Lexpert magazine features articles and columns on developments in legal practice management, deals and lawsuits of interest in Canada, the law and business issues of interest to legal professionals and businesses that purchase legal services.
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58 LEXPERT MAGAZINE | MARCH 2016 | IN-HOUSE ADVISOR: AUTOMATION | With the press of a button, you have a term sheet. And it's free — a world not of- ten associated with corporate legal advice. It makes you wonder why more in-house counsel aren't clamouring for their outside law firms to use it to drive down what they spend on legal. "It's amazing stuff but it requires a signif- icant investment and quite a lot of work to generate that amazingness," says Alliston. Ramping up takes a massive upfront in- vestment of non-billable hours, with law- yers required to deconstruct hundreds, if not thousands, of legal documents in each area of the law where automation is going to be used. Someone then has to code each part of each one to create the program. e sys- tems also have to be continually updated and recoded where needed. "If a new rule or decision changes the logic or adds a new variable or new lan- guage, or you need a new question in the questionnaire to make it appear when you need it, it's quite a lot of work," says Allis- ton. "It's not for the faint of heart." at's why some firms are not embracing document automation. "We're using one such soware but very minimally," says a partner who spoke on condition he and his law firm not be identi- fied. "What we have found is that our para- legals struggle mightily trying to develop the appropriate 'set-up' to automate repeti- tive documents. "At one point, we did have a specialist in the firm who could do this, but that person le. Our paralegals have generally 'given up' on using the soware." Another lawyer speaking off the record says programming takes a lot of lawyer time that is "not rewarded. e billable- hour model makes it impossible to benefit from providing clients with easy-to-create contract precedents." Osler, Hoskin & Harcourt LLP has be- come one of the latest Canadian law firms to join the march towards automation. It recently assigned three people to do noth- ing but deconstruct documents and code as part of a pilot project testing two different soware systems. Mara Nickerson in Toronto, Osler's Chief Knowledge Officer, says while the investment of non-billable time is daunt- ing, "the imperative in the legal industry is to streamline our work and work more effi- ciently. So we're looking for all opportuni- ties where we can push work to a lower-cost resource or turn the work faster." As more and more legal work is done by automated systems, one thing seems clear: It is an unstoppable force that, hand-in- hand with artificial intelligence, over time, will sharply drive down legal costs. In other words, events are no longer creating the perfect storm for automation. Turns out document automation is doing that all on its own. FOR A SENSE of the potential impact on legal bills, take a plain-vanilla Ontario- based $100-million all-Canadian syndi- cated loan with one borrower, three guar- antors and funds earmarked for general operating purposes. A few years ago, the outside law firm would have used a couple of partners and two or three associates in the principal ju- risdiction as well as a partner and one or two associates in each of the other prov- inces and territories. It would also require "heavy involvement" from the assistants, says Jonathan Dyck, a banking lawyer at Miller omson LLP in Toronto. He estimates the client would have been billed for roughly 150 hours of legal work. Take an average of $400 an hour and that comes to $60,000 before disbursements and taxes. at same transaction today, using au- tomation, would involve one partner, one associate and one or two paralegals, Dyck says. He estimates it would generate 100 billable hours or less, putting the bill closer to $40,000. Miller omson uses automated docu- ment systems in virtually every area from insolvency to banking, including M&A. Dyck believes it's just a matter of time before businesses bring documentation au- tomation in-house, cutting their external lawyers out completely on small, recurring transactions that involve repetitive work. e hold up is that in-house depart- ments face the same up-front cost of setting it up as their outside law firms do. "We did the loan and security docu- ments for one of our clients and suggested to them that might be something worth looking at. e answer at that moment was: 'It's not the right time for us to make that kind of investment.' "e soware itself is relatively inex- pensive depending on what you're using — it's just the time and effort of creating the templates you use that makes it such a big investment." But with their large legal departments and portfolios of repetitive work, Dyck sees banks and insurers – for generations a law firm's prime clients – as prime candidates. "Relatively straightforward transactions, small loan values, for example, one borrow- er, one guarantor in Ontario, a loan of, say, $4 million, they could automate the term sheet and prepare it themselves. I'm sure over time they'll have it." Time is short. At least two of Canada's big banks are said to be testing it and a third is reported to be in the procurement phase. Where two or three banks go, its breth- ANDREA ALLISTON > STIKEMAN ELLIOTT LLP Almost every legal department has something it does that involves very repetitive requests from the business. It would be helpful for them not to have to keep reinventing the wheel and giving the advice again and again. So having something standard that the business can generate themselves to alleviate the workload on the legal department is a huge benefit.