SPAIN: An Introduction to Alternative Legal Service Providers

The Spanish ALSP Industry 

A couple of years ago, the Spanish alternative legal service provider (ALSP) industry was still nascent and unstructured. Today, as modern listed and private corporations and PE sponsors increasingly engage ALSPs in Spain, the legal market widely recognises the Spanish ALSP space as dynamic, quickly expanding, and broadly adopted.

ALSPs in Spain render some of the services traditionally performed by law firms in a more innovative, efficient, and client-oriented manner, with three main groups of alternative legal services currently being offered in Spain:

• flexible legal talent;

 • managed legal services; and

 • legal technology.

ALSPs in Spain are leveraging different business models and come with different structures, sizes, and market strategies. They range from small digital-law boutiques or legal start-ups with an innovative approach, to massive disruptors with high- calibre lawyers and specialised expertise, with strategic alliances with global ALSPs powerhouses, such as Axiom exclusive alliance partner Ambar.

Some ALSPs in Spain are implementing rigorous process and project management tools and integrating technology in their service model to gain efficiency and allow lawyers to concentrate their quality time on sophisticated legal work. Some others show a much more undeveloped use of management and technology tools and will require substantial efforts to build credible cutting-edge technology and process management intelligence.

Proprietary technology development marks another important attribute of ALSPs, and it is often emphasised more strongly in ALSPs than at traditional law firms. Technology-enabled services allow ALSPs to provide higher value legal services and take on different and more complex tasks. Some ALSPs rely on third-party technology, but others are developing ambitious state-of-the-art proprietary systems in search of competitive advantages.

The Spanish ALSP industry proves to be a thriving and diverse growing industry, with five main prominent trends.

ALSPs are offering more sophisticated services to a more varied segment of clients 

General Counsel of Spanish corporations are one of the most sophisticated, demanding, and experienced buyers of legal services in Western countries. Spanish corporations' in-house legal teams have a clear understanding of the legal market and a sound knowledge of the value proposition across the diverse group of legal providers and the differentiated expertise offered by each type of ALSP.

Clients resort to ALSPs in Spain to benefit from their specialized expertise and show an expanded and more diverse use of ALSPs across all three main categories of alternative legal services:

• flexible legal talent;

• managed legal services; and

• legal technology.

In many countries, ALSPs have been mainly engaged for cost savings. In Spain, ALSPs are steadily moving up the legal value chain to offer more sophisticated services to corporates.

In-house legal departments tend to use ALSPs to also access expertise that they lack in-house, to gain more flexibility on their cost and organisational structures, to meet peak demand without having to permanently increase their headcount and to use their existing resources more efficiently and strategically.

Differentiated tiers across a varied array of ALSP firms 

In a short period of time, Spanish ALSPs cover all the spectrum of the legal space, with some ALSPs offering sophisticated legal services to high-end clients and competing with top traditional law firms, others focused on legal and consultancy services for SMBs or start-ups, and others highly specialised in the digital, privacy and cybersecurity arena.

While the Spanish ALSP industry has gained a great deal of media attention, only a few Spanish ALSP firms are managing to gain impressive market share and notoriety in the high-end of the legal value chain, becoming key players for complex M&A, litigation or arbitration, contract negotiation or legal niche-type expertise.

Companies are actively experimenting with flexible legal talent 

Regardless of whether clients have faced headwinds or tailwinds moving into 2024, the experience during the COVID-19 pandemic has highlighted the need for C-suite leaders and general counsel to reimagine the cost structure of their in-house legal teams. A combination of creativity and diligence will yield multiple opportunities to replace fixed for variable costs and thereby create a structure able to reengineer staffing requirements for a more flexible mix of full- and part-time employees supplemented by experienced flexible legal talent and flexible legal talent firms for special projects.

One of the easiest ways for companies to take advantage of the ALSP model is to establish long-term partnerships with flexible legal talent firms to gain cost and organisational efficiency and flexibility, access the right legal talent for each project and meet peak demands with highly skilled specialists and high-calibre lawyers coming from top national and international law firms and the most sophisticated in-house legal departments.

Continuous growth of managed services firms to outsource ongoing tasks 

Managed legal services providers contract for all or part of the ongoing function of an in-house legal team, typically routine and high-volume work. Managed legal services have gained prominence in the market across multiple categories, including regulatory risk and compliance services, litigation and investigation support, due diligence for corporate transactions and legal research.

Among the largest managed services firms are the big four accounting firms, which are increasingly offering a deeper array of alternative legal services to corporate clients.

Increasing legal technology adoption 

In recent years, the legal technology landscape in Spain has undergone a transformative revolution, propelled by groundbreaking advancements in generative artificial intelligence (AI) and automation. This profound shift has not only disrupted the global legal services market but has also led to the emergence of cutting-edge products uniquely tailored to the Spanish legal context. Both local startups and international tech giants have swiftly entered the Spanish market, promising to revolutionise everyday legal tasks, thereby accelerating the pace of innovation.

However, amid this rapid evolution, concerns about data protection and cybersecurity have become paramount. Clients, rightly wary of potential vulnerabilities, are increasingly demanding robust safeguards to ensure the security and integrity of their data.

The landscape of legal technology is not immune to the threat of cyberattacks, and the need for stringent security measures has never been more urgent. As the legal sector increasingly relies on digital solutions and cloud-based platforms, the risk of data breaches looms large. Consequently, there is a pressing need for technology providers to prioritise data security and implement robust encryption protocols to safeguard sensitive information.

Looking ahead, the next phase of legal technology adoption in Spain holds promise for transformative change. As success stories continue to unfold, showcasing the tangible benefits of technology for enterprises, understanding and acceptance are expected to grow. However, alongside this optimism, there is a recognition of the importance of maintaining vigilance against emerging cybersecurity threats. By prioritising data protection and implementing comprehensive security measures, the legal sector can harness the full potential of AI-driven technologies while safeguarding the integrity and confidentiality of sensitive information.

Conclusion 

In conclusion, the Spanish alternative legal service provider (ALSP) industry has undergone a remarkable transformation over the past years, evolving from a fledgling sector to a dynamic and rapidly expanding landscape. With innovative approaches to delivering legal services and a diverse array of offerings, ALSPs in Spain are meeting the evolving needs of clients across various sectors.

With key trends such as the provision of sophisticated services, the emergence of differentiated tiers, the active experimentation with flexible legal talent, the expansion of managed services, and the increasing adoption of legal technology, the Spanish ALSP legal sector is poised for continued success and prosperity in the years to come.