What is LegalTech and are they even allowed to do it? These are the two questions we lawyers are probably all asking ourselves at the moment when we come into contact with the digitization of our profession. While the first question is very easy to answer on the basis of the many useful and well thought-out applications that are just getting the LegalTech market going, the second question will probably be the all-important one in the future.

In the secondpart of the series "Regulation of the LegalTech Market", we looked at the legal requirements of contract generatorsunder German law. In this third part, we look at the SmartLawrulings of the Regional Court of Cologne (LG Köln, Urt. v. 8.10.2019 – 33 O 35/19,  AnwBl Online 2019, 883) and the Higher Regional Court of Cologne (OLG Köln, Urteil vom 19. Juni 2020 – 6 U 263/19, AnwBl Online 2020, 404).

Hamburg Bar Association sues for injunction

Depending on the design, provider and user, contract generators become the target of legal attacks. Even the renowned Wolters-Kluver publishing house had to experience this in the context of the SmartLaw rulings. The publisher has developed contract generators ("Smartlaw") with the help of its own contract forms and now offers these to an undefined audience on the internet for a fee. As a result, the Hamburg Bar Association brought an action for an injunction against this offer on the grounds of infringement of the Legal Services Act (RDG) and misleading advertising statements.

The Cologne Regional Court upheld this action. In the Wolters-Kluver appeal, the Cologne Higher Regional Court agreed with the opinion of the Cologne Regional Court with regard to the advertising statements, so that the publisher withdrew its appeal in this respect. However, the Higher Regional Court of Cologne Cologne rejected a violation of the RDG.

Reasons for decision

The different decisions were based on different opinions with regard to the existence of a legal service within the meaning of Section 2 RDG. While the Regional Court of Cologne affirmed its requirements (cf. also Part 2 of the series), the Higher Regional Court of Cologne denied in particular the activity "in a concrete affairs of others" as well as the "legal assessment of the individual case" by the providers of contract generators.

a) Human or technical activity

Both courts agreed that the existence of a legal service is not excluded because the person seeking legal advice does not make personal contact with the service provider, but wants to have his specific legal questions examined via a telephone hotline or an Internet forum, for example. According to the Cologne Regional Court, this principle also applies to the providers of LegalTech software, so that a relevant activity within the meaning of Section 2 (1) RDG exists. The Higher Regional Court of Cologne also does not consider the contract generator software as such to be an "activity" of the provider pursuant to Section 2 (1) RDG.  However, the activity of the provider is the development and provision of the software.

b) Concrete affair of others

The Regional Court of Cologne qualified the offer of contract generators in distinction to the use of a form book as an activity in a concrete affair of others. Due to the large number of questions asked in the creation process of a generator, an individual image of the concrete case of the person concerned is created for the customer and the customer receives a product that is directly suitable for use ("ready for signature"). The decision as to which form modules are suitable for the specific case is taken from the person seeking legal assistance by the contract generator. The assumption of a "concrete" affair is further supported by the fact that the boundary to legal services is crossed even in the case of human advice in the context of drafting a contract if the service provider reviews the legal provisions specified in the form at the request of the customer and suggests alternatives (see OLG Karlsruhe, NJW-RR 2011, 119/120).

According to the Higher Regional Court of Cologne, however, the legal assessment incorporated into the program relates to a large number of conceivable cases. The assessment must relate to an actual, not merely fictitious case, so that the intention in the design to cover all conceivable cases is not sufficient (see also Wettlaufer, MMR 2018, 55, 56). Accordingly, the subsequent use of the contract generators by the users was activity in a specific individual case, but not in a "affair of others". The programming of the abstract legal decision trees and provision of the program in question does not fall within the scope of the RDG due to the lack of activity in a concrete affair of others (see Wessels, MMR 2020, 59). The view that the questionnaire exceeds the format of a standard form book both due to the number of questions and their specificity, that alternative suggestions comparable to human advice are made and that a legal review is carried out cannot be upheld.

c) Legal case-by-case examination

The Cologne Regional Court also affirms the characteristic of case-by-case examination by referring to a judgment of the Karlsruhe Higher Regional Court (OLG Karlsruhe, NJW-RR 2011, 119/120), according to which even in the case of human advisory services in the context of drafting a contract, the borderline to legal services is crossed if the service provider, at the request of the customer, reviews the legal provisions specified in the form and proposes alternatives. The purpose of the RDG as stated in Section 1 (1) sentence 2, "to protect the consumers of legal services, legal relations and the legal system from unqualified legal services", speaks in favor of treating individualized legal tech services no differently than services provided by human advisors. Finally, according to the Cologne Regional Court, there is also a legal examination of this individual case, i.e. a concrete subsumption of a factual situation under the relevant legal provisions, which goes beyond a mere schematic application of legal norms without further legal examination (see BGH, GRUR 2016, 820/824 - "Schadensregulierung durch Versicherungsmakler"). Since the technical aids used, such as a pre-programmed decision tree, are also not relevant here and the product is based on a legal examination when the software is programmed, this procedure does not differ significantly from that of an advising and examining lawyer, but merely takes place in advance in terms of time and, due to standardization, in a format that can be reproduced several times.

According to the Higher Regional Court of Cologne, the activity of offering contract generators in any case does not require a "legal case-by-case examination". The program runs - recognizable to the user - according to a fixed routine in a question/ answer scheme, with which a factual situation is inserted into a predefined grid. Irrespective of the number of questions, the assistance provided by the program in this respect and the individuality of the legal document finally created, this does not constitute a legal examination.

 

The Higher Regional Court of Cologne rightly argues with the purpose of the RDG. The aim of the RDG is a fundamental reorganization of the law of extrajudicial legal services, which is oriented to the aspects of deregulation and liberalization, and which permits the development of new professional profiles. This was also emphasized by the German Federal Court of Justice in its "wenigermiete.de" decision (BGH, Urteil vom 27.11.2019 - VIII ZR 285/18, AnwBl Online 2019, 63). In the present case, this also requires an interpretation of the term "legal service" within the meaning of Section 2 (1) RDG that is just as closely aligned with the protective purpose. The purpose of the RDG is to protect the person seeking legal advice - whether consumer or entrepreneur -, the legal system and the legal system from the often far-reaching consequences of unqualified legal advice, Section 1 (1) RDG (see also BTDrucks. 16/3655 page 30). The legal document generator offered by the defendant does not constitute a danger against which the RDG seeks to protect.

It is unclear why the prohibition of document generators should lead to an improved protection of those seeking legal advice. For consumers and entrepreneurs, for whom the use of legal advice for the formulation of legal documents is, for example, too expensive and/ or time-consuming, the document generator extends the offer of assistance by an obvious digital and thus particularly user-friendly option. It would require a concrete justification to prohibit the consumer such an attractive assistance with the completion of their own legal affairs in their own responsibility. To reserve the application of a logically mandatory decision-making process, which can typically be particularly well computerized, for lawyers only because the program depicting such a decision-making process is based on legal evaluations, contradicts the genesis and objective of the RDG with regard to the development of new professional profiles and with regard to the fact that the law was intended to be "limited to cases of genuine application of the law".

Conclusion

The SmartLawruling of the Cologne Higher Regional Court may have brought the desired clarity in the application of the RDG to the offer of contract generators and similar LegalTech offers for the automation of legal documents. Nevertheless, a supreme court review remains to be seen. Until that happens, alternative solutions must be sought and examined (Part 4).