This is also one of the key issues that will be discussed in the upcoming inaugural Lawyers Weekly Partner Summit, taking place on Thursday, 20 June 2024, at The Star, Sydney. Click here to buy tickets.

While there is still some fear in the profession that the rise of such tech could mean the beginning of the end of lawyers, clients are demanding efficiency more than ever. However, the legal profession has reportedly not embraced emerging tech at the same pace as other sectors.

Despite a recent report from Dye & Durham revealing that in 2024, firms will turn to AI more and more in a bid to keep talent and drive efficiency, there remain a number of key challenges around the implementation of emerging tech into law firms, and many BigLaw firms may also not be utilising AI to its fullest potential.

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The impact of AI on partners and leaders

ChatGPT made global headlines over the course of last year – and the last two years have seen a “massive investment” from the IT industry in new applications or features into products enabled by AI.

Now, according to Clayton Utz partner Simon Newcomb, the profession is starting to see those new features hit the market.

“Some firms, including ours, have already adopted some of these products, and we may expect to see a gradual increase in use of AI tools over the next 12 months as others do the same. Partners will need to make new business decisions, such as identifying use and investment cases, including how to predict and measure ROI on these tools, some of which are quite costly not only to purchase but in the partner and staff time they involve in deployment,” he said.

“Law firms [that] choose to adopt AI will need to become more AI literate, and that will involve training their people in a range of new skills and establishing policies and guidelines around the use of the tools. Some new skills for partners will include prompt engineering, working in collaboration with an AI to learn how to ask questions that get the most from the AI and leave the questions it can’t handle to a human, how to manage risk in using tools that may not be 100 per cent accurate, and how to manage work created by staff using AI.”

In light of these new risks, firms using AI will need to implement law society and court guidelines around compliance – and guidelines have been released in Victoria, NSW and Queensland.

The Bar Council also released guidance on barristers’ use of AI technology in July last year – but also warned that as large language models continually evolve, so do the risks.

“The guidelines so far are mostly about applying existing duties to the AI context, but do create some new issues that law firm partners will have to consider and operationalise, such as when firms need to disclose AI use to clients, courts and litigants,” Newcomb said.

“The curation and management of data may also become a more important issue for partners to think about. There will be a need to balance cyber security objectives around data minimisation with AI objectives, which might include data retention. There may also be a need to create data projects to enable AI tools. For example, we found that we needed to create some metadata that we didn’t previously have to enable an AI project.

“Access to AI capabilities will probably also drive more use of cloud services with some associated shifts in emphasis from technical management to procurement and supply chain management.”

AI will also transform the daily responsibilities and strategic decision-making processes for law firm partners “in more ways than one” by FY25–26, added UNSW senior lecturer Sebastian Sequoiah-Grayson.

“Much of decision making – strategic or otherwise – proceeds on the assumption that the events and statements with which we are engaging have emerged from the space of reasons, intent, and purpose. Anticipating such purpose is a large part of the work of legal professionals. Outputs from generative AI do not have purpose so understood; hence, anticipating such outputs and articulating a response will require a new mindset,” he said.

“Generative AI in concert with human actors – cyborgs in a sense – will have the most impact in the short-term future. Fully automated agents are soon to appear. Facial recognition that can scan crowds is already in use by law enforcement, and a phone-based analogue for consumers is at hand.”

Many BigLaw players have recently implemented AI into their practices: KPMG partnered with Microsoft to develop “KymChat”, a proprietary version of ChatGPT, and both Allen & Overy and PwC partnered with AI platform “Harvey”.

And in February last year – in a first for Australian law firms – Clayton Utz built a product to help its lawyers use and benefit from ChatGPT in a “reliable and effective” way. The product initially works with another commercial AI tool to pull key information from a case. Once complete, ChatGPT converts that output into a case summary. This summary is then reviewed by a lawyer for any required edits.

“In an abstract sense, there is considerable alignment between the activities that lawyers do as knowledge workers and the capabilities of AI in terms of searching for information, extracting details, summarising and comparing long documents, drafting,” Newcomb said.

“There are a few major technologies driving changes. Foundation models are providing the generative AI capability, which is enabling the IT industry to build AI features into so many applications. Semantic (vector) searching is enabling the retrieval of information by its meaning and relevance, which is a major advancement from traditional keyword searching.

“And retrieval augmented generation (RAG) opens up a change in how we use law firm data and other legal content by making AI applications much more relevant and able to cite sources. RAG is underpinning most of the applications coming to market at the moment.”

In terms of specific AI for lawyers, there have been notable developments in office applications, legal research, document review, due diligence, contract drafting and negotiation.

Thomson Reuters launched a new AI platform: Westlaw Precision Australia with AI-Assisted Research, earlier this week, following the official Australian launch of Lexis Nexis’ Lexis+ AI™ following a successful trial phase.

“Historically, AI has been used in litigation support for classifying documents, and newer versions are introducing generative functions. I also expect that AI (e.g. conversational search) will be built into our document management systems. The DMS is likely to become an important central repository to provide the data for other integrated AI applications that draw on it,” Newcomb said.

“Much of this technology is still in its early stages, and companies are investing heavily in research and development on their AI solutions. There is also fierce competition in the AI industry and massive investment by AI companies into developing foundation AI models. With this investment, advancements in the underlying generative AI models, and experience from broader deployment in the legal industry, AI technology will continue to improve and open new opportunities.

“Not all AI advancements map onto the legal context. A good example is the Microsoft Copilot Teams transcription and notes feature, which many people in business love, but in the legal context, I think lawyers and clients may be uncomfortable using it for full and frank discussions about legal problems.”

AI advancements v client expectations

Law firms adopting AI technologies will need to become more AI literate, fostering new skills and policies as new advancements develop, as well as new strategies for partners to navigate these changes and maintain strong client relationships.

Newcomb said that within Clayton Utz, the firm is sharing information with their clients “all the time” around new changes – communication, he said, is “good for building relationships as we all navigate these opportunities and challenges together”.

“It’s important for law firm partners to have an open dialogue with clients regarding AI use in the legal support they offer. Clients are not only interested in how AI might be deployed in their own businesses but are increasingly keen to learn how we are using AI.

“Clients want to know how the firm is innovating with AI. They want to know how that will benefit them whether it be in terms of speed, level of service or financial benefits. There may be new opportunities for firms to collaborate with clients, for example, by providing AI solutions to clients that are curated and managed by the firm,” he said.

“Clients are also interested in talking about whether the use of AI by their lawyers creates risk for them and how the firm is managing that. There is the potential for the redistribution of some work. In-house teams may look to bring in some more routine work that they can do more effectively or cheaply with AI tools, or they may find that it becomes economical for their external lawyers to manage it when supported by AI.”

New AI advancements are also likely to “keep everyone busy”, added Sequoiah-Grayson, who said he suspected that a lot of “home-baked legal arguments will emerge from the general population” as the use of AI becomes more common among society generally.

“This is relatively new territory, so being prepared to take certain risks and to adapt from failure will be vital. Anticipate that one’s clients may have beliefs and wants that have emerged from their interactions with AI on the relevant matters,” he said.

Challenges over the next year

Despite a number of key AI tools on the market for legal professionals, there remain key challenges around the practical use of these tools, leaving partners and legal leaders with a variety of hurdles to overcome.

“Most AI tools that currently exist typically only augment lawyers. These tools often need to be directed and validated by a skilled lawyer, so AI complements and somewhat changes their work, but doesn’t replace it in most cases,” Newcomb said.

“There are predictions about AI causing major shifts in the workforce, with changes for lawyers in the leverage model or the end of the billable hour. In the longer term, AI-enabled tools may allow lawyers to provide much more value in much less time, and the delivery and business model may become more about collaboration between lawyers and AI. Those predictions rely on the technology continuing to evolve so that it is much more capable than it is today. It’s too early to say whether and when that will happen.

“The power and value of human reasoning should not be underestimated. Legal practice is a very difficult technical problem to solve. AI tools can currently help find information or provide simple drafting more efficiently, but, in most cases, it can’t apply the law as well as a human lawyer can or devise a legal strategy to get to a client outcome.”

Clayton Utz was also one of the first Australian law firms to adopt Lexis+ AI™ – something Newcomb said the firm did in order to learn how to use the tool most effectively “while mitigating the risks and taking opportunities to help shape its development”.

“For FY26, I would expect changes to be more gradual. For the time being, talent management will be about equipping people with tools and training them to have the skills to be most effective when using AI. The business model will be more about incremental efficiencies than major workforce and commercial changes,” he said.

“Firms may start to see instances where clients want the option to have a certain level of AI or AI-augmented legal service (for due diligence) and are content to accept the risks to access an associated fee level.”

Moreover, “human” knowledge remains more important than ever as these advancements continue, concluded Sequoiah-Grayson.

“The legal profession will need to move to bespoke testing of new talent immediately. There is no obvious way to mitigate against AI-assisted performance assessment without face-to-face engagement. Enticingly, we should expect that human legal knowledge, legal reasoning, and the construction of careful, novel legal arguments will increase in value and such skill sets become more scarce. In an age of mass-produced ideas, it is the bespoke that will attract discerning minds. Partners would do well to leverage these assets,” he said.

“Bear in mind that the output of a legal decision or process does not exhaust the outcome. Outcomes are richer and are woven into the tapestry of our world. The legal profession is well placed, perhaps uniquely so, to make both worlds and, through its actions, to make people. If we do not lose sight of the sort of people that we hope to make, then uses of AI both right and wrong will be made clear.”

Lawyers Weekly will host its inaugural Partner Summit on Thursday, 20 June 2024, at The Star, Sydney, at which speakers will address the range of opportunities and challenges for partners and partner equivalents, provide tips on how they can better approach their practice and team management, and propel their businesses towards success. Click here to book your tickets – don’t miss out! For more information, including agenda and speakers, click here.