James Morgan (pictured), EMEA GC at leading Japanese bank MUFG explains that the EMEA legal function has been on an AI and digital transformation journey over the last few years. To kickstart the journey, he made sure that he addressed his own knowledge-gaps first.
‘I recognised my own inadequacies in anything technological,’ he admits, ‘and so one of the first things I did, I took a master’s level course in legal technology with a focus on AI, blockchain, and techno ethics.’
He continues: ‘We have this new generation of lawyers coming through who have technology built into their everyday working lives. It would be hypocritical of me to be setting a strategy and not really understanding what that strategy should look like.’
In 2022, the team hired Esther Woo, former head of legal services transformation at Ashurst, to bring legal ops into the function – a decision that Morgan says was driven by an awareness of the rising importance of technology, as well as the need to improve efficiency as the EMEA legal function sought to become more of a strategic partner in the business.
Since then, AI in legal has boomed. Leading legal AI providers Harvey and Legora launched in 2022 and 2023 respectively, while more recently Anthropic launched Claude for Legal earlier this year.
Morgan and his team have enthusiastically been adopting the new technology in various ways while continuing to test where they can increase efficiencies.
This includes competitions on finding the best use cases for their new legal generative AI tool, Leah, hiring legal technologists and expanding the legal ops function from one team member to six, as well as establishing a team of 20 junior lawyers to invest time into fixing the underlying data for trade agreement flows.
‘If technology is deployed properly, our external counsel are focused on the things that really add value – those are the things we’re willing to pay for’
Another way in which the function has deployed AI is to interrogate invoices their external counsel is sending them.
‘We have law firm panels. Those panels will have agreed terms, but it’s very difficult once you agree those terms to keep track across a large team with a lot of legal matters going on at any one time to make sure that what has been agreed is exactly what we’re being charged for,’ says Morgan.
Earlier this year KPMG released a report that found that of the 500 senior in-house lawyers surveyed, 82% said they expect their external providers to explain to them how they are using AI, and that 87% preferred outcome-based pricing models to time-based pricing.
However, Morgan wants to be clear that he isn’t necessarily expecting his invoices from firms to see dramatic cuts:
‘External counsel’s own use of AI gets talked about a lot. I would say there are two camps around external counsel’s use of AI and the impact on internal teams. One camp will say that it should make our external counsel fees cheaper, and that should be passed through. I’m not in that camp, which is why I’d probably shock other GCs.’
Explaining his position, Morgan says: ‘Thinking about what the technology can be used for, if it’s deployed properly, then actually it means that our external counsel are much more focused on the things that really add value, the big strategic issues, and those are the things that actually we’re willing to pay for.’
While Morgan concedes that it is inevitable that the price tag on large volume pieces of work should go down, he argues that the types of work firms will be engaged for will start changing.
‘More generally law firms are pitching to us differently. They’re pitching to us on the value that they can bring, rather than on the amount of work they can do.’
Will this change law firms’ business models?
‘There’s no one size fits all answer,’ Morgan says, ‘but AI’s coming. Law firms will have to adapt their models.’
‘How do you train someone to spot AI hallucinations when they haven’t got 20 years of experience to be able to do that?’
What can in-house teams do to prepare for this change? Morgan believes GCs should be promoting AI, but that they should start with understanding the technology first, so that it can be embedded in a way that actually makes a difference.
While lawyers need to be aware of the risks, they shouldn’t forget where the opportunities lie, and should shift away from ‘a fear that this was something that was going to come and take people’s jobs’ to ‘understand how careful and thoughtful deployment of AI can accelerate revenues for the business and can really create a more meaningful role for the individuals within the legal team.’
For the next generation of lawyers coming through, however, there is understandably fear around how AI will impact junior lawyers learning the key skills for the job.
‘I think something that the industry has really got to get to the bottom of is how do you train someone at the start of their career to interrogate and be curious and spot errors in AI hallucinations, for instance, when they haven’t got 20 years of experience to be able to do that,’ Morgan says.
Within the MUFG EMEA legal team, at least, testing and experimentation around the technology will continue. Morgan explains his mindset:
‘What is it that an in-house legal function brings to the company? In this case, is it someone that can sit there and review provisions in a contract and change wording around, or is it a real partner of the business that can spot problems early, navigate around them, potentially save the company lots of money and bring real value?’
