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Law firms have been racing to adopt artificial intelligence after developments in the technology have enabled it to draw up contracts, assist due diligence processes and draft legal opinions.

The launch of natural language chatbot ChatGPT in November marked a significant turning point in generative AI. Created by Microsoft-backed OpenAI, the bot produces convincing and humanlike sentences, using large language models to predict the likely next word in a sequence.

It has led other big tech companies, including Google and Microsoft itself, to quickly follow suit. Start-ups have also been leveraging the underlying technology used in these products to develop specialist AI for legal services.

Law firms and consultancies are now using the software to automate tasks and drive efficiencies, spurred to cut costs by falling revenues amid a corporate dealmaking drought. Magic Circle law firms and Big Four accounting groups have been experimenting with AI platforms built for legal tasks such as drafting contracts, translating documents into different languages, and suggesting legal opinions.

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We get several thousand queries daily, and it is pretty consistent across the offices...in multiple languages [and] different areas of law, says David Wakeling, head of Allen & Overys markets innovation group, which comprises both lawyers and developers. The law firm was the first Magic Circle firm to adopt generative AI and has been using an eponymous product by a US start-up called Harvey AI since November. It is [now] a serious part of the operating model, he explains. We are way past trial.

Harvey was built using the GPT language models created by OpenAI, which has also invested in the US start-up. As well as the general internet data that underlies GPT, Harvey is trained in legal data including case law. The system alerts A&Os lawyers to fact-check the content it creates, as generative AI is known for hallucinating: stating things confidently as fact, despite there being no basis for them in reality.

It is a blank page, quick first stab, Wakeling says. You know you are always going to edit it; it is never good enough. But [if] you apply that to 3,500 people, that is a serious saving in terms of time; an hour or two a week is a big deal.

We need human lawyers to ensure we keep expanding and pushing forwards the law so it doesnt atrophy

Almost half of all current tasks in the legal profession could be replaced by AI, according to a recent report by Goldman Sachs. Automating them would eliminate the need for humans to carry out some of the more administrative and mundane work although it could also mean that trainee solicitors and graduates at law firms no longer got to experience it.

We need to think about how we train young lawyers, says Kay Firth-Butterfield, head of artificial intelligence at the World Economic Forum. They cannot all instantly be able to advise on the most complex matters or do complex client meetings, or think of ways to challenge the status quo. This has to be learned.

She sees limits to AIs use: Because all that generative AI can do is look at historical data to give answers, we need human lawyers to ensure we keep expanding and pushing forwards the law so it doesnt atrophy.

Protagonists argue that AI-based tools will free up lawyers to do more skilled work and give strategic advice, while saving time and reducing costs for firms and clients.

It definitely reduces the billable hours, says Richard Robinson, founder and chief executive of Robin AI, which launched in 2019 and provides AI-based legal software. But he points out: The best firms want to be paid for high-level strategic work, things that fundamentally, at least today, no AI is trying to replicate like high-level negotiations, insights into whats happened in other [similar] deals in the market.

$1bnPwCs investment in AI to automate parts of its audit, tax and consulting business over the next three years

Robin AI works with two of the Big Four accounting firms, as well as private equity funds and law firm Clifford Chance. It sells software and also offers an added service, where its team of 30 in-house lawyers and paralegals oversee the AI-generated results. Its technology can also be used to scan legal documents to assess risk exposure.

But Robinson warns that these tools are basically not ready to be used without people safeguarding them highlighting that the pure output of such technologies should always be checked and edited by a qualified expert.

Large language models improve as more data is fed into them and as they are put to more use. PwC, which uses Harvey for mergers and acquisitions, due diligence and drafting contracts, says it has had an influx of clients saying they want to adopt AI, but are concerned about data protection.

Data confidentiality and security is paramount and really important...because data is sensitive and there is legal privilege, says Sandeep Agrawal, a partner in PwCs tax and legal services. Agrawal met executives from Harvey recently to discuss how it can ringfence data and encrypt the information, meaning it is more secure. Harvey segregates all customer data and offers encryption tools to protect access to client information.

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In a sign of growing confidence in the technology, PwC last week pledged to invest $1bn in AI to automate parts of its audit, tax and consulting business over the next three years.

Jerry Ting, chief executive of contract management business Evisort and a lecturer at Harvard Law School, reports a similar shift towards adopting AI in recent months. Evisort, which launched in the US in 2016, offers AI software that allows clients to create and manage contracts including drafting and signing through an automated process.

Before GPT, it was: here is what AI is, heres why it benefits you; it was almost that we had to convince them, he says. Now, they are showing up at the door already convinced. The question becomes: how do I use it in a way thats safe, that actually drives my business outcomes, and it does fit in my budget?

This article has been updated to reflect that Evisort is a contract management business

Original post:
Law firms embrace the efficiencies of artificial intelligence - Financial Times