AI tops the dispute risk list for UK GCs
AI has moved to the number one source of future disputes for in-house legal teams, according to Shoosmiths' Litigation Risk 2026 report. The survey of 360 GCs and senior lawyers at UK companies with revenues over £100m shows concern shifting from cost control to case quality, reputation, and timeline.
Businesses see AI as both a cost saver and a litigation minefield. That tension is driving policy changes, budget increases, and a sharper focus on preparedness.
Where GCs expect disputes to come from
- AI-related disputes now sit at the top of the risk chart.
- Intellectual property slips to second place.
- Class actions and breach of contract follow.
Within AI-related disputes, GCs are most concerned about employment issues created by AI's impact on roles, and discrimination claims tied to AI-driven decision making. Contractual disputes over AI services, privacy/data protection issues from AI processing, and IP infringement from employee use of generative tools round out the list.
Over the past year, the most common disputes companies actually faced were regulatory, followed by employment and competition.
What's driving the decision to litigate
Cost has dropped from first to fifth place as a go/no-go factor. The top considerations now:
- Legal merit (68%)
- Potential reputational damage
- Expected duration
- Expected value (57%)
- Cost of pursuing (47%)
Proactive claims to raise funds remain underused, but one in five companies have done so. Group litigation/class actions and IP are the categories most likely to use third-party funding.
Budgets, headcount, and capability
Most businesses are spending more to support in-house disputes work. More than seven in ten GCs expect higher headcounts and litigation spend over the next three years.
What companies are doing now
- 59% implemented document retention policies.
- 50% ran a litigation/compliance preparedness review.
- 47% provided internal training on specific litigation risks.
- 43% placed restrictions on generative AI use.
- 28% banned WhatsApp for company business.
How AI is already being used in disputes
- 75% use AI for e-discovery.
- 45% for horizon scanning.
- 37% to spot opportunities for claims against others.
- 35% to identify litigation risks.
Practical steps for GCs
Run a litigation preparedness review and fold AI into every stage of it. Sense check reliance on AI outputs, map failure points, and document who owns each risk.
- Policy and governance: Update AI acceptable use, vendor standards, and model validation rules. Tie them to employment, privacy, and IP policies.
- Employment and discrimination risk: Audit AI in hiring, performance, and workforce planning. Test for bias and keep human-in-the-loop review. See guidance on AI and data protection from the ICO here.
- Contracting for AI services: Tighten SLAs, IP ownership, indemnities, training data rights, security, audit rights, and termination/transition clauses.
- Data protection: Run DPIAs for AI use cases, limit personal data, track sources, and log decisions for accountability.
- IP controls: Set rules for employee use of generative tools, including confidential info, training data, and output ownership. Establish a review process before public use.
- E-discovery readiness: Align retention policies with AI-generated content and chat logs. Ensure holds capture AI system outputs and prompts.
- Funding strategy: Pre-assess claims suitable for third-party funding (IP and group claims), with evidence preservation plans ready.
- Training and drills: Deliver role-specific training for legal, HR, procurement, and product. Tabletop test an AI-driven incident (bias claim, data leak, or vendor failure). For skills development, see AI training for legal teams.
Bottom line
AI now sets the agenda for dispute risk. GCs are prioritizing legal merit, reputation, and speed over pure cost-and investing in people, processes, and controls to keep pace.
The firms that win will treat AI like any other high-impact system: clear ownership, strong controls, reliable evidence, and contracts that hold up under pressure.
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