The Future AI Limitation in Corporate Law and Beyond
By Klizandra Castrodes
As artificial intelligence (AI) further develops for practical usages, corporations are embracing AI and machine learning to optimize operations and competitive advantages. Corporations are slowly integrating AI into decision-making processes and core business functions. While there are no signs of AI fully taking over the legal profession, the adoption of AI technology offers a lot of promise within decision-making processes within corporate legal frameworks. Yet, as there holds great efficiency within AI usage, law firms must edge with a side of caution as AI usage also holds great risk for users and clients.
Within the scope of corporate law, AI can further hasten decision-making across legal functions. In regard to contract review and management, AI tools can be used for revision and document analysis to reduce time and human error. AI systems can analyze through vast databases at a time to find relevant texts imperative to legal research. (Couture) Furthermore, AI and machine learning have to monitor internal data and detect regulatory risks to companies stay ahead of evolving legal requirements. (ABA) Machine learning, specifically, can “analyze corporate policies and practices, identifying deviations and potential compliance issues” to effectively assess and plan for risks. (Fish) Predictive analytics enable legal teams to assess litigation risks and forecast outcomes based on historical data, supporting smarter business decisions. Overall, AI and machine learning technologies can serve as a useful asset in the modern corporate legal environment.
However, while AI hold great potential for practical usage, there poses extreme security risks with its utilization. While some lawyers have used AI for individual work, major industry practice holds risk with sharing firm data with AI tools. AI systems can be vulnerable to cyber-attacks if industries choose to share sensitive information, such as trading activities and investment strategies. In addition, as more companies utilize AI to create and manage financial product, there will need to be greater disclosure to clients and individuals about the decision-making process and actors involved. (SEC) Accountability becomes complex as legal decisions begin to be influenced by new AI models, making it difficult to determine intent within disputes. Agencies such as the Federal Trade Commission (FTC) have begun to take necessary steps to create guidelines and safeguards against the potential risks behind generative AI and machine learning models. In April 2024, the FTC created a new policy against government and business impersonation through Ai technologies. Impersonations through copycat accounts, fake government alerts, and other scams have accumulated above “$1.1 billion… more than three times what consumers reported in 2020.” (FTC) The FTC’s new rule banning impersonation fraud grants protections for individuals and the requirement of defendants “to return money to injured customers.” (FTC)
Furthermore, in September 2024, the U.S Securities and Exchange Commission (SEC) created an extensive plan for creating guidelines to the utilization of AI and machine learning technologies for utilization. Regarding accountability and disclosure, the SEC has broadly discussed further plans for algorithmic transparency and data governments to require companies to disclose information about their AI usage and to regulate the data being created by those systems. Also, while AI and machine learning technologies are a giant leap within our technologies, the SEC also acknowledges that we still do not know the computational power limits AI may reach. Many AI systems need to undergo testing and certification before more explicit limitations and guidelines can be set legally. However, SEC recognizes the needs and concerns behind AI and machine learning technologies and the agency is working towards creating necessary tests and regulations for the professional usage of these systems. (SEC)
AI and machine learning technologies hold great promise in the nearby future for corporate law firms for their efficiency and timeliness in decision making processes. However, there are great risks within security and disclosure that need to be creating before AI technologies can be utilized within the professional fields. Yet, as programmers and scientists further develop these testing and certifications to minimize risk and conflict with AI usage, corporate law may seek a balance innovation with legal responsibility through AI integration.
(No date) FTC Ai use policy. Available at: https://www.ftc.gov/system/files/ftc_gov/pdf/FTC-AI-Use-Policy.pdf (Accessed: 29 May 2025).
Ai regulation - embracing the future (2024) Discussion: AI Regulation - Embracing the Future. Available at: https://www.sec.gov/files/sec-cfu-presentation.pdf (Accessed: 29 May 2025).
Clio (2024) Legal innovation and AI: Risks and Opportunities, American Bar Association. Available at: https://www.americanbar.org/groups/law_practice/resources/law-technology-today/2024/legal-innovation-and-ai-risks-and-opportunities/ (Accessed: 29 May 2025).
Couture, R.J., Perlman, A. and Morley, J. (2025) The impact of artificial intelligence on law firms’ business models, Harvard Law School Center on the Legal Profession. Available at: https://clp.law.harvard.edu/knowledge-hub/insights/the-impact-of-artificial-intelligence-on-law-law-firms-business-models/ (Accessed: 28 May 2025).
Fish, D. (2024) The impact of AI and Machine Learning on Corporate law, Romano Law. Available at: https://www.romanolaw.com/transforming-corporate-law-the-impact-of-ai-and-machine-learning/ (Accessed: 28 May 2025).