In 2021, Volkswagen AG approached the global law firm Freshfields with a problem. The German automaker’s technology unit was preparing to release new software features and wanted to make sure that they would be compliant in the more than 100 countries where Volkswagens are sold.
Ordinarily, it would bring in lawyers from each jurisdiction to vet the updates, budgeting thousands of euros per country — a process that would need to be repeated if any components changed in the future, Freshfields said.
However, this time a seven-year-old part of the law firm focused on integrating tech and legal work stepped in with a different approach.
Illustration: Mountain People
Over the next year-and-a-half, the programmers and lawyers at Freshfields Lab worked with attorneys around the world to build a flexible artificial intelligence (AI) platform that allowed Cariad, Volkswagen’s software arm, to run real-time global risk assessments. The technology, which is still in use, adapts to the automaker’s product updates, is updated when a country enacts legal or regulatory changes, and visualizes everything on an interactive map.
Freshfields Lab was an early effort to integrate technology into legal workflows. Now, it is one of many such efforts at major law firms around the world. With AI threatening to upend the field, big law is hiring engineers and software specialists, adapting AI tools into day-to-day workflows, and developing bespoke AI legal products to license to clients. That, in turn, is forcing a rethink of pricing and hiring models, how firms should be structured, and even the kinds of services law firms should offer.
“Radical evolution,” is how Drew Winlaw, a partner at Simmons+Simmons who oversees the firm’s global AI strategy, describes the transformation gripping the industry.
In certain areas of the law, AI appears to be a natural fit. For lawyers who work with large volumes of data — contracts, legal filings, financial documents and correspondence — AI can help by summarizing, translating, transcribing, comparing, reviewing and outlining. During the due diligence process, when lawyers assess and investigate a counterparty’s files, or during the discovery phase of litigation in the US, when both parties are obliged to show each other all relevant evidence, AI tools enable document review at a previously unimaginable speed.
At the same time, AI brings risk to a field that demands exacting accuracy. A database tracking AI-introduced inaccuracies in legal filings has recorded hundreds of instances around the world. The Wall Street firm Sullivan and Cromwell had to apologize in a court filing for submitting an incorrect citation generated by AI.
Even with the industry in flux, there has been one change that has been largely welcomed: the end of tedious, repetitive paperwork.
“When I started as an associate, we used to review thousands of contracts as part of due diligence in merger and acquisition transactions, going through each and every page by hand,” said Martina Farkas, head of innovation at Linklaters in Germany. “We don’t do that anymore.”
The future of AI in law might look something like the 14th floor of Potsdamer Platz 1 in downtown Berlin. In lieu of lawyers in suits behind mahogany desks, the open-plan office is populated with programmers and attorneys in sneakers and jeans. This is the global headquarters of the Freshfields Lab, which oversees 30 developers worldwide who work closely with lawyers and clients to develop technical solutions to legal problems.
“This is not about locking programmers in a room until they come up with something,” said Geritt Beckhaus, who joined the Lab’s founding team as a young attorney and now co-runs it with Lukas Treichel. “Here, programmers and lawyers work together on equal terms.”
At the heart of the Lab’s work is an adaptable platform that clients can use for data processing, restructuring or due diligence. Depending on their needs, they can either purchase out-of-the-box access or hire the Lab to tailor it to them. And Freshfields is not the only law firm licensing custom AI tools to generate profits: Allen & Overy Shearman offers ContractMatrix, and Linklaters has a product called Applied Intelligence.
However, building custom AI tools requires resources and in-house tech skills that most law firms do not have, meaning out-of-the-box products are the most commonly used. Legora and Harvey have emerged as the two giants of the legal AI industry, with US$5.6 billion and US$11 billion valuations respectively.
Tools like these have profound implications for how lawyers do business. For example, what a Freshfields client gets from the firm’s “Multijurisdictional Insights Platform” is not legal advice. A red bar on the screen warns that information on the platform is just that, information, and if a client wants a full, in-depth legal review by a flesh-and-blood lawyer they would have to request it separately.
This has led to the introduction of multi-tier pricing models, with clients able to choose between cheaper and more AI-heavy output, or slower and costlier human-led legal advice.
That not only threatens the all-mighty billable hour, it also reflects how AI is changing client demand. Some clients might say, “I don’t need 100 percent quality, I need 90 percent quality, I don’t care about perfect,” said Nick West, a partner and chief strategic officer at Mishcon de Reya, which uses Legora.
While it is not always possible for a law firm to responsibly cut corners, he added, these tools can offer trade-offs “between perfection, speed, quality, and cost.”
Clients are even hiring law firms just to check work done by AI, said Alexander Behrens, who focuses on AI issues at Allen & Overy Shearman and heads the firm’s financial regulatory practice in Germany. That puts lawyers in a similar position to insurance companies, he said.
Behrens has wondered if lawyers are cannibalizing their own work by giving clients access to legal AI tools. While he thinks they are not, he also does not see other options.
“In any case: If we don’t offer this, someone else will,” he said.
These AI-led changes could lead to major transformations in how law firms are structured. As fewer low-level employees would be needed to review documents and compare contracts, many in the industry expect hiring to slow. And if junior employees are no longer able to develop experience and expertise, pipeline problems could arise later on, but as firms hire trainees years in advance, it might take a while to see how these changes pan out.
With fewer routine tasks to complete, Sam Dixon, chief innovation officer at Womble Bond Dickinson, suspects the job of lawyering could tilt toward advisory and consulting. Given that juniors should start thinking about “future skills now,” he said.
Beckhaus, who co-directs Freshfields Lab, said that as the field evolves with AI, new and different kinds of talent would be needed. During the COVID-19 pandemic, Freshfields hired a team around a Dutch physicist who had developed machine-learning tools for law firms.
“A law firm is no longer, by any means, a business run solely by fully qualified lawyers,” said Farkas from Linklaters. “If you don’t keep up with the times, you’ll be kicked out in time.”
Still, some legal subfields remain largely immune to AI. Behrens cites banking supervision, his own area of expertise, as an example. Much of the work relies on unwritten knowledge — on assessing the reactions of regulators and making judgement calls.
“Wherever humans are involved, AI has a tough time — at least for the foreseeable future,” he said. “Negotiations will continue to take place between real people.”
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