The legal sector in London is experiencing significant transformations, particularly influenced by advancements in artificial intelligence (AI) and its applications. As 2024 unfolds, law firms are entering a pivotal era characterised by robust AI policies, increased salaries for junior lawyers, and substantial industry mergers. According to the weekly column by Maria Ward-Brennan in City A.M., AI is expected to dominate discussions and practices within law firms throughout the year.
A notable trend in this evolution is the comprehensive adoption of AI within many of the leading law firms in the City. Most have either implemented firm-wide AI policies, established partnerships with technology providers, or developed proprietary AI programmes. Julian Taylor, senior partner at Simmons & Simmons, emphasised the importance of "upskilling and reskilling" in the legal workforce, noting a gradual shift in hiring practices. He remarked, “Digital proficiency and AI literacy is emerging as a prerequisite for legal professionals – and not just apprentices or those early in their careers.” This development aims to invigorate the legal landscape by attracting talent from diverse and non-traditional backgrounds.
However, a significant discussion point that has yet to be thoroughly explored is the impact of AI on legal fees. According to a report by LexisNexis from September 2023, 71 per cent of in-house legal teams anticipate that external lawyers will leverage AI, consequently leading to modifications in pricing structures. The report further revealed that 39 per cent of private practice lawyers feel pressured to revise their billing practices due to AI, a notable increase from 18 per cent just nine months prior. Taylor also noted, “AI could serve as a catalyst for change in one area that has remained a constant: the legal sector’s pricing model.”
Looking ahead to 2025, Andrew Lloyd, managing director of Search Acumen, predicts that AI will become the standard within the industry. Nonetheless, law firms might need to reflect on their existing fee structures, as the efficiency gained from AI in handling volume tasks could prompt changes. Lloyd stated, “I don’t think we’ll suddenly see the industry shift en-masse from hourly rates, but I do think the pace of technological change will mean we start to see firms trialling new pricing models at the margins to understand how they can best capture client demand and balance that with improved profitability.”
Class actions also remain a significant area of focus in the legal sector, showing no signs of abating. Paul Lewis, joint managing partner of Herbert Smith Freehills (HSF), pointed out that “class actions continue to be front and centre in the disputes arena, driven by litigation funding and claimant law firm activity.” A report from law firm CMS indicated that the total claimed value of opt-out claims in the UK reached €66.29 billion (£56.32 billion) as of 31 December 2023, marking a 48 per cent increase from the previous year. The report also highlighted the filing of new claims involving over 540 million members, substantially exceeding the UK's population.
Despite the apparent growth in class actions, the landscape of litigation financing faces uncertainty due to delays by the Labour government regarding a pivotal litigation funding bill, which seeks to provide funding to individuals and smaller firms pursuing claims against larger entities. Chris Bogart, CEO of Burford Capital, expressed concerns about the implications of the government's postponements on London's reputation as a premier legal hub.
Lewis remains optimistic, asserting, “We expect this upward trajectory for class actions to continue unabated – even if there are still significant question marks hanging over funding and elements of procedure as we head into 2025.”
As the legal sector grapples with these advancements and challenges, the integration of AI and the evolution of legal practices stand poised to reshape the industry in the years to come.
Source: Noah Wire Services