Regional Snapshot: What's Happening in Legal Innovation in Brazil?

A glimpse into the landscape of legal innovation in Brazil might operate for many of us as a peek into the future - because developments we have long been heralding as imminent in the United States have already well and truly unfolded south of the border. For example, it is clients who dictate the cost structure of legal work performed by outside counsel, so most of this work is performed at a flat fee rather than by the hour. And the legaltech industry in Brazil is booming in comparison to that of other Latin American countries, with the number of start-ups having doubled since 2015.

Indeed, the magnitude of the Brazilian ecosystem alone is likely to be surprising to those who aren’t familiar with it. Brazil has more law schools — some 1,300 — than the rest of the world combined. And the country has over a million lawyers — which means that there are more lawyers per capita in Brazil than in the U.S., even though there are 113 million fewer people in Brazil. This number gives rise to the astonishing fact that there is a lawyer for every 190 people in the country. Perhaps unsurprisingly, the nation is also highly litigious, with over 80 million active ongoing law suits. This latter number can be partly attributed to the fact that, compared to other jurisdictions, access to court justice costs next to nothing. With the bar for entry so low, it’s not unheard of for legal action to be brought over debts of less than $10.

Over the past two years, I’ve developed an interest in the way that legal innovation develops in different parts of the world, and why this varies from one place to another. Consistently, it seems, there are certain social forces that impact the speed with which change penetrates the legal industry in a particular region, and the nature of a local legal market is one of those forces. Another is regulation, and the Brazilian legal market is more highly regulated than some others, with ALSPs unable to operate and non-lawyers unable to run law firms, for example.

When I spoke to Barbara Gondim da Rocha, the Head of Knowledge Management and Innovation at Rocha, Marinho E Sales Advogados (“RMS”) in Fortaleza, Brazil, she confirmed that the very size of the Brazilian legal ecosystem has had an impact on the development and adoption of legal technology in the nation. However, there are other factors at play too. As far back as 2006, Law n. 11.419 was passed in Brazil, legalizing digital evidence and electronic filings, signatures, communications, and judgments in court proceedings. The notion of digital transformation in law is therefore not new to the Brazilian legal system. Gondim also tells me that after 2014, in the wake of recession, corporate legal departments in Brazil started taking a more strategic approach to outside legal spend. Legal counsel across the country united and organized themselves, in much the same way that counsel in the U.S. have through CLOC (though years earlier), seizing the reins of the client-lawyer relationship and demanding greater transparency around fees. Now, Barbara says, the clients in the Brazilian legal landscape overwhelmingly dictate the fee structure for legal work.

With substantial cost pressure being applied consistently by clients, resulting in a high demand for flat fees, the need for law firms to adopt efficiency measures such as legal project management, alternative timekeepers and legal technology has long been understood. This is really what has driven the legal technology market in Brazil. In 2015, a local association identified 40 local Brazilian legaltech start-ups. Now, there are well over 80. Many of these serve as legal marketplaces, or in the access to justice space. Online dispute resolution and automated documents are another popular area, but what’s perhaps more interesting is that the market seems to be maturing with the evolution of advanced tools in the realm of analytics and AI. Neuralmind is one of these, promising to improve legal contract analysis using the latest advances in AI. And in 2017, AB2L was founded, an association for Law Tech in Brazil. AB2L has been very active in organizing local events and in bringing high-profile international speakers in legaltech to Brazil for various local conferences.

But while the development of legal technology has been flourishing, Gondim says that the law firm resources necessary to implement it and leverage it appropriately have been lacking. She equates this problem to buying a very expensive car and yet not being able to drive. Gondim herself developed her own title after beginning to read legaltech blogs and attend conferences in other jurisdictions, where she learned about knowledge management and the significance of a strong knowledge function to support innovation at a law firm. At RMS, Gondim has gradually been able to build a team of cross-disciplinary professionals who are able to properly leverage legal technology for the benefit of not just attorneys at the firm, but also the firm’s clients.

“Law is no longer enough,” she says. “It is assumed.”

In an environment where clients are sophisticated enough to understand what a particular type of legal work should cost, and what tools are available to reduce costs, Gondim has found that working directly with clients and listening to them is critical in creating a competitive edge. After spending time talking to the firm’s clients to understand where they wanted to see improvements (spoiler alert: they wanted change on the service side), she was able to generate internal support for a broad process mapping exercise that led to improved systems and data mapping. The result? New business flowed to the firm, which is flourishing and has since opened additional offices. “It worked!” says Gondim. The firm is now able to provide greater transparency and metrics around all of its matters, in a way that is directly responsive to client demands.

Roles like Gondim’s are gradually increasing across law firms in Brazil, and courses are available at various institutions to teach new lawyers about legal technology and legal innovation. Local enthusiasm for legal innovation is also evident in the fact that there are over 15 chapters of Legal Hackers across the country. With the advent of educated innovation drivers who are capable of leveraging the technology already available in the nation’s legal market, Brazil is on track to become one of the world’s most interesting regions for legal innovation.

Legal Innovation in Brazil