How AI is Transforming the Global Legal Industry

Major law firms are integrating artificial intelligence and hiring software engineers to automate regulatory compliance and document review. Freshfields Lab developed a real-time risk platform for Volkswagen’s Cariad division, signaling a shift toward tiered pricing models and a reduction in manual due diligence across the global legal sector.

In 2021, Volkswagen AG sought assistance from the international firm Freshfields to ensure new software functions complied with regulations in more than 100 countries. According to Freshfields, traditional methods would have required lawyers from every jurisdiction to review updates at a cost of thousands of euros per country.

Freshfields Lab, a division dedicated to legal technology, spent a year and a half collaborating with global lawyers and programmers to build a flexible AI platform. The tool allows Cariad, Volkswagen’s software division, to perform real-time global risk assessments via an interactive map that updates as countries change laws.

Why are law firms hiring software engineers?

Large firms are recruiting engineers to adapt AI tools to daily workflows and create proprietary products for licensing. Drew Winlaw, a partner at Simmons+Simmons, describes this transformation as a “radical evolution” of the industry.

Some firms have already launched specific products. Allen & Overy Shearman offers ContractMatrix, while Linklaters has developed Applied Intelligence. Beyond in-house tools, the sector is seeing the rise of AI giants like Legora and Harvey, which hold valuations of $5.6 billion and $11 billion, respectively.

Did You Know? The global headquarters of Freshfields Lab is located on the 14th floor of Potsdamer Platz 1 in Berlin, where programmers and lawyers work together in an open-plan office wearing jeans and sneakers.

How is AI changing legal pricing and labor?

The shift toward AI is forcing firms to rethink the traditional billable hour. Freshfields’ “Multijurisdictional Insights Platform” provides information rather than legal advice, noted by a red warning bar on the screen. This distinction has led to tiered pricing where clients choose between cheaper AI-based results or more expensive, slower human review.

Nick West, a partner at Mishcon de Reya, stated that some clients may prioritize speed and cost over 100% perfection. This shift may reduce the demand for junior employees who traditionally handled repetitive tasks like reviewing thousands of contracts during due diligence.

Martina Farkas, innovation director at Linklaters in Germany, confirmed that the manual review of pages in merger and acquisition deals is no longer the standard practice.

Expert Insight: Samantha Carter notes that the legal industry is facing a critical trade-off between precision and efficiency. While AI can process data at an “unimaginable” speed, the recent apology from Sullivan and Cromwell for an AI-generated incorrect citation highlights the high stakes of accuracy in judicial filings.

What happens next for the legal profession?

Industry leaders expect the role of the lawyer to shift toward high-level consultancy and advisory work. Sam Dixon, innovation director at Womble Bond Dickinson, suggests that junior lawyers may need to develop new “skills of the future” as routine tasks vanish.

Hiring patterns could slow down for entry-level roles, which may create future experience gaps. However, Alexander Behrens of Allen & Overy Shearman suggests that firms must offer these tools because if they do not, competitors will.

Certain specialties may remain resistant to automation. Behrens points to banking supervision, where work relies on unwritten knowledge and value judgments. He notes that negotiations are likely to remain between humans for the foreseeable future.

Frequently Asked Questions

What is the Freshfields Lab?
It is a division of the law firm Freshfields that employs 30 programmers worldwide to develop technical solutions for legal problems, such as the risk assessment platform used by Volkswagen.

How does AI impact the cost of legal services?
Firms are introducing tiered pricing models. Clients can opt for lower-cost, AI-driven information or pay more for comprehensive legal reviews conducted by human lawyers.

Are there risks associated with using AI in law?
Yes. AI can introduce inaccuracies in legal documents. For example, the Wall Street firm Sullivan and Cromwell recently apologized for submitting a citation generated by AI that was incorrect.

Do you think AI will eventually replace the need for junior lawyers in large firms?