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AI and the Law: will machines take a mega bite out of the legal industry?

4 December 2017

Andrew Cheung, general counsel at Dentons, discusses how AI is transforming the legal profession and what lawyers can expect in the future.

Andrew Cheung

In 2015, dozens of scientists and artificial intelligence experts, including Stephen Hawking and the co-founders of Google's famous AI DeepMind, signed an open letter urging for greater caution and controls in AI research and development. Stephen Hawking has followed this warning up with a recent seminar asserting that AI will be either the best or worst thing for humanity - building on his earlier thesis that AI could spell the end of the human race. Certainly there are many lawyers and law students that are worried it could spell the end of the legal profession as they know it. Are they right to be concerned? Generally speaking the safe money is with backing Stephen Hawking but it is worth exploring this a little further.

Whether you fear it or embrace it, AI is present and being used by everyone in the profession right now and you can expect more rather than less of it. Whenever you search for something on the internet or file your emails or send a text, machine learning algorithms are working away (in theory at least) to make the process smoother, faster and more efficient. If it is working as it should, you will not even know that it is there.

This sort of AI is not what professor Hawking is concerned about. He is concerned about massive disruption caused by machines and programmes learning at a far faster rate than humans can hope to match – a new exponential evolution that transcends the timescales needed for biological evolution. Whilst humans rule the earth, it is (thank goodness) generally accepted that lawyers cannot be wholesale replaced by technology. A machine could not in the foreseeable future replace the analysis, empathy, good judgment and emotional intelligence needed to be a good lawyer. However, the shape and role of the profession is certain to change with advances in AI as a tool to augment and automate the practice of law, with commoditised, highly process driven aspects of the law being most at risk.

We are already seeing significant investment in the augmentation of AI into current practices to provide a competitive edge, including automating manual tasks and processes, providing faster and more relevant access to large and diverse bodies of information, improving the prediction of outcomes for clients and improving client experience and marketing tools. Dentons technology fund, Next Law Ventures, is working with a number of technology start ups that are tackling everything from regulatory complexity, to risk management, to the provision of natural language legal advice notes, to the hiring of a flexible legal workforce. These solutions all use AI to maximise the utility of vast bodies of information that lawyers do not at present have the time or skills to effectively exploit. And Dentons is not alone. A recent article in the Financial Times named a number of law firms who have developed (note they are not developing, this is here and now) AI solutions including Herbert Smith Freehills, Linklaters, Cooley and Allen & Overy. A&O's MarginMatrix is particularly interesting because it was co-developed with Deloitte.

This sort of augmentation, while not wholesale replacing lawyers with terminators, will still have a profound impact on the shape of the profession. First, it dispenses with the need for manual labour-intensive tasks, which means less paralegals are needed and the training of junior lawyers needs to change. Second, it requires a shift from traditional billing models to software for service revenue streams. Third, it raises interesting questions about liability if the system goes wrong or is not performing as optimally as a person. Finally, and most profoundly, it introduces a winner-takes dynamic where only the largest firms (both within and outside the law) can afford to invest in and develop these solutions, which concentrates increasing proportions of market share in the hands of fewer and fewer firms. It also has the effect of concentrating the gains of new legal tech in the hands of partners of those firms who have benefited from the competitive edge such technology brings.

Where does that leave small to medium size law firms? Those whose business models depend heavily on the analysis, empathy, good judgment and emotional intelligence required to be good lawyers in specialised areas of the law will likely be least affected. Those who are involved in more commoditised areas of legal practice or are a full service medium sized firm without access to this technology are most at risk.

Part of the answer to this is consolidation, which is partly why we have seen so many large law firm mergers in the past five years. Fewer bigger firms can afford to invest in innovation to give them the competitive edge they need to survive and grow market share. Another part of the answer, so far not explored to any great degree by firms, is partnering with other similar law firms, third party tech firms or venture capital funds to co-develop new technology in a collaborative or collective scheme. The law society is looking at some very interesting ideas in this space. Putting one's head in the sand and hoping this doesn't happen (or doesn't happen before you retire) is not an option.

And we should not forget that with risk and downside comes some potentially huge benefits not just for law firms but for society as a whole. Reducing the cost of legal services will increase access to justice across society and improve the standard of those legal services. There will still be bad lawyers (or good lawyers who have a bad day) but with AI helping to manage matters, reminding of deadlines and presenting relevant research and data, the prospects of shoddy legal practice and mistakes should reduce considerably. New technology may, in theory, also mean less but more productive work and a healthier profession as a whole. Professor Richard Susskind, one of the UK's leading AI scholars, considers that technology could release considerable latent demand for legal services, meaning there is more rather than less work to go around. While this makes absolute sense, the key questions we should all consider is who this work will go to and what you need to do today to ensure that your firm can compete for this work tomorrow.