Speech by Mr Edwin Tong, Senior Minister of State for Law & Health, at the 5th International Bar Association Asia Law Firm Management Conference

18 JAN 2019

18 Jan 2019 Posted in Speeches

Distinguished guests,

Ladies and gentlemen,

First of all, let me warmly welcome you to Singapore. In terms of legal industry and legal reform, we have seen so much. But at the same time, we do see that there is also so much more we can learn from each other. Being in a room like this, in a room full of so many distinguished leaders of successful firms in Asia and beyond, I think we can certainly learn a lot from each other, not just amongst ourselves but also from the policy-makers’ perspective, so I look forward to chatting with you over lunch.
But I do have a job to do. As Jerry^[1] says, I am supposed to tell you how to change or what to change in practice. But I am not going to do that because it would be impossible. You are all, as I said, leaders of your own practices, and I have, until six months ago, only ever been in one firm – Jerry’s firm. So I only have that somewhat limited experience in terms of the management of a firm. But I do however want to share with you how we, from the Government’s perspective see the legal landscape shifting, what are the challenges that are coming ahead, some of which you know, others which I hope I can share with you. And also, what are the steps that we take as a legal industry in this economy, this jurisdiction, to prepare for that change.
The conference theme for today is really an apt one – “The Future is Here – Are We Ready?” And there are two different publications that I think resonate with this. The first is Larry E. Ribstein’s “Death of Big Law”^[2] for those of you who are familiar, and the other, of course, is Richard Susskind’s “The End of Lawyers”^[3]. I think we are all here to prove that this statement wrong, obviously. There is no doubt that there are very strong forces facing the legal industry. Globalisation, information technology, people say AI. The way in which legal services are consumed – which has to shape the way legal services are to be delivered – is very much changing and very quickly so. Law firms have to adapt. Not necessarily to change the model and I would suggest actually that, fundamentally, the people talent within firms is still very important but you may have to change the way in which the shop front of the firm looks in about five to seven years or so, as you deliver legal services to a very different industry.
In my speech today, I will share some thoughts on the changed or the changing operating environment of law firms, what options there might be, and how we see it in terms of the Singapore jurisdiction. So let me start with the changing environment.

The changing environment for law firms
The common law lawyers amongst us will know that we always say that the change of the common law is “incremental”. Small little steps, baby steps sometimes. For years this has been the case for many law firms which saw comfortable growth without very much or very major disruption to their traditional business models. But sweeping and large-scale forces like globalisation and the advancement of technology are exerting a significant and growing impact on how law firms go about their businesses. As I said, the way in which legal services are consumed and therefore have to be delivered, has to be relooked.
One result is that the legal industry has seen the entry of new forms of legal service providers whose model, or their “DNA”, is to provide global legal solutions, often leveraging and using technology.
There are multi-disciplinary practices such as the Big Four accounting firms, which leverage vast networks and comprehensive client service packages to service clients across different jurisdictions, different geographical boundaries and, indeed, different time zones. Just as an illustration, by headcount alone, PricewaterhouseCoopers’ legal arm was one of the world’s ten largest law firms in 2016, according to the figures published at that time.^[4] The legal arms of the remaining three Big Four firms were just a few hundred lawyers shy of that.
Alternative providers of legal services include companies such as Axiom, which was formed in the year 2000. Axiom offers tech-enabled legal, contracts and compliance solutions for large enterprises and uses legal experience, technology, data analytics to perform tasks such as due diligence. Today, Axiom operates across three different continents with more than 2,000 employees, and counts more than half of the Fortune 100 corporations as its clients.
The extent to which the legal services ecosystem will change remains to be seen. We can guess at it, we can predict a little bit, but the speed at which globalisation and technological disruption are taking place is something that is quite unprecedented. Many law firms have continued to deliver strong results, while the revenue of alternative legal service providers makes up, at the present, only a fraction of the estimated US$700 billion global legal services market. The total revenue for alternative legal service providers was estimated in a 2017 study^[5] by Thomson Reuters and academic institutions to be just around US$8.4 billion. However, a subsequent report did note that the total revenues of these providers have been growing fast, and that just some years ago the revenues of these providers were zero. ^[6] So every dollar that they have grown by is likely to be a dollar that would have been available to the traditional legal practices to earn.
Moreover, the demand for their services is expected to increase. The 2017 study also showed that at least 51% of law firms and 60% of corporate legal departments were using alternative legal service providers for at least one type of service. A further 21% of law firms and 14% of corporations planned to use such a provider in the next year to access specialised expertise, cost control and other types of services meeting peak demand.
Ultimately, law firms have to respond to this landscape. They have to respond to the changing paradigms, and the responses will have to be conditioned by the competition, obviously, and I would suggest, most importantly, what your clients want. What your clients want has got to be the heart and soul of how you design a response to the new paradigm.
Take the example of the “billable hour”, which for many years, decades even, has been used as a somewhat standard way of billing. Ironically, this concept became the norm in the US in the 1970s because there were client demands for more transparency and more accountability and to have a more precise way of measuring the amount of time that was spent by the lawyer on a project. Prior to that, what lawyers did was just to “eyeball” the bill,^[7] and decide whether as a matter of holistic billing or overall billing, it was sufficient. I guess it has come a full circle because that is what we do now, we look at the bill and value has got to be ascribed to it.
But what clients want is not to have a running tab that continues running and running but one that gives an estimate of what the amounts could be likely in a transaction, and even in increasingly less predictable arenas like dispute resolution that has also been the demand of clients. So with the adoption of AI there are discussions about whether this method or methodology will affect the pricing models of law firms. For example, if remote appearances in court, which of course calls for a different type of advocacy, becomes commonplace, then should lawyers still bill as they do – as they appear physically in court? How do we account for that kind of thing? Some have called for a move towards value billing but measuring the value of the lawyer’s output is not always straightforward. Or at least that is what we as lawyers tell our clients.

How law firms can evolve
So how far should law firms evolve? One could shop for new tech gadgets or new solutions but there are literally hundreds, if not thousands, of choices on the market, some more savvy looking than others. If you turn the pages of legal publications everywhere, they are persuading you, those in charge of IT or computer systems in the firm, to try the services. They offer trial periods, they tell you, you can upscale, you can downscale and so on. But there is really no magic bullet. Should a law firm be building its own in-house technical expertise? Some develop it in-house so that they are not relying on a module from a provider that you are tied to – you cannot upgrade without their saying so and without paying a lot more money. Should it be working with clients or other law firms? Can you get together with other law firms, similar practices and share the platform? I think the competition between some of the larger firms probably militates against that.
How about collaborating with legal solution providers, as Baker McKenzie and Taylor Wessing have done with legal tech company LitiGate to help to automate legal research and also look at how arguments are assessed in court? You have solutions that include AI platforms that take on board all the precedents, look at the outcome of all the decisions by a particular judge and then predict what type of arguments would find favour with which kind of judge, which now, as lawyers, we guess at. We have an informal database of this kind of information which we sometimes share, even across firms, but is there a more formal solution to it, is this something that we can use AI to do?
These are all difficult questions, particularly in the abstract, and they do require an evaluation of so many factors such as the characteristics of the firm, the size of the firm, the market segment that you serve, the clients you have, and law firms may well find that the answers lie in embracing wholesale changes and not just small incremental ones. Instead of just trying to find a patch work solution or to plaster on this or that bit of missing technology, you might want to completely overhaul your system.
The introduction of pilot programmes may be useful for law firms, and I will speak a little bit later about what the Ministry of Law has done for firms, particularly the smaller firms within our legal industry which may find it economically challenging to upscale.
But before I go there, one example of a successful pilot, although not by a law firm, I would add, was the UK Serious Fraud Office’s four-year bribery and corruption investigation of Rolls-Royce. This was a case that was high profile. It was complex, lots of documents, and eventually it was settled in 2017 I believe. It was also the SFO’s largest investigation with about 30 million documents submitted for review. It was also, as far as I am aware, the first time that AI was deployed in a criminal case in the UK. So they used a robot that could process more than 500,000 documents a day. It was used to scan documents for legally privileged content at speeds that were 2,000 times faster than a human lawyer. The success led the SFO to announce last April that the deployment of AI investigators for new case work will continue. [8] I am not sure if that is good news or bad news but that seems to be the way it is going.
With increased demand for white collar and investigation expertise,^[9],^[10] even within private practice , it is not difficult to see how law firms can then use technology to handle investigation cases more efficiently and tap new revenue streams as well.
The law firms that have already embarked on an innovation journey can offer lessons on the steps that law firms can take, and I would like to take the opportunity to congratulate those who felt bold enough to take the plunge and have done so.
Rajah & Tann Asia, recently launched Rajah & Tann Technologies to offer solutions in emerging practice areas such as cybersecurity and also data breach management.
Global law firm Clifford Chance recently launched Create+65, the first innovation lab here which brings together the legal tech ecosystem stakeholders to share knowledge, develop, and also test new legal services tools.
Fundamentally, however, as I alluded to at the start, you can have lots of machinery, lots of new toys, but it is the people that ultimately make the firms work. So law firms – and I think this is one of the sessions you had earlier this morning – must continue to attract, to retain, to nurture, to develop their talent, whether organically or through alliances, lateral hires and so on. Pressures on the bottom-line may well raise the temptation to cut back on training, but it will be lawyers with the right skill-sets who will have just what it takes for firms to differentiate themselves from the competition and succeed in the new environment.
We at the Ministry have studied and have accepted a proposal to increase from six months to 12 months, the length of time that a trainee has to go through before he is qualified and he is able to practise on his own. But ultimately, it is not a quantitative issue. It is not about lengthening the process or doubling the amount of time, it is about what additional qualitative features you can inject into a trainee’s traineeship period. And I think that will make a difference.
The other reason I say that it is the people within the firms that make the difference is because, for all the technology and the fancy structures that you might have, ultimately, when the client picks up the phone or sends an email, they want to know who they are speaking to and whether that person is able to service their needs. And that is why behind all of this, behind all or any of the successful AI, really lies the lawyer in question. There is an increasing realisation, therefore, that lawyers also need a strong mix of technical and legal skills; it is no longer about being a one -dimensional lawyer and I feel this has really been the case for some time now. You cannot just be proficient and good in your legal skills. You have got to have local knowledge, market knowledge, leadership, business knowledge and business skills, and you have got to know the business of your clients well. I don’t want to go into this too much because I think all of you know this better than I do.
Given the changing paradigms that I have mentioned, it really makes sense for lawyers and law firms to consider talent with capabilities beyond just the traditional lawyering skills. On that score, I note that some firms and some of the larger ones like Clifford Chance have taken to appointing or looking for one person within their partnership who is a “head of innovation” who will handle the implications of technology, what we do with technology and how do we fuse and mesh the use of technology with the needs of clients. And I think it is that interface that is important because, again, you can have lots of new technology and lots of good AI but if you cannot mesh it with the clients’ needs and how you intend to deliver those legal services, then I think it will be very limited in usage.
But I would go further to say that adapting to change might not always or necessarily involve grand experimenting with new solutions or completely new platforms. It could also involve a return to basics by realigning customer service with client expectations. With clients having more choices, retaining their custom is not simply about having some new shiny piece of technology but rather what law firms can do best in trying to understand their clients’ needs better.
A recent UK survey on complaints of solicitors’ services highlighted large gaps in what lawyers think clients want, and what clients actually prefer. From the feedback of more than 500 law firms and about 2,000 dissatisfied clients, the Solicitors Regulatory Authority and the Legal Ombudsman found, for example, that while 64% of firms thought that a positive outcome for their work was a key part of consumer expectations, only 33% of the consumers reported expecting a positive outcome, although they did value their lawyer’s legal experience and knowledge highly^[11].
The study also identified examples of good practice in law firms, including the inclusion of fee-earners in the complaints handling process, so that they can learn to improve their service to avoid future complaints. Such practices will help law firms, including smaller firms which may find it harder to deal with disruption, to differentiate themselves from the competition and refocus on building personal relationships to provide superior client experiences.
Earlier on, before lunch, I was chatting with some people, and someone was saying that law firms typically assign, as the relationship partner, the partner with the highest billings for that particular client. That is probably true in most cases, but sometimes the clients do not want the person with the highest billing to be talking to them. They want someone who is able to understand their services, understand their business and bring together the best part of their multidisciplinary firm to meet their needs. So understanding the clients’ needs and understanding the psyche of the clients is just as important.

Government is supportive of law firms seeking to evolve
Let me now turn to what the Government in Singapore has been doing to try to uplift firms seeking to make that change and to try to support them. In Singapore, we recognise that a collaborative approach between all the stakeholders: Government, practitioners, the bar, and certainly the legal industry, is key to helping law firms manage change. Stakeholders are not just law firms, but bar associations, law schools, the clients, the providers and, of course, ourselves, the Government.
Through initiatives such as the Singapore Academy of Law’s Future Law Innovation Programme, or FLIP. FLIP brings together law firms and technology players to catalyse innovation across Singapore’s legal industry. FLIP has three main components: a co-working space to help law firms boost productivity, a pre-accelerator programme providing training workshops and tech demos, and a legal sector-specific accelerator to groom promising legal tech start-ups and incubate new business models or services conceived by law firms, and that is expected to be launched later this year.
115 Singapore law practices have also adopted more than 140 technology solutions through the Tech Start for Law programme which ran for a year from March 2017 through to February 2018. This programme was launched by the Ministry of Law, the Law Society and SPRING Singapore (which has now been renamed Enterprise Singapore) to help law firms attain a baseline level of technology. Under the programme, Singapore law practices received 70% funding support for the first year of adopting technology products for practice management, online research and online marketing as part of the modules.
We also have programmes to help law firms develop talent. The SkillsFuture Study Award for the legal sector offers Singaporean lawyers SGD$5,000 to defray out-of-pocket expenses for two eligible courses, and these are:

a. The Singapore Academy of Law - INSEAD Law Firm Leadership Programme, a three-day intensive management programme specifically designed and contextualised to address the needs of leaders of law firms such as yourselves, and

b. the UK’s Qualified Lawyers Transfer Scheme, which allows lawyers to pursue dual qualification as a solicitor of England and Wales. The thinking is that having the dual qualification enhances their standing and allows them also to offer a service that they previously did not have.
The Government has welcomed and continues to welcome feedback from firms as to how we can further support them on this journey. But it is something that we see as necessary to be collaborative between all the different facets and all the different stakeholders of the legal industry.

Opportunities for law firms that navigate change
While globalisation has made the provision of legal services increasingly borderless, this has created new opportunities and platforms you can pursue new options that might not have been there before. Law firms that are gearing up to be future-ready will be heartened by the opportunities in the region, and I will just venture to suggest two opportunities that exist at our door step in Asia.

a. First, the OECD, which is the Organisation for Economic Co-operation and Development, has projected that growth in Southeast Asia, China and India as a whole can be expected to grow by an average of 6.3% a year, every year, from 2018 to 2022^[12]. That is a significant growth albeit it needs to be contextualised against the current economic trends in the world, and also the issues that the US and Chinese are facing in terms of trade issues. Today, ASEAN alone stands as the sixth-largest economy in the world and in 2030, which is no more than about 11, 12 years from now, it is expected to become the fourth-largest after just the EU, US and China. ^[13] So it is a burgeoning area, it is a growing area and one that, in my view, is filled with opportunity.

b. Second, China’s Belt and Road Initiative (BRI) also heralds a tremendous opportunity. They have at least from what I can see, US$900 billion worth of projects which have been either planned or are underway^[14]. That also reflects a great opportunity for the legal industry to find ways to partner with the investors coming in, with the stakeholders, within the BRI infrastructure itself.
Despite the trade wars and despite the looming economic uncertainty, in Asia, the prospects look bright and they remain bright.
In this regard, Singapore has continued to strengthen our business fundamentals. The legal sector is not seen in isolation and does not operate as a silo. It is plugged into every other feature of our economy. Banking, finance, accounting, how we grow our MNCs, how we get more of the M&A (Mergers & Acquisitions) kind of work coming to Singapore, all of that is the ecosystem that the legal industry operates in. So it is in that context that we want to build a stronger, rule of law-based, trusted operating environment, and of course also one that is augmented by an extensive network of trade agreements. We have 22 FTAs implemented with 33 trading partners. We believe that paves the way for better market access and also for trade flow.
Thriving business brings demand for legal services, so that is the opportunity, and the value proposition that we have as lawyers. We have continued and will continue to develop our legal services sector, which will create even more opportunities for law firms.
You would have seen in the papers today that we have now turned our attention to IP (Intellectual Property). That is one of the key drivers of our economic growth. We want to make our IP laws more robust, we want to update them to deal with the technologies of today, and to ensure that anyone who has an idea, a good idea, who comes to Singapore, will have their IP protected and will have the best opportunity to advance and develop his business.
We now have SIAC (Singapore International Arbitration Centre), SICC (Singapore International Commercial Court), and SIMC (Singapore International Mediation Centre), a triumvirate behind dispute resolution. We also have the Singapore Convention on Mediation being signed on 7 August this year. It is a big step for us and one that we are very proud of, because for the first time, we will have a convention signed in Singapore. For the longest time I grew up citing the New York Convention and so I hope a new generation of lawyers will grow up citing the Singapore Convention on Mediation.
All of that is really testament to how we intend to continue to grow these sectors, whether it is dispute resolution, IP, IT, banking, and how we strengthen the rule of law across the spectrum of the services we offer.
Engaging key markets in the region, including China, in legal and judicial cooperation remains something that we are keen on doing. I mentioned a short while ago the BRI project. We believe that offering parties an option to do dispute resolution outside of China, offering them mediation as an option, has been quite attractive, and we will continue to do so, and this is partly because projects in the BRI, as I mentioned, are very large infrastructural projects, projects which both sides do not want to derail because of disputes. So mediation steps in to keep the relationship, resolve the dispute, and let the project carry on.
So we are looking at several fronts as well, and also strengthening our relationship with the Chinese as far as possible. Last year, 24 lawyers from six leading firms in China’s Shaanxi Province were here, seconded to various firms in Singapore so that there is exchange, and learning about each other’s jurisdictions and exchange technology and know-how. But also as I mentioned earlier, the first step to enhancing legal services beyond all the nice bells and whistles we have in technology is really the personal relationships. So the more we can grow that aspect, the better I think it will be for lawyers.
And so on that score, before I end off, I just want to add that the Ministry of Law, working with the Law Society and also Enterprise Singapore has launched the Lawyers Go Global programme. This aims to connect Singapore’s lawyers, with global opportunities and their global counterparts through overseas trips, training, and also marketing. So far, about 60 delegates, lawyers from Singapore, have gone on three trips to Guangzhou, to Sydney, and also to Colombo.

Conclusion
I wish to end off here by saying that you have not been having your lunch so I’ll step off this podium shortly. I do want to end by commending the efforts of IBA and of course all of you. IBA continues to lead the field on law firm management skills, talking about and trying to bring about change, in a way which I think the legal fraternity would need, and also takes the lead in so many other ways. I know that the IBA’s membership has grown from 34 in 1947 to now more than 190 bar associations spanning across 170 countries. In that way alone, the voice that IBA has is strong, powerful, influential, and certainly I would encourage you to take the lead in encouraging change to happen amongst lawyers not just in Asia, as is the focus today, but really right across the world. And keep Singapore at the forefront of that development as well. With that, thank you very much, you can really now have your lunch!

^[1] Mr Jerry Koh, Conference Co-Chair, Deputy Managing Partner, Allen & Gledhill LLP, Singapore
^[2] Larry E. Ribstein, “The Death of Big Law”, 1 August 2010, Wisconsin Law Review, Vol. 2010, No. 3 2010.
^[3] Richard Susskind, “The End of Lawyers?: Rethinking the nature of legal services”, 2008, Oxford University Press
^[4] ALM Intelligence, Elephants in the Room, Part I: The Big Four’s Expansion in the Legal Services Market, 2017,
^[5] Alternative Legal Service Providers – Understanding the growth and benefits of these new legal providers, Thomson Reuters, 2 May 2017
^[6] Center for the Study of the Legal Profession at the Georgetown University Law Center, Thomson Reuters Legal Executive Institute and Peer Monitor: 2018 Report on the State of the Legal Market.
^[7] https://www.michbar.org/file/barjournal/article/documents/pdf4article1834.pdf
^[8] https://www.sfo.gov.uk/2018/04/10/ai-powered-robo-lawyer-helps-step-up-the-sfos-fight-against-economic-crime/
^[9] https://www.pwc.com/gx/en/services/advisory/forensics/economic-crime-survey.html
^[10] https://www.ft.com/content/19dc6b3a-64f7-11e8-a39d-4df188287fff
^[11] https://www.sra.org.uk/sra/how-we-work/reports/first-tier-complaints.page
^[12] Economic Outlook for Southeast Asia, China and India 2018, Fostering Growth Through Digitalisation OECD.
^[13] The Business Times, Positioning ASEAN for Further Economic Growth, 29 Aug 2018.
^[14] Fitch Ratings BRI report, 2018

Last updated on 31 Jan 2019