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Is Lawtech the new normal?


Marc Andressen, the world’s leading tech investor famously quoted, “Software is eating the world”. This statement is a powerful reflection of how technology is reshaping various industries, including the legal field. In recent times, the legal market has undergone significant changes due to reduced demand and increased competition, primarily caused by the automation of many legal tasks. This shift is prompting a reimagining of traditional legal practices. Notably, in 2018, there was an astonishing 718% increase in investments in the legal industry, driven by a desire among legal consumers for more efficient and tech-driven services. The legal profession, traditionally reliant on labor-intensive lawyer-focused practices, is now ripe for a technological makeover. Unlike certain sectors like Fintech, Lawtech is still in its early stages of development, but recent progress indicates a promising future, as we’ll discuss below.”


Forces Shaping the Legal Industry

Richard Susskind, a legal tech expert, highlighted three forces shaping the legal industry: market changes, technology, and deregulation. The 2008 financial crisis and the COVID-19 pandemic accelerated tech adoption. Some examples were the introduction of ChatGPT and JusticeBot.


AI’s Role in Key Legal Sectors

AI can produce promising results in certain sectors of law for example blockchain technology has emerged as a powerful tool with the potential to address cross-border issues and play a crucial role in the fight against money laundering. Despite significant investments by both companies and governments in curbing this illicit activity, blockchain offers distinct advantages that can enhance anti-money laundering efforts.

  •       Transparent- all transactions are recorded; this makes it nearly impossible for criminals to use cryptocurrency for illicit purposes.
  •       Immutable records- any transaction added cannot be deleted or altered.
  •       Traceability- it allows authorities to trace back to the source.
  •       Smart contracts- this tool can be used to automate compliance checks and flag suspicious transactions.

The flip sides

It is detrimental to bring to light the downside of blockchain. Crypto usage to fund terrorism and trafficking has been widespread over the last 5 years totaling approximately $20 billion. Besides its advantageous features, there are certain limitations notably pseudonymity- a feature that allows illicit users to hide their identities, enabling authorities to trace back to specific wallet addresses, but the owner’s identity may remain hidden. Terrorist groups associated with ISIS routinely use crypto as an aid to raise funds for illicit activities. Pro-ISIS groups in Tajikistan reportedly raised $2 million in 2022 using Tron-based USDT, as per TRM.

Balancing Transparency and Risk:

The question arises: Can we truly integrate blockchain into anti-money laundering efforts when it poses such risks? The straightforward answer is that blockchain should be deployed for administering generic tasks rather than entrusted with highly confidential or risky operations. It is crucial to acknowledge that while blockchain offers significant advantages, it must be used judiciously within the legal and financial sectors, ensuring that its potential benefits are maximized while its associated risks are mitigated.

In summary, while blockchain technology holds promise for enhancing transparency and efficiency in legal domains, its application in high-risk areas like anti-money laundering requires careful consideration and risk mitigation strategies to strike a balance between its potential benefits and the challenges it presents.

The UAE’s Progressive Approach to Legal Tech

UAE’s efforts to embrace the AI and blockchain-driven industry involve the integration of practices such as digital signatures, electronic notarization, and virtual courtrooms. Furthermore, In the UAE, Federal Law No. 1 of 2006 on Electronic Commerce and Transactions, Article 12, permits the use of “smart contracts.” These contracts can be formed and enforced through computer programs, known as “automated electronic agents,” even if there is no direct human involvement. This legal provision recognizes and validates the use of automated systems for conducting transactions. It is important to note that there may arise instances where computers cannot render/code contracts effectively due to their complex nature. To elaborate contracting parties often employ wordings like, “reasonable endeavors”; ‘good faith’; and ‘negligence’ that cannot be encoded. In a traditional contract, parties have the option to adjust the agreement when circumstances evolve. However, smart contracts lack this adaptability unless they are programmed from the outset to accommodate changes. When there is a dispute about the contract’s meaning, courts assess how an objective and reasonable human observer would interpret the agreement. Computers lack the capacity for common sense and cannot employ it since it is not part of their programming. Likewise, as opposed to fully automating contracts it is suggested to only imply e-contracts in less sophisticated and simple instances. For example, in the use of NDAs, lease agreements, service agreements, etc.

The UAE’s Approach to AI Regulation

So far, UAE does not have any regulations in place for AI. However, analyzing the deep-rooted consequences of regulating AI, is nearly not practical owing to its unforeseeable risks and complexities. Determining liability in the event of AI-related incidents presents a complex legal question. Traditional legal principles like foreseeability, intent, and standard of care may not neatly apply to these systems, as they lack the full spectrum of human cognitive abilities and emotions, at least in the present context. Nevertheless, a viable approach is to introduce regulations tailored to specific industries to address these emerging issues.

AI Integration in UAE Courtrooms

Another noteworthy incorporation of AI in the legal sector of the UAE is its inclusion in the courtroom. For example, in areas of “risk assessments” or “evidence-based methods”. These algorithms claim to predict how defendants might behave in the future. In Abu Dhabi Courts, judges can use machine learning algorithms trained on past cases to assist them in determining sentences or whether to acquit defendants. Similarly, DIFC courts are exploring the use of predictive analytics to aid judges in their research.

Arbitration and Tech: The Role of Federal Arbitration Law (FAL)

The introduction of Federal Arbitration Law (FAL) Law No. 6 of 2018 replaced relevant provisions of the UAE Federal Civil Procedure Code and governs arbitrations in the UAE, excluding special jurisdictions like the Dubai International Financial Centre (DIFC) and Abu Dhabi Global Market (ADGM). FAL, primarily following the UNCITRAL Model Law 2006, introduced several technology-related provisions. Firstly, the FAL permits arbitration agreements to be executed through electronic communications or “electronic messages.” However, a clear and comprehensive definition of the term “electronic message” is notably absent from the law, leaving room for potential ambiguity. Secondly, Article 24 of FAL takes on the authorization of notices via email or fax for cost-efficiency and smooth communication whereas in the old legislation, traditional methods of courier were to be relied upon. Furthermore, Article 41.6 of FAL allows awards to be electronically signed, removing the requirement for physical presence in the UAE.


Conclusion: Lawtech’s Transformative Potential in the UAE

Hence after a thorough analysis of the current developments, it is practical to conclude that AI should be incorporated to keep pace with the progress and cut down on unnecessary costs but not eliminate manpower completely. It is an efficient tool that can be used to replace generic tasks that are time-consuming and labor-intensive. It must be used to enhance the present legal system rather than replace the entire system. No AI can replace the traditional system, human cognitive capabilities are way distinctive from coded machines that work on pre-programmed sets of instructions. It is noteworthy that UAE has been on pace with the latest AI trends and simultaneously cautious enough to not erode the traditional system.

Article by:

Huda Nasimudeen,
Litigation department.



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