As AI becomes an increasingly common tool across the legal sector, experts are urging caution against over-reliance and highlighting the need to manage client expectations around what the technology can realistically achieve.
Sonia Jordan, Restructuring and Insolvency Partner at Knights and President of R3, has echoed those concerns in response to a new R3 report examining the impact of AI and automation across the restructuring, turnaround and insolvency profession.
Sonia said:
“I read the report both as a practitioner and Parter at Knights and also with my R3 presidential hat on – and so with the concerns of members as a whole.
“My overarching takeaway is that many across the profession remain cautious of using AI generated products in every aspect of their work, preferring to limit its use to more analytical tasks. The reasons highlighted range from concerns of security, privacy and data protection as well as a lack of regulatory guidance.
“However, on the more positive side, it’s pleasing to see the report has highlighted how much of the more information intensive work, such as reconstructing and reviewing financial transactions and producing reports, has been eased as a result of AI intervention.
“It’s pleasing to see the report has highlighted how much of the more information intensive work, such as reconstructing and reviewing financial transactions and producing reports, has been eased as a result of AI intervention.”
Sonia Jordan
“As a cautionary tale against over-reliance on AI tools, I’ve had personal experience in the last month, working on a pre-pack administration – which is where the deal to sell the business and assets of a company is structured and agreed immediately before administrators are appointed.
“The non-UK buyer questioned a sales contract I’d drafted after they had run it through an AI tool, which found the drafting ‘not acceptable’. This led to the buyer having to instruct a London firm, insisting that firm redraft the contact. The new contract produced by them was almost identical to that which I’d originally produced. This all because that particular AI tool did not appreciate English law insolvency standard drafting resulting in the other party who relied on it incurring significant additional expense and legal spend and time delay for no reason at all. Other reported issues have seen AI generated legal arguments used in court – where the AI tool has “hallucinated” and simply ‘made up’ case law, which was not then checked by the human advocate, causing judicial and regulatory censure as well as reputational damage.
“AI does not replace the human involvement, and it does not obviate the need for the careful supervision of outputs. Yes, it cuts down the time taken to perform certain tasks, but it is not a replacement for human thought processes and judgement.
“If you are being pushed by your client base, to turn things around even more quickly than normal because they expect you to be using AI, there just needs to be careful management of the education process between professional and lay client because, yes, it is an effective tool, but it’s important that our clients understand the parameters in which we can effectively use it for the their benefit. It's not, we just plugged it in, it spat out an answer and here you are.”