The promising prospects and potential pitfalls of AI in the legal industry

Posted by Josephine Clark, marketing assistant at Legal Futures Associate Perfect Portal

Clark: AI holds immense potential

The legal industry, steeped in tradition, precedent, and the intricacies of human interpretation, is witnessing an increasingly apparent integration of artificial intelligence (AI) as the digital era progresses.

This shift brings about a blend of exciting possibilities and challenges. In this exploration, we’ll delve into the potential benefits and conflicts that AI could introduce, with insights from professionals in the field.

The promise of AI

One of the most significant advantages of AI, not limited to the legal sector, is its remarkable speed in completing tasks that would consume considerably more time when performed by humans.

Edmond Boulle, co-founder of Orbital Witness, which uses AI to automate legal due diligence for the property sector, underscores this point: “If you take that speed advantage and apply it to things like due diligence, where the average page count for a property transaction is 1,200 pages, you can see how powerful AI is.”

AI serves as a valuable ally for legal researchers by swiftly analysing case law, statutes and regulations, providing lawyers with valuable insights to make informed decisions.

Adam Fletcher, conveyancing and IT director at Yorkshire law firm Ridley & Hall, offers his perspective: “We like what we see of streamlining processes, improving accuracy, and enabling more efficient decision-making. But we aren’t jumping on AI immediately.”

Access to a comprehensive database of legal information is a game-changer for legal professionals. Edmond further highlights that AI excels in accuracy, stating: “The latest large language models (LLMs) are achieving lawyer grade levels of accuracy. As an example, at the start of this year, the Stanford Centre for Legal Informatics demonstrated that one such LLM was outperforming 90% of students in the bar exam in the US.

“Domain-specific AI applications are even more capable and accurate. It just gives you a sense of how far this stuff has come on and it’s only going to improve as time goes on.”

Implementing AI solutions has the potential to lead to significant cost savings for law firms and legal departments. Operating at a higher level of accuracy and speed is likely to result in fewer billable hours, translating into more cost savings and a better service for clients.

While this may initially appear as a potential loss for solicitors, it can in fact lead to more substantial profit margins. This is because enhanced speed and accuracy may attract clients for repeat business, allowing law firms to accommodate more clients. So not incorporating AI technology could prove a costly decision.

In comparison to companies like Google and Adobe, which boast gross margins of 60-90%, law firms face a fixed cost structure and often struggle to achieve margins exceeding 40%. AI has the potential to help law firms break free from this, enabling them to boost their margins as they expand.

Potential conflicts and challenges

While the prospects of AI in the legal industry are promising, they also bring their fair share of conflicts and challenges.

A major area of concern, not limited to AI but applicable to any new technology, is trust in the product and its potential.

Edmond believes people should approach AI with an open mindset, remarking: “AI is not yet a perfect system, and if anyone adopts it now with that expectation, they are likely to be let down. But the capabilities of AI are improving at an unbelievable pace, and the risks of not adapting to the new technology and being left behind are more severe.”

AI algorithms are only as good as the data they are trained on. If the training data is biased, AI systems can perpetuate and even exacerbate existing biases in the legal system. Ensuring fairness and impartiality in AI decision-making is a critical challenge.

Adam Fletcher concurs: “Technology is only as good as the data, and we know bad data is out there.”

Some individuals worry that AI, particularly chatbots used for initial stages of enquiries, could lead to job displacement among legal professionals.

Mike Leeman, managing partner at Liverpool firm Bell Lamb & Joynson, wants to ensure his clients feel listened to.

“Clients want to feel like they are listened to and that’s something we really invest in – that client journey. However, we want this communication to feel like it’s come from real people, not bots, which is why we’ve shied away from automation and from bots on our website. We use real people, because clients can tell sometimes.”

AI can enhance efficiency but cannot replace the view and expertise that lawyers bring to their work. There will always be a need for a human workforce. Mike is focused on reassuring his staff: “People do worry their jobs will be replaced but we want to show them that it won’t, and it will, in fact, create new jobs.”

Kylie Johnson, property manager at Ridley & Hall, also emphasises concerns about the environmental impact of implementing AI, arguing: “There needs to be more discussions around the effect on the environment.”

The legal industry, being highly regulated, faces the challenge of integrating AI while navigating complex regulatory frameworks. Ensuring that AI solutions comply with legal and ethical standards is a significant concern.

Adam highlights the need for data regulation within AI: “Lawyers need to ensure they are using AI in the right way. AI is still a lot like people in the sense that you can have a great lawyer, but they have bad days.”

The way forward

As AI continues to make inroads into the legal industry, it is essential to strike a balance between reaping the benefits and addressing the potential conflicts.

The legal industry must adapt to the changing landscape by promoting continuous learning and upskilling. Professionals can then focus on areas that require human expertise, such as complex legal reasoning and interpersonal skills.

Adam’s view is that “we need a wider discussion about how we are using tech, and we need to be challenging our tech providers and our own processes – is this speeding the process up? I think AI plays a vital part in it, but it’s not the answer.”

Transparency in AI decision-making is crucial. Legal professionals should be able to understand and explain how AI algorithms arrive at their conclusions, helping to build trust in AI systems.

Governments and regulatory bodies should keep pace with AI advancements and update existing regulations to ensure that AI applications in the legal sector adhere to the law and ethical standards.

Edmond states that AI is only going to develop further and get better: “Having technology that can assist with accuracy and reduce the risk of complaints and claims, is going to be huge for firms that want to maintain their reputation and secure their insurance year after year in a challenging environment.

“We’re still at the beginning of an adoption curve, but the fact that we’re now familiar with using AI, like ChatGPT, in our personal lives means that we are seeing faster uptake for professional AI applications.”

Adam has similar sentiments: “AI is here and it’s not going to go anywhere, therefore lawyers that fight AI will fall by the wayside. It’s OK to be cautious and want to see where it is going, but also understanding that it will need to be utilised in the not-too-distant future, to be able to move forward.”

AI holds immense potential for revolutionising the legal industry, from streamlining processes to providing valuable insights. However, realising this potential comes with significant challenges, including concerns about data privacy, bias, and ethical dilemmas.

As the legal sector moves forward, it is crucial for legal professionals to embrace AI while also carefully navigating the complexities it introduces. By doing so, they can harness the power of AI to enhance their work and better serve their clients while upholding the principles of justice and fairness that are at the heart of the legal profession.

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