December 3, 2022

Virtual Law Firms and Their Impact on the Legal Industry

I.            Introduction

For a long time technology has been a catalyst for change through empowering organizations to increase their productivity and offer opportunity to adopt more competitive business models rather than those traditional ones. As part of this change, we recently started to witness the increased number of “virtual law firms” that are redefining the shape of how legal practices operate and how legal work is being done. With more and more virtual law firms being born, and the support of the internet, legal services are becoming more widely accessible to the clients.  

In this article, we will discuss more about what is a virtual law firm, the benefits it can bring to the legal industry and how can virtual law firms change the game in the legal industry.

II.            What is a virtual law firm?

To start off, we need to unwrap the notion of virtual law firm. In simple words, a virtual law firm is a law firm that doesn’t have a physical business seat. Not only the nonexistence of physical location makes a law firm a virtual firm. According to the e-Lawyering Task Force of the ABA, a virtual law firm must have a secure client portal that user can access from its website. This facilitates the sharing of information and documents, as well as communication between lawyers and clients. It must be completely secure and encrypted, and users must sign in using credentials.

Some lawyers prefer to use the term “cloud-based law firm” instead of virtual law firm. Nonetheless, and regardless of the term we use, the goal of both is to save lawyers the spending on renting a physical location to do business. However, there are still many jurisdictions which requires physical space when opening and operating as a law firm.  

For instance, there has been no indication of unified rules on the EU level requiring a physical firm to be established before embracing a virtual law firm in the European Union; however, there are individual requirements for each EU country regarding the necessity of establishing a physical firm first. For example, such countries are Slovenia, Austria, Germany and some others. In the United States (US), a handful of states such as Delaware have a Bona Fide Office Rule that requires attorneys to maintain a physical office, while most US states have softened their laws to allow virtual law offices. For example, New Jersey removed the requirement in 2013.

Since the consequence of doing business through virtual law firms is also partially digitalization of information, it is more than necessary to use special software solution that allows legal service provider to manage all their information and cases in one place, from client billing, expenses, and from documentation to calendaring. Any desktop or laptop computer, tablet, or smartphone can be used for accessing the legal practice management system anytime and anywhere. Such systems give law professionals ability to have a complete overview of the past and ongoing law firm processes, including managing all the legal work through one single point. It’s very challenging for solo and small-firm attorneys to build, update and handle an effective working case management system solely by themselves. While some use email to track and archive all the activities of various cases legal practice management system designed specifically for attorneys can offer robust features that are easier to use and more efficient.

Thompson Reuters underlines that a law practice management system tailored for legal professionals ties it all together for a brick-and-mortar or virtual law office. This application can coordinate these important functions:

  • Client portal to easily, securely share documents/drafts with a client;
  • Contacts database for sharing and collaborating with colleagues;
  • Court calendar system that syncs with email;
  • Legal document management repository, sometimes with collaboration features;
  • Time and legal billing system;
  • Real integration (more than links) with other legal programs, enabling tasks such as online legal research, form building, and legal case management and analysis – without time-consuming importing and exporting from one program to the other;
  • Build-in communication features.

III.            The benefits of providing legal services through a virtual law firm

A virtual law firm gives the client an immediate access to certain competitive advantages. Some of the most compelling advantages will be described further below.

Reduction of overhead cost

Investment requirements for entering private practice might be quite high. However, lawyer may eliminate those expensive physical necessities with a virtual office. Costs associated with leasing an office, outfitting it, and employing receptionists and other management positions. Instead, lawyers may launch a virtual office and get going on establishing a clientele straight away while offering services at more competitive prices.

Also, using a secure communications solution that is integrated with legal practice management software to operate lawyer’s virtual law practice means they won’t need any in-house gear or additional software, in addition to lowering overhead costs associated with renting physical office space as mentioned above. In reality, all these legacy costs frequently stymie the ability to change for traditional law firms, causing them to become weighed down.

Ease of geo-expansion: One of the key benefits of virtual law firms is the elimination of many of the physical constraints to developing lawyer’s business and practice. For example, a lawyer could be based in one city but create an office in another, getting the access to a distinct client base not only in their home city where they have already started and based but also beyond. Another privilege is that a group of attorneys qualified to practice law in new jurisdictions can be hired and kept on staff. You can offer legal services with lawyers based in different cities or countries. So, operating as a virtual law firms give a lot of flexibility to lawyers in terms of managing their time and operations.

Better communication and enhanced privacy options: When a lawyer decides to provide law practice through a virtual law firm, he/she will have on-demand access to professional virtual office space, private virtual offices, and virtual meeting rooms available at users convenience. As needed, you can meet with individual clients or business teams. You have the option of meeting with your clients in a private and professional setting without worrying about someone overhearing your discussions.

Enhancing work-life balance: Working remotely not only gives employees greater flexibility over their schedules, but it also eliminates the need to spend hours traveling every day. A virtual law firm’s improved flexibility and mobility can boost productivity and improve work-life balance for remote lawyers and ad hoc practitioners.

IV.            Considerations when making the shift to virtual practice

Phasing into a virtual law firm raises some considerations to ensure the effective implementation of lawyer’s virtual law firm, from taking privacy concerns into consideration, also effective communication strategy internally between staff and externally with clients, and the territorial requirements that maybe in place. Here we will spotlight what we mean by such considerations.

Eliminating privacy concerns: There is a great obligation to secure clients’ data and sensitive information, thus the infrastructure and security procedures utilized to protect client data raise additional challenge. Law firm’s data must be safe, and all communication routes must be secured.

Effective communication strategy: Lawyer’s strategy will also be determined by the size of his or her firm. A large law business with several attorneys and clients all around the world will necessitate a more extensive communications plan than alone practitioner-run firm. Ensure that there are open lines of communication between lawyers and clients, and that everyone engaged is aware of applicable Data Protection rules and Privacy’s best practices.

Territorial accessibility: As we already pointed out, some countries mandate that law firms have a physical office address. Virtual lawyers may wonder, if they can work from a location outside their licensed jurisdiction if the client resides in their licensed jurisdiction. If the client resides in their licensed jurisdiction, there is a higher risk of crossing jurisdictional lines, as clients can essentially come from anywhere. To prevent malpractice issues, it is critical to be cautious while interacting with new clients and also be aware of local rules when providing legal services.

V.            This new modality!

Even as Covid-19 is slowly fading into history, its consequences will linger in the air probably for a long time. Lawyers are not surely rushing back into the office, and many will see option to work remotely not only as a benefit, but as a standard of the profession. Firms must therefore trust their teams to be productive while working remotely in a proactive manner using this new modality and utilize their discretion to choose when they need to be in the office.

Law firms that will get their approach to remote or hybrid work properly can benefit from higher employee retention, better work-life balance for all, and lower rent and utilities costs. Firms can also guarantee remote personnel are as efficient and effective as possible by deploying cloud-based practice management software.

It’s believed that such new modality of working has its own peculiarity in terms of the detrimental influence it brings to the traditional office-life and personal life, as the line between the two become blurred, also the fact that there is no substitute for face-to-face interaction. Moreover, the complexity whereas the state regulations vary regarding attorneys being able to practice law in other jurisdictions, finding a virtual law firm that has resources in states where it can service clients. This way of collaboration with other attorneys that are licensed in other states and still service the clients.

VI.            Virtual law firms do change the game in the legal industry

Finally, with many countries throughout the world willing to implement a hybrid e-courts system, the possibility of having a lawyer execute his job totally in a few clicks, end to end, from home would undoubtedly transform the legal industry. Consider a lawyer in the past who would go to court in the morning to appear in court hearings, then return to his firm in the afternoon to pick up documents or meet with a client, doing all of this in just a few clicks without ever leaving his desk. All he needs now is a stable internet connection and he’s ready to go! Wouldn’t that new modality fundamentally alter the legal industry?

This Article was prepared by Hossam Hesham.

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About Hossam Hesham
Hossam Hesham is an Egyptian legal professional with experience that encompasses working as an in-house banking lawyer, preceded by law firm experience, and most recently he has added to his professional career an experience in banking governance in Italy. Hossam’s experience has an emphasis on contracts and legal advisory. As a passionate lawyer about legal technology, he pursued postgraduate studies and has been conferred a Master’s Degree in Law with a specialization in LegalTech from Lithuania. Hossam has been a member of the Egyptian Bar Association since 2015.

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