INDUSTRY ANALYSIS/REGIONAL SNAPSHOT: WHAT'S HAPPENING IN LEGAL INNOVATION IN ITALY
Regional Snapshot: What's Happening in Legal Innovation in Italy
Published on Sun, June 05 byNicola Shaver
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In spite of its proximity to European countries such as France, Austria and Spain, where legal innovation is flourishing, Italy has still not seen a lot of development in this area.

 

It’s impossible to regard the evolution of legal technology and legal innovation in any region in the absence of the regulatory framework within which the legal industry sits. In Italy, law is highly regulated. No alternative business structures are permitted for law firms, meaning that for the most part lawyers operate in associations with profits split across partners. Even practicing in-house carries license restrictions imposed by the National Bar Council. This restrictive environment means that lawyers are less likely to introduce cross-industry expertise into firm leadership, and less likely to invest heavily in high value technology that comes with a price tag that may generate concerns around the take-home profit-per-partner.

 

Marco Imperiale, an Italian lawyer and the Innovation Officer at LCA Studio Legale in Milan, says that the limitations on practice and technology simply mean he approaches innovation in different ways. When his role was initially created, Marco became the first legal innovation officer in the country.

 

“I focus on both tech and non-tech innovation – such as third party funding, legal design, sustainability. If you put fifty Chief Innovation Officers for law firms in the same room, you’ll notice that everyone is doing a different job. I am lucky to be involved in a significant number of different kinds of projects.”

 

Regarding the technology aspect, Marco says “in Italian law firms it is very hard to work with a data-oriented mindset, although we are ahead of the curve.” Trying to be innovative in an environment that is not yet open to new ways of doing things has its challenges. “Let’s put it this way. We try to be 2030 in a country that looks a lot like 2010, especially compared to the uptake of legaltech tools in the US, UK or some Asian countries”.

 

For a country with a population of sixty million people, there are a large number of lawyers in Italy – almost 250,000. However, the legal market features fewer large deals than in some of the neighboring European economies, and it is generally characterized by small and mid-sized firms. A good number of lawyers working for larger firms are employed in the Italian offices of international firms. For the most part, Italian lawyers service individuals or the country’s own companies, which tend to be on the smaller side – 85% of Italian companies have fewer than 50 employees. And, Marco says, these corporate clients aren’t asking for innovation in the same way that clients in other jurisdictions are.

 

“If we consider all the Italian firms, the technology available in Italy is still at its early stage,” Marco says. “Legal technology is not considered an emergency. When clients will consider it as an emergency, and some of our clients are already on that path, there will be a huge step forward”.

 

Marco says it’s not that his firm isn’t investing in technology, but rather that they are an exception. However, as in other regions, COVID has had an influence on digital transformation, particularly in the increased confidence lawyers have in digital tools. This is a positive development for people like Marco, who hopes that the post-COVID world will see a boost in the adoption of digital solutions.

 

It’s likely that language also plays a role in the scarce development of legaltech in Italy. The Italian language is in limited use across the world compared to, say, French or Spanish. Consequently, the incentive for vendors to enter this market is low. The cost of customizing an existing tool for the Italian language outweighs the benefits of new-market penetration. The industry therefore remains far less automated and the work less standardized than in many other jurisdictions.

 

“You know how it works. You need to train the machines, which means investing time and effort, and both of them have an economic value from the firm’s perspective. More than this, lawyers really like plug-and-play software. This means that unless a tool is really ready to go (and this is very difficult from a practical point of view) it is unlikely to be adopted”.

 

Some lawyers in Italy use tools to augment their legal practice because they work in the outpost of an international firm, or in a larger firm like Marco’s. “For a practice management tool – maybe the US leadership of a firm will pay for an Italian customization for internal use. Or maybe the partners will decide to carry on with the investment because they see the added value. But for smaller, national firms, such expenses are not considered essential”.

 

However, the glass is not always half-empty. “I believe we are a very creative and flexible country; therefore, I am optimistic regarding the rise of legal tech, especially in the mid-term. We just need the right stimulus,” says Marco. “Moreover, I’d stress that it’s not only a matter of tools, but of implementation, and it’s hard to find a country that focuses more on emotional connection than Italy”.

 

This is an interesting point, the notion that implementation and uptake of technology may be influenced by the nature of the people in a region, and by the emotional authenticity of their communications.

 

A scan of the legal technology companies currently operating in Italy, however, reveals only a handful of entities. Two of these offer practice management functionalities for law firms. One is targeted at corporate clients, for contract lifecycle management, and the others are compliance tools. However, there are ten chapters of Legal Hackers operating across the country, signaling a rising interest in legaltech among law students and the younger generation of lawyers in Italy. After LCA created a role dedicated to innovation, other firms have followed suit and there are now four innovation roles in the Italian legal industry. In 2012, Italy’s “Start-Up Act” was passed (Decree-Law 179/2012), providing support and various incentives to companies that can be classified as innovative technology start-ups. The country’s first Legal Tech Forum was held in 2015, organized by the IP-focused Italian legaltech start-up Koprja. The forum is now an annual event that has also spawned an online educational platform (Legal Tech Academy), to keep lawyers updated on the legal technology ecosystem.

 

Marco points out that Diritto al Futuro, an event dedicated to the future of legal profession, organized by ASLA – an association that includes most of the Italian big law firms - brought 2000 people to the Italian stock exchange last year. “This means that both students and lawyers are feeling the necessity of riding the legal technology wave. If they don’t, they’re likely to pay a significant price”.

 

This groundswell of activity is indicative of approaching change. In spite of the continued heavy regulation of the legal market in Italy, we may soon start to see some legaltech evolution in this region.

 

*This article was originally published on Tower of Babel - A Legaltech Blog on September 14, 2020. It is republished here with the author's permission.

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