It is a real pleasure to contribute to the conceptualisation effort that Carmen Pastor and the BAES Group (Financial Technology and Law Laboratory) are carrying out to design the regulation of the European and Spanish financial market within the framework of Information Technologies and Artificial Intelligence. The recent 3rd International Conference on the Present and Future of the Regulation of Cryptoassets in the European Union held at the University of Alicante on 14 and 15 December offered the opportunity to share the work of researchers and professionals on this topic. A resounding success, from which we have all learned. Let me join in the many congratulations already received. I am now going to briefly summarise some of the issues that I pointed out in my presentation.

In the evolution of the legal landscape, two significant implosions have occurred in the last fifty years. The first is attributed to globalization and the transformation of law firms into transnational legal entities. The second is a consequence of technological advancements1. However, it is crucial to clarify their implications.

The economic and cultural globalization observed from the mid-1980s to the end of the last century followed the significant transformation of legal professions between 1960 and 1980 in the US and European countries, after a long period of stagnation. Law & Society researchers characterized this shift as a move from a centralized view of the state and law to a distributed normative decentralization in firms, corporations, and political and social organizations2. Traditional legal structures and forms imploded as service providers aimed to control not only supply but also stimulate demand in line with the rapidly expanding global economy. The primary consumers of legal services shifted from individual citizens to corporations, financial institutions, and state administrations. This legal expansion —the so-called big-bang of lawyers and increase in litigation rates— was further fuelled by changes in regulation within the financial and stock markets.

The second implosion was triggered by (i) the collapse of large law firms that had transformed into consultancies by the end of the century, such as Arthur-Andersen, and the enactment of legislation like the Sarbanes-Oxley Act (USA 2002); (ii) and the financial crisis of 2008-2012. Both sets of events led to the expansion of a services market with characteristics beyond the strictly legal realm. This services market is gradually becoming “uberized,” welcoming professionals with specific technical expertise rather than a strict legal background. These include knowledge engineers, project managers, financial experts, customer advisors, product process experts, documentalists, risk prevention experts, data protection experts, and AI programmers.

The emergence of GPT3.5, GPT.4, and ChatGPT post-pandemic has further intensified these previous trends. Since at least 2012, AI has held a prominent place on the agendas of firms. The Governance, Risk Management, and Compliance (GRC), or RegTech (encompassing LawTech and Fintech) market has experienced exponential growth. Data provided by Raymond Blijd at LegalComplex (LegalPioneer) covering 1984 to 2020 reveals a total legal tech investment of $12.3 billion. Considering the potential market for risk, compliance, and management, the sum reaches $3 trillion. The current estimate stands at 51,654 contracts and 4.3 trillion.

In summary, we can assert that: (i) the “platform-driven economy” is already widespread; (ii) there has been integration of old ICT law (e.g., intellectual property, patents, data protection) and IT for lawyers (technological advancements in e-discovery, semantic web, search, and document management tools, ODR); (iii) a polarization exists between legal corporations and ‘uberized’ individual lawyers; (iv) and in between, web-based legal services (LawTech), integrated into large law firms or offering independent online services.

The development of semantics, Natural Language Processing (NLP), ontologies, information storage, and retrieval techniques, along with Machine Learning (ML) and Deep Learning (DL), has led to the convergence of these approaches into a unified field of techno-regulation (LawTech, also known as Fintech, Regtech, and Suptech). Its primary functions include the supervision, monitoring, and compliance of regulatory systems, encompassing smart contracts, cryptocurrencies, and Online Dispute Resolution (ODR).

The inevitable questions that arise include: 

  • How can the construction of this professional legal space align with the institutional development of the new public space?
  • How can “platform law” be reconciled with the emergence of legal ecosystems with enforceable components? 
  • How can values be embedded and modelled in information systems, platforms, and digital infrastructures? 
  • How can citizens, consumers, disabled individuals, and vulnerable communities be better supported and protected?

As is well-known, the European Commission is actively working to regulate and harmonize the digital single market, focusing on nine common real-time linked dataspaces (plus the tenth on the European Open Science Cloud, EOSC)3. The fifth space is on finance “to stimulate innovation, market transparency, sustainable finance, as well as access to finance for European businesses and a more integrated market”. And the eighth, on legal and administrative matters, “to improve transparency and accountability of public spending and spending quality, fighting corruption, both at EU and national level, and address the needs for effective enforcement of EU legislation and foster innovative applications of gov tech (technology at the service of public administrations), reg tech (technology at the service of regulation) and legal tech (technology at the service of law) in support of legal practitioners and other public interest services.

The challenge lies in how to achieve these goals, the instruments required, and the technical methods to implement them.

My main argument is that the regulation and construction of platforms in the platform-driven economy, particularly in the banking and financial sector, go beyond mere hetero-, co-, and self-regulation4. They involve technological and computational intra-regulation. Consequently, the perspective and approach to regulation must encompass a formal inside-outside viewpoint, both within and outside intelligent information systems, and an intra middle-out approach, stemming from the conceptual modelling of the modules and architecture of the computational design5. This approach focuses on the cyclical and circular legal construction of technology’s adequacy to meet the requirements or conditions set for the effective fulfillment of the rights of citizens, consumers, companies, and corporations6.

Consideration must be given to intelligent agents (MAS, multi-agent systems), the metaverse (e.g., digital replicas, digital twins), cyber-physical systems within the Internet of Things, and formal compliance languages (business and legal compliance). These elements need to be incorporated into the five versions of the web. Web 3.0 represents the Semantic Web. Web 4.0 is the Web of intelligent agents. Web 5.0 —in its Industry 5.0 version, at least—involves implementing ethical values and legal norms in applications and platforms.

This is the challenge we must now face. The attached figure illustrates a new regulatory space with instruments that have already reshaped the traditional legal field, demanding the adaptation and redefinition of certain categories to achieve the necessary harmonisation for online and real-time regulation in the nine data spaces identified by the EU. One crucial category is “legality” or “validity.” If conditions for the semi-automatic creation and functioning of legal ecosystems, along with their necessary relationship with citizens (end-users) in hospitals, banks, manufacturing, and administrations, are established, validity cannot solely rely on a presupposed or formal basis. It must also be ecological, underlying the acceptance and regular use of regulation models systematically produced in Human-Machine Interaction (HMI). This is especially true for the control of banking data, as emphasized by the EU and Carmen Pastor in her closing speech at the Conference7. An integrated holistic perspective is essential to conceive this new regulatory space with complex scenarios, where a proportional balance between horizontal and vertical legal perspectives is necessary, and dialogue among all actors involved already inevitable.

Dimensions of regulation for an integrated dataspace on the Web and Industry 4.0 and 5.0. Source: Pompeu Casanovas.

— Pompeu Casanovas i Romeu, Research Professor in AI, Law and Ethics at the Instituto de Investigación en Inteligencia Artificial (IIIA-CSIC), Adjunct Professor at La Trobe University (Australia), and founder of the Instituto de Derecho y Tecnología of the UAB.

How to cite this post: Casanovas, P., ‘La doble implosión en las profesiones jurídicas y un nuevo espacio de regulación’, La clave de BAES, 17th January 2024, https://www.baeslegalcripto.eu/legalcripto/en/the-double-implosion-in-the-legal-professions-and-a-new-integrated-data-regulation-space-by-pompeu-casanovas/

This work is licensed under CC BY-NC-SA 4.0

  1. Cf. Pompeu Casanovas, “Inteligencia Artificial y Derecho: la doble implosión de las profesiones y servicios jurídicos en la era digital”, in M. Serrano y O. Velarde (eds.), Mirando hacia el futuro. Cambios sociohistóricos vinculados a la virtualización. Madrid: Centro de Investigaciones Sociológicas (CIS), pp. 83-114. ↩︎
  2. Cf. Richard L. Abel and Philip S.C. Lewis (Eds.) (1988). Lawyers in Society, 3 vols. Berkeley: University of California Press; Richard L Abel,  Ole Hammerslev,  Hilary Sommerlad,  and  Ulrike Schultz (eds.) (2020). Lawyers in 21st-Century Societies, vol. 1 (2020), vol. 2 (2022).  London: Hart Publishing.  ↩︎
  3. European strategy for data. 19.2.2020 COM (2020) 66 final. ↩︎
  4. L. de Koker, T. Okal, P. Casanovas, “Where’s Wally? FATF, Virtual Asset Service Providers, and the Regulatory Jurisdictional Challenge”, D. Goldbarsht, L. de Koker (eds.), Financial Technology and the Law, Cham: Springer Nature, 2022 ↩︎
  5. Cf. Ugo Pagallo, Pompeu Casanovas, and Robert Madelin. The middle-out approach: assessing models of legal governance in data protection, artificial intelligence, and the Web of Data. The Theory and Practice of Legislation 7, no. 1 (2019): 1-25; Pompeu Casanovas, Louis de Koker, Mustafa Hashmi, Law, socio-legal governance, the internet of things, and industry 4.0: a middle-out/inside-out approach.  J 5, no. 1 (2022): 64-91.  ↩︎
  6. Cf. Marta Poblet, Pompeu Casanovas, Víctor Rodríguez-Doncel (2019). Linked Democracy: Foundations, tools, and applications. Cham: Springer Nature.  ↩︎
  7. Cf. Carmen Pastor Sempere (2023), “Open Finance”, Fundación Notariado, Cuadernos de Derecho y Comercio 80: 17-60. ↩︎