The Evolving Regulations of AI for Legal Technology: 2025 Outlook

AI is reshaping the legal industry at a pace regulators (and the rest of us) are scrambling to keep up with. While innovation continues, legal tech vendors and firms now face a growing set of rules and guidance that can’t be ignored.

The EU AI Act, the Council of Europe's AI Convention, and the UK’s ever moving stance on AI regulation are all set to reset expectations omn how AI is built and deployed in legal settings. Compliance is only part of the challenge, vendors and firms also need to manage liability risks, transparency demands, and the expectation that AI will be explainable, accountable and human-supervised.

The EU AI Act

The EU AI Act, which took effect on August 1, 2024, is the world’s first attempt at fully regulating AI. Much like GDPR before it, this law won’t just affect businesses inside the EU it has global reach (Brussels Effect).

The Act sorts AI into four categories based on risk:

Unacceptable risk: AI that poses clear threats to human rights (e.g., social scoring, manipulative AI, predictive policing based on profiling) is outright banned from February 2025.
High-risk: AI used in law enforcement, migration, employment, finance, and legal decision-making must comply with strict documentation, human oversight, and accuracy safeguards.
Limited risk: AI that interacts with users (like chatbots or AI-generated content) must be disclosed, but faces fewer restrictions.
Minimal risk: AI applications with low or no real impact on rights or safety can operate freely.

From a legal tech perspective, AI tools that handle contract analysis, legal research, or case outcome predictions, to me could easily be classified as high-risk. That means compliance isn’t optional, firms must have a risk management framework, human oversight, and transparency mechanisms baked into their AI solutions.

Key Deadlines and Enforcement

The AI Act’s rollout happens in stages:

February 2025: The ban on prohibited AI systems kicks in.
August 2025: General Purpose AI (GPAI) models (like GPT-4 and Claude) must comply with transparency and accountability rules.
August 2026: Compliance for high-risk AI systems becomes fully enforceable.

If you’re a vendor developing AI-driven legal tools, missing these deadlines isn’t an option. Fines can hit €35 million or 7% of global revenue, regulators are making it clear they see this as important, though hopefully it sees more implementation than GDPR ever has.

General Purpose AI (GPAI)

The AI Act zeroes in on General Purpose AI models, splitting them into two tiers:

Standard GPAI: These models must meet general transparency and documentation obligations.
Systemic-risk GPAI: If a model’s training exceeds 10^25 FLOPS, it faces enhanced regulatory scrutiny.

What does this mean for legal tech? Even if your firm isn’t building AI models, but just consuming them, you’re still on the hook for compliance. If you’re integrating GPT-4, Claude, or any other foundation model into your workflows, you need to ensure data governance, AI auditing, and responsible usage.

Legal tech vendors fall under the “provider” category, meaning they bear the primary liability for compliance. Firms that build their own AI solutions also fall under this category, as they are directly responsible for the development and deployment of the AI system. Firms that use AI internally are “deployers”, with their own responsibilities like ensuring human oversight and monitoring AI performance.

Then there’s the Product Liability Directive. The EU is updating liability laws to explicitly treat AI outputs like physical products, meaning vendors can be sued for AI mistakes just like they would for selling a faulty product. If an AI system misinterprets legal precedent, produces biased contract reviews, or generates hallucinated case law, vendors and firms alike could be held accountable.

AI compliance isn’t just a regulatory issue, it’s now a liability risk.

The AI Convention: Global Alignment on AI Ethics and Legal Accountability

The Council of Europe’s AI Convention, signed in September 2024, marks the world’s first legally binding AI treaty. It introduces fundamental governance principles, including:

Transparency and explainability: AI-generated content must be clearly identifiable.
Accountability and oversight: Organisations must document and justify AI decision-making.
Privacy and fairness: AI must not reinforce discrimination or infringe on fundamental rights.
Safe innovation: Regulatory sandboxes are encouraged for AI development.

For legal tech vendors and firms operating across borders, this signals the rise of cross-border AI compliance. Unlike the EU AI Act, which is focused on regulatory enforcement, the AI Convention is more about establishing guiding principles that governments must implement in their own legal frameworks. However, this does not mean it lacks teeth, signatories are expected to introduce national laws that align with the Convention’s principles, which could lead to tighter AI governance in jurisdictions that currently lack any planned AI-specific regulations.

One key feature of the treaty is its emphasis on legal accountability. It mandates that AI developers and deployers establish clear mechanisms for legal recourse, ensuring that individuals affected by AI-driven decisions have access to remedies. This has significant implications for legal AI tools, particularly those involved in risk assessments, legal research, and case prediction.

Firms using AI for legal decision-making must ensure that any AI-generated output can be audited, challenged, and corrected if necessary, it also emphasises data protection, bias mitigation, and transparency, elements that legal tech vendors must embed into their products to avoid falling foul of emerging global standards.

The UK’s AI Regulation Bill: A Shift Toward Structured AI Governance?

The UK has, until now, taken a fairly light-touch approach to AI, but that looks to be changing. The Artificial Intelligence (Regulation) Bill, reintroduced in March 2025, could bring the UK closer in line with the EU’s stricter rules.

The Bill proposes:

A central AI Authority to oversee AI governance (instead of sharing responsibility across existing regulators like the ICO and CMA).
A risk classification system similar to the EU AI Act, meaning high-risk AI would face mandatory compliance measures.
Legal obligations on AI developers and users, moving beyond voluntary principles.

While this bill isn’t law yet, it signals that the UK is preparing to tighten AI regulation. If passed, it could bring the UK closer to the EU’s model, requiring compliance assessments, AI auditing, and stricter transparency measures for AI deployed in legal settings. Unlike the EU’s AI Act, which enforces a centralised compliance model, the UK’s approach is still evolving and may lean toward a more flexible, sector-led framework.

For legal tech firms, this means staying alert, the UK has so far encouraged businesses to self-regulate through voluntary AI principles, but that could soon change since self-regulation can often mean very little. Firms developing AI-driven legal tools should anticipate the introduction of mandatory impact assessments, human oversight requirements, and increased scrutiny on AI explainability. The UK government is also likely to introduce guidance on AI use in professional services, which could have a direct impact on law firms using AI for contract review, compliance automation, and legal analytics.

In short, while the UK’s AI regulatory approach is still in flux, one thing is clear: legal tech vendors and firms need to start preparing now for a more regulated AI landscape.

What You Need to Do Now

With AI regulation rapidly evolving, legal tech firms and vendors can’t afford to wait. Here’s where to focus:

Classify Your AI Risk Level: Determine if your AI solutions are high-risk under the EU AI Act or similar UK regulations.
Audit Your Compliance Framework: Ensure your AI models meet transparency, documentation, and oversight requirements.
Prepare for Product Liability Risks: AI mistakes can now lead to legal claims. Vendors need to ensure model accuracy and maintain strong disclaimers.
Implement AI Governance Structures: Law firms should have AI oversight committees and enforce human-in-the-loop review processes.
Track Global Regulatory Changes: AI laws are still evolving. Staying ahead of compliance requirements is critical for risk management.

2025 is a turning point for AI in legal technology. Compliance is no longer just a checkbox it’s a going to be business critical requirement, with the EU AI Act, the AI Convention, and the UK’s potential AI regulation will mean legal tech vendors and firms must take governance seriously.

AI innovation will continue, but so will scrutiny. The firms that adapt early, build in compliance, and treat AI as a tool that needs accountability and oversight will thrive. The ones that ignore it? They’ll face fines, lawsuits, and a regulatory landscape that’s only getting stricter.