Technology: law firms eye significant opportunities from UK’s ‘Silicon Valley’ plans

Neil Hodge Thursday 25 April 2024

Since leaving the EU, the UK government has talked up plans that would allow the country to develop an economy embracing emerging, data-driven artificial intelligence (AI)-based technologies. These plans – across areas including green energy and Fintech – could present significant opportunities for law firms.

In his budget statement in March, UK Chancellor Jeremy Hunt told members of parliament that the UK was ‘on track to become the world’s next Silicon Valley’ – an ambition he has spoken of repeatedly since he took over the role.

The UK has taken a ‘wait and see’ approach towards legislating on AI specifically. The government is keen not to stymie AI innovation by imposing rules and requirements that would deter investment and is in favour of enabling existing industry sector regulators to oversee AI use and abuse as part of their normal remit, instead of setting up a dedicated AI regulator.

For instance, as it stands, AI-related anti-competitive market behaviour is regulated by the UK’s Competition and Markets Authority in accordance with the country’s Competition Act. Issues that fall into this category include algorithmic collusion, personalised pricing and abuse of a dominant position in the digital markets. ‘But these areas will need to be effectively regulated by an AI-specific legislation at some point in the future, taking into account the rapid development and use of AI systems’, says Anurag Bana, Senior Project Lawyer in the IBA’s Legal Policy and Research Unit.

In answer to the current legislative situation, the UK government intends to take a ‘pro-innovation’ approach to the implementation of AI into practice and everyday life, says Clark. Some examples include streamlining visa processes to attract global talent, fostering collaboration between academia and industry, and investing in infrastructure for AI research and development.

Meanwhile, to boost the UK’s chances of becoming a major centre for AI, Clark says the country could create legislative frameworks that balance innovation with ethical considerations, such as data privacy and algorithmic accountability, and provide greater legal certainty around issues such as machine liability and identifying who would be responsible for the decisions taken by an artificial mind. In sectors such as Fintech and healthcare, revisiting regulations around data sharing and interoperability to ensure innovation is supported could encourage experimentation and the adoption of AI technologies, he says.

Part of the reasoning behind the UK’s approach, say commentators, is that the UK wants to distinguish itself from the EU. The bloc has forged ahead with the world’s first dedicated AI Act, with a focus on consumer protection and protecting citizens from harm caused by algorithmic bias and false information, among other things, by imposing duties on AI developers and organisations using the technology. Its critics have suggested that the AI Act repels innovation through harsh rules and fines, pointing to countries with a more relaxed approach – in particular, China – who, they say, will potentially harness greater economic benefits and see innovation thrive.

Clark believes if the UK endeavours to become the next ‘Silicon Valley’ for AI development, law firms will be poised to play a crucial role in navigating the legal complexities surrounding AI technologies. They’ll be able to offer expertise in areas such as regulatory compliance, intellectual property protection, contract negotiation and AI-related litigation.

Additionally, law firms with a hand in technology will probably experience increased demand for their services as businesses seek guidance on navigating the evolving legal landscape of AI, he says. In essence, adds Clark, there’s an ‘opportunity for legislative adaptation and legal expertise to support innovation, while also positioning UK law firms to capitalise on the growing demand for legal services in the AI sector’.

Chris Holder, Member of the IBA Technology Law Committee Advisory Board and a partner at law firm Bristows in London, says the UK’s plans would present massive opportunities for law firms. ‘Technology law is a growth area and more firms are investing heavily in getting specialist expertise to service client needs’, he says. ‘There is no doubt that the UK’s legal services market could meet the demand from clients if the government is serious about these AI industry growth plans.’

However, he says there are a number of obstacles that are likely to prove significantly challenging. Firstly, ‘the UK might like to think it can steal a march on other countries by introducing a business-friendly, lighter-touch regulatory environment to AI development than the EU, for example, but in reality the EU’s AI Act sets the legislative tone: every AI developer operating around the world will need to follow the EU’s legislation if they want to sell their goods and services into the EU and so a lighter touch regulatory regime in the UK doesn’t much matter to them.’

Another stumbling block curtailing the UK’s ambitions, he believes, is the unavailability of capital. ‘Tech companies need funding and there is still nowhere near the appetite in the UK to fund start-ups in the way investors will happily do so in the US’, explains Holder. ‘The risk culture here is completely different.’

He says that going to the markets is also a problem, as neither AIM, the London Stock Exchange’s market for small and medium-sized growth companies, nor the FTSE stock market index are particularly performing well. ‘If the government wants to see start-up growth, it will need to introduce some incentives to inject cash’, adds Holder.

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