LawtechUK Sandbox Showcase – Legal regulators need to consolidate to aid innovation 

LawtechUK on Friday 28 January hosted a showcase to highlight some of the challenges and the lessons learned from the first cohorts of sandbox startups, including how to overcome the many issues around data sharing and a regulatory environment that doesn’t lend itself easily to change. A heavyweight panel discussion included a suggestion from Crispin Passmore, former executive director of the Solicitors Regulation Authority and former strategy director of the Legal Services Board, that the UK Parliament now needs to do far more to streamline the regulatory landscape, including potentially consolidating those dual legal regulators.  

The LawtechUK sandbox began in December 2020 and is one of the many government-backed initiatives to help transform the legal sector through technology. The pilot stage came to an end in March 2021 and the latest cohort of startups are Avvoka, Lexyfi, Feesier, Valla, Legalme, Hunit, Smarter Contracts, and What Visa.  

Speaking on a panel to discuss the lessons from the sandbox, including the challenges around access to data, were David Howarth, director of Avvoka; Danae Shell, co-founder and CEO of Valla; Amy McConnell, head of legal operations at Vodafone Business; Bruce Braude, chief technology officer at Deloitte Legal UK (which sponsored the showcase); and Passmore, who is now founder & managing director of Passmore Consulting. 

Speaking of Avvoka’s experiences over the past few months, Howarth said: “We wanted to explore if we can use AI to automatically detect certain clauses. We really wanted to get data to train our models to automate these agreements.” 

But while Howarth says Avvoka has had some “fantastic results,” he added: “This is our first time looking at AI and people think it’s much further ahead than it is. There is a huge amount of work to be done. [The sandbox has been] helpful in getting law firms to share data and some firms were open to sharing their share purchase agreements, but there is still a lot of convincing to be done. The technology is there but often it’s the lack of data holding us back from achieving what we can do.” 

Swallow pointed out that much of the data sharing with the sandbox startups came from the in-house legal sector, which will perhaps benefit most from technological change. McConnell said: “It’s not surprising that people think and fear they will be sharing confidential information, but we felt comfortable sharing our templates with lawtech providers because the benefits outweigh the concerns, and most are open for our customers to see.” 

She added: “One of our proof of concepts was how to share the insights of the data without sharing the data itself.” 

For Braude, this is a challenge that has been difficult to overcome. He said: “At Deloitte we’re working with data day in, day out, but the big challenge for us is that this is not our own data. It’s the client’s data and I face the same challenge at Deloitte as in previous roles. When we want contracts to train AI, if we are doing it for the client that’s fine, but for general training, it’s a conversation we continue to have even if we anonymise the data.  

“They are the clients’ contracts. We are willing to share to enhance access to justice but more work needs to be done across the industry so there is more openness to sharing contracts while respecting confidentiality.” 

The industry struggles not just from a lack of access to data but a regulatory environment that makes it difficult for startups to thrive. Passmore said: “Well done to the regulators for trying, and not so well done to Parliament for giving them a framework that’s not so perfect for innovation.”

He observed: “Startups need to learn to live with ambiguity. When you start out you want answers, but there are more grey areas. Ambiguity can be your friend and open up a small window that you can drive tanks through.” 

And he added: “The SRA and FCA (Financial Conduct Authority) regulate in different ways. Should we be asking the government to consolidate the legal regulators? We consolidated financial services and telecoms. Perhaps [in the legal sector] we need a single point of entry where startups can focus on problems and not be held back by an industry drawn up hundreds of years ago.” 

While startups wait for that day to come, Crispin says the lesson is to “be brave and work through it”, but he said: “In the meantime the regulators need to listen and engage more. I’d like to see them go out and talk to the market. I’m thinking of the supermarkets where they go out and talk to their customers and suppliers. I want to see the regulators going out and doing that.” 

Shell said: “What will kill my startup is if we have to stop operating while we wait for the regulators. Is there a way to give us training wheels but not stop execution until we get through the process? That is my big ask.” 

Passmore said: “Regulators get criticised if they let people in and they do wrong, but the authorisation process is long and cumbersome. I would get my rubber stamp out on the basis that startups tick the right boxes, and then supervise them after that.”

To read more about the sandbox, see the articles below.