In October last year, an almighty spat broke out between lawyers in Hamburg, Germany, and Wolters Kluwer which was providing the market with a document automation/generation system called Smartlaw – see Artificial Lawyer article here. Some local lawyers were not happy that a tech and legal data company was in effect selling legal documents to the public without a lawyer engaged in the process.
That case has now moved forward and last Friday (15 May 2020) the Cologne Higher Regional Court made some preliminary comments.
As Artificial Lawyer’s very limited German language skills have not been refreshed since the mid-1980s, Dirk Hartung, Executive Director Legal Technology – Bucerius Law School, has kindly offered to provide an English language overview of what happened and what it means, in part based upon a German report. Please see below.
The reason why this one matters so much is that if it became ‘normal’ for courts in Europe to forbid the use of self-service doc automation/doc creation tools without a lawyer being explicitly involved in the process, then it would have a significant impact on several companies. It could also set a precedent for more fights against other forms of tech solution in Europe that provide services and products to clients without a lawyer present.
‘The Hamburg Bar Association sued Wolters Kluwer over their offering of Smartlaw. They offer an online contract generator, which guides the user through a series of interview questions to customize a contract based on different templates. The Hamburg Bar believes that this is offering a legal service, which falls under the German Legal Services Act’s unauthorized practice of law regime. Their case rests on two arguments:
- Offering contract generation is a legal service, for which Wolters Kluwer has no license
- Wolters Kluwer engaged in unfair competition and misled their customer
In the oral hearing last Friday, the Cologne Higher Regional Court, presented its preliminary results to the parties for comments and to ask for clarifications, which is standard procedure as civil litigation in Germany is mostly in writing with one formal oral hearing to exchange arguments, hear witnesses and possibly settle.
The first point on unauthorized practice of law (UPL) is the more generally interesting one as there is no clear decision yet, whether offering contract generators constitutes practice of law. Typically, practice of law requires legal advice of another party in an individual case. This is is highly doubtful as I pointed out in an earlier statement last fall. The court consequently doubts whether there is actually advice to another party as the user typically uses the contract generator for themselves.
The fact that someone else wrote the code and set up the logic behind the dialogue system does not change this and the court believes this to be in agreement with the legislative intention of the German Legal Services Act. The court also pointed to an obiter dictum of the Federal Court of Justice in a very prominent case last November about using the exception for debt collection for legal technology business models.
Germany’s highest court for civil matters therein stated doubts that a mere automated calculator for rent reduction based on an expert system (the case dealt with the rent control offering wenigermiete.de) actually constituted any legal advice at all. The Cologne court further said that generally legal services require human activity and so that computer programs do not offer legal services.
Consumers would understand that the generated contract is not the result of actual human advice and not expect individual advice. The expert system is, in the words of the court, a mere advancement of existing contract templates and a useful digital tool. The Legal Services Act is not meant to protect lawyers from competition.
The second point on unfair competition would likely be upheld as Wolters Kluwer marketed the offering with terms such as ‘faster and quicker than a lawyer’, ‘legal documents in lawyer quality’, ‘more individual and safer than any template and chapter than a lawyer’, and ‘legal documents in lawyer quality – in cooperation with our legal experts – all of them experts in their fields’ – ‘we have developed the creation process to mimic the conversation with a lawyer’.
The court believes that this is misleading potential clients alleging the software provides the same service as a lawyer. Wolters Kluwer had previously deleted these parts of their marketing and has retracted its appeal regarding this issue after the clarification.
The decision will be pronounced on June 19th, but it seems that on the central matter of UPL the court will side with Wolters Kluwer. The court will probably allow an appeal to the Federal Court of Justice where the Senate for competition law would have to decide whether or not to agree with its colleagues from the tenancy law senate.
[Note: For full disclosure it should be stated that the article that I am rephrasing above appeared in Legal Tribune Online, which is owned by Wolters Kluwer. The author, Martin Huff, who should be credited with reporting this first, is a renowned veteran lawyer and journalist. He was the head of communications of Wolters Kluwer and is currently the CEO of the Cologne Bar Association.’]
By Dirk Hartung, Executive Director Legal Technology – Bucerius Law School, Hochschule für Rechtswissenschaft gGmbH, Hamburg, Germany.