In the past decade, the emergence of a new business model in the global legal services industry has presented a disruptive challenge to the traditional legal service model. This new model is called New Law.
The rise of New Law can be traced back to 2008. After the global financial crisis, many in-house legal departments of Wall Street big names in the United States abandoned the traditional model of hiring external lawyers, so as to keep costs within budgets, and changed to the New Law model in engaging external lawyers.
There is however no universal definition of New Law. According to Jordan Furlong (who is a legal market analysis consultant), “Any model, process, or tool that represents a significantly different approach to the creation or provision of legal services than what the legal profession traditionally has employed” can be considered New Law.
However, the best way to explain to legal service consumers what New Law is, is to compare it to the traditional model, which has the following major differences:-
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The New Law model emphasizes and gives lawyers flexibility and autonomy. Lawyers in the New Law model are not employed by any law firm but instead provide legal services as a self-employed contractor. Many of them are experts in certain practice areas, but they are tired of the rigid rules and long work hours of traditional, large-scale law firms. They wish to provide legal services in a more autonomous and flexible fashion. Therefore, lawyers under the New Law model can provide legal services for a particular job or project, or provide services at a certain period of time or work directly at the client’s company for a specified period of time. This is very different from the nine-to-five life of traditional law firms.
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Second, the New Law model adopts the so-called Alternative Fee Arrangements (AFA). Put simply, AFA is just the antonym of the traditional law firm’s time-based charging model. That is to say, AFA is a fixed fee model. In the legal profession of western economies, law firms especially the large firms generally charge based on the time lawyers spend, and this is so whether in contentious or commercial matters. This causes tremendous uncertainty to clients in budgeting legal costs. Therefore, clients, especially SMEs, find AFA extremely appealing.
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Third, the New Law model widely uses the so-called Legal Tech, which includes computer software, applications, data analysis, mobile devices, etc. Their use simplifies and automates client communications, schedules for lawyers, document and case management, online billing and invoicing, time tracking etc. The use of Legal Tech finally streamlines and simplifies workflow, reducing the time for lawyers to process cases and thus costs, so that both lawyers and clients benefit.
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Fourth, the New Law model separates the marketing function and the delivery of legal services. This means that the law firm itself is responsible for the marketing of legal services, while lawyers focus on providing professional legal services to clients. This allows lawyers to free up more time to do their professional work without having to be distracted from work outside the professional areas.
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Fifth, a lawyer under the New Law model does not necessarily work in his law firm but may work directly at the client’s office. This way, his role is like the client’s in-house lawyer. This novel work arrangement enhances the communication between the lawyer and the client and allows the lawyer to have a deeper understanding of the client’s business, organisation and personnel.
Because of these advantages, law firms operating under the New Law model have flourished in the past decade, and in some jurisdictions, they seem to be surpassing traditional law firms. So, in recent years, we have seen that the Big 4 are entering this profitable market.
But the advantages of the New Law model are precisely its shortcomings. Many of the so-called New Law firms are not managed, operated or owned by lawyers, but instead by professional managers, IT technicians or marketing professionals. They may not be able to fully understand the client’s legal needs, nor are they able to understand the substance of the legal services provided by professional lawyers. So they themselves can be seen as some sort of intermediaries for legal services. They solicit clients for lawyers and extract about 20-30% of the lawyers’ fees as commissions, but legal consumers may wonder why in seeking legal services they cannot communicate directly to professional lawyers but have to go through a lay go-between and to give him a handsome commission?
In view of this, many traditional law firms have also changed their business model to the New Law model to provide legal services directly to clients rather than through intermediaries.
(SimplifyLaw is the commercial practice of a Hong Kong law firm operated under the New Law model. We charge fixed fees and use legal technology. Please visit our website www.simplify-law.com to learn more)