AI: Opportunity, Risk, and the Legal Imperative for Businesses

Artificial Intelligence (AI) is everywhere. It’s no longer a distant concept - it’s shaping industries, redefining workflows, and influencing strategic decisions across sectors. Whether you’re a global enterprise or a boutique firm, AI is either part of your operations or part of your ecosystem through suppliers, clients, or competitors. Ignoring it is not an option.

At a recent KaurMaxwell event at Boodles, Dean Armstrong KC shared his perspective on AI’s legal implications. As a litigator, I want to build on those insights and explore what this means for businesses navigating the AI revolution.

AI and Data: The Hidden Risk

AI thrives on data. But what happens when the data feeding your AI systems was never meant to be used? For businesses processing large volumes of personal data, the risk of group action claims is real - and potentially catastrophic. Even trivial incidents can give rise to large liabilities, particularly if large numbers of people are involved. If your AI systems use personal data, then you could unwittingly be exposing your business to a related claim. Evaluating your AI workflows enables you to consider and balance your risks against the outcomes which you want to achieve with that data.

Accountability: “The AI Did It” Is Not a Defence

If your business uses AI to deliver outputs, liability doesn’t vanish because the error came from an algorithm. Courts will look to the business for answers, not the AI tool. This means that evidence of robust governance, clear accountability, and human oversight when using AI systems is non-negotiable when it comes to providing answers.

Proactive Litigation Strategy

Bruce Lee famously said: “It is better to be a warrior in a garden than a gardener in a war.” The same applies to litigation. The worst time to learn how to defend an AI-related claim is when you’re already embroiled in one. Ask yourself:

• Does your business have records showing how and why you implemented AI?
• Did you assess the risks of your chosen course of action and give due consideration to individual’s data rights?
• How do you validate AI outputs?
• What representations do you make to third parties about AI-generated deliverables?

These questions aren’t theoretical - how well you answer them represents your first line of defence.

Avoiding AI Is Not the Answer

With all of these worries, you could be forgiven for thinking that steering clear of AI avoids risk. It doesn’t. Avoiding AI creates inefficiencies and competitive disadvantages. The challenge is finding a balanced approach - leveraging AI’s benefits while mitigating legal exposure.

The Certainty Conundrum

Businesses crave certainty. Given the UK AI regulator’s stated intention to adopt a principles-based approach, and its decision to delegate compliance oversight to sector-specific regulators, achieving regulatory certainty for AI in the UK market remains challenging. The solution? Proactive legal strategy, documented decision-making, and a culture of compliance. These aren’t just safeguards - they enable you to introduce innovative products and services with a long-term horizon.

Final Word

AI is transforming business. The winners will be those who embrace it intelligently - balancing innovation with risk management. The question isn’t whether to use AI; it’s how to use it responsibly.

If any of the issues discussed resonate with your business and you want to explore how we might be able to assist, please do not hesitate to contact Sajjid Kurmani.