The impact of AI on law firms: A deep dive into risks and opportunities

One of the primary opportunities presented by AI for law firms is the automation of repetitive tasks. This allows legal professionals to focus on more complex and strategic work, ultimately improving the quality of service provided to clients. AI can also streamline processes such as contract review, legal research, and case management, reducing the time and effort required to complete these tasks. 

Another significant opportunity is the ability of AI to analyse vast amounts of data quickly and accurately. This can help law firms make more informed decisions, predict outcomes of cases, and identify trends that may not be apparent to human analysts. AI can also assist in identifying potential risks and opportunities for clients, providing a competitive advantage for law firms in the UK. 

It is clear that the use of AI is going to be the way forward for progressive law firms wanting to serve their clients in a professional and effective manner, and Sir Geoffrey Vos KC, Master of the Rolls, supported this when he said, “The day is coming, and soon, when professionals and others will be legally on the hook for not using generative AI”; he went on to suggest that AI was more likely to be used directly by consumers, rather than just by lawyers who advise them. 

In January 2024, the International Monetary Fund said, “Artificial Intelligence will affect up to 40% of jobs worldwide”, with jobs that require nuanced judgment, creative problem-solving, or intricate data interpretation, like those involving lawyers, being augmented or replaced by advanced AI algorithms; this could rise to 60% but it is believed that, in half of these cases, AI will benefit the workforce. 

So, what is AI? AI refers to the development of computer systems that can perform tasks that typically require human intelligence, such as visual perception, speech recognition, decision making, and problem-solving; the Information Commissioner defines AI as, “Algorithmic systems that solve complex tasks by carrying out functions that previously required human thinking.” 

Categories of AI are:

1. Narrow or weak – designed for a specific task, for example, Siri, that doesn’t possess general intelligence or consciousness;
2. General – machines that possess the ability to apply intelligence to any problem, rather than just one specific problem, in a way that is indistinguishable from human intelligence;
3. Superintendent – an often-speculative concept where machines will surpass human intelligence.

Well known AI systems include, ChatGPT, Google AI, IBM AI, Microsoft AI, Einstein, Siri, Alexa and Luminance. 

Many law firms are already seeing the benefits of AI, with the development of their own systems like: 

• Lawrence - an AI paralegal.  
• SIDSS - a structured information decision support system, which compares initial client details of medical negligence claims with the tens of thousands of previous cases in the database to deliver a “confidence score”, expressed as a percentage, as to whether the firm should continue to investigate the case.   
• Harvey - a system that uses natural language processing, machine learning and data analytics to automate and enhance different aspects of legal work. It can operate in multiple languages.  
• FLARE - a lease reporting tool, which can produce “a really good first draft” of a lease report, with links and explanations of how it got there. Lawyers still have to read leases and the tool was about “augmenting rather than replacing” the role of lawyers. 

There are a number of guiding principles that should be followed when using AI, namely: 

• Confidentiality – do not input confidential client information into any AI solution that lacks appropriate security measures.  
• Competence – ensure competent use of AI, including the associated benefits and risks, and apply due diligence and consideration to facts and the law.  
• Law – lawyers should analyze the relevant laws and regulations applicable to them or clients.  
• Management – managers need to establish clear policies regarding the use of AI and its supervision.  
• Fees – hourly fees should not be charged for the time saved by using AI.  
• Disclosure – clients should be consulted over the use of AI in their matter(s).  
• Biases – lawyers should be aware of possible biases and the risks they may create when using AI. 

One of the concerns around the use of AI by law firms is the lack of detailed, sector-specific regulation, and the fear that when this is implemented the Solicitors Regulation Authority (SRA) may apply it retrospectively and catch-out firms that have developed and used it in ways the SRA may then see as not being in the best interests of clients. Existing non-AI related regulations include the Equality Act, UK General Data Protection Regulations (GDPR), and SRA Codes of Conduct. 

GDPR requires firms to carry out a data protection impact assessment (DPIA), when looking at projects like the introduction of AI; a DPIA is designed  to help firms systematically analyse, identify and minimise the data protection risks of a project or plan. It is a key part of a firm’s accountability obligations under the UK GDPR, and when done properly helps assess and demonstrate compliance with data protection obligations. 

A DPIA does not have to eradicate all risk, but should help minimise and determine whether or not the level of risk is acceptable in the circumstances, taking into account the benefits of what a firm wants to achieve. Conducting a DPIA does not have to be complex or time-consuming in every case, but there must be a level of rigour in proportion to the privacy risks arising. 

Alongside the opportunities of AI, there are also risks that UK law firms need to be aware of when implementing AI technologies into their practices. One of the main concerns is the potential for bias in AI algorithms, which can lead to incorrect or discriminatory outcomes. It is crucial for law firms to ensure that their AI systems are trained on diverse and unbiased data to mitigate this risk. 

AI systems reflect the biases, values and decisions of those who create them and can have significant social ramifications, but mitigating bias and unfairness can be done through: 

• Use of diverse and representative data  
• Bias detection  
• Transparency  
• Continuous monitoring and feedback  
• Regulations and standards 

Additionally, there are concerns about the impact of AI on jobs within the legal industry. While AI can streamline processes and improve efficiency, there is the possibility that it could lead to job displacement for some legal professionals. It is essential for law firms to consider the implications of AI on their workforce and determine how they can upskill employees to work alongside AI technologies effectively. 

But for some people and companies, things have gone badly wrong because they relied too heavily on third-party AI systems, like CharGPT, to provide information, which turned out to be wrong completely, or in part; for example: 

• A New York lawyer referenced example legal cases that did not exist. The lawyer told the court he was "unaware that its content could be false".  
• A litigant in person quoted six wrong cases.  
• A group of academics had to apologise to KPMG after their submission to an inquiry contained false allegations of serious wrongdoing, which were collated by an AI tool and not fact-checked. 

There is no current caselaw around professional liability where AI is involved, so it is strongly recommended that firms speak with their insurers if they are looking to implement AI systems, particularly in relation to potential areas of liability, including: 

• Negligence in decisions to delegate work to AI  
• Negligence in the implementation of AI (instruction, training, monitoring of AI)  
• Strict liability for errors by AI  
• Vicarious liability – e.g. liability of firm if outsourced 

AI presents both opportunities and risks for law firms, but by embracing AI responsibly and proactively addressing potential risks, they can enhance the quality of their services, improve efficiency, and maintain a competitive edge in an increasingly digital world. It is essential for law firms to stay informed about the latest Legal AI developments and trends to leverage this technology effectively in their practices.