Digital thinking spreads across Asia’s law firms

When the Financial Times published its first Innovative Lawyers report covering Asia-Pacific in 2014, it revealed some startling disparities between different countries in how innovative their law firms and in-house lawyers were.

Australian law firms, for example, were innovating more than some of the most advanced firms in the UK. By contrast, managing partners at Japanese law firms were not convinced that being innovative was right for a traditional profession.

Today, many Japanese firms perform well in the FT’s rankings of innovative law firms and are increasingly embracing a multidisciplinary, automated future.

For example, Nishimura & Asahi last year set up a digital transformation group that provides both legal and non-legal support for clients on a range of new technologies, data and regulations to help them undertake digital transformation. This kind of offering is unusual at Japanese firms and more common in the UK, the US and Europe, where firms have long augmented their legal expertise with complementary disciplines.

In addition, the Nishimura digital transformation group works across legal practice areas and industry sectors. Kazuhiro Takei, the Nishimura partner who set up the initiative, says the most significant feature of the group is that it is multidisciplinary and cross-sectional in its approach.

The idea of moving away from legal practice areas as the structure for organising a law firm’s way of working is truly radical thinking — from any lawyer, anywhere. Historically, law firms have organised themselves around their own legal specialisms — unlike other businesses, which mirror the structure of their clients.

This trend of lawyers broadening out their roles is highlighted in two sections in particular in this report: developing the market and individual practitioners.

As the need to work around the Covid-19 pandemic accelerates the digital transformation of many companies, lawyers have had to race to keep up with the pace of business innovation. A prime example of this came from King & Wood Mallesons, which created the legal standardisation required for the first digital bank guarantee in Australia. When lockdown safety measures precluded the use of paper guarantees, the firm worked with Lygon, a consortium that includes three leading Australian banks, to create a digital version using blockchain technology.

The work — which would have been “spooky” for a traditional lawyer, according to Scott Farrell, the KWM partner involved — has provided a new business model for the issuance of guarantees. The time taken to issue a guarantee has also been reduced from one month to a single day. The project involved corporate, banking, regulatory and competition lawyers working alongside bankers, data scientists and digital engineers.

“The work probably touched on, even in the firm, five or six traditional [practice] areas,” Farrell says. “But the skill wasn’t just corralling people, it was corralling ideas.” Law and tech had to work in harmony with each other.

In the innovative practitioners’ section, it is apparent that several of the individuals featured could simply be referred to as “digital lawyers”. From pioneering non-legal advice to making the law easier to access and understand via legal design, these practitioners are able to straddle converging industries, such as finance and technology. Grace Chong at Simmons & Simmons in Singapore, and Scott Thiel at DLA Piper in Hong Kong, are both versatile in the fintech sector, for example. Another featured practitioner, Sara Rayment, trained as a lawyer at KWM before setting up her own legal design law firm, Inkling Legal Design, in Australia to help revolutionise the content of legal documentation and make it more consumer-friendly.

Much of the innovative work by lawyers makes the law easier to access and businesses more sustainable — even if these are not the prime objectives. One feature of Nishimura’s digital transformation group is its focus on sustainable governance, helping clients think digitally and consider their environment, social and governance (ESG) obligations.

Thiel believes his tokenisation platform for asset-backed securities — in a test by DLA Piper, the first asset used was a piece of fine art — has the potential to increase access to finance because it lowers the entry level for investors.

Nearly all the firms in the FT’s annual ranking of the most innovative law firms in the region (see table) have noticeably embraced digital transformation and sustainability. Those at the top are all becoming “future-ready” law firms.

Among the international firms — those that do not have their headquarters in Asia-Pacific — Freshfields Bruckhaus Deringer is an example of a leading organisation using its credibility and influence to have an impact on both local and global social and trade questions. In the past year it has created an app for asylum seekers in Hong Kong that helps them know their rights. The firm has also been trying to ease trade frictions between China and the west by helping to facilitate Chinese investment deals in Europe.

However, the standout innovative law firm in the Asia-Pacific region is King & Wood Mallesons. Its commitment to the digital economy can be seen throughout its business, from training its lawyers to improve their digital literacy to helping Chinese clients better understand the implications of using data in an international market place.

More importantly, KWM is a firm that continues to show resilience. As Farrell puts it: “The world is changing so fast. Everything I know has to be changed again.”