In-House Legal Teams See Major Productivity Gains From AI

AI-powered legal innovation: Unilever’s in-house legal team is leading the charge in leveraging artificial intelligence to transform corporate legal operations, setting a new standard for efficiency and cost-effectiveness.

• Unilever has established three “powerhouses” or legal delivery centers in Barcelona, Mexico City, and Bengaluru, employing 85 staff to handle large volumes of legal contracts using advanced technologies, including generative AI.
• The implementation of AI tools like Microsoft’s Copilot and CoCounsel has resulted in significant productivity gains, with lawyers saving an average of 30 minutes per day on tasks such as contract drafting and review.
• This increased efficiency has allowed Unilever’s legal team to handle more work in-house, reducing reliance on external counsel and potentially altering the economics of the corporate legal industry.

Industry-wide adoption: Other top in-house legal teams featured in the 2024 FT Innovative Lawyers Europe report are also embracing generative AI, realizing benefits sooner than anticipated.

• ASML, a chipmaking equipment provider, has implemented ContractMatrix, an AI tool used for reviewing third-party contracts, summarizing regulations, and conducting research tasks.
• Repsol, a Spanish energy company, developed its own AI tool called Lexia and has been using Harvey, tracking over 12,000 prompts or queries in less than six months across its 160-lawyer team.
• These companies are not only improving their internal operations but also renegotiating terms with external law firms to ensure AI-generated cost savings are passed on to them.

Changing dynamics with external counsel: The increased capabilities of in-house legal teams equipped with AI are reshaping their relationships with external law firms.

• Companies are becoming more selective about the work they outsource, reserving external counsel for complex issues requiring specialized expertise.
• ASML has included clauses in contracts with preferred law firms requiring them to pass on savings generated from their use of AI, anticipating a reduction in fees.
• Repsol’s general counsel, Pablo Blanco Pérez, predicts that speed will become a crucial competitive factor in the legal industry, stating that “the fastest eat the slowest.”

Productivity and cost benefits: Early adopters of AI in legal departments are reporting tangible improvements in efficiency and cost reduction.

• Unilever’s internal analyses show that lawyers using AI tools are saving an average of 30 minutes per day, freeing up time for more complex problem-solving.
• ASML expects AI to reduce the cost of using outside lawyers over time, particularly for quick questions that can now be addressed internally using AI tools.
• The ability to handle more work in-house is allowing companies to be more strategic about when and how they engage external legal services.

Challenges and opportunities: While the benefits of AI in legal operations are becoming evident, companies are still navigating the early stages of implementation and integration.

• Maria Varsellona, Unilever’s chief legal officer, emphasizes that the impact of company-wide job cuts will be minimal for the legal team due to improved efficiency from AI and other changes.
• Companies like ASML are in the process of measuring the benefits and time savings delivered by AI tools, indicating that the full potential of these technologies is yet to be realized.
• Repsol’s experience with over 12,000 AI prompts in less than six months suggests rapid adoption and integration of AI tools into daily legal work.

Future outlook: The integration of AI in corporate legal departments is poised to continue, with potential far-reaching implications for the legal industry.

• As AI tools become more sophisticated and widely adopted, they may fundamentally change how legal work is distributed between in-house teams and external firms.
• The focus on speed and efficiency enabled by AI could drive further innovation in legal service delivery models.
• Companies that successfully integrate AI into their legal operations may gain a competitive advantage through reduced costs and increased agility in handling legal matters.

Broader implications for the legal industry: The rapid adoption of AI by in-house legal teams signals a potential shift in the balance of power between corporate legal departments and traditional law firms.

• As in-house teams become more capable and efficient with AI assistance, law firms may need to evolve their service offerings and pricing models to remain competitive.
• The legal industry could see a redistribution of work, with routine tasks increasingly handled in-house, while complex, high-value advisory work remains the domain of specialized external counsel.
• This transformation may accelerate the trend towards alternative legal service providers and tech-enabled legal solutions, reshaping the landscape of legal services in the corporate world.