The EU AI Act and new Product Liability Directive is introducing comprehensive regulations that will aim to ensure companies Worldwide that develop, or leverage AI technologies are safe, transparent, and accountable. The Act classifies AI applications based on 4 levels of risk, with stricter requirements for those users which are deemed high risk. AI use within the justice sector falls under the ‘high risk’ category, which is likely to result in demanding regulation on law firms who develop their own AI tools or use third-party AI.
The Product Liability Directive, which makes companies liable for damage caused by a defect in their product, will be expanded (for products marketed after December 2026) to include software, specifically AI systems creating new liability risks such as data security breaches, errors in algorithms and biased decision making. The new directive will set out a liability framework for when companies are liable for damage caused by a defect in their product.
UK based firms will need to consider whether their AI technologies will be sent to, or used in the EU, if this is the case, this will bring them under the directive’s jurisdiction. Its therefore vitally important that firms have a clear grasp of the regulation which will affect their business and look to put robust Risk Management strategies in place.
In terms of UK AI legislation, It’s anticipated that a first draft will be presented to the UK’s Parliament within the first half of 2025. Although UK legislation is not anticipated to be as broad as the EU’s, Law firms should act now to adopt best practices which regularly monitor and review AI use, and ensure staff are adequately trained in the use of AI and associated risks.
As AI continues to redefine how law firms operate, practices will need to place increased emphasis on robust compliance and risk management strategies to navigate these regulatory changes, including ensuring insurance programmes are tailored for AI driven risks. Staying ahead of these shifting standards will be essential for future proofing your business.
Our team has been providing Risk Management and Insurance Solutions to the Legal Sector since 2000. Contact us today to discover how we can help you manage AI-related risks and stay ahead of evolving regulatory requirements.
Statistic quoted on use of AI in law firms provided by recent LexisNexis Survey