AI litigation eclipses other emerging risks through 2026
AI-related litigation has overtaken intellectual property, breach of contract and group claims as the most threatening emerging risk over the next three years. That is the headline from Shoosmiths' Litigation Risk 2026 report, based on responses from 360 general counsel and senior in-house lawyers.
More than half expect an uptick in AI disputes. The anxiety is concentrated: 87% pointed to AI-related employment disputes and discrimination claims as their top concern, followed by contractual disputes over AI services and privacy/data protection claims tied to AI data processing.
Where disputes will hit hardest
- Employment and discrimination: Hiring, performance management and monitoring tools are the flashpoints. Expect scrutiny on explainability and bias.
- Contracts for AI services: Warranties, training data provenance, model updates and service levels are under the microscope.
- Privacy and data protection: Lawful basis, automated decision-making, and cross-border transfers are driving complaints and investigations.
Cyber pressure is compounding exposure
Geopolitical shifts are feeding risk. 73% of firms say state-sponsored cyber-attacks have already increased litigation exposure, with 27% saying the risk has jumped considerably.
In response, 70% strengthened cyber operations in the last year and another 26% plan to do so, spurred by high-profile attacks on household brands.
"We're in an era of global instability, and that is having a real impact across boardrooms. By analysing global trends and areas of concern for businesses, organisations can better anticipate potential disputes and implement targeted risk-mitigation measures to safeguard both their reputation and financial position." - Alex Bishop, partner and head of litigation, regulatory and compliance at Shoosmiths
Budgets and decision filters are shifting
Firms are spending an average of £600,000 on high-value disputes. Cost matters, but it's no longer the first gate.
Legal merit, reputational risk and expected duration now carry more weight than price alone. That signals more selective, impact-led case strategies.
Resourcing for the uptick
Three in four organisations plan to expand their in-house legal teams. 71% also expect to increase spending on dispute resolution.
What to do now: a practical checklist for in-house teams
- Map AI across the business: Catalogue use cases, models, vendors, training data sources and decision types. Assign owners. Keep a live register.
- Employment risk controls: Run algorithmic impact assessments. Test for bias before and after deployment. Preserve explainability. Update policies on monitoring, hiring and automated decisions.
- Contracts for AI services: Require warranties on data provenance and IP, audit rights, model/version transparency, bias and accuracy SLAs, incident notification, and clear indemnities and caps. Lock down change management and termination assistance.
- Privacy and data: Complete DPIAs, limit purposes, minimize data, set retention rules and log automated decision-making. Align with guidance from the ICO on AI and data protection (ICO AI guidance).
- Governance and documentation: Approvals for AI procurement, guardrails for employee use (including shadow AI), human-in-the-loop criteria, and a model risk taxonomy. Align to frameworks like the NIST AI RMF.
- Dispute readiness: Evidence preservation for models and datasets, version control, audit trails, and litigation hold playbooks. Pre-identify experts and preferred counsel. Refresh arbitration and jurisdiction clauses for AI-specific issues.
- Cyber response: Tabletop test incident, extortion and notification plans. Tighten third-party risk management and breach communications. Coordinate with insurers on coverage triggers and panel requirements.
- Board reporting: Provide a simple risk heatmap (employment, contracts, privacy, cyber). Track open actions, owners and timelines. Tie funding requests to measurable risk reduction.
Capability building
AI disputes move fast, and so do the standards expected of legal teams. Upskill on AI procurement, bias testing, data protection and incident response to keep pace with your business.
If you need structured training for legal and compliance teams, explore role-based options at Complete AI Training.
Your membership also unlocks:
