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02:56 PM

Digital attorneys

How to fell Goliath with a mouse-click

By: Laura de la Motte

Legal techs such as Flightright, Myright or Wenigermiete help consumers pursue claims against companies. Lawyers, unsurprisingly, offer a scathing critique of these new competitors.


Your new attorney.

Whether your train was delayed or your flight got cancelled, whether you’re paying too much rent or you want money back from VW in the diesel scandal: The cost and bureaucracy of fighting for your rights often deters you from calling a lawyer.

It’s a market niche that has spawned a range of digital start-ups known as legal techs that offer to take over all the paperwork, chase up the culprits and go to court if necessary. They tend not to cost anything up front and instead take a third of the eventual payout, if they succeed in getting one.

Flightright and EU Claims cover disputes with airlines, Bahn Buddy does trains, Wenigermiete.de fights landlords. Myright represents VW owners and helps with accident claims, while Abfindungsheld, Myright or Mehrabfindung help get you better redundancy payouts.

Lawyers – the old-fashioned flesh-and-blood kind – are not amused. They’re complaining that the startups aren’t legal and don’t have to demonstrate any expertise in the fields they cover.

Small is beautiful

What makes legal techs so attractive is that they offer to get even small claims paid out. They analyze cases with algorithms fed with all the law on a particular subject and allow consumers to check out their chances of success with a few mouse-clicks. If the prospects are good, they’ll take over prospective legal expenses. That makes legal techs interesting for people who don’t have legal insurance.

German consumer organization Stiftung Warentest calculated that for a claim of €100 ($113), lawyers’ fees and court fees amount to around €263. If the lawyer conducts out-of-court settlement talks, the costs increase by €48.

That makes consumers and lawyers reluctant to pursue small claims. “Many firms with claims against them know that and speculate that many consumers won’t defend themselves,” said Daniel Halmer, the founder of Wenigermiete.de.

Attorney vs. Algorithm: Legal Startups Challenge Barristers

Attorney vs. Algorithm

Legal Startups Challenge Barristers

Digitalization can overtake some of the work of highly paid attorneys and poses a significant cyber threat. It is so topical, legal startups are now part of the German Lawyers Day.

“We want to establish our reputation and will go to court even it’s just for five euros,” he added. “Our opponents take note of that, and that’s our systemic advantage. In the end it means we’re more likely to secure an out-of-court settlement than a consumer would on their own.”

A question of license

Certified lawyers aren’t allowed to cover their clients’ court costs or to collect a cut of the payout. Legal techs get around that by having a debt collection license. Lawyers are questioning whether that entitles the firms to provide legal advice and representation.

A number of courts are deliberating on that right now. “Most legal techs have had their business practices challenged by lawyers,” said Peer Schulz, the co-founder of Helpcheck. He’s in touch with many peers in the German Startups Association, which has issued a paper calling for the law to be amended to accommodate the new business segment.

Wenigermiete.de, which represents tenants, is at the forefront of the fight. In a number of cases at the Berlin State Court, landlords have successfully fended off claims by convincing judges that the tenants weren’t entitled to be represented by the startup. The issue has been brought before Germany’s highest court for criminal and private law, the Federal Court of Justice.

Lawyers argue that legal techs lack the expertise to protect their clients. But Schulz says that doesn’t necessarily matter. “Consumer rights lawyers also often seize on interesting issues without having any special knowledge of them,” he said. He admitted that he wasn’t a lawyer but said his company Helpcheck had consulted Berlin’s Humboldt University in setting up its software.

Standard solutions

Consumer watchdogs also see the benefits of legal techs. “The sites are suitable for standardized cases,” said Eugénie Zobel of Stiftung Warentest. “The cost spectrum is usually easy to understand.”

Digital Revolution: Meet my lawyer, the computer

Digital Revolution

Meet my lawyer, the computer

The digital revolution has reached a long-coddled trade. With “legal tech,” software can replace lawyers on many routine tasks, forcing some in the profession to reconsider their options.

However, consumers should be skeptical if websites offer excessive payouts or “guaranteed success,” she warned, adding that there’s no such thing.

Facto AG, which helps consumers get life insurance payouts, had to file for insolvency last summer following mounting complaints that it wasn’t giving customers regular progress updates.

Consumer watchdogs find it difficult to give reliable pointers on how to identify a good legal tech. “The market is still too new and in too much flux for us to give general quality recommendations,” said Christian Rumpke of the regional Brandenburg consumer organization which has checked out legal techs.

He said consumers seeking claims could start out by approaching official mediation organizations that don’t take fees. The legal techs themselves recommend using comparison sites like Trustpilot, Provenexpert or Google to check them out.

Laura De La Motte is an editor at the Handelsblatt finance desk and a specialist banking correspondent. David Crossland adapted this article into English for Handelsblatt Today. To contact the author: [email protected]

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