The Productivity Paradox: Does more technology mean less growth?
Is there scope to use AI in commercial contracts? Will it save time, or ultimately cost more time in review and pose greater risk?
Based on current AI models, the conceptual difference is marginal between using a template from an online precedent library and asking a junior associate to insert some of the basic information for review by a partner vs letting AI do that work.
Both require senior legal review.
Is technology making due diligence easier or harder? Is the volume of available data overwhelming or useful?
- Technology can make due diligence easier in terms of cataloguing documents in a coherent manner at speed.
- AI tools can find key words in large volumes of data.
- AI does not, however, bypass the need for human intervention to assess relevance. It can only help point you in the direction of where to focus your efforts
What are your three top new legal risks that technology presents to businesses?
- Exposure to legal claims for failure to comply with ever-changing international regulations in the areas of data privacy and cyber security.
- Claims from individuals and businesses arising from decisions made on the basis of flawed AI models implemented with insufficient human oversight.
- Insufficient transparency in AI model development.
Modern Arguments: Dispute resolution in a mobile and connected world
How should parties seek and agree a seat for ADR, and what advantages does your jurisdiction offer?
For cross-border disputes, we would recommend arbitration over the courts due to the ability to enforce arbitration awards in most jurisdictions under the terms of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.
For complex international disputes, we would typically steer our clients towards either the London Court of International Arbitration (LCIA) or the Singapore International Arbitration Centre (SIAC).
Each of these organisations is (a) internationally respected for their neutrality and impartiality in resolving disputes, and (b) have a reputation for using high-quality commercial arbitrators, experienced in determining international business disputes.
Have you seen or do you expect to see a rise in the use of AI to discover infringements and actionable matters?
Greater use of AI algorithms has already started to materialise in this space and is likely to increase, since AI tools are better placed than human beings to sift through large quantities of data to detect potential infringements in real time.
What questions does AI pose for liability – who is accountable for the actions of AI and has your jurisdiction prepared for the question?
Developers and programmers each have the responsibility to test their systems at every stage to avoid and/ or address errors or harmful outcomes. Developers have a further responsibility to ensure that the use of their AI tools is subject to clear user agreements which limit their use to stated purposes.
Users and operators have a responsibility to test any AI technology they deploy to check for errors and algorithmic bias.
Jurisdictions including the UK now have regulations in place to ensure that no decision which affect a person should ever made by AI alone without human checks and balances being in place.
The UK government has established bodies like the Office for Artificial Intelligence and the Department for Digital, Culture, Media & Sport (DCMS) to oversee AI development and its societal impact, as well as the AI Council, an independent expert committee formed to advise the government on AI and help shape policy.
What are your three top tips for anticipating and reducing AI-related liabilities?
- Conduct a comprehensive risk assessment to identify potential
liabilities and risks associated with
the relevant AI system, taking into account potential legal, ethical, and regulatory implications. - Ensure that the decision-making process of the AI system is
transparent and explainable,
including how it operates, what data it uses, and how it reaches its conclusions. Focus on these areas
should make it easier to identify and mitigate against unintentional bias in the model going forward. - Keep abreast of legal requirements related to data privacy, security and discrimination.
Winding up: Insolvency in the digital age?
Are you seeing a trend in the type of firms facing insolvency? Are there any sectors in your jurisdiction particularly at risk?
- The UK is seeing a trend of highly leveraged businesses struggling with an inability to service debt levels in uncertain global market conditions.
- Companies in real estate and construction continue to face high
upfront costs and delays in
project completions, making them vulnerable to funding shortfalls and market fluctuations. - An increasing number of manufacturing businesses are struggling with supply chain challenges, the need to decarbonise their manufacturing processes, and competition from producers manufacturing their products in lower-wage economies.
Does AI have a place in insolvency proceedings? What opportunities does it offer, and what safeguards does it require?
- Routine tasks, such as document review, claim validation, and
report generation can be automated,
reducing time and costs involvedin insolvency proceedings. - AI can help identify fraudulent activities by highlighting inconsistencies and unusual patterns in financial transactions and statements.
- AI-driven platforms can facilitate communication and
coordination among creditors, debtors, and
other stakeholders, improving transparency and efficiency.
Is the sharing economy at high risk of insolvency? Many businesses are heavily funded but struggle to turn a profit – are they at greater risk of running out of money?
Whilst innovative and disruptive, businesses in the sharing economy face significant risks including:
- Reliance on venture capital for growth and sustainability,
creating pressure to scale rapidly, at the
expense of profitability. - Thin profit margins due to high operational costs, competitive pricing to attract users, and significant investments in technology and infrastructure.
- High potential for price wars due to competing players
operating in similar markets.
We would recommend: - Prioritising financially sustainable growth over rapid expansion.
- Developing multiple revenue sources to reduce dependency on any single stream.
- Continually seeking ways to optimise operations and reduce costs.
- Proactively engaging with policymakers and adapting business models to comply with evolving regulations.
- Innovating constantly to stay competitive and meet changing customer demands.
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