Could laws be analyzed from the perspective of technological efficiency?

Francisco de Elizalde, IE Law professor specializing in Comparative Private Law and Director of the Jean Monnet LEGROB Module, participated in the panel event “The TCL method to take on future technological challenges” which was held on Friday November 6, 2020. During the event, professor Elizalde expounded on his theory of “Technological efficiency as a new legal methodology.”

Professor de Elizalde defines technological efficiency as the fitness of law to interact autonomously with IT systems such as blockchain or artificial intelligence without human intervention. A legal rule would be considered more technologically efficient when it requires less human intervention—whether by lawyers or other experts.

Could laws be analyzed from the perspective of technological efficiency? What would make a rule technologically efficient? Professor de Elizalde argues that it would depend on the rule having two characteristics: objectivity and standarization.

Objectivity

A rule could be considered technologically efficient if a decision can be reached without human intervention—if a breach in contract can be determined without human assessment.

Take the example of compensation claims for flight delays. If the IT system can connect with flight data and determine if a flight was late or not—without a human getting involved at any stage—the rule can be considered objective and therefore technologically efficient.

Objectivity can be seen in the case of blockchain technology which functions by means of conditional logic. If a certain flight is delayed, then the contract states that 250 euros are owed in compensation. The breach of the contract—the delayed flight—can be determined without human intervention simply by analyzing flight data. This then triggers a payment of compensation.

However, a rule such as “the parties must act in good faith” is not objective. It cannot be determined without human intervention or a legal expert who can decide if the parties involved did indeed act in good faith. For that reason, the rule cannot work autonomously and cannot be considered technologically efficient.

Standarization

The second characteristic of technological efficiency is standardization. A rule can be considered technologically efficient if it can be standardized—applied equally to a variety of cases without individual analysis of each one separately.

If a rule is standardized in this way, it’s easier to predict a certain decision. In the case of AI, the more standardized inputs in an algorithm, the more standardized outputs. If the rule is highly standardized—or very common—the algorithm will reach more precise outcomes.

The idea of technological efficiency was tested as part of a survey conducted by Professor de Elizalde with legal tech companies operating in litigation for consumer claims in EU member states.

The survey revealed that homogeneity of law is considered ”essential” or “very important” for more than 95% of those companies dealing with airline claims and who are currently operating without the intervention of lawyers. The objectivity and standardization of the rules involved in airline claims permit this very high level of automation.

Automation of these services was possible only because of the homogeneity of the laws involved. Airlines and banking have the highest levels of automation, with IT systems able to assess the possibility of a claim and establish compensation successfully without any human intervention.

Professor de Elizalde’s methodology has interesting implications for legal practice and legal research. Not only does it offer a new theoretical approach for studying law that takes into account the impact and interaction of technology, but the framework could also help lawyers compare legal rules from different countries to determine, from a functional perspective, whether a rule could be more efficient or improved to work more autonomously with technology.

By helping legal practitioners analyze law from the perspective of technological efficiency, allowing them to identify those rules that are highly technologically efficient, this new legal methodology enables firms to make decisions about which parts of their practice could benefit from experimentation with new legal tech tools.

Note: The views expressed by the author of this paper are completely personal and do not represent the position of any affiliated institution.