The legal industry refers to the aggregation and integration of sectors within the economic system that provide legal goods and services. The global legal industry is fast-growing: in 2015, it was valued at US$786 billion, US$886 billion by 2018 and is expected to exceed US$1 trillion by 2021. The United States and Europe dominate the legal industry, with the former accounting for more than half of the global market revenue. Meanwhile, Europe accounts for more than a quarter of revenue. Legal services in the Asia-Pacific region continues to grow, with total revenues of $103.3 billion in 2018.
Background Types of services The legal industry carries out the following services amongst others: The legal representation of one party's interest against another, whether or not before courts or judicial bodies by, or under supervision of, members of the Bar Legal advice and representation in civil cases Legal advice and representation in criminal cases Legal advice and representation on behalf of the government General counselling, advising and/or preparation of the following legal documents: Articles of incorporation, partnership agreements or documents in connection with company formation Patents and copyrights Preparation of deeds, wills and trusts Other activities of notaries public, civil law notaries, bailiffs, arbitrators, examiners and referees Administration and operation of civil and criminal law courts, military tribunals and the judicial system Rendering of judgments and interpretations of the law Arbitration of civil actions.
Types of stakeholders Traditionally, major stakeholders in the legal industry include lawyers, judicial systems and law schools. However, in recent years, the industry has expanded to include alternative legal service providers (ALSPs), which provide high demand legal services that were traditionally provided by law firms. These range from small legal tech start-ups to the Big Four accounting firms that offer legal managed services to their clients. Allied legal professionals in roles like knowledge management, learning and professional development, legal project management, legal process engineering and legal technologists are also an important part of facilitating the delivery of legal products and services. ALSPs provide many legal services such as document review, contract management, litigation support, e-Discovery and contract lawyers and staffing. ALSPs are widely utilised to manage various legal services. Some law firms may also hire ALSPs to provide additional services for their corporate clients, whereas corporates may work closely with ALSPs to provide specialised legal support for their in-house legal teams.
Types of technologies Legal technologies are also beginning to be pervasively adopted to improve the quality, efficiency and cost-effectiveness of legal services and their delivery. Machine learning in legal research and document review, distributed ledger technologies in smart contracts, advanced statistical modelling for legal analytics of big data, and the digitalisation of court processes are popular areas for legal technology adoption and innovation.
Types of professional development In addition to a law degree and professional certification to practice as a lawyer, a number of key legal systems require some form of continuing education. This is necessary as the pace of change is accelerating and it is necessary for legal professionals and allied legal professionals to keep up-to-date In order to remain relevant and effective. There is significant work underway in the US, UK and Singapore to articulate the types of future-focused competencies needed by different legal industry roles. Models of competence include the DELTA Model, the SRA competence statement and the Legal Industry Framework for Training and Education (LIFTED).
Impact of COVID-19 Indeed, the 2020 coronavirus pandemic (aka COVID-19) affected global legal services with the temporary shutdown of offices, pay cuts, layoffs, and deals paused indefinitely. To stem losses, global law firms quickly instituted pay cuts for partners and associates, furloughed staff, suspended summer associate programs and delayed first-year associate classes. At the same time, clients postponed or scrapped deals and asked to renegotiate existing payment plans with law firms. As a result, law firms and the legal industry experienced extreme financial distress in the first three quarters of 2020.
During the pandemic, few legal departments were fortunate to experience a steady flow of business. For example, restructuring and bankruptcy departments experienced a surge in work in the US as corporates looked to survive the crisis and others looked to mitigate losses.
On the other hand, during the first two quarters of 2020, the total number of global M&A deals continued to fall with cancelled deals and corporate financial distress. A reprieve came during the third quarter of 2020 when the market rebounded with the value of the global M&A market deals doubled to $891 billion, with those disclosed values of US$5 billion or more skyrocketed (356%) quarter over quarter. However, despite a positive third quarter in 2020, the number of M&A deals have fallen from (5,106) in 2019 valued at US$2.58 trillion to (3,494) in 2020 valued at US$1.86 trillion.
Law firms that embraced technology early on communicated easily with their clients and participated in multi-jurisdictional transactions. Research shows that lawyers adopted technology at the fastest rate during the pandemic than pre-Covid times. According to Clio, (85%) firms used software to manage their practice and (79%) relied on cloud technology to store firm data. During the pandemic, (83%) of firms met with clients virtually; (73%) allowed clients to pay invoice electronically and (62%) permitted clients to share and sign documents electronically securely.
While most firms lost revenue in Asia, some firms experienced an increase in restructuring deals and discussions regarding distressed acquisitions. In addition, firms in Asia reported that their regulatory teams, as well as their litigation teams, were in high demand, although the total number of M&A deals decreased (20%) from 2019 to $381.2 billion. In Hong Kong, the Chinese corporate team took on five IPOs in September 2020 with another eight deals ready to go. Asian law firms also experienced an uptick in regulatory investigations and litigation related to force majeure and business interruption.
Legal industry insights by country
Australia The legal services market in Australia saw a surge in demand from 2018 to the end of 2019. The Australian legal services market constitutes a mature market valued currently at US$21bn. From 2009 to 2015, the Australian legal services market experienced a gradual decline, moving from overall demand at (6%) in 2009 to overall demand at (-3%) in 2015. However, in 2018, the Australian legal services market saw a surge in demand, with an average increase of (7.8%). Demand has remained strong in 2019 and 2020, although traditional Australian law firms faced increased competition from ALSPs, and NewLaw firms.
The legal services market in Australia is projected to show growth over the next five years. Despite an (8.1%) decline in revenue for legal services in 2019–2020, legal services revenue are expected to grow by (1.2%) from 2020 to 2021. Demand from the following sectors will support the continued growth of the legal services market in Australia: demand from property operators and developers and banking, finance and insurance firms.
Brazil Brazil has the largest economy in Latin America. As of 4 October 2021, the population of Brazil was over 214 million. In 2021, Brazil's GDP reached about US$1.49 trillion – a strong measure of economic strength.
The legal system in Brazil is a hybrid, originating from Portuguese law and then evolving to its own autonomous legal institutions. Brazil operates on a civil law system based on European civil codes such as Portugal, France, and Germany, which elevates statutes over judicial precedent.
Brazil's economy opened up to the global market in the 1990s, which had a significant impact on Brazil's legal services market, with the most significant impact on the corporate sector. With an influx of both domestic and foreign legal work, demand for corporate services grew, which led to new laws governing corporate activity and created demand from corporates navigating the new legal environment.
In 2014, Brazil enacted the Clean Companies Act. The Clean Companies Act is an anti-bribery law imposing liability on companies and promoting compliance programs and cooperation with authorities. The Clean Company Act applies to business organisations in Brazil, whether local or foreign and any Brazilian foundations or associations. The Clean Companies Act is similar to the U.S. Foreign Corrupt Practices Act ("FCPA") and the U.K. Bribery Act 2010 ("Bribery Act"), which looks to the enforcement of bribery offences.
In September 2019, the Brazilian government enacted the "Law of Economic Freedom" to encourage investment in and the development of business in Brazil.Brazil, Law 13,874 of 20 September 2019 The guiding principles include the presumption of freedom in doing business, the presumption of good faith of individuals, minimal intervention of the state on doing business, and the recognition that individuals are vulnerable before the state.
On August 26, 2021, The New Business Environment Law was passed. The New Business Environment Law helped Brazil advance 20 positions in the World Bank's Doing Business ranking and seeks to simplify the opening and operation of companies in Brazil. Some of the measures include automatic approval for businesses in medium risk activities, changes in governance rules, ease of foreign trade, etc.
Canada In 2020, there were over 130,000 lawyers practising in Canada. In 2019, of 61 "stand-out" Canadian lawyers, (71%) of private practice lawyers preferred to work at a local Canadian law firm, rather than an international firm. From 2018 to 2019, the majority of corporates identified that they have international legal needs with about (36-37%) of legal spend allocated for international spending. While corporate clients explored the use of ALSPs, (85%) of legal spend is still with traditional law firms and litigation (36%) is the largest legal spend of corporates.
In 2019, Canadian in-house teams in sourced more and over 60% of companies expected to decrease external legal spend.
Egypt Egypt, historically regarded as one of the cradles of civilization, has experienced dynamic changes in its legal sector over the decades. As of 24 October 2023, the population of Egypt surpassed 100 million, with an economy that remains one of the most diverse in the Middle East and North Africa. Stemming from its rich history and influenced by various global legal systems, Egypt's legal framework evolved predominantly from civil law traditions, borrowing elements from French, Roman, and Islamic law.
With the liberalization of its economy in the late 20th century, Egypt witnessed a surge in both domestic and international trade. This economic transition catalyzed a notable transformation in Egypt's legal services market, especially impacting the corporate sector. The influx of domestic and foreign legal work necessitated refined corporate service offerings, spurring the development of new laws governing corporate activities and generating demand from businesses navigating this evolving legal landscape.