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Legal Design and Ethics in Commercial Contracts with a Twist of Law and Economics

An Interview with Katri Nousiainen

Katri, as an introduction maybe you can tell us something about yourself and your profession. About the things you do on day-by-day basis in the legal sector, and so on.

I am a Lawyer and Professional in Legal Education. Currently I hold a Resident Research Fellow position in the Harvard Law School at the Center on the Legal Profession (CLP).

In addition to my work at the Center, I am also affiliated with the University of Cambridge Law (the UK). Before joining the Harvard Law School, I was affiliated with the University of Berkeley Law, Center for Law and Technology (BCLT) and with the Aix-Marseille School of Economics.

You are currently conducting pioneering work on impact in Legal Design and Ethics in Commercial Contract with a twist of Law and Economics. Could you possibly elaborate a bit more on this research project?

Sure! I am conducting empirical research on Legal Design and Ethics in Commercial Contracts from the perspective of Law and Economics. My current work intends to scientifically measure the impact and value of legal design, and to find, for example, metrics to assess efficiency and quality in contracting practice. I am especially interested in employing technology within law, economics, and legal design.

My current work comprises three sub-works. First, I have created a solid General Theory of Legal Design; second, I have introduced a New Quality Metrics for the legal profession, and then, finally I have applied the General Theory of Legal Design and the presented New Quality Metrics to an empirical case study to measure the impact and value of Legal Design in Commercial Contracting.

The empirical study has demonstrated and approved the claim that the legal profession could greatly benefit from the Legal Design approach in bringing comprehensibility for contracting practice. This approach will increase efficiency, and provide for greater quality in legal practice. The empirical study found that legal designed commercial contracts were more comprehensible than traditional legalese contracts - even to lawyers and sophisticated parties. Almost ⅔ of the participants preferred the Legal Designed contract over the traditional legalese contract! The preliminary results of the study further revealed that around 70 % of the participants were not able to comprehend the traditional written legal terms and found them ambiguous, and even nearly 90% of the participants pointed out that there is further room for improvement within clarity of the terms.

Even though the conducted empirical study has been a pilot and a single experiment in a particular industry, the results are still greatly promising and support the learning from other fields of science and their best practices being applied within law. We can imply from these novel results that certainly more comprehensibility is needed in the contracting practice and that the legal design approach can bring systemic impact in society in decreasing information and knowledge asymmetry. Moreover, through this empirical study the legal design approach has now been demonstrated to be a useful scientific tool and method in searching for a solution to improve legal quality. In addition, this study has more far-reaching implications for contracting generally, and particularly for industries in transition. The work demonstrates that there is a pressing call for a better legal quality and that the Legal Design approach could be the key! Through the current work on legal design, I have learned that the approach is also well-suited to be employed within emerging and new technologies. For example, this could be pivotal in the current rise of new quantum technologies such as quantum computers.

(See, General Theory of Legal Design in Law and Economics Framework of Commercial Contracting can be downloaded here )

You’re also active in the educational field. What activities do you do?

Besides conducting research, I greatly enjoy giving expert lectures and training on various practice areas of Commercial Law, Legal Design, and Law & Technology. I also educate via speaking and organizing workshops at conferences and seminars across the US, Europe and LATAM.

Courses and teaching topics that have lately gained growing interest are often within the intersection of law and technology. For instance, my recent course on Legal Design and Ethics in Commercial Contracting in Law and Economics Framework was very well received by the audience and it was awarded as one of the highest quality courses in academic year (2021/2022) - but also it received the highest rating for recommending the course for one's peers. For me this implies that there is definitely room and need for further courses to be taught at law schools that comprise an interdisciplinary approach, ideally within the intersection of law and technology, incorporating innovation, economic analysis of law, and legal design.

Moreover, my next course on Quantum to Law, has brought a lot of interest from legal professionals. They wish to better understand new technologies, and especially the second quantum revolution, and what kind of implications and applications it will have on the legal profession and the legal field in general. The course approaches quantum technology through law, economics, sustainability and society lenses. There will shortly also be published academic articles, several book chapters, first released in September, and podcasts on this subject, with my colleague Dr. Joonas Keski-Rahkonen, a postdoctoral researcher in the Department of Physics at Harvard University, where we carefully discuss some of the commercial applications and implications of quantum to law. Moreover, we have introduced a Quantum roadmap- Law, Economics, Sustainability, and Society - LESS is more! The Quantum Roadmap will guide legal professionals through its 5 principles, to achieve a more sustainable approach within emerging technologies.

What’s overall your opinion on the current process in the Legal sector when you think about development, planning, and implementation of (innovative) Legal Design? Do you see differences between Asian, American, and European firms in their daily operation and how they develop, plan and implement (innovative) Legal Design strategies?

To succeed as a legal professional, it is no longer enough just to know the law - rather the competitive advantage of firms/professionals lies nowadays within human-centricity, by which I mean, that we should legally design our professional services in a way that they bring measurable added value to the end-user, and that the clients sees that their needs are being recognized and answered. Legal design approach can be the key to improve the quality of current practice. Thus, I see that all the lawyers should get familiar with this new innovative way of approaching law and legal practice.

In my view, Finland has shown to be one of the most proactive countries within the Legal Design approach. For instance, we have law firms that have fully based their strategic approach on legal design. Furthermore, legal design is also recognized to be at the level of science. For instance, Hanken School of Economics, (Helsinki) has taken cutting-edge standing and teaches Legal Design on a Master Level course. The course has shown to be a great success among students and it has also been awarded for its high quality. University of Helsinki has followed Hanken’s successful path and they have also started offering a course this Spring on Legal Design.

As regards the Middle-Europe, for instance, in France, we can also see a movement towards more innovation by design in the legal and public sector. In France, even the judges at the court are nowadays taught to understand the legal design approach and its benefits in judicial proceedings. One of my favorite Legal Design operators in France is Amurabi, which does legal design projects for the public and private sector. The Legal Design field is expanding in Middle-Europe, and we can surely read of many success stories in applying Legal Design.

What comes to North-America, we have here great ongoing projects and courses running on Legal Design. Stanford Legal Design Lab, where the approach originated, is probably one of the most well known for running empirical field studies around legal design. The Lab is headed by famous legal designer, Margaret Hagan, who is also the founding mother of this innovative approach to law. Another Lab, here in North-America, is also worth mentioning, namely the NuLawLab in Boston that regularly works around design and innovation. They are actually shortly publishing an interesting book on Legal Design and Dignity that surely will gain a lot of interest.

The practices that have taken place on Legal Design, are mostly built on the design thinking approach and various design methods. Often practices vary between operators, but I would not say that the difference in practice would lie within countries, but rather within individual practitioners of legal design. The field is still a bit dispersed - and eventually, information is widespread. These are also the reasons I came up with the General Theory of Legal Design and the empirical study Measuring the Impact and Value of Legal Design to bring more common theoretical standing, shared empirical understanding, and to bring the Legal Design approach on the stage of science.

I believe that collaboration is the key here. In my experience, the practitioners in the Legal Design field collaborate intensively and thus, the methods and learned best practices merge and improve further through time. I have had, for instance, the pleasure and luck to learn from legal design colleagues in Finland, France, Sweden, the USA, Canada, Columbia, German, Australia, and Italy, - just to name a few countries! The wide list of countries, and several continents, demonstrate that this is not just a momentary movement, but that Legal Design should be seen as a real academic field of science that is anticipated to transite how we see and practice law. Join the party!

Many lawyers, general counsel, and corporate counsel talk about the importance of the business of law and it looks like they easily adopt words like Brand Management, Consultative Selling, Legal Tech, A.I., workflow software, etc. not knowing what it really stands for. Do you also experience this lack of knowledge and how do you cope with the difference in knowledge levels?

I do recognize this phenomenon! For instance, too much legal software is being sold without understanding the end user and their needs. Concepts, challenges, and needs are often not clear for the sellers of the services and then, unfortunately, the clients get disappointed when they feel that technology did not solve their challenge. Frankly, technology does not solve all the challenges that we have. However, it can be beneficial and bring advantages if we know exactly what we are trying to solve or improve. Here as well, the Legal Design approach can come handy as it is based on the idea of human-centered design in solving and improving services, processes, and products. The approach fosters transparency, and I firmly believe that good communication is also the key here to diminish information and knowledge asymmetry between different parties.

Do you think that Law Schools understand the need to change the traditional curriculum or at least give more attention to the business of law?

Technological, innovative and interdisciplinary skills are something that, in my view, have become gradually more important in working life. Technological tools and innovative approaches are steadily entering into the legal field. We have seen new professions emerging inside the legal profession, many of which consist of employing technology and applying innovative approaches such as legal design. You may find people, for instance, working in new positions on legal operations, being legal designers, or selling legal tech to law firms. There is no doubt that the Legal Profession is in transition and we should prepare lawyers for this change. I highly recommend current and future lawyers to have interdisciplinary studies on subjects such as, design thinking, law and economics, legal design, cognitive sciences and law & tech in their professional tool box helping them to adjust and foster the transition of the legal field!

Business schools are important here too, since more interdisciplinary understanding is needed between fields and professions. It would be beneficial for lawyers to understand numbers and especially financial sheets to be able understand the big picture and work for their clients best interests. Last but not the least, we need to also further bridge between business of law and academia to answer the needs and demands of working life in transition.

As Law Schools are the breeding ground for lawyers, how far- in your opinion - can we solve the problem of change acceptance by changing the curriculum?

The curriculum changes may take time but the change is inevitable. The legal profession is transitioning, and we need to be able to provide the best tools for the current and future lawyers to serve their clients best interest with the best possible tools available. Law schools have the responsibility to offer students an opportunity to learn about these tools and how to employ them. We have quite a good understanding, for instance, of how through the legal design approach we can improve the quality in the legal field. Now we just need to support the change and collaborate for the future of law and legal profession!

There is a lot of discussion ongoing about disruption in the legal market: a big bang against incremental change. Some say the legal market is on the verge of a disruptive force that will have a huge effect on the market. Then again, others say the change will be an incremental process and the market will evolve naturally. What are your thoughts on this?

I trust the path dependency process. Markets will work on themselves, and we should not interfere too much. I see competition as a good thing, as often a lack of it can form even further disruptions. It's been said that innovation is the key to success in entrepreneurship, and that everyone wishing to make profits needs to innovate in order to be successful. I believe that innovation is often the welcomed prerequisite for change. Sometimes, surprisingly, a change can be more welcome than we could have initially thought of. I believe that natural evolving of the market can bring good outcomes. Again, the legal design approach can support and foster successful change in the legal market.

What advice can you offer to young legal professionals or aspiring legal entrepreneurs about starting a company and working for a legal startup?

Trust yourself! Get familiar with the Legal Design approach and make it at the core of your business strategy. It will help you to understand your prospective end-users, find maybe even new prospective business segments, gain competitive advantage and reduce transaction costs. Further, employing an implemented legal design approach will signal to the market that you are a transparent operator and worthwhile to contract with!

Reading the General Theory of Legal Design will get you started and can help you assess and monitor important metrics. Learn from the interdisciplinary best practices and make them work for the benefit and advance of your prospective business. As the legal profession is in transition, I would advise to have legal design in your company’s core strategy from the very beginning.

“You don’t want to be late for this party!”

Katri Nousiainen is a Lawyer, Professional in Legal Education, Research Fellow at Harvard Law School (CLP)


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