As legal tech valuations skyrocket, and AI dominates the airwaves, City law firms have been warned they are ‘sleepwalking into a crisis of judgment’ by treating AI as a definitive authority rather than a collaborative tool.

A report by Positive Group, exclusively shared with City AM, stated that the legal sector faces a potential crisis of judgment due to its overreliance on AI, with data showing more than 60 per cent of lawyers now actively use the new tech in everyday tasks such as drafting, research, and client delivery.

It was found that, rather than transforming legal practice, AI tools are simply being layered onto old ways of working. The intense pressure of billable hours and heavy workloads creates a major behavioural risk, as time-poor lawyers are uncritically accepting AI outputs without fully interrogating them.

Headlines have been lighting up with hallucination issues at several law firms across both sides of the Atlantic, with ‘fake’evidence presented to the courts, in the case of Pinsent Masons, a junior lawyer was blamed.

The report suggested that AI is directly dismantling the traditional apprenticeship model of training juniors by automating high-volume, repetitive foundational tasks, such as document review and basic research, where juniors used to develop their skills.

As a result of junior lawyers not receiving the same training, the report highlighted that there is now “less requirement to go and interrogate sources,” leaving firms highly vulnerable to over-trusting AI outputs.

Francesca Bennetts, partner at A&O Shearman, stated: “The skills that make a good lawyer, critical thinking, creativity, and attention to detail, are the same skills needed to be an AI-augmented lawyer. The tools may have changed, but the foundations of good practice remain the same.”

Will Marien, CEO at Positive Group, pointed out that some firms are “potentially sleepwalking into a crisis”, highlighting, “Firms must actively equip their talent with the behavioural skills to overcome automation bias and over-trust, ensuring human agency remains the final line of defence.”

Legal sector faces mounting pressure

However, law firms are stuck in a loop: client expectations mean lawyers need the best AI tools at their fingertips, while competitors pour millions of pounds into embedding AI systems across their firms, including Kirkland & Ellis, which invested $500m to build its own.

The report highlighted that corporate clients are driving a double standard, as one unnamed legal leader noted, clients are effectively demanding that firms “use AI… but want everything human validated, cheaper, and with full liability”.

It was suggested that this tension highlights a broader shift in how value is defined, as while AI accelerates the production of legal outputs, client
expectations are becoming more nuanced. In some contexts, value is defined by efficiency, speed, cost and scale, particularly in high-volume work, while in others, professional judgement remains critical.

“One effective strategy has been co-developing AI products with clients: when they succeed in the market, it not only builds loyalty but also delivers real-world impact innovation,” Jose Maria Balana, Hogan Lovells partner, stated.