceis needed in multiplecountries and if thefirm has experienceworking with interna-tional clients. Whilesome businesses mayprefer internationalfirms because of their reputation, it’simportant to keep in mind that not alllocal offices may be equally strong: in-house counsel have to do their home-work on the makeup and expertise ofa local legal services provider.

Working in certain industries andcountries sometimes requires in-houselawyers to work with local counsel, andchoosing international firms may notwork. “We need trusted advisers whoare able to tell us how to navigate the in-dustry and without local insight, it justdoesn’t work,” said OPEC generalcounsel Asma Muttawa. She cites theexample of Libya where there are no in-ternational law firms and businessesgoing in have to choose from local firms.

In Asia, there is heavy reliance onlocal firms for a number of jurisdic-tions. In Korea, local firms are the onlychoice and in China, international firmscan’t litigate in court. What businessescould consider is working with both aninternational and a local firm. The firstmay be better in areas such as strategy

while the second may have betterconnections with regulators.

Local vinternational As firms pretend tobe international toattract clients, in-house counsel needto keep in mind that

being international isactually not the key.

What is more importantis the capability toculturally understandwhat the business is

seeking to receive and provide guid-ance on the sensitivity of the transac-tion locally.

Tapping into people networks iskey when it comes to assessing outsidecounsel. “In Asia, chambers of com-merce are an excellent resource,” saidGraham Wladimiroff, vice presidentand assistant general counsel, retailbranding and information solutions atAvery Dennison. “In China, I’ve beeninvolved in legal committees which aregreat communities to go to for namesand references, and we have createdregional counsel networks where wecan bounce ideas off each other.”

According to Stephen Solursh, vicepresident and associate general coun-

sel at OP Trust Pension Plan, going totrusted counsel in your own countryto see which firms they have workedwith in the local country, speakingwith in-house friends with similar in-dustry rules and going to conferenceslike the IBA can provide more oppor-tunities for in-house counsel to meetoutside lawyers skilled in areas wherefuture investment needs can be antici-pated.

What about directories? While legal directories can be a goodresource, they should not be the onlyone. “Directories can be used as ascreening tool to see who the top firmsare in particular markets, but shouldbe used along with other options par-ticularly when selecting individuallawyers,” said Solursh.

American Express vice presidentand senior M&A counsel ValentinaCassata added: “Legal directories aremore of a confirmation check andhelp narrow down the choices but in-house counsel should not be shy toask for materials. They should lookfor detailed biographies of not just thelead partner but the team working ona transaction to see how strong theirspecialty areas are.”

If a mandate is big and importantenough, meeting directly with the firmis best as this can enable in-housecounsel to understand the office cul-ture and get to know and trust thefirm. “Reach out to the team directly,”said Cassata. “Work out details suchas billing arrangements and communi-cation plans at the outset when youhave the bargaining power.”

Stephen Solursh

NEWS ROM E , I TA L Y2 IBA Daily News

Fast fashion is transforming the way intellec-tual property (IP) is being protected. Thespeed at which designs are being copied and

the shortening of time from one collection launchto the next mean fashion houses need to be inno-vative in how best to protect their brands. Panel-lists shared best practices and strategies inyesterday afternoon’s session, ‘Fashion design andfast fashion: inspiration or imitation? Free ride orfair play?’.

Trying to catch up with the pace at which coun-terfeits are being created for numerous designs is afutile race, especially as IP protection budgets areshrinking. A strategy for fashion brands is to havea targeted focus. “In our work with Jimmy Choo,we created a strategy whereby we asked the designteam to pick out one or two designs that they areemotionally linked to to focus on,” said Shoosmithspartner Gary Assim. “Rather than registering onedesign for €600 and multiplying that by 80 overtwo seasons, we had a zero-tolerance policy onthose two designs only and applied injunctions. Thedamages were put back into the business as a fund-ing strategy and they became a profit centre for thebrand.”

Trussardi corporate affairs, legal and compliancemanager Sara Citterio said it’s important for fashionhouses to focus on what is really the most valuableand be selective.

“We’ve been focusing on protecting IP rights incountries where we are distributed,” she noted.“For instance, we’re big in China, Italy and Russiaso we choose to protect our designs more in thesecountries than others and also in countries wherewe produce as we have found that counterfeits werecoming from our own producers who were overproducing and putting fake labels on the products.”

Rather than fighting against fast fashion, fashionhouses have worked with the fast fashion flow. Bymaking high end fashion more approachable,brands are increasingly experimenting with the fash-ion and fast fashion connection.

“At the beginning, many fashion houses tried tofight against it,” said Citterio. “It was seen as amajor threat but as time went by, fast fashion hastaken its own role in the fashion industry.”

Assim gave the example of H&M which bringsin collaborations with designers to create limitedcollections. “It’s a way to work in tandem with fastfashion and show the customer base that a luxurybrand item can be affordable,” he said.

The fast fashion flow

KEY TAKEAWAYS• It’s important for fashion houses to focus on

which IP is really the most valuable and be se-lective: one panellist noted that her employer fo-cused on protecting IP rights in countries whereit has distribution networks;

• The key message was that fashion houses needto be innovative in how best to protect theirbrands.

In recent months, blockchain hasattracted interest outside of thetech space and right to the very

top of the financial sector. Lastmonth, more than 75 banks signed upto the Interbank Information Net-work tested by JPMorgan, RoyalBank of Canada and ANZ for almosta year, and the Italian Banking Asso-ciation successfully passed the initialtest phases for its blockchain inter-bank system.

But while blockchain has enteredthe public’s consciousness relativelyquickly, there is still a way to go beforeit can fully reach its potential and af-fect banking on a massive scale. Inparticular, there is hope that for capitalmarkets, the stock ledger can be pro-grammed so that shares owned by oneinvestor cannot be moved and there-fore the impact of a single transactionwith a cryptocurrency on the price ofan asset is not as great.

“It’s a phased approach,” AndreaTinianow, chief innovations officer attech consultant Global KompassStrategies, told delegates at yesterday’ssession, ‘Titanic fail or overwhelmingsuccess: Blockchain in the capital mar-

kets’. “The liquidity aspect will come,but it’s just not there yet.”

As part of its Blockchain Initiative,the US state of Delaware updated itscorporate law framework to allow acompany to store financial records ona blockchain. There is a desire frommany to have a fully regulated frame-work in place, as opposed to a simplepeer-to-peer network, and this is mak-ing potential new entrants pause tosee the next developments.

The updated EU Payments ServicesDirective (PSD2), which forces banks toshare customer data with their competi-

tors, could be the accelerator to provid-ing the liquidity aspect blockchain iscurrently lacking and also encouragefurther regulatory intervention.

“PSD2 allows for the creation of areal-time settlement facility,” said Bore-nius of counsel Jorma Yli-Jaakkola.

Doing so means the liquidity prob-lem could be alleviated.

PSD2 and blockchain could funda-mentally change the role of a bank,particularly when considering com-petitors are increasing in number, andin the case of challenger banks, creat-ing more new issues than before.

This is even influencing companiesoutside of financial services. US re-tailer Overstock issued its ownblockchain subsidiary, tZero, earlierthis year and has changed the very na-ture of its business into one centredaround cryptocurrencies.

Yet, even though companies froma variety of different sectors are in-vesting in cryptocurrencies, many ju-risdictions are still behind. “Somejurisdictions have not regulated onthis issue because it’s not on their mapyet,” said David Flechner, partner atShearman & Sterling.

KEY TAKEAWAYS

• Blockchain technology is not quiteready to provide liquidity to in-vestors, but it could start to do sosoon;

• PSD2 offers the opportunity of areal-time settlement facility thatcould be utilised with blockchainand reduce its liquidity problem.

Blockchain’s liquidity problem

Certain states and banking insti-tutions need to start being hon-est and taking responsibility

for their actions to prevent the illegalsales of arms to terrorist groups androgue states.

These actors are running their statesas business models and allowing terrorcells safe passage of billions ofdollars that allow them to fi-nance their activity andpurchase arms andweaponry profiting fi-nancially and regardlessof the moral and societalimplications.

It’s a complicated issuethat ranges from govern-ments not doing whatthey are supposed to bedoing, to bankers being selfish and topeople who have their own ideologi-cal business incentives to violate thelaw, said Gregory Kehoe of Green-berg Traurig during yesterday’s ses-sion, ‘The business link tointernational crime: individual andstate liability under the arms salestreaty, the Palermo Convention on

the financing of terrorism activities,and international criminal law’.

“With smart and innovative peoplewho are steeped in business and inter-national banking, we are in a bravenew world where hundreds and hun-dreds of billion of dollars can travelaround the world in 24 hours,” he

said. “Vigilance on every singlelevel has to be brought to

bear if this is going to becurtailed.”

The message: stateand business sponsoredtransactions that lead to

horrific events such as theSarin attack in Syria mustbe prevented at all costs.

Perpetrators of immoralinternational crimes often

rely on the profits of transnational or-ganised crime to fund and sustain theircriminal activity. This business linkcomes at the expense of innocent livesaround the world, and as such, a num-ber of organisations and initiativeshave been established to combat it. Butstates and banks must adopt these rulesand stop looking the other way.

The 2014 Arms Trade Treaty is onesuch example of this: it establishedcommon standards in relation tothe control of the supply ofarms by states and theircontractors within states.It also inaugurates trans-parency between statesso that they can seewhere arms are goingand avoid lessons learnedfrom the past.

The stipulations requirestates with national lawsthat have a regime to mon-itor those categories of relevantweaponry and to monitor what is rele-vant to them. Crucially, however, theTreaty has yet to be fully ratified bythree players of incredible significance.

“The fact that China, the US andRussia have not implemented it meansthat in many respects it is a dead letter

if we are going to properly monitorthe supply of the arms trade,” said

Steven Kay QC, of 9 Bedford RowChambers in London.

Kay outlined an ongo-ing case, in which he isacting pro bono on be-half of two whistleblow-ers, where a bank inCyprus was found to be

assisting a number of ille-gal actors, including themilitant arm of the Shi’iteMuslim group Hezbollah, agroup accused of multiple

acts of terrorism. Despite the caseshowing clear breaches in internationalcriminal law, nothing has been done.He said: “We have all this regulationbut no one is using it, meanwhile thepeople who blew the whistle find them-selves on the run for breaching a con-fidentiality agreement.”

www.iflr.com NEWSThursday, 11th October 2018 3

A call to arms

Distinguished history.Exciting future.

As we prepare to celebrate our first 50 years, we reaffirm

our commitment to our clients and our community

for the next 50 years and beyond.

RomaVia Venti Settembre, 1roma@unlaw.it

MilanoVia Borgonuovo, 27milano@unlaw.it

MilanoVia B. Zenale, 19milano@unlaw.it

UNLAW.IT

KEY TAKEAWAYS• Certain states and banks need to start taking responsibility for their ac-

tions in order to prevent the illegal sales of arms to terrorist groups androgue states;

• Perpetrators of immoral international crimes often rely on the profits oftransnational organised crime to fund and sustain their criminal activity.

Steven Kay QC

Gregory Kehoe

The growth in artificial intelli-gence (AI) software and pro-grammes and their roles in the

practice of law are opening lawyersand bar associations up to a giddynew world of possibility and uncer-tainty.

In this murky future, there aresome things legal professionals cancount on. One of these is that AI willplay a role. The question of regulating– what exactly to regulate, and howand when to begin – cannot be kickedinto the long grass.

“AI will be an integrated part oflegal services in the future,” saysMerete Smith, secretary general ofthe Norwegian Bar Association.“We have seen a little bit of it butnot exactly what it will be. Do wewait and see or start regulating rightnow?”

AI and its potential as a disruptivetechnology to trigger unforeseeablechanges make this a particularly dif-ficult question to answer. While out-side the legal world, AI technologyhas convincingly topped humanminds in drafts, chess and now theancient Chinese game of Go, in thelegal world firms have tested and seenAI due diligence productsoutperform lawyersand achieve somenotable success incase prediction.

“When wetalk about AIwe are talkingof somethingbeyond wordsearches, weare talkingabout the abilityof a robot or aprogramme to learnand teach itself to be-come more efficient,”says session moderatorSteven Richman fromClark Hill.

The advent of AI raises new ques-tions about what the ‘practice oflaw’ means. Companies or providersof legal AI are not regulated. Whilethere may be programmes that canput together a contract, and puttingtogether a contract is generally con-sidered practicing law, the conceptthat only (human) lawyers, regulatedby bar associations, practice law isno longer valid.

Lawyers have ethical obligationsto supervise work performed by non-lawyers in the context of what theydo, but what happens if a client en-gages an AI firm directly, asks Rich-man. “It used to be that youassociated delivery of legal serviceswith what lawyers do, but now thereis a thought that what lawyers do isonly a part of the delivery of legal ser-vices,” he says.

Know your tech“Lawyers must understand the tech-nology related to their legal practice,”says Richman. “They have an obliga-

tion to communicate withclients as to what is

available.”One of the

most dramaticexamples of AIuse has been incase predic-tion.

“What hap-pens if you have

one of these pro-grammes, and it

runs the analysis onyour case and predicts

the outcome that theclient will lose. But you feelin your gut that there is abetter chance, you per-

suade the client to go forward and thenthe client loses,” says Richman. “Areyou guilty of malpractice because youdidn’t follow the AI programme’s rec-ommendation?”

There then follows the question ofcost, and whether it is an overhead ora cost the client has to bear.

A similar question can be asked inrelation to confidentiality. If a group offirms pool together to invest in AI, whoowns the information that goes into the

product and what are the confidentialityissues?

Lawyers need to know their tech-nology to properly advise and repre-sent clients and keep their bestinterests at the fore. This amounts toan ethical obligation to know yourtech.

If AI technology replaces armies ofjunior lawyers conducting due dili-gence and analysing case histories,training and legal practice will alsohave to evolve. The way legal servicesare provided will change with that,with non-legal entities conductingwhat is now considered legal practice,and legal practice re-focusing onother areas.

As AI develops, off-the-shelf prod-ucts could suddenly make some legalservices affordable to a vast propor-tion of the population, and tip thebalance away from small firms andtowards AI companies at one end,and large firms at the other. AI prod-ucts could offer cheap and directlegal advice to a new section of thepopulation without a lawyer-interme-diary. The change in the organisa-tional structure of the legal servicesindustry alongside the potential tobring in people who now do not en-gage with legal advice carries regula-tory implications.

How and what to regulate?“We have this paradox of the expan-sion of legal services beyond whatlawyers have been doing with thesenotions of unauthorised practice oflaw, but the boundaries are still influx,” says Richman. “Nevertheless,the ethics rules and regulatory regimeneed to be reviewed.”

It remains unclear whether AI canand should be regulated, and if sohow. Richman suggests there may be

may be ways to regulate using a sim-ple question of registration, or insur-ance mechanisms, but stresses thatregulation needs to be looked at, notfor its own sake, but to ensure clientsare protected.

As to timing, no one knows thefuture, says Smith. In a part of theworld where people have holidays,holiday companies were once busylooking at tech to make ways ofbooking faster and cheaper, when uppopped Airbnb to turn businessmodels on their heads. AI has thisdisruptive potential. It also has un-known potential. The sector couldsee self-enforcing contracts based onthe concept behind blockchain andsmart contracts, or robot jurors sit-ting in the jury box alongside hu-mans analysing arguments andcarefully logging facial tics and ex-pressions.

While very few answers havebeen proposed to these questions atthis stage, the unavoidable reality isthat their arrival and impact on thestandards upheld by law profession-als must be considered. The legalcommunity also needs to keepabreast of developments, lest it becaught unawares.

ROM E , I TA L Y4 IBA Daily News

AI know what you’re thinkingPREVIEW

SESSION: Regulating artificial intel-ligence: is it time?

TIME: Today (1115 – 1230)

VENUE: Session Room P, Level -1

COMMITTEES: Bar IssuesCommission and Bar IssuesCommission Regulation Committee

Some form of artificial intelligence regulation will be needed, but the big questionsof what to regulate, how to regulate and when to make a move remain unanswered

The concept thatonly humanlawyers, regulatedby bar associations,practice law is nolonger valid

Steven M Richman

Merete Smith

Ageneration after countriesthroughout Central and East-ern Europe and elsewhere in

the world celebrated the overthrow ofauthoritarian regimes and committedthemselves to building societies basedon the rule of law, the rule of law hascome under challenge. Recent populistsurges have led to the dilution or aban-donment of rule of law reforms andthe values on which they were based.

Today’s guests will provide first-hand accounts of the warning signs,the circumstances, and the conse-quences of governmental actions thathave undercut the independence of ju-diciaries, vilified the press, suppressedindividual freedoms, and attacked thelegal profession.

Some key questions and issues thatwill be addressed include:• Freedom House reports that in

2017 the rule of law and other

tenets of democracies came undertheir most serious attacks ‘indecades’. Are we approaching apoint of crisis?

• What are the warning signs that therule of law is being challenged andbasic freedoms are being put at risk?

• What are the tools and tactics thatautocrats commonly use to in-crease their power at the expenseof the rule of law?

• How can countries effectively pro-

tect and strengthen the rule of law,and preserve free societies?

• Do members of the legal professionhave a special responsibility to de-fend the rule of law? If so, how?

The session will be moderated byHomer Moyer, member of the IBARule of Law Forum Advisory Boardand partner at Washington, DC lawfirm of Miller & Chevalier. Panellistsare: professor Metin Feyzioglu, from

the Union of Turkish Bar Associations(Ankara, Turkey); Sternford Moyo, exofficio council member of the IBA‘sHuman Rights Institute; the Hon-ourable Justice Rimvydas Norkus,chief justice of the Supreme Court ofLithuania (Vilnius, Lithuania); Jen-nifer Rubin, The Washington Post(Washington, DC, US) and; JusticeWlodzimierz Wrobel of the SupremeCourt of Poland, Criminal Division(Warsaw, Poland).

www.iflr.com NEWSThursday, 11th October 2018 5

A conversation with…a distinguished international panel

SESSION: A conversation with… adistinguished international panel Threats to the rule of law: are weat a crisis point?

TIME: Today (1315 – 1415)

VENUE: Auditorium, Foyer Level

Homer Moyer Jennifer Rubin Sternford Moyo

PREVIEW

The US is not going to join the global Com-mon Reporting Standard (CRS) but anytrustee considering re-domiciling to the US

would be jumping from the frying pan and into thefire, according to panellists at yesterday’s session,‘The CRS: how it is working in practice?’.

Passive investment funds in the US make up 78%of the world’s total, by far the most of any jurisdic-tion globally.

The Obama administration was largely infavour of switching from the Foreign Account TaxCompliance Act (FATCA) to the CRS and its au-tomatic information exchange system. But afterthe election of President Donald Trump, there hasbeen absolutely no indication that the US will doso, in keeping with the his ‘America first’ policy.Efforts were made to repeal FATCA last year butcame to nothing.

Yet while trustees may consider switching juris-dictions to one included within the CRS scheme,this could be a mistake. The increased regulatorydemands for the US and a rise in due diligence areputting pressure on lawyers, but jurisdictions in-cluded under CRS have reported few difficulties.

“What we are seeing is rather than trustees leav-ing Guernsey, more are coming to the UK instead,”said Ajay Wiltshire, of counsel at Saffery Champ-ness. For these jurisdictions signed up, there hasbeen relatively little disruption.

“There have been no difficulties in the privatesector, but we have needed to go through a process

of educating people on what the changes are,” ex-plained Maria de Lourdes Marengo, partner atPanamanian law firm Patton, Moreno & Asvat.

This could be a tricky task, however, given thatthe CRS does not really act as a law, but mostly asa contract. And with 104 separate jurisdictionssigned up, this means 104 separate interpretations,all of which could change in the future.

The General Data Protection Regulation (GDPR)also provides complications. Questionnaires forbanks are getting longer and more information isbeing transferred throughout the world, meaningthat the chance of a data breach is significantly in-creased. This is exacerbated by the fact that it is dif-ficult to ascertain whether the data collected isactually within the spirit of the regulation.

So while the US may not be the most advanta-geous jurisdiction for a trustee, there are no short-age of obstacles for others.

Into the fire

KEY TAKEAWAYS

• The US is not going to join the CRS but anytrustee considering re-domiciling to the USwill face difficulties;

• The increased regulatory demands for the USand a rise in due diligence are putting pres-sure on lawyers, but jurisdictions includedunder CRS have reported few difficulties.

Technology plays an increas-ingly important role both inthe legal profession and within

legal systems, but questions havearisen regarding its relationship withthe rule of law and the values that un-derpin it.

A revolutionary change is happen-ing in the way law is being practiced,according to Christina Blacklaws,president of the Law Society of Eng-land and Wales, chair of its Technol-ogy and Law Policy Commission, theUK government’s LawTech DeliveryPanel and co-chair of the session.

“The impact of technology on thelegal world is one of – if not the –most important issues that lawyersneed to understand and address intheir careers and businesses, whereverthey practice,” she tells IBA DailyNews.

Society and the legal profession in-creasingly rely on new technologiesusing algorithms, machine learning ordistributed ledger technologies. Tech-nology and automated processes areassisting and facilitating human deci-sion making in many areas, and insome instance, replacing it.

As such, it’s vital thatlegal practitionersrecognise the usesthese may have.“If we want toremain relevantto our clientsand continuebeing trustedadvisors, weneed to embraceand own techno-logical innovations.The lawyers whodo will not onlysurvive but thrivein this brave newworld,” says Blacklaws.

Big Brother is watching you But ethical issues are being brought tolight for the use of big data and algo-rithms – for instance, when it comesto the possibility of bias in data sets,the impact of facial recognition tech-nology on an individual’s right to pri-vacy or the cybersecurity issues raisedby data transfers.

In many jurisdictions, algorithmsare used to determine the likelihood of

an offender re-offending and to high-light crime hotspots, while biometricsare relied upon to identify potentialcriminals or terrorists. These systemsclearly have proved useful in tacklingcrime but evidence suggests that thereality isn’t as clear-cut.

US non-profit ProPublica found inan investigation carried out in 2016that data judges rely on in the auto-mated assessment to determine if acriminal will re-offend appeared to bebiased against ethnic minorities. Sim-ilar criticism has been levelled againstthe so-called predictive crime mappingtechnology used by law enforcementteams around the world.

Facial recognition software hasbeen met with a similar sentiment.The system that London’s Metropoli-tan Police uses to spot potential sus-pects in the street is believed to singleout the wrong or innocent people inup to 98% of cases. BigBrotherWatchhas also warned that the technology isturning people into ‘walking IDcards’.

For session organiser Tomasz War-dynski CBE, partner at Wardynski &

Partners, while each human deci-sion carries responsibility

as to its consequences,the truth is more

complex when itcomes to ma-chines and algo-r i t h m i cintelligence. Au-tomated pro-cesses by their

very nature don’tmake decisions

based on internalisedsets of morals oremotions. Never-theless, technologyneeds to be held to

the same standard of conduct that so-ciety expects from individuals and thelegal system, and to respect the samecore values of fairness, integrity andimpartiality.

“We need to make whatever effortpossible to be able to encode notionslike trust, empathy and compassion inmachines,” he says. “Technologydoesn’t exist outside of responsibilityand doesn’t liberate the people usingit from the obligation to be held ac-countable for their actions.”

“What we have noticed is that peo-ple are more technological than axiolog-ical and I think this is proving a growingproblem, if not a threat,” he adds.

Mr Robot, Esq.If not addressed properly and globally,technology can also become a threatto the legal profession itself. While itis certainly one of the more relation-ship-driven sectors, it certainly has notbeen immune from the penetration oftechnology.

Much has been written about theimpact automation has had in sectorsranging from manufacturing to retailand financial services. The legal sectorhasn’t received the same level of atten-tion. Work is ongoing in various juris-dictions worldwide, including at EUlevel, to support policy makers to out-line an appropriate legislative frame-work for the use of algorithms in thelegal sector.

According to a 2017 IBA report,‘more and more legal work is carriedout by algorithms; this applies, inparticular, to routine work, such asreviewing an employment contract,registering a trademark or makingdivorce papers available’.

For junior lawyers in particular,the issue is a real one, as they tendto be more involved in data gather-ing and management tasks than theirmore senior counterparts. A recentsurvey released by the AmericanLawyer found that nearly 20% ofassociates believed automation wasthe main threat to their job, withtasks including document draftingdeemed the most susceptible tobeing replaced.

“I think it’s important for thelegal profession to think about whowill gain and who will lose when itcomes to automation,” says Wardynski.

ROM E , I TA L Y6 IBA Daily News

Win and lose

SESSION: SPPI Showcase: the tech revolution - a threat to the core values ofcivil society and of the legal profession?TIME: Today (0930 – 1230)VENUE: Session Room E, Level -1 COMMITTEES: Section on Public and Professional Interest (Lead), Technol-ogy Law Committee; Senior Lawyers' Committee (Lead), Young Lawyers'Committee, Law Firm Management Committee, Professional Ethics Commit-tee and Cybercrime Subcommittee

Technology has the power to change the legal profession and the way legal services are provided

The impact of technology on the legalworld is one of the most important issuesthat lawyers need to understand andaddress in their careers and businesses,wherever they practice

Christina Blacklaws

PREVIEW

ROM E , I TA L Y8 IBA Daily News

Preparing, negotiating, structuringand papering M&A transactionsis one of those fields in which

legal tech and artificial intelligence (AI)is already having an impact. While howfar it will go remains unknown, thefact that legal tech and AI willtake up an important seat atthe corporate law table ofthe future is undoubted.

Today’s session co-chair Rainer Kaspar, ofAustrian law firm PHHProchaska Havranek and co-chair of the IBA’s YoungLawyers’ Committee, pointsout that a lot of due diligence softwareis used on the market right now. Con-tract drafting is also being developed,not just in the sense of drafting specificclauses but in tailoring agreements tosuit the situation of a transaction and itsparties. Whether legal tech and AI willbe able to work through every stage ofstructuring and documenting an M&Atransaction depends on who you talk to.

“Legal tech and AI companies obvi-ously think they will do this at some

point and that it is just a question oftime,” says Kaspar.

‘We tend to overestimate the effect ofa technology in the short run and un-derestimate the effect in the long run’

this is the often-repeated adage byRoy Amara, a former presi-

dent of the Institute for theFuture, when talking aboutAI. Amara’s law, as it’sknown, fits the currentbuzz around AI. But real

work needs to be done tounderstand and prepare forit. All legal tech will likelyhave AI built into it, what

matters is how it’s being used.

Eyes on the prizeThe efficiencies that AI-driven legal techcan bring at the due diligence stage of adeal threaten to do away with the wholeidea of having vast teams of associatessitting in a data room for weeks on end.This in turn can impact the skills juniorlawyers need to have and the way theirtime is spent in practice.

The efficiencies will also impact

transaction timings and costs for thelaw firms and clients, as well as poten-tially the types of legal service entitiesthat might be able to participate indeals, and the way external counsel andin-house teams work with each other.

Emily Foges, chief executive of Lu-minance Technologies, a UK-based legaltech developer, argues that paralegalsand associates often spend hours scan-ning near identical documents and man-ually tracking progress, whereas AI cangive legal teams an instant insight intothe whole data room while prioritisinginformation in an intuitive way. Thisfrees up lawyers to focus on more intel-lectually demanding work.

Common fears about legal tech andAI are that it will only benefit the largelaw firms with the resources to developprogrammes. But AI could benefit smalloutfits. While these don’t have the armiesof lawyers to handle the due diligence andcontracting arrangements on very largeM&A transactions, they may be able toredress the balance with technology.

Another area for consideration isthat acquisition-hungry entities may opt

to invest in their own legal tech to cutexternal legal fees, again possibly a big-ger threat to large law firms.

Glass half fullThe best preparation is cool-headed op-timism. Pessimism is dangerous, partic-ularly for the legal profession which isoften characterised as being less tech-oriented than other types of consultants.

The example of Excel, invented 30years ago is used as an analogy. Everyaccountancy firm uses Excel, but aclient would not think of using Excel asits accountant. It also argues that thelegal profession should not worry aboutAI any more than it did about the ad-vent of the iPhone. Having said that, AI-driven legal tech promises moredisruption.

“Software will replace some legalwork, the question is when,” says Kas-par. “People think it will be soon but Ibelieve it will happen in the mid-term.”

Only a matter of time Artificial intelligence will soon be crossing over to M&A

SESSION: The future of M&A: howlegal tech, AI and big data willchange deal-makingTIME: Today (0930 – 1045)VENUE: Session Room O, Level -1COMMITTEES: Young Lawyers‘Committee, and Corporate andM&A Law Committee

Rainer Kaspar

PREVIEW

Francesco Isolabella DellaCroceStudio Legale AssociatoIsolabellaItaly

Lawyers need to focus onquality and find their niche, and resist op-portunities to broaden their scope. Weneed networks of quality boutiques.

Raja SujithMajmudar & PartnersIndia

Adapting to new technologytakes time and can impact alot of things: this needs to

be communicated to clients.

Joanie ZhangDentonsChina

Artificial intelligence is anissue because basic workcan be replaced. Lawyers

need to make their work higher-value.

Fernando NavarroAshurstSpain

That’s the million-dollar ques-tion! Being capable of pro-viding added value means

lawyers and law firms need to differentiateto keep doing business especially in placesthat are over-lawyered.

Rocco RondiBMG AvocatsSwitzerland

The ‘uberisation’ of theeconomy and how law firmsadapt to that is important.

The pace of everything is changing.

Simon HartRPCEngland

Global uncertainty, botheconomic and political, is aproblem. Deals happen

when people have confidence – Brexit andUS tariffs are issues.

Chris EngelsClaeys & EngelsBelgium

Giving young lawyers experi-ence of basic legal work be-fore some of it gets replaced

by artificial intelligence is a challenge.

Shakirat KotunMinistry of JusticeNigeria

Enforcing the rule of law isan important issue all overthe world, especially in this

anti-globalist climate.

Maria Belen Moreno BendlinAltra LegalParaguay

It depends on the market:being a young lawyer inParaguay means that it can

be difficult to establish credibility on an inter-national scale. We need a robust legalregime in place everywhere to encourageforeign investment.

V Lakshmi KumaranLakshmikumaran &SridharanIndia

Changing and disruptive busi-ness trends that lawyers don’t

necessarily understand can be an issue.

Ocheme AbuFederal Inland RevenueServiceNigeria

Delays in court processes: abrief may take more than

10 years to conclude, there are frequentadjournments of cases in court.

John DohertyPenningtons ManchesEngland

One issue that has alwaysbeen around is making legaland justice services as ac-

cessible as possible. If this is achieved, it’s awin-win for everyone.

NEWS ROM E , I TA L Y10 IBA Daily News

QUESTION What are the main challengescurrently affecting the legal profession?

www.iflr.com NEWSThursday, 11th October 2018 11

There are serious concerns aboutthe level of debt China is accru-ing with its aggressive overseas

investment policy. But the country willcontinue its expansive outbound M&Adrive as it looks to acquire distressed as-sets in key sectors and regions.

Initiatives such as the ambitiousOne Belt, One Road strategy, and theforward-looking Made in China 2025plan ensure that the country will con-tinue along this path in the years tocome. China has outlined a number oftarget sectors that it intends to be thedominant manufacturer globally inwithin seven years including next-gen-eration IT, aerospace and aviationequipment, agricultural equipment, andbiomedicine and high performing med-ical devices.

“This is where the future is going tolie, in the world of buying companiesthat are going-concern and in distress,”AlixPartners’ Brent Carlson told atten-dees of yesterday’s ‘Looking for that di-amond in the rough: Asian investorsfinding value in distressed foreign mar-kets’ session.

The Chinese policy is to become a

leader in these sectors by 2025, andglobally to replace the current leaders.“They are looking to buy companiesthat are on the turn and also buyingtechnologies from companies that maybe in difficulty. An example was whenWanxiang Group bought A123’s auto-motive battery business in the US – thiswas an indicator of where the futurewave of deals will come.”

Panellists addressed the unique op-portunities and challenges for Asian in-vestors seeking to invest in distressedcompanies outside of Asia, drawing at-tention to the fact the largest number ofinvestment opportunities in NorthAmerica in the last 10 years has been inAlberta, Canada, where the commoditycrisis led to a significant devaluation ofa number of assets in the energy sector.

It’s a serious issue for Canada: buy-ers look at an asset they have paid forand think that because they paid thismuch it must be worth this much,noted Xiaodi Jin, a lawyer at BordenLadner Gervais. “In certain industrieslike energy, there are significant end oflife liabilities associated with the asset,and when the oil price collapsed, a lot

of these assets that the companies wereholding were just enormous end of lifeliabilities with almost no company be-hind it,” he said.

There is a case in the courts rightnow where the Alberta regulator is ar-guing that it doesn’t want this liabilityto go to the taxpayer, but to creditors,which North American companies areunwilling to take on.

“This creates a pretty unique situa-

tion where we have had a flurry of $1deals in Alberta, and where it seemsChinese companies can buy these assetsand if it goes poorly walk away fromthem, but if the price recovers and itgoes well they can make a ton of moneywith nothing put in,” said Jin. Regula-tors have pointed the finger at the di-rectors of these companies, andnewspapers and Canadian citizens haveshown their discontent.

However, Chinese companies look-ing to corner specific markets will con-tinue to make acquisitions in distressedsectors as long as they make sense interms of their core business. Certain ju-risdictions, such as South Korea, arefeeling the pressure of the 2025 policyand there will be further distress inthese sectors and geographies. But therewill be movement based on where theacquisitions can occur due to pushbackfrom regulators in various jurisdictions.

Made in China?

KEY TAKEAWAYS• China has outlined a number of

target sectors that it intends to bethe dominant manufacturer glob-ally in within seven years;

• They are looking to buy compa-nies that are on the turn and alsobuying technologies from compa-nies that may be in distress.