The Rise of Legal Technology in Mexico #LegalTechLives with Daniel Gutierrez

Andrew Arruda
June 4, 2018

First off, can you introduce yourself and let folks know how you got into legaltech?

I am a practicing lawyer in Baja California, Mexico, and the co-founder of Laboralisto, the first cloud-based labor litigation analytics platform. I reside and practice law and tech literally at the border between Mexico and the U.S./California.

The reason I got into legaltech and co-founded my company with my law partner and former Labor Board Judge Jose Diaz was out of necessity. There was a sudden surge in labor litigation affecting our clients that required us to find a better way to manage complex litigation in diverse cities in Mexico.

High turnover in manufacturing plants in Mexico generates a lot of human and legal friction; many employees resign/are fired and that usually requires (in Mexico and many Latin American countries) the activity of a labor lawyer either to formalize the resignation of the employee or the dismissal notice filed by the employer.

This resignation/termination needs to be ratified/deposited before a Labor Board officer, and this judge advocate is legally required to advise/summon a worker to review the Employer Economic Offer. It is not rare that a disgruntled worker refiles or amends in the alternative, which is to submit his/her claim to arbitration before a Labor Board, which means a new case in full-fledged labor litigation!

Labor arbitration litigation requires time consuming back and forth of personal data and questions of fact and evidence thereof that can become complicated to manage. It can become a nightmarish workflow.

For decades, this back-and-forth was handled through private physical messenger services, telephone calls and, more recently, email. Lawyers had to communicate not only with clients’ HR managers but increasingly with HR managers and even external attorneys of the clients’ agents/workers of 3rd party and intercompany suppliers, as the traditional lines of employment are blurred in many industrial and commercial services contexts worldwide.

It was necessary to create a sort of CRM/litigation support software solution made by lawyers and used equally by lawyers and HR managers that is efficient but also respects privacy rights as should be expected in the 21stcentury.

The purpose of the Laboralisto platform is to “put everyone on the same page.”

Recently Thomas Hamilton, ROSS Intelligence’s VP of Strategy and Operations, attended the first annual big legaltech event in Mexico. Can you tell folks what the event was and who was in attendance?

I had the privilege and honor to meet Thomas at the successful launch of the Mexico Legal Summit in April of 2018 in Mexico City. I was surprised to learn that Mexican in-house counsel and law societies are increasingly curious and knowledgeable about legaltech options in Mexico. Legaltech is still in its birth stage in Mexico, and only a few of the larger firms have begun using data rooms, litigation monitoring and e-billing platforms; however, the widespread attendance of the legal community to this event is testimony that the Mexican legal profession and academia is indeed interested and curious about these new technologies.

I was pleasantly surprised by the openness and knowledge of the NAFTA market of legal services by Mr. Hamilton. Canada is a multilingual and multicultural federation that recognizes both common and civil law traditions (Quebec), much like Mexico and the rest of Latin America that derives much of its laws from Napoleonic (civil law).

There are many pioneering companies that are binational efforts. For example, ROSS Intelligence was incubated in Canada and accelerated in Silicon Valley, California. Laboralisto was incubated in California at the Founder Institute by a group of Mexican lawyers and American and Mexican software engineers and data scientists—but we go after the Mexican and Latin American legal markets.

Hearing about the latest developments and trends in legaltech last April and interacting with thought leaders such as Thomas Hamilton, Martin Katz from IIT Kent Chicago, Stephany Corey from CLOC and other luminaries in legaltech was really inspiring!

April 2018 also saw the approval of the Mexican Fintech Law: It is a framework statute that will require additional work by the three main watchdog agencies entrusted with regulating banking, insurance and securities, but hopefully by next year the increasing intersection of legaltech and fintech should make for an interesting and fun forum.

Besides including fintech, I wish for next year that A2J initiatives in Mexico also become a part of the Mexico Legal Summit. The promise of legaltech is to make it easier for everyone to get the benefit of quality legal services at fair prices.

How do you see the legaltech movement developing in Mexico? Is it something that has been happening for a while or is this a new movement?

It’s very recent, but I can’t say yet that it is truly a movement. For cultural reasons, legaltech entrepreneurs like us have only recently come out of the woodwork to connect through informal meetups. My belief is that we few have been wrongly thinking that we should be “under the radar” to have a chance at success.

We truly are in the beginning stage of establishing an ecosystem where software engineers, data scientists, angel investors and academia collaborates in more formal ways to spur new initiatives for Mexico and Latin America.

Being under the radar should be replaced with “fail fast” and “experiment again faster” again and again in order to capture opportunities in this large but new legaltech market.

What are some legaltech startups, innovative law firms or any other organization that you think folks in the legaltech community should know about?

Besides Laboralisto, other worthwhile platforms are Max, a Facebook bot to calculate the amounts of pre-settlements from the workers side, tratoapp, which like us is a Founder Institute incubated startup in Mexico (originally from Mexico City) that helps lawyers find and share commercial contract forms.

Law firms in Mexico, especially in Mexico City (like many in the U.S. or Europe) are very conservative. If they have developed apps it’s only for their internal use and they do not advertise much about their innovations.

We think different, because we are close to California and also out of the traditional “clubby” centers of power like Mexico City. We believe that sharing and crowd-sourcing data and collaborating with foreign or Mexican software companies and litigators can help us more quickly realize the potential of data-driven outcomes in law.  

We are also encouraged by the advances of Mexican Fintech Law, which will allow first movers into legaltech to potentially monetize risk averse applications in insuretech, smart contracts and AI in labor law and other legaltech fields.

What are some challenges you see currently being faced by the legaltech community in Mexico and how do you think they will be overcome?

There are important challenges but they can be overcome:

  • Data access fees can be expensive for consumers: Even if most Mexican wireless consumers (+80 percent) have access to a smartphone, the cost of data consumption fees can be a challenge for many end users. Developers need to rely on Facebook or Whatsapp ecosystems of bots/apps, which are subsidized in most Mexican cellular plans, or develop light data apps.
  • Self-contained legacy ERPs still rule the enterprise market in Mexico for business applications, and in general there is an unjustified reluctance to adopt cloud-first solutions. However, that is changing as most tax and payroll services now require a great level of interaction in cloud environments for banking and taxes, including payroll taxes, etc. Clients are much more receptive as of late.
  • General lack of awareness of cloud apps’ potential by the legal community: The Mexican Legal Summit should wake up many influencers in the field, but most people are still not aware that cognitive software and workflow automation is so much easier to deploy now, if you do your homework.

I know you’re interested in predictive sentencing; where do you anticipate this would have the greatest impact in Mexico?

The greatest impact should be almost immediate. Many larger corporations have to manage a large legal department and/or a complicated web of specialty litigation law firms to handle labor litigation throughout Mexico.

Why? Labor litigation in Mexico is very common (1 out of 12 employers will get slapped with a lawsuit every year), as every manufacturing facility, warehouse or retail outlet can be deemed an “establishment” amenable to labor litigation against the national or regional corporate employer at the local labor board, with the potential risk of losing up to 300 percent annual wages as downside risk each time an employee brings a labor lawsuit.

Just “moneyballing” each labor board or type of case should give employers and lawyers an insight worth a lot in terms of hours of work and/or money savings; finding out the optimal “out-of-court settlement” ranges for each submarket should help shorten litigation efforts and save a ton of money in legal fees and unnecessarily large labor awards.

How do you see things continuing forward when it comes to legaltech in Mexico? For example, where do you think things will be in five years? How about in 10?

There are cultural hurdles in Mexico that are preventing lawyers from embracing legaltech. But with the arrival of younger lawyers that are native to the cloud, we should be catching up to more developed countries in the next five years, especially since AI and blockchain are becoming such hot topics not only in legaltech but also markets like fintech, insuretech, logistics, etc.

We ask everyone the same final question, and we’ve heard all sorts of fun answers. What non-work related invention would you like to have right now?

If I had a magic wand I would love to have a software (maybe a blockchain-based system) that makes expensive and lengthy elections moot, by asking every month or year the most important three to four electoral questions to every citizen in my country and make all public policy principles and specific public policy decisions transparent, efficient and democratic.

Andrew Arruda

CEO & Co-Founder of ROSS Intelligence. International speaker on the subjects of AI, legal technology, & entrepreneurship and has been featured in publications such as The New York Times, BBC, Wired, Bloomberg, Fortune, Inc., Forbes, TechCrunch, the Washington Post, and the Financial Times.