Clarity is growing that 'we're not going back to the status quo of globalization and calm waters'
Legal departments in multi-national corporations must navigate the impacts of trade wars and economic sanctions, political instability and conflict, inter-region regulatory divergence, cybersecurity and state-sponsored cyberattacks, and standards applying to environmental stewardship and human rights throughout supply chains.
In this interconnected global environment, says Sean West, an entrepreneur, consultant, and author, in-house counsel must increasingly consider geopolitical risks and trends.
West is co-founder of Hence Technologies, a software company used by law firms and legal departments, which, among other things, helps firms manage geopolitical risk. A researcher and author, West spent 12 years at Eurasia Group, a geopolitical advisory firm, where he served as deputy CEO. He also produces a newsletter on the “intersection of geopolitics, law, and technology” and teaches a course on the same subject at the University of California, Berkeley School of Law.
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“For the last five years, I realized that there was just an absolute dearth of information for lawyers about the geopolitical context and about how they should navigate a world that's on fire, a world that's changing around them.”
West says he often attends legal-sector conferences on AI coming away feeling like the most important issue has not been addressed: the broader constellation of political risks associated with the technology’s proliferation.
Regulators generally lag new technology, but AI is pushing legal services over a tipping point, he says. Consumers are composing poetry, making recipes, and designing travel plans with AI. If they have a legal question or legal service need, despite any disclaimer provided that indicates the tool is not a substitute for legal advice, the consumer will ask, and the technology will oblige. This is a massive market opportunity for legal tech builders.
“As a result, I think you're going to have this dynamic where the use of these tools is going to get ahead of regulation. There's a sense of complacency that the regulation is good enough. But once it escapes, it's hard to reverse it.”
West offers the example of the government relations strategies employed by the ride-sharing apps. They entered markets where they were restricted, got customers addicted to the product, and then used them to lobby government to change the rules. “I think we're going to see a lot of that in the AI-for-legal space because I don't think governments really understand the environment that's being created here.”
While the instinct may be to restrict the use of the technology, he says the accessibility and general usability of AI-powered tools make that untenable. “This is a very different moment of technology than we've been in the past.”
In addition to the technological upheaval, the world is beset with a handful of other debacles that West says will impact the responsibilities of law firms and in-house lawyers.
“Regardless of whether you're advising clients in-house or advising clients externally, the world is literally on fire. There are wars raging in Europe and in the Middle East. We've got a cold war between the US and China that's forcing countries, increasingly, to pick sides.”
“We've got a decline in the rule of law on an international level. There had once been a convergence towards global values and global rules and norms. That is now in reverse.”
This is relevant to lawyers because they are increasingly responsible for the reporting lines of government affairs, the risk department, ethics, compliance, and ESG, he says. These departments report to them, and CEOs and boards are increasingly turning to lawyers for strategic advice on what companies should do. If the legal department or external counsel have not built the right infrastructure or instincts to digest global events, they will be stuck in a “reactive position.”
Lawyers cannot treat geopolitical and legal risk as relevant only when large-scale events are erupting, says West. When Russia amassed troops on the Ukrainian border, those with operations in Russia should have known what was next instead of being surprised when they crossed that border, and “massive sanctions” required them to quickly sell their assets and exit the country.
“You don't have to forecast the actual event; you have to be paying attention to what's going on in the world and doing that planning and adapt. Are there options I can take today, rather than tomorrow, that will help me better comply with the rules that are coming in the future?”
On China and Taiwan, the US-versus-China dynamic means that those doing business with Chinese companies will be pressured to cease, he says. Lawyers must figure out how to structure the contracts to ensure their organization is positioned to comply with whatever is on the horizon.
“What's changed in the last three years is an awareness that we're not going back to the status quo of globalization and calm waters,” says West. “We are in a much more turbulent time. As a result, lawyers, in order to advise their clients, are investing more in understanding these types of events.”