Hong Kong.

 

While far from the competitive legal tech market in the U.S. and the burgeoning one in the U.K., legal tech is taking hold in another city well known as a hub of international business and trade.

Though legal technology in Hong Kong has for years been focused on serving the e-discovery and compliance needs of multinational law firms, the industry is now setting itself up to serve a  broader clientele, leveraging homegrown technology to redefine the city's legal sector.

Brian Tang, founder and manager director of Asia Capital Markets Institute, a managed services consultancy and startup investor that provides education and policy solutions for companies, noted that law firms' adoption of innovative legal technology is still in its infancy in Hong Kong. Yet there are some law firms in the territory already using legal technology, namely local satellite offices of international or U.S.-based firms who deploy e-discovery platforms in their day-to-day work.

Most of these firms have benefited from a new focus by U.S.-based e-discovery providers like Epiq and Relativity on the Hong Kong market. “I would say there have been significant developments in the state of forensic technology, particularly in the e-discovery space over the time I've been in Hong Kong,” said Cori Lable, partner in the Government and Internal Investigations Group in the Hong Kong office of Kirkland & Ellis.

Lable, who has been working in Hong Kong for four years, noted that when she first started, Epiq and FTI “were two of the biggest [e-discovery] providers,” but now there is “a lot more competition.” What has also changed over the years, she added, is the sophistication of e-discovery tools, which can now better handle non-English languages.

To be sure, e-discovery in Hong Kong and the broader Asia market is still far from the norm. Many regulators are unfamiliar with e-discovery, and investigations usually rely on paper documents, Lable said. But data localization laws, especially China's Cybersecurity Law, have spurred the need for broader internal e-discovery and data governance.

“I think that is a large reason why you have seen many major companies over the past years setting up data centers” in the region, she said.

Grassroots Momentum

But legal tech is not just growing in the Hong Kong because of foreign e-discovery companies increasing their presence. There is also a grassroots movement in the city that is trying to bring legal tech mainstream. Unlike in Singapore, where legal tech is actively pushed by the local judiciary, these grassroots forces represent, for now, the main efforts making change a reality in Hong Kong.

And over the past year, these efforts have started to bear fruit. In spring 2017, for instance, David Lam, a law student and research assistant at the University of Hong Kong, co-founded the Hong Kong Legal Hackers group, an official chapter of the International Legal Hackers Summit. Lam noted the group will be supporting “ABC” legal innovation in the local market, referring to artificial intelligence, blockchain and cloud. It will also be looking to bring legal tech companies, legal professionals and innovators together to share ideas.

“I would say that it's about community building, because the legal tech landscape in Hong Kong has various pieces, but they are not reaching out to each other,” he said.

In late February  2018, Hong Kong also hosted its first-ever hackathon open to legal practitioners and innovators, as a part of the Global Legal Hackathon legal technology development competition in over 40 worldwide cities. The team that won the local Hong Kong event created “Decoding Law,” a machine learning-powered browser extension that helps users decipher local legislation. The app was one of the four winning platforms chosen at the third and final round of the Global Hackathon event in New York.

The Global Legal Hackathon, however, wasn't the only legal tech event this spring. In March, Hong Kong Legal Hackers hosted a Hong Kong Computational Law and Blockchain Festival, while in April 2018, the Law Society of Hong Kong launched a two-day access to justice legal tech hackathon as well.

So what's behind Hong Kong's recent flurry of legal tech activity ? Lam believes that it comes down to two causes. The first is a push by the Law Society of Hong Kong to encourage local legal professionals to be “more open-minded to these innovations and technologies,” he said. The second is legal professionals feeling pressure from the financial sector, a dominant local industry in Hong Kong's economy, to adopt more cost effective and innovation services—a consequence, he added, of the financial industry's own recent experience of adopting and developing financial technologies solutions.

Access to Hong Kong Justice  

If Hong Kong's legal tech scene was jump started by the Law Society and the financial industry, its future is being defined by its law students. Like Lam, the team behind Decoding Law is mainly made up of law students seeking to pave the way for using tech in local access to justice efforts.

Ellie Tse, a third-year law student at the Chinese University of Hong Kong and one of Decoding Law's members, noted that, while legal tech development has been growing in Hong Kong over the past few years, the development of access to justice solutions is a relatively new phenomenon.

Indeed, there are a few reasons Hong Kong may only now be seeing innovation around access to justice tech. Sherman Ho, another Decoding Law member and a third-year law student at the Chinese University of Hong Kong, explained that recent Occupy Central protests in Hong Kong has “caught the attention of the younger generation” and made them want to be more aware of their own rights. He also pointed to the recent bribery trials concerning former Hong Kong chief executive Donald Tsang as another reason people have become more interested understanding the law.

Still, Hong Kong law can be uniquely challenging to understand. While Hong Kong is in China, it exists as a Special Administrative Region (SAR) and therefore has its own set of laws and regulations separate from the mainland. This is due to the “one country, two systems” principle agreed upon in the UK's 1997 handover of Hong Kong to China. Hong Kong, for instance, is one of the “only common law sections that accepts both English and Chinese,” Tse said.

But deciphering legalese in Cantonese—the Chinese dialect native to Hong Kong—is not as easy as it is in English. Ho explained in Cantonese legalese, there are no spaces between words, and  “there are some uncommon words” that many will not know because they are only used in legal texts. English, too, has words and phrases that are specific to legal, though far less than Cantonese.

Decoding Law, however, doesn't just see access to justice potential in spreading awareness of the law. Tse noted that as legal tech helps lower overhead and administrative costs for legal professionals, legal services should become “cheaper, so access to justice also increases.”

Local Legal Tech

While Hong Kong has caught the attention of some big players in the U.S. legal tech market, it has also spurred its own homegrown legal tech and managed services provider called Zegal.

For Zegal, Hong Kong's nascent local legal tech market was fertile ground for its document management and drafting tools. “There was no product offering in this part of the world that could allow businesses to create their own legal documents,” said Daniel Walker, CEO of Zegal. What's more, with international companies in Hong Kong focused solely on e-discovery and information governance, there is little to no competition in other legal tech areas.

Zegal, however, isn't out to disrupt the traditional legal market in Hong Kong. “We don't and would never see ourselves as a disruptor. We see ourselves as a big supporter of the industry. We are founded by lawyers,” Walker said. The company, for instance, offers a premium subscription service whereby its clients can have unlimited access to Zegal's partner law firms alongside its document tools.

Though it started operating in Hong Kong in 2015, Zegal has since expanded to Singapore, Australia, and most recently the UK. What's more, the company is set to launch its next generation of products—customizable legal workflow tools—in the summer of 2018, and aims to further develop its offerings by using novel technologies like AI in the near future.

For some, Zegal's success speaks to the potential Hong Kong has to become a legal tech hub in its own right. Hong Kong Legal Hacker's co-founder Lam noted that because of the city's location between markets in the West and East, Hong Kong “is more like a middle man economy,” providing professional services for international businesses and clients. “What I anticipate is that maybe legal tech is the next thing,” he explained.

Decoding Law's Ho believes Hong Kong's best bet is serving the yet untapped broader legal market in China. But he added that Hong Kong startups may have a more challenging time developing legal tech than their counterparts in other countries because of the need to account for multiple and more complex languages.

Hong Kong legal tech may also have to focus on more Chinese and international clients in lieu of the local law firm market. Asia Capital Markets Institute's Tang, for example, noted that, for the time being, most local law firms in Hong Kong are “mom and pop” practices, who may not be able to afford legal technology.

To be sure, there are other hurdles facing Hong Kong legal tech. While it is catching on in the city, it still has to overcome resistance from an older generation of attorneys and a local legal education system that doesn't emphasize tech skills. “For law students in Hong Kong, I would say generally we do lack some technological background, and that's one of the challenges as well,” Lam said.

But these technical and educational challenges are similar to the ones faced by the U.S. market just a few years ago. So for Hong Kong, it may be only a matter of time, and effort, before potential becomes reality.